As filed with the Securities and Exchange Commission
on May 12, 2000
Registration No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. ___ |_|
Post-Effective Amendment No. ___ |_|
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1940 |_|
Amendment No. ___ |_|
(Check appropriate box or boxes)
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THE CAPITOL MUTUAL FUNDS
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
--------------------------
Registrant's Telephone Number, including Area Code: (800) 626-2275
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With copies to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Ave., N.W.
Suite 5500
Washington, D.C. 20006
It is proposed that this filing will become effective on June 11, 2000 pursuant
to Rule 488.
No filing fee is required under the Securities Act of 1933 because an indefinite
number of shares of beneficial interest in the Registrant, without par value,
has previously been registered pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. The Registrant filed on August 13, 1999, the
notice required by Rule 24f-2 for its fiscal year ended March 31, 1999 (File No.
33-33144; 811-6030).
<PAGE>
NATIONS RESERVES
CROSS-REFERENCE SHEET
PART A
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ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ------------------
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1 Beginning of Registration Statement COVER PAGE OF REGISTRATION
and Outside Front Cover Page of STATEMENT; CROSS-REFERENCE
Prospectus SHEET; FRONT COVER PAGE OF
PROXY STATEMENT/PROSPECTUS
2 Beginning and Outside Back Cover TABLE OF CONTENTS
Page of Prospectus
3 Fee Table, Synopsis Information, APPENDIX I--EXPENSE SUMMARIES
and Risk Factors OF THE FUND AND ACQUIRING
FUND; SUMMARY--INTERIM
INVESTMENT SUB-ADVISORY
AGREEMENTS; SUMMARY--THE
REORGANIZATION; FEE TABLES;
OVERVIEW OF THE
REORGANIZATION AGREEMENT AND
THE REORGANIZATION; OVERVIEW
OF THE FUND AND ACQUIRING
FUND; FEDERAL INCOME TAX
CONSEQUENCES; RISK FACTORS
</TABLE>
<PAGE>
<TABLE>
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ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ------------------
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4 Information About the THE INTERIM AGREEMENTS;
Transaction TRANSACTION 1 AND THE INTERIM 1
AGREEMENT; TRANSACTION 2 AND
THE INTERIM 2 AGREEMENT; BOARD
CONSIDERATION; INFORMATION
ABOUT GARTMORE
THE REORGANIZATION;
DESCRIPTION OF THE
REORGANIZATION AGREEMENT;
REASONS FOR THE
REORGANIZATION AGREEMENT;
BOARD CONSIDERATION;
COMPARISON OF INVESTMENT
OBJECTIVE, INVESTMENT
MANAGEMENT AND PRINCIPAL
INVESTMENT STRATEGIES; THE
MASTER FEEDER STRUCTURE;
COMPARISON OF CORPORATE
STRUCTURE; COMPARISON OF FUND
AND ACQUIRING FUND
PERFORMANCE; COMPARISON OF
ADVISORY AND OTHER SERVICE
ARRANGEMENTS AND FEES;
COMPARISON OF PURCHASE,
REDEMPTION, DISTRIBUTION AND
EXCHANGE POLICIES AND OTHER
SHAREHOLDER TRANSACTIONS AND
SERVICES; FEDERAL INCOME TAX
CONSIDERATIONS; CAPITALIZATION
5 Information About the N/A
Registrant
6 Information About the Fund ADDITIONAL INFORMATION ABOUT
Being Acquired THE COMPANY
7 Voting Information VOTING MATTERS; GENERAL
INFORMATION; QUORUM;
SHAREHOLDER APPROVAL;
PRINCIPAL SHAREHOLDERS;
ANNUAL MEETINGS AND
SHAREHOLDER MEETINGS
8 Interest of Certain Persons NOT APPLICABLE
and Experts
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<PAGE>
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ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ------------------
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9 Additional Information NOT APPLICABLE
Required for Reoffering by
Persons Deemed to be
Underwriters
</TABLE>
PART B
- ------
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- -------- ------------ -------------------
<S> <C> <C>
10 Cover Page COVER PAGE
11 Table of Contents TABLE OF CONTENTS
12 Additional Information About INCORPORATION OF DOCUMENTS BY
the Registrant REFERENCE IN STATEMENT OF
ADDITIONAL INFORMATION
13 Additional Information About INCORPORATION OF DOCUMENTS BY
the Fund Being Acquired REFERENCE IN STATEMENT OF
ADDITIONAL INFORMATION
14 Financial Statements EXHIBITS TO STATEMENT OF
ADDITIONAL INFORMATION
PART C
- ------
ITEM NO.
- --------
15-17 Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of this
Registration Statement.
</TABLE>
<PAGE>
THE FOLLOWING ITEMS ARE HEREBY INCORPORATED BY REFERENCE INTO VARIOUS PARTS OF
THIS REGISTRATION STATEMENT:
NATIONS RESERVES ("RESERVES")
From Post-Effective Amendment No. 29 of Reserves' Registration Statement, filed
July 30, 1999 (SEC File Nos. 33-33144; 811-6030):
Prospectuses for the Primary A Shares, Investor A Shares, Investor B
Shares, and Investor C Shares of the Nations International Equity Fund,
dated August 1, 1999, as supplemented.
Statement of Additional Information for Nations International Equity
Fund, dated August 1, 1999, as supplemented.
The audited financial statements and related independent accountants' reports
for Nations International Equity Fund for the fiscal year ended March 31, 2000.
NATIONS FUND, INC.
From Post-Effective Amendment No. 45 of Nations Fund, Inc.'s Registration
Statement, filed July 30, 1999 (SEC File Nos. 33-4038; 811-4614):
Prospectuses for the Primary A Shares, Investor A Shares, Investor B
Shares, and Investor C Shares of the Nations International Growth Fund,
dated August 1, 1999, as supplemented.
Statement of Additional Information for Nations International Growth
Fund, dated August 1, 1999, as supplemented.
The audited financial statements and related independent accountants' reports
for Nations International Growth Fund for the fiscal year ended March 31, 2000.
<PAGE>
NATIONS FUND, INC.
One Bank of America Plaza
101 South Tryon Street
Charlotte, N.C. 28255
TELEPHONE: 800-653-9427
June 14, 2000
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
Nations International Growth Fund (the "Fund") to be held at 10:00 a.m. (Eastern
time) on August 1, 2000, at One Bank of America Plaza, 33rd Floor, Charlotte,
North Carolina (the "Meeting"). At the Meeting, you will be asked to approve
three interim investment sub-advisory agreements and a proposed reorganization
(the "Reorganization") of the Fund into Nations International Equity Fund.
THE FIRST THREE PROPOSALS relate to the investment sub-advisory
arrangement that the Fund has with Gartmore Global Partners ("Gartmore").
Gartmore has recently experienced three changes in ownership. These changes
relate only to the corporate ownership of Gartmore's parent companies and have
not resulted, and are not expected to result, in any significant change to the
Gartmore personnel who manage the Fund or in the way that the Fund is managed.
Nevertheless, the federal securities laws require that shareholders be given the
opportunity to approve a new investment sub-advisory agreement in order to allow
Gartmore to continue to serve as investment sub-adviser to the Fund whenever
this type of change occurs.
Accordingly, we are soliciting your vote on three interim investment
sub-advisory agreements that have been put in place as a result of each of the
three changes. Each interim agreement is identical to the investment
sub-advisory agreement that was last approved by Fund shareholders (except with
respect to certain differences required by the federal securities laws, and a
reduction in the fee paid to Gartmore, all as explained in the attached Combined
Proxy Statement/Prospectus).
THE FOURTH PROPOSAL relates to the reorganization of the Fund into
Nations International Equity Fund ("International Equity Fund"). Management is
proposing the Reorganization based on its belief that International Equity Fund
will likely better serve the long-term interests of Fund shareholders. Through
market depreciation and redemption activity, the Fund's asset size has declined
significantly, making it more difficult for the Fund to maintain favorable
economies of scale and achieve other benefits that come from greater asset size.
Because the International Equity Fund is significantly larger than the Fund,
combining the two will result in a mutual fund that will be able to spread its
fixed costs over a much larger asset base.
The International Equity Fund has a substantially similar investment
objective, principal investment strategies and investment risks as those of the
Fund. Importantly, the Reorganization will result in lower total operating
expense ratios for all Fund shareholders. Of course, the features and services
that are available to you today also will continue to be available to you as an
International Equity Fund shareholder after the Reorganization.
If shareholder approval is obtained and the other conditions to the
Reorganization are satisfied, it is anticipated that the Fund would be
reorganized into the International Equity Fund on September 8, 2000, when your
Fund shares would be exchanged for shares of equal value of the same class of
shares of the International Equity Fund. Lastly, the Reorganization is expected
to be tax-free under federal income tax law and all of the customary costs
associated with the Reorganization and this proxy solicitation will be borne by
Banc of America Advisors, Inc., Gartmore and/or its affiliates. The Fund will
not bear any of these expenses.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
TO APPROVE EACH INTERIM INVESTMENT SUB-ADVISORY AGREEMENT AND THE PROPOSED
REORGANIZATION.
<PAGE>
The formal Notice of Special Meeting, Combined Proxy
Statement/Prospectus and Proxy Ballot are enclosed. The proposed Interim
Agreements and the Reorganization and the reasons for the unanimous
recommendation of the Company's Board are discussed in detail in the enclosed
materials, which you should read carefully. If you have any questions about the
proposals, 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 to 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 SUBMITTING 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 COMBINED PROXY STATEMENT/PROSPECTUS
("PROXY STATEMENT") select one of the following quick and easy methods to submit
your proxy - ACCURATELY and QUICKLY.
<S> <C>
VOTE ON-LINE VOTE BY TOLL-FREE PHONE CALL
1. Read the enclosed PROXY STATEMENT and have 1. Read the enclosed PROXY STATEMENT and have your
your PROXY BALLOT* at hand. PROXY BALLOT* at hand.
2. Go to Web site WWW.PROXYVOTE.COM 2. Call toll-free 1-800-690-6903.
3. Enter the 12-digit Control Number found on 3. Enter the 12-digit Control Number found on your
your PROXY BALLOT. PROXY BALLOT.
4. Submit your proxy using the easy-to-follow 4. Submit your proxy using the easy-to-follow
instructions. instructions.
* DO NOT MAIL THE PROXY BALLOT IF SUBMITTING YOUR PROXY BY INTERNET OR TELEPHONE.
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2
<PAGE>
NATIONS FUND, INC.
One Bank of America Plaza
101 South Tryon Street
Charlotte, N.C. 28255
TELEPHONE: 800-653-9427
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 1, 2000
To Nations International Growth Fund Shareholders:
PLEASE TAKE NOTE THAT a special meeting of shareholders (the "Meeting")
of Nations International Growth Fund of Nations Fund, Inc., will be held at
10:00 a.m., Eastern time, on August 1, 2000, at One Bank of America Plaza, 33rd
Floor, Charlotte, North Carolina, for the purpose of considering and voting
upon:
ITEM 1. Ratification and approval of an interim investment sub-advisory
agreement among Nations Fund, Inc., on behalf of Nations International
Growth Fund, Banc of America Advisors, Inc. and Gartmore Global
Partners for the period beginning on March 6, 2000 and ending on May
[15], 2000.
ITEM 2. Ratification and approval of an interim investment sub-advisory
agreement among Nations Fund, Inc., on behalf of Nations International
Growth Fund, Banc of America Advisors, Inc. and Gartmore Global
Partners for the period beginning on May [15], 2000 and ending on June
[ ], 2000.
ITEM 3. Ratification and approval of an interim investment sub-advisory
agreement among Nations Fund, Inc., on behalf of Nations International
Growth Fund, Banc of America Advisors, Inc. and Gartmore Global
Partners for the period beginning on June [ ], 2000 and ending on the
date of the reorganization described below (or, if the reorganization
does not occur, on June [ ], 2001).
ITEM 4. Approval of a proposed agreement and plan of reorganization,
dated as of June 14, 2000 (the "Reorganization Agreement"), between
Nations Fund, Inc., on behalf of Nations International Growth Fund, and
Nations Reserves, on behalf of Nations International Equity Fund.
ITEM 5. Such other business as may properly come before the Meetings or
any adjournment(s).
Items 1, 2, 3 and 4 are described in the attached Combined Proxy
Statement/Prospectus.
YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE
PROPOSALS.
Shareholders of record as of the close of business on June 5, 2000 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 THE ACCOMPANYING PROXY BALLOT, WHICH IS BEING SOLICITED BY
THE COMPANY'S BOARD OF DIRECTORS. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETINGS. SHAREHOLDERS ALSO MAY SUBMIT THEIR PROXIES BY: 1) 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
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
Dated June 14, 2000
NATIONS FUND, INC. AND NATIONS RESERVES
One Bank of America Plaza
101 South Tryon Street
Charlotte, North Carolina 28255
1-800-653-9427
This Combined Proxy Statement/Prospectus ("Proxy/Prospectus") 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 Nations International Growth Fund (the "Fund"). The Special
Meeting and any adjournment(s) are referred to as the "Meeting." The Meeting has
been called to consider the proposals described in the formal notice of meeting
and in this Proxy/Prospectus.
This Proxy/Prospectus sets forth concisely the information about the
proposals scheduled to be considered, including a proposal to reorganize the
Fund into Nations International Equity Fund (the "Acquiring Fund"), and the
information about the Acquiring Fund that a shareholder should know before
deciding how to vote. This Proxy/Prospectus should be retained for future
reference.
Additional information about the Acquiring Fund is available in its:
o Prospectuses;
o Statement of Additional Information, or SAI; and
o Annual and Semi-Annual Reports to shareholders.
All of this information is in documents filed with the United States
Securities and Exchange Commission (the "SEC") and is available upon oral or
written request and without charge. The information contained in the
prospectuses of the Acquiring Fund is legally deemed to be part of this
Proxy/Prospectus and is incorporated by reference. Copies of the Acquiring Fund
prospectus(es) also accompany this Proxy/Prospectus. The annual report to
shareholders for the fiscal year ended March 31, 2000 and the prospectus(es) for
the Fund have previously been mailed to Fund shareholders. Additional copies of
any of these documents are available without charge by writing the address given
above or by calling 1-800-765-2668. Documents also are available on the website
of the SEC at www.sec.gov.
It is expected that this Proxy/Prospectus will be mailed to
shareholders on or about June 14, 2000.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROXY/PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SUMMARY................................................................................................x
Interim Investment Sub-Advisory Agreements....................................................x
The Reorganization............................................................................x
Fee Tables...............................................................................x
Overview of the Reorganization Agreement and the Reorganization..........................x
Overview of the Fund and the Acquiring Fund..............................................x
Federal Income Tax Consequences..........................................................x
Risk Factors.............................................................................x
THE INTERIM AGREEMENTS.................................................................................x
Transaction 1 and the Interim 1 Agreement.....................................................x
Transaction 2 and the Interim 2 Agreement; and Transaction 3 and the Interim 3 Agreement......x
Board Consideration...........................................................................x
Information About Gartmore....................................................................x
THE REORGANIZATION.....................................................................................x
Description of the Reorganization Agreement...................................................x
Reasons for the Reorganization Agreement......................................................x
Board Consideration...........................................................................x
Comparison of Investment Management, Investment Objective and
Principal Investment Strategies.............................................................x
The Master Feeder Structure...................................................................x
Comparison of Forms of Business Organization..................................................x
Comparison of Fund and Acquiring Fund Performance.............................................x
Comparison of Advisory and Other Service Arrangements and Fees................................x
Comparison of Purchase, Redemption, Distribution and Exchange Policies
and Other Shareholder Transactions and Services.............................................x
Federal Income Tax Considerations.............................................................x
Capitalization................................................................................x
VOTING MATTERS.........................................................................................x
General Information...........................................................................x
Quorum........................................................................................x
Shareholder Approval..........................................................................x
Principal Shareholders........................................................................x
Annual Meetings and Shareholder Meetings......................................................x
ADDITIONAL INFORMATION ABOUT THE COMPANY...............................................................x
FINANCIAL STATEMENTS...................................................................................x
OTHER BUSINESS.........................................................................................x
SHAREHOLDER INQUIRIES..................................................................................x
APPENDICES
I. EXPENSE SUMMARIES OF THE FUNDS
II. COMPARISON OF PERFORMANCE OF THE FUNDS
III. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
</TABLE>
2
<PAGE>
SUMMARY
The following is an overview of certain information relating to the
three proposed interim investment sub-advisory agreements (each, an "Interim
Agreement" and together, the "Interim Agreements") and the proposed
reorganization of the Fund into the Acquiring Fund (the "Reorganization"). More
complete information about the Reorganization is contained throughout this
Proxy/Prospectus and its Appendices.
INTERIM INVESTMENT SUB-ADVISORY AGREEMENTS
The investment sub-adviser that manages the fund on a day-to-day basis
is Gartmore. As described below in more detail, Gartmore has recently
experienced three changes in ownership. These changes relate only to the
ownership of Gartmore's parent companies and have not resulted, and are not
expected to result, in any significant change in the Gartmore personnel who
manage the Fund or in the way that the Fund is managed. Nevertheless, federal
securities laws require that shareholders must be given the opportunity to
approve a new investment sub-advisory agreement in order to allow Gartmore to
continue to serve as investment sub-adviser to the Fund whenever this type of
change occurs.
Accordingly, Fund shareholders are being solicited on three Interim
Agreements that have been put in place as a result of the three changes. The
first two changes led to the Royal Bank of Scotland plc becoming the indirect
parent of Gartmore. The third and last change led to Nationwide Mutual Insurance
Company becoming the indirect parent of Gartmore.
Each of the three Interim Agreements is identical to the investment
sub-advisory agreement that was last approved by Fund shareholders, except with
respect to certain differences required by federal securities laws that are
explained below, and also except with respect to the fact that the investment
sub-advisory rate payable under the second and third Interim Agreements is lower
than that payable under the first Interim Agreement and also the agreement that
was last approved by shareholders.
Additional details on each of the three changes in ownership of
Gartmore's parent companies and the corresponding Interim Agreements can be
found under "The Interim Agreements."
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FUND
SHAREHOLDERS RATIFY AND APPROVE EACH INTERIM INVESTMENT SUB-ADVISORY AGREEMENT
WITH GARTMORE.
THE REORGANIZATION
Fee Tables
In addition to proposing the Interim Agreements, management also is
proposing that the Fund be reorganized into the Acquiring Fund. The following
table shows, as of March 31, 2000: (i) the current annualized total operating
expense ratios of the Fund; (ii) the current annualized total operating expense
ratios of the Acquiring Fund; and (iii) the PRO FORMA annualized total operating
expense ratios of the Acquiring Fund based upon the fee arrangements that will
be in place upon consummation of the Reorganization.
The table shows that the total operating expense ratios of the
Acquiring Fund are lower than those of the Fund. This means that ongoing fees
and expenses charged on a post-Reorganization basis will be less than those
currently charged. Detailed PRO FORMA expense information for each proposed
reorganization is included in Appendix I.
3
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<TABLE>
<CAPTION>
Total Operating Expense Information
PRO FORMA
Total Total Combined
Operating Fund/Class Operating
Fund/Share Class Expense Ratios Post-Reorganization Expense Ratios
<S> <C> <C> <C>
International Growth Fund International Equity Fund
Primary A shares 1.27% Primary A shares 1.15%
Investor A shares 1.52% Investor A shares 1.40%
Investor B shares 2.27% Investor B shares 2.15%
Investor C shares 2.27% Investor C shares 2.15%
</TABLE>
Overview of the Reorganization Agreement
The document that governs the Reorganization is the agreement and plan
of reorganization between the Company, on behalf of the Fund, and Nations
Reserves ("Reserves"), on behalf of the Acquiring Fund (the "Reorganization
Agreement"). The Reorganization Agreement provides for: (1) the transfer of all
of the assets and liabilities of the Fund to the Acquiring Fund in exchange for
shares of equal value of the same classes of the Acquiring Fund; and (2) the
distribution of the Acquiring Fund shares to the shareholders of the Fund in
liquidation of the Fund. The Reorganization is subject to a number of
conditions, including approval by Fund shareholders.
As a result of the proposed Reorganization, a Fund shareholder will
become a shareholder of a corresponding Acquiring Fund and will hold,
immediately after the Reorganization, Acquiring Fund shares having a total
dollar value equal to the total dollar value of the shares of the Fund that the
shareholder held immediately before the Reorganization. The Reorganization is
expected to occur on September 8, 2000. The exchange of Fund shares for
Acquiring Fund shares by Fund shareholders in the Reorganization is expected be
tax-free under federal income tax law and shareholders will not pay any sales
charge on the exchange.
For more information about the Reorganization and the Reorganization
Agreement, see "The Reorganization-Description of the Reorganization Agreement."
Overview Comparison of the Fund and the Acquiring Fund
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES. The
investment objective and principal investment strategies of the Fund are
substantially similar to those of the Acquiring Fund. The Fund seeks long-term
capital growth by investing primarily in equity securities of companies
domiciled in countries outside the United States and listed on major stock
exchanges primarily in Europe and the Pacific Basin. The Acquiring Fund seeks
long-term capital growth by investing primarily in equity securities of
non-United States companies in Europe, Australia, the Far East and other
regions, including developing countries.
However, there are some important differences. For example:
o unlike the Fund, the Acquiring Fund invests all of its assets
in another fund, which is called a master portfolio. The
Acquiring Fund does not have its own investment adviser or
sub-adviser because it invests its assets in Nations
International Equity Master Portfolio (the "Master
Portfolio"). The Master Portfolio has the same investment
objective and principal investment strategies as the Acquiring
Fund. Throughout this Proxy/Prospectus, the terms Acquired
Fund and Master Portfolio are sometimes used interchangeably;
and
o unlike the Fund, which is sub-advised by a single investment
sub-adviser (I.E., Gartmore), the Acquiring Fund's Master
Portfolio utilizes a "multi-manager" approach, which means
that it is managed by more than one sub-adviser. Gartmore,
INVESCO Global Asset Management (N.A.), Inc. ("INVESCO") and
Putnam Investment Management Inc. ("Putnam") each manage
approximately one-third of the assets of the Master Portfolio.
INVESCO, Putnam, and Gartmore each will manage their
respective portion of the Master Portfolio using similar
styles of investment management; each style
4
<PAGE>
does vary somewhat from the other and also varies from the
style utilized by Gartmore in managing the Fund. One effect of
these differing investment styles is that, if the
Reorganization is approved by shareholders, Gartmore expects
to sell a substantial percentage of the Fund's portfolio
securities prior to the Reorganization. This is because the
multi-managers of the Acquiring Fund anticipate purchasing
different securities that they believe will be better
performing than those that are expected to be sold.
Accordingly, although the Acquiring Fund is expected to have a
portfolio of securities of similar type as those held by the
Fund, they are not expected to be exactly the same securities.
When Gartmore sells these securities in order to allow the
multi-managers to implement their respective investment
styles, the Fund will incur brokerage commissions and such
sales also may result in taxable capital gain or other
distributions to the Fund's shareholders.
For additional information about these and other similarities and
differences between the investment objective and principal investment strategies
of the Fund and Acquiring Fund, see "The Reorganization--Comparison of the
Investment Objective, Investment Management and Principal Investment
Strategies."
SERVICE PROVIDERS. With the exception of the investment sub-adviser,
the Fund and Acquiring Fund have the same service providers, including Banc of
America Advisors, Inc. ("BAAI"), as investment adviser, as discussed under "The
Reorganization--Comparison of Advisory and Other Service Arrangements and Fees."
Except with respect to the contractual fee rates relating to investment
sub-advisory services, the contractual fees rates charged to the Fund and the
Acquiring Fund (or its corresponding master portfolio) relating to other service
providers are the same.
PURCHASE, REDEMPTION, DISTRIBUTION, EXCHANGE AND OTHER PROCEDURES. The
purchase, redemption, distribution, dividend, exchange and other policies and
procedures of each share class of the Fund are identical to those of the
corresponding share class of the Acquiring Fund. For more information concerning
these policies and procedures, see "The Reorganization--Comparison Purchase,
Redemption, Distribution and Exchange Policies and other Shareholder
Transactions and Services."
Federal Income Tax Consequences
The Reorganization is not expected to result in the recognition of gain
or loss, for federal income tax purposes, by the Fund, the Acquiring Fund or
their respective shareholders. However, the sale of securities by the Fund prior
to the Reorganization, whether in the ordinary course of business or in
anticipation of the Reorganization, could result in taxable distributions to the
Fund's shareholders. See "The Reorganization--Federal Income Tax Considerations"
for additional information. Since their inception, each of the Fund and
Acquiring Fund believes it has qualified as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly,
each believes it has been, and expects to continue to be, relieved of any
federal income tax liability on its taxable income distributed to shareholders.
Principal Risk Factors
Because of the substantial similarities in investment objective and
principal investment strategies of the Fund and Acquiring Fund, investments in
the Acquiring Fund will generally involve risks that are similar to those of the
Fund, although there are some differences that a shareholder should consider.
Principal risks that are common between the Fund and Acquiring Fund and those
that are not common between the Fund and Acquiring Fund are discussed below.
o PRINCIPAL RISKS COMMON TO BOTH THE FUND AND THE ACQUIRING FUND
INVESTMENT STRATEGY RISK. The investment sub-advisers (in the case of
the Acquiring Fund) and Gartmore (in the case of the Fund) choose stocks that
they believe have the potential for long-term growth. There is a risk that the
value of these investments will not rise as high as expected, or will fall.
FOREIGN INVESTMENT RISK. Both the Fund and Acquiring Fund invest in
foreign securities. Foreign
5
<PAGE>
investments may be riskier than U.S. investments because of political and
economic conditions, changes in currency exchange rates, the implementation of
the euro, foreign controls on investment, difficulties selling some securities
and lack of or limited financial information; foreign government controls on
foreign investment, repatriation of capital and currency; foreign withholding
and other taxes potentially at punitive levels; inadequate supervision and
regulation of some foreign markets; difficulty selling some investments, which
may increase volatility; different settlement practices or delayed settlements
in some markets; difficulty getting complete or accurate information about
foreign companies; less strict accounting, auditing and financial reporting
standards than those in the U.S.; political, economic or social instability; and
difficulty enforcing legal rights outside the U.S.
EMERGING MARKETS RISK. Both the Fund and the Acquiring Fund may invest
in foreign securities of issuers located in countries considered to be emerging
markets countries, like those in Eastern Europe, the Middle East, Asia or
Africa. Emerging markets countries may be more sensitive to the risks of foreign
investing. In particular, these countries may experience instability resulting
from rapid social, political and economic development. Many of these countries
are dependent on international trade, which makes them sensitive to world
commodity prices and economic factors in other countries. Some emerging
countries have a higher risk of currency devaluation, and some countries may
experience long periods of high inflation or rapid changes in inflation rates.
STOCK MARKET RISK. Both the Fund and Acquiring Fund invest in common
stocks. The value of the stocks that the Fund and Acquiring Fund hold can be
affected by exchanges in U.S. or foreign economies, financial markets, and the
companies that issue the stocks, among other things. Stock prices can rise or
fall over short as well as long periods. In general, stock markets tend to move
in cycles, with periods of rising prices and periods of falling prices.
o PRINCIPAL RISKS AND OTHER CONSIDERATIONS NOT COMMON TO BOTH THE FUND
AND THE ACQUIRING FUND
FUTURES RISK. The Acquiring Fund's corresponding Master Portfolio may
invest in foreign currency exchange contracts to convert foreign currencies to
and from the U.S. dollar, and to hedge against changes in foreign currency
exchange rates. There is a risk that this could result in losses, reduce
returns, increase transaction costs or increase volatility.
INVESTING IN THE MASTER PORTFOLIO. The Acquiring Fund began investing
in the Master Portfolio in August 1999. Other mutual funds and eligible
investors can buy interests in the Master Portfolio. All investors in the Master
Portfolio invest under the same terms and conditions as the Acquiring Fund and
pay a proportionate share of the Master Portfolio's expenses. Other feeder funds
that invest in the Master Portfolio may have different share prices and returns
than the Fund because different feeder funds typically have varying sales
charges, and ongoing administrative and other expenses. The Acquiring Fund can
withdraw its entire investment from the Master Portfolio if it is in the best
interests of the Acquiring Fund to do so. It is unlikely that this would happen,
but if it did, the Acquiring Fund's portfolio could be less diversified and
therefore less liquid, and expenses could increase. The Acquiring Fund might
also have to pay brokerage and other charges and a withdrawal from the Master
Portfolio could also result in the recognition of taxable income by the
Acquiring Fund without its receipt of any cash.
UTILIZING A MULTI-MANAGER APPROACH. The multi-manager strategy is based
on the belief that having more than one manager may result in better performance
and more stable returns over time. However, there is no guarantee that this
will, in fact, be the case.
For a more complete description of the Funds' and the Acquiring Funds'
investment strategies and restrictions, see the Funds' and the Acquiring Funds'
Prospectuses and Statements of Additional Information.
THE INTERIM AGREEMENTS
The Investment Company Act of 1940 (the "1940 Act"), requires that
shareholders approve a mutual fund's investment sub-advisory contract. In order
to protect investors, the 1940 Act also requires that any time an investment
sub-adviser undergoes a change in ownership or control, the investment
sub-advisory agreement under which it provided sub-advisory services to a mutual
fund is deemed to be assigned and terminated. Shareholders must then approve a
new agreement in order for the fund to continue to receive sub-advisory
services. In order to
6
<PAGE>
ensure that a fund isn't left without sub-advisory services after the
termination of a sub-advisory agreement but before shareholders can approve the
new agreement, the 1940 Act allows a mutual fund's board of directors to approve
and put into place an interim investment sub-advisory agreement, subject to
certain conditions.
On March 6, 2000, May [15], 2000 and June [ ], 2000, Gartmore underwent
separate changes in ownership. These changes were the types of changes that
could be deemed to have caused the termination of the then current investment
sub-advisory agreement that the Fund had in place with Gartmore. Accordingly,
Interim Agreements were put in place as described below in more detail.
TRANSACTION 1 AND THE INTERIM 1 AGREEMENT
As of March 6, 2000, Gartmore was a joint venture, structured as a
50/50 general partnership between NB Partner Corp. and Gartmore U.S. Limited. As
of that date, NB Partner Corp. was a wholly-owned subsidiary of Bank of America
Corporation and Gartmore U.S. Limited was an indirect wholly-owned subsidiary of
Asset Management Holdings plc ("AMH").
Until March 6, 2000, AMH was a wholly-owned subsidiary of National
Westminster Bank plc ("NatWest"), which was owned by public shareholders. On
that date, the Royal Bank of Scotland Group plc ("RBS") acquired NatWest in a
tender-offer transaction ("Transaction 1"). As a result of Transaction 1, RBS
acquired indirect ownership of 50% of Gartmore. Accordingly, Transaction 1 was
treated as a "change in control" of Gartmore, which effected an assignment and
termination of the investment sub-advisory agreement last approved by
shareholders (the "Previous Agreement"). The Previous Agreement was last
approved by shareholders at a meeting held on July 12, 1997. Under that Previous
Agreement, BAAI paid Gartmore at an annual rate of 0.70% of the average daily
net asset value of the Fund.
At regular meetings held on March 3, 2000, the Boards approved an
interim agreement among BAAI, Gartmore and the Company, on behalf of the Fund
(the "Interim 1 Agreement"), in accordance with the terms of Rule 15a-4. In
particular, the Interim 1 Agreement (i) does not provide for any increase in the
compensation to be received by Gartmore from that provided in the Previous
Agreement; (ii) provides that the Board, or a majority of the Fund's outstanding
shares, may terminate the Interim 1 Agreement at any time, without payment of
any penalty, on ten (10) days written notice to Gartmore; (iii) contains the
same terms and conditions as the Previous Agreement, with required exceptions;
and (iv) provides that compensation earned by Gartmore under the Interim 1
Agreement be held in an interest-bearing escrow account to be paid to Gartmore
only if the shareholders of the Fund ratify the Interim 1 Agreement, and that if
shareholders do not ratify the Interim 1 Agreement, Gartmore shall be entitled
to a portion of such compensation that equals its costs incurred in providing
services under the Interim 1 Agreement (plus interest earned on that amount
while in escrow). The investment sub-advisory fee rate payable to Gartmore under
the Interim 1 Agreement is at an annual rate of 0.70% of the average daily net
asset value of the Fund, which is the same as under the Previous Agreement. The
term of the Interim 1 Agreement is from March 6, 2000 through May [15], 2000.
TRANSACTION 2 AND THE INTERIM 2 AGREEMENT; AND TRANSACTION 3 AND THE
INTERIM 3 AGREEMENT
Prior to the closing of Transaction 1, RBS expressed interest in
selling the entire Gartmore advisory business to a third-party. Subsequently,
Gartmore U.S. Limited and NB Partner Corp. entered into an agreement whereby NB
Partner Corp. agreed to transfer its 50% interest in Gartmore to Gartmore
Securities Limited ("Transaction 2"). Transaction 2 resulted in AMH indirectly
owning 100% of Gartmore; accordingly, a sale of AMH by RBS would convey the
entire Gartmore advisory business to the buyer. On March 30, 2000, RBS announced
the sale of AMH to Nationwide Mutual Insurance Company ("Nationwide")
("Transaction 3"). Consequently, upon the closing of Transaction 3, Nationwide
indirectly owned 100% of Gartmore. Transaction 2 closed on May [15], 2000 and
Transaction 3 closed on June [ ], 2000.
At special meetings held on April 26, 2000, the Boards approved an
interim agreement (the "Interim 2 Agreement") in connection with Transaction 2,
and an interim agreeement (the "Interim 3 Agreement") in connection with
Transaction 3, in accordance with the terms of Rule 15a-4, even though the
previous agreement had already been terminated by Transaction 3.
7
<PAGE>
The Interim 2 Agreement and Interim 3 Agreement are identical in all
material respects to the Interim 1 Agreement except for the effective date,
termination date and sub-advisory fee rate. The investment sub-advisory fee rate
payable to Gartmore under the Interim 2 Agreement is at an annual rate of 0.54%
of the average daily net asset value of the Fund, which is less than the rate
payable under the Interim 1 Agreement. The term of the Interim 2 Agreement is
from May [15], 2000 through June [ ], 2000. The investment sub-advisory fee rate
payable to Gartmore under the Interim 3 Agreement is an annual rate of 0.54% of
the average daily net asset value of the Fund, which is the same as the rate
payable under the Interim 2 Agreement and less than that payable under the
Interim 1 Agreement. The term of the Interim 3 Agreement is from June [9], 2000
through June [8], 2001.
BOARD CONSIDERATION
At an in-person meeting held on March 3, 2000, the Board of the Company
(the "Board") considered matters relating to Transaction 1 and approved the
Interim 1 Agreement. Such approval was made by the Board, including a majority
of the Directors who were not parties to the Interim 1 Agreement or "interested
persons," as such term is defined under Section 2(a)(19) of the 1940 Act, of any
party to such Agreement. Specifically, the Board determined that the
compensation payable under the Interim 1 Agreement was fair and reasonable and
did not reflect an increase in compensation from the Previous Agreement. The
Boards also determined that the scope and quality of services to be provided to
the Funds under the Interim 1 Agreement would be at least equivalent to the
scope and quality of services provided under the Previous Agreement.
At an in-person meeting held on April 26, 2000, the Board considered
matters relating to Transactions 2 and 3 and approved the Interim 2 Agreement
and Interim 3 Agreement. Such approvals were made by the Board, including a
majority of the Directors who were not parties to the Interim Agreements or
"interested persons," as such term is defined under Section 2(a)(19) of the 1940
Act, of any party to such Agreements. Specifically, the Board determined that
the compensation payable under the Interim 2 Agreement and Interim 3 Agreement
was fair and reasonable and did not reflect an increase in compensation from the
Interim 1 Agreement. The Boards also determined that the scope and quality of
services to be provided to the Funds under the Interim 2 Agreement and Interim 3
Agreement would be at least equivalent to the scope and quality of services
provided under the Interim 1 Agreement.
INFORMATION REGARDING GARTMORE
Gartmore, with principal offices at One Bank of America Plaza,
Charlotte, North Carolina 28255, currently serves as investment sub-adviser to
the Fund pursuant to the Interim 3 Agreement which was approved by the Board of
Directors of the Company. As of the date of this Proxy/Prospectus, Gartmore is
an indirect subsidiary of AMH, which in turn, is an indirect subsidiary of
Nationwide. Nationwide is headquartered at One Nationwide Plaza, Columbus, Ohio
43215-2200. [Gartmore is managed by a four-person management committee, with two
members appointed by each partner, and day-to-day affairs are managed by a chief
executive officer and a chief investment officer.]
The principal executive officers of Gartmore are listed below. The
business address of each such individual is One Bank of America Plaza,
Charlotte, North Carolina 28255.
Name and Address Position at Gartmore Principal Occupation
The aggregate amount paid to Gartmore by BAAI for the Fund for the
period March 31, 1999 through March 31, 2000 was $1,205,459. The aggregate
amount paid to Gartmore by BAAI for all of the mutual funds in the Nations Funds
family for the period March 31, 1999 through March 31, 2000 was $3,477,041.
8
<PAGE>
Gartmore also serves as investment sub-adviser to three other
international portfolios in the Nations Funds family: Nations International
Equity Master Portfolio, Nations Emerging Markets Fund and Nations Annuity
International Growth Portfolio. For services provided pursuant to investment
sub-advisory agreements, BAAI pays Gartmore sub-advisory fees, computed daily
and paid monthly, at the annual rates of:
<TABLE>
<CAPTION>
Total Net Assets
Fund Name Current Annual Sub-Advisory Fee as of 3/31/2000
- --------- ------------------------------- ---------------
<S> <C> <C>
Nations International Equity Master 0.65% of the first $60,000,000 of the $
Portfolio Master Portfolio's average daily net
assets; plus, 0.55% of the next
$130,000,000 of the Master
Portfolio's average daily net assets;
plus 0.45% of the next $200,000,000
of the Master Portfolio's average
daily net assets; plus 0.40% of the
Master Portfolio's average daily net
assets in excess of $390,000,000.
Nations Emerging Markets Fund .66% of average daily net assets $
Nations Annuity International Growth .54% of average daily net assets $
Portfolio
</TABLE>
For the fiscal year ended March 31, 2000, Gartmore did not waive or
otherwise reduce its compensation under any applicable contract for the Fund.
For the fiscal year ended March 31, 2000, Gartmore waived or otherwise reduced
its compensation under any applicable contract for the all the other mutual
funds in the Nations Funds family in an amount equal to $223,410.
No officer or director of the Company is an officer, employee,
director, general partner or shareholder of BAAI, Gartmore or their affiliates.
THE REORGANIZATION
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 Acquiring Fund in exchange for
shares of equal value of the same classes of the Acquiring Fund; and (ii) the
distribution of such Acquiring Fund's shares to shareholders of the Fund in
liquidation of the Fund. The completion of the Reorganization is conditioned
upon the Company and Reserves receiving an opinion from counsel that the
exchange contemplated under the Reorganization will be tax-free under federal
income tax law. The Reorganization Agreement includes a number of other
conditions for completion of the Reorganization, sets forth representations and
warranties of the parties and describes the mechanics of the transaction.
The Reorganization Agreement also provides that the Reorganization may
be abandoned at any time before the closing of the Reorganization (the
"Closing") upon the mutual consent of the Fund and Acquiring Fund. At any time
before or (to the extent permitted by law) after approval of the Reorganization
Agreement by Fund shareholders: (i) the parties may, by written agreement
authorized by the Company's Board of Directors and Reserves's Board of Trustees
and with or without the approval of their shareholders, 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 is to be in writing and authorized by the Company's
Board of Directors or Reserves's Board of Trustees with or without the approval
of the parties' shareholders).
Upon completion of the Reorganization, all outstanding shares of the
Fund will be canceled. Exchange or redemption requests received thereafter will
be deemed to be exchange or redemption requests for shares of the Acquiring
Fund. At closing of the Reorganization, the assets of the Fund will be
transfered to the Acquiring Fund as described above. Immediately thereafter,
those assets will be kicked up to the Master Portfolio.
9
<PAGE>
Finally, the Reorganization provides that BAAI, Gartmore and/or their
affiliates will bear all customary expenses associated with the Reorganization.
The Fund will not bear any of these costs.
A copy of the Reorganization Agreement is available at no charge by
calling or writing the Company at the toll-free telephone number or address
listed on the first page of the Proxy/Prospectus. Copies of the Reorganization
Agreement also are available at the SEC's website (www.sec.gov).
REASONS FOR THE REORGANIZATION
The primary reason for the Reorganization is management's belief that
the interests of the shareholders of the Fund would likely be better served if
it participated in the Reorganization, thereby enabling shareholders to own
shares of the Acquiring Fund with its significantly larger asset size, while at
the same time allowing Fund shareholders to remain invested in a similar mutual
fund in the Nations Funds family. Through market depreciation and redemption
activity, the Fund's asset size has declined significantly, making it more
difficult for the Fund to maintain favorable economies of scale and achieve
other benefits that come from greater asset size. Because the Acquiring Fund has
a significantly higher asset size than the Fund, it has lower total operating
expense ratios than the Fund, which means that Fund shareholders would pay less
in total operating expenses if the Reorganization were consummated.
Accordingly, management, including the Board of Directors of the
Company, believes that the proposed Reorganization should benefit Fund
shareholders by, among other things:
o Offering reductions in total operating expense ratios for all Fund
shareholders; and
o Offering shareholders the opportunity to remain invested in a
generally similar mutual fund in the Nations Funds family.
BOARD CONSIDERATION
The Company's Board of Directors unanimously voted to approve the
Reorganization Agreement at a meeting held on April 26, 2000. During
deliberations, the Directors (with the advice and assistance of its counsel)
reviewed and considered, among other things: (1) the various aspects of the
Reorganization and the terms of the Reorganization Agreement; (2) the current
and declining asset levels; (3) the investment advisory and other fees paid by
the Fund, and the historical and projected expense ratios for the Fund, as
compared with those of the Acquiring Fund; (4) the expected cost-savings for all
of the Fund's shareholders; (5) the investment objective, principal investment
strategies and risks of the Fund and their relative compatibility with those of
the Acquiring Fund, (6) the historical investment performance records of the
Fund and the Acquiring Fund; (7) the fact that Fund shareholders would
experience no change in shareholder services with respect to their class of
shares; (8) the anticipated tax-free nature of the exchange of shares in the
Reorganization; (9) the fact that moving from a single adviser to a
multi-manager approach may cause a significant repositioning in the Fund's
portfolio prior to the Reorganization, thereby causing the Fund to experience
increased brokerage commissions and also possibly causing the Fund to make
taxable capital gain or other distributions to its shareholders; (10) potential
benefits of the Reorganization, if any, to other persons, including BAAI and its
affiliates (E.G., the benefit of consolidating resources within BAAI and its
affiliates). The Board also considered BAAI's belief that the Reorganization
would eliminate certain duplicative shareholder costs (E.G., legal and
accounting costs) and reduce market overlap-that is, BAAI's belief that
investors had not perceived a significant enough difference between the Fund and
its corresponding Acquiring Fund to warrant offering both investment options. It
also was noted that BAAI, Gartmore and/or their affiliates would assume all
customary expenses associated with the Reorganization.
Based upon its evaluation of the information presented to it, and in
light of its fiduciary duties under federal and state law, the Board of
Directors of the Company, including all of the non-interested directors,
determined that participation in the Reorganization, as contemplated by the
Reorganization Agreement, was in the best interests of the Fund, and that the
shares of the Fund would not be diluted as a result of the Reorganization.
Similarly, the Board of Trustees of Reserves, including all of the
non-interested Trustees, also evaluated the Reorganization and based upon its
evaluation of the information presented to it, and in light of its fiduciary
duties under federal and state
10
<PAGE>
law, determined that participation in the Reorganization, as contemplated by the
Reorganization Agreement, was in the best interests of the Acquiring Fund and
that the shares of the Acquiring Fund would not be diluted as a result of the
Reorganization.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FUND
SHAREHOLDERS VOTE TO APPROVE THE REORGANIZATION AGREEMENT.
COMPARISON OF INVESTMENT MANAGEMENT, INVESTMENT OBJECTIVE AND PRINCIPAL
INVESTMENT STRATEGIES
The investment objective and principal investment strategies of the
Fund and the Acquiring Fund are substantially similar. The chart below compares
these aspects of the Fund and Acquiring Fund. Additional information about the
Fund's and Acquiring Fund's investment objective and principal investment
strategies is contained in their Prospectuses and Statement of Additional
Information.
The Fund and Acquiring Fund both normally invest at least 65% of their
assets in common stocks of foreign issuers.
However, there are two primary differences between the two funds:
o Master/Feeder - The Acquiring Fund is a "feeder" fund. A
feeder fund typically invests all of its assets in another
fund, which is called a "master portfolio." The Fund invests
all of its assets in Nations International Equity Master
Portfolio (the "Master Portfolio"), a series of Nations Master
Investment Trust. The details of this structure are outlined
below, under "The Reorganization--The Master/Feeder
Structure."
o The Investment Sub-Adviser - As described in the chart below,
unlike the Fund, which is sub-advised solely by Gartmore, the
Acquiring Fund utilizes a "multi-manager" approach, where
INVESCO, Putnam and Gartmore each manage approximately
one-third of the assets of the Master Portfolio.
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND INTERNATIONAL EQUITY FUND
- ----------------------- ------------------------------------------------- ------------------------------------------------
<S> <C> <C>
Investment BAAI is the Fund's investment adviser. BAAI is the Master Portfolio's investment
Management: Gartmore is the Fund's investment adviser. The Master Portfolio
sub-adviser. Brian O'Neill, the principal sub-advised utilizing a "multi-manager"
senior investment manager of the Gartmore approach, which means that it is managed
Global Portfolio Team, makes the by more than one investment sub-adviser.
day-to-day investment decisions for the INVESCO, Putnam and Gartmore each manage
Fund. approximately one-third of the assets of
the Master Portfolio. Six portfolio
managers from Gartmore, INVESCO's
International Equity Portfolio Management
Team and Putnam's Core International
Equity Group make the day-to-day
investment decisions for their portion of
the Master Portfolio.
- ----------------------- ------------------------------------------------- ------------------------------------------------
Investment The Fund seeks long-term capital growth by The Acquiring Fund seeks long-term
Objective: investing primarily in equity securities capital growth by investing primarily in
of companies domiciled in countries equity securities of non-United States
outside the United States and listed on companies in Europe, Australia, the Far
major stock exchanges primarily in Europe East and other regions, including
and the Pacific Basin. developing countries.
- ----------------------- ------------------------------------------------- ------------------------------------------------
Principal The Fund normally invests at least 65% of The Fund invests all of its assets in the
Investment its assets in foreign companies listed on Master Portfolio. The Master Portfolio
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND INTERNATIONAL EQUITY FUND
- ----------------------- ------------------------------------------------- ------------------------------------------------
<S> <C> <C>
Strategies: major exchanges in Europe and the Pacific has the same investment objective as the
Basin. These companies can be of any Fund. The Master Portfolio normally
size. The Fund may invest up to 35% of invests at least 65% of its assets in
its assets in securities of issuers established companies located in at least
located in developing countries in the three countries other than the United
Asia and Pacific regions, Africa, Latin States. The portfolio managers select
America and Eastern Europe. The Fund will countries, including emerging market or
generally hold 50 to 80 securities developing countries, and companies they
invested in approximately 10 industry believe have the potential for growth.
sectors within 15 to 20 stock markets.
The Fund invests in common stocks, The Master Portfolio primarily invests in
preferred stocks, and convertible securities, equity securities which may include equity
such as warrants, rights and convertible interests in foreign investment funds or
debt. trusts, convertible securities, real estate
investment trust securities and depository
receipts. The Master Portfolio may invest
in foreign currency exchange contracts to
convert foreign currencies to and from the
U.S. dollar, and to hedge against changes
in foreign currency exchange rates.
The Fund may also invest in securities that The Master Portfolio may also invest in
aren't part of its principal investment securities that aren't part of its principal
strategies, but it won't hold more than 10% investment strategies, but it won't hold
of its assets in any one type of these more than 10% of its assets in any one type
securities. These securities are described in of securities. These securities are
the SAI. described in the SAI.
The portfolio manager uses a "bottom-up" The Master Portfolio is a "multi-manager"
approach to selecting securities, looking for fund. It has three different investment
companies with: managers. Each is responsible for
managing approximately one-third of the
o high quality and sustainable earnings Master Portfolio's assets. The managers
o high growth potential over a two-year all have different, but complementary,
investment horizon investment styles:
o quality management teams
o the ability to finance growth internally o Gartmore combines "top down,"
o strong financial results allocation among regions around the
world with a stock selection process
Throughout the investment process, the that focuses on investing in securities
portfolio manager balances the Fund's when growth is likely to be higher, or
emphasis on growth companies with a sustained longer, than other investors
sensitivity to securities prices. expect.
o INVESCO uses a "bottom up"
approach, focusing exclusively on
stock selection, and looking for
sustainable growth.
o Putnam is a "core manager," focusing
on stable, long-term investments,
rather than growth or value stocks. It
combines "bottom up" stock selection
with "top down" country allocation.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND INTERNATIONAL EQUITY FUND
- ----------------------- ------------------------------------------------- ------------------------------------------------
<S> <C> <C>
The portfolio manager may sell a security The multi-manager strategy is based on the
when its price reaches the target set by the belief that having more than one manager
portfolio manager, when there is a may result in better performance and more
deterioration in the growth prospects of the stable returns over time. A manager may
company or its industry, when the portfolio sell a security when its price reaches the
manager believes other investments are target set by the manager, when the
more attractive, or for other reasons. company's growth prospects are
deteriorating, when the manager believes
other investments are more attractive, or
for other reasons.
</TABLE>
THE MASTER/FEEDER STRUCTURE
The Acquiring Fund is a feeder fund in a master/feeder structure, which
means that it invests all of its assets in Nations International Equity Master
Portfolio, which has an identical investment objective and principal investment
strategies. The Master Portfolio is a series of Nations Master Investment
Trust--a registered investment company in the Nations Funds family. 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. In addition to the Acquiring Fund, there is one
other feeder fund that invests in the Master Portfolio. It is a series of the
World Horizon Funds and is called World Horizon International Equity Fund. In
addition, other feeders also may invest in the Master Portfolio in the future.
All feeders in the Master Portfolio will invest on the same terms and
conditions as the Acquiring Fund and will pay a proportionate share of the
Master Portfolio's expenses. For the Acquiring Fund, such expenses and fees are
already reflected in the total operating expense ratios that are shown in this
Proxy/Prospectus (see Appendix I). However, other investors in the Master
Portfolio are not required to sell their shares at the same offering price as
the Acquiring Fund and could be sold with different sales loads and on-going
administrative and other expenses. Therefore, Acquiring Fund shareholders may
have different returns than other shareholders who invest in the Master
Portfolio. In addition, the Acquiring Fund may withdraw its entire investment
from the Master Portfolio if the Board of Trustees of Reserves determines that
it is in the best interests of the Acquiring Fund to do so. Also, other
investors in a Master Portfolio may similarly withdraw their investment at any
time. The Acquiring 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 Reserves. A withdrawal could result in
a distribution in kind of portfolio securities (as opposed to a cash
distribution) by the Master Portfolio to the Acquiring Fund. That distribution
could result in a less diversified portfolio of investments for the Acquiring
Fund and could adversely affect the liquidity of the Acquiring Fund's investment
portfolio. In addition, if securities were distributed, the Acquiring 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 adverse tax
consequences for a shareholder.
The Acquiring Fund and Nations International Equity Fund (Offshore) are
currently the two interestholders in the Master Portfolio. This means that any
matter upon which the interestholders of the Master Portfolio are required to
vote (for example, a new investment advisory contract) will be voted upon by
each of each of these feeder funds. In determining how to vote its interests,
the Acquiring Fund may either submit the matter to its shareholders and vote its
interests in the same proportion as its shareholders vote, or it may vote its
interests in the same proportion as the Nations International Equity Fund
(Offshore)'s (or any other feeder fund's) interests are voted.
The Master Portfolio intends to be treated as a partnership for federal
income tax purposes rather than as a regulated investment company or a
corporation under the Code. Under the rules applicable to a partnership, a
proportionate share of any interest, dividends, gains and losses of the Master
Portfolio will be deemed to have been
13
<PAGE>
realized (I.E., "passed-through") to its interest holders, regardless of whether
any amounts are actually distributed by the Master Portfolio. Each interest
holder in the Master Portfolio, such as the Acquiring Fund, will be taxed on its
share (as determined in accordance with the governing instruments of the Master
Portfolio) of the Master Portfolio's income and gains in determining such
holder's taxable income. The determination of such share will be made in
accordance with the Code and Treasury Regulations promulgated thereunder. It is
intended that the Master Portfolio's assets, income and distributions will be
managed in such a way that an interest holder in the Master Portfolio will be
able to qualify as a regulated investment company by investing substantially all
of its assets through the Master Portfolio.
COMPARISON OF FORMS OF ORGANIZATION
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 a fund's governing charter 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 the Fund into a series of Reserves, which is a Massachusetts business
trust. There are few differences between these forms of organization although
one advantage to a Massachusetts business trust is its potentially greater
flexibility. 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
organized in Massachusetts 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 Fund and that which
apply to the Acquiring Fund as a series of Reserves.
o The Board of Trustees. The Fund, as part of a Maryland
corporation, is governed by a Board of Directors. The Acquiring
Fund, as part of a Massachusetts business trust, instead is
governed by a Board of Trustees. The Board of Trustees of Reserves
has 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 similar set of documents, called 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 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 Reserves could, under certain circumstances, be held
personally liable for the obligations of the trust. However,
Reserves has provisions in its Declaration 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.
14
<PAGE>
COMPARISON OF FUND AND ACQUIRING FUND PERFORMANCE
For a comparison of the performance of the Funds and their
corresponding Acquiring Funds, by class, see Appendix II. Of course, the past
performance of the Fund and Acquiring Fund is no guarantee of how they will
perform in the future.
COMPARISON OF ADVISORY AND OTHER SERVICE ARRANGEMENTS AND FEES
The Fund and the Acquiring Fund have the same service providers. Upon
completion of the Reorganization, these service providers are expected to
continue to serve the Acquiring Fund in the capacities indicated below.
Service Providers for the Funds and the Acquiring Funds
-------------------------------------------------------
Investment Adviser BAAI
Investment Sub-Adviser Gartmore for the Fund; INVESCO,
Putnam and Gartmore for the
Acquiring Fund
Distributor Stephens Inc. ("Stephens")
Co-Administrator BAAI
Co-Administrator Stephens
Sub-Administrator The Bank of New York
Custodian The Bank of New York
Transfer Agent PFPC Inc.
Sub-Transfer Agent Bank of America, N.A. ("Bank of
America") (for Primary A shares only)
Independent Accountants PricewaterhouseCoopers LLP
Investment Advisory and Sub-Services. Detailed information about the
advisory and sub-advisory arrangements for the Fund and the Acquiring Fund,
including fee rates, is provided above under "The Interim Agreements."
Administration Services. Stephens and BAAI are the co-administrators
for the Fund and Acquiring Fund. Stephens and BAAI provide the Fund and
Acquiring Fund with administrative services, including, among other things,
general supervision of their non-investment operations, preparation of proxy
statements and shareholder reports and general supervision of data completion in
connection with preparing periodic reports to the respective Boards of the
Company and Reserves. For these services and the assumption of expenses,
Stephens and BAAI are entitled to a monthly fee, in the aggregate, at the annual
rate of 0.22% of the Fund's and Acquiring Fund's average daily net assets.
Distribution and Shareholder Servicing Arrangements. Shares of the Fund
and Acquiring Fund are distributed by Stephens, a broker-dealer registered under
the Securities Exchange Act of 1934 (the "1934 Act").
PRIMARY A SHARES. Primary A shares are not subject to any distribution
or shareholder servicing fees and, accordingly, the Fund and the Acquiring Fund
have not adopted any related plans.
INVESTOR A SHARES. Pursuant to combined distribution and shareholder
servicing plans adopted pursuant to Rule 12b-1 under the Act by the Fund and
Acquiring Fund for their Investor A shares, the Fund and Acquiring Fund may
compensate Stephens for any activities or expenses primarily intended to result
in the sale of Investor A shares, including sales related services provided by
banks, broker/dealers or other financial institutions ("Selling Agents") that
have entered into a sales support agreement with Stephens. In addition, the Fund
and Acquiring Fund may compensate or reimburse broker/dealers, banks and other
financial institutions ("Servicing Agents") which provide
15
<PAGE>
shareholder support services to their customers who own Investor A shares. This
shareholder servicing and distribution plan provides that the Fund may pay
Stephens, Selling Agents that have entered into a sales support agreement with
Stephens, or Servicing Agents that have entered into a Shareholder Servicing
Agreement with the Fund and Acquiring Fund up to 0.25% (on an annualized basis)
of the average daily net asset value of the Investor A shares of the Fund and
Acquiring Fund.
INVESTOR B SHARES AND INVESTOR C SHARES. The Fund and Acquiring Fund
have adopted distribution plans pursuant to Rule 12b-1 under the 1940 Act with
respect to the Investor B Shares and Investor C Shares of the Fund and Acquiring
Fund. Pursuant to these distribution plans, the Fund and Acquiring Fund may pay
Stephens for expenses incurred in connection with the marketing or distribution
of the Fund's shares, including sales related services provided by selling
agents that have entered into a sales support agreement with Stephens. Payments
under these distribution plans will be calculated daily and paid monthly and may
not exceed 0.75% on an annualized basis of the average daily net asset value of
the Investor B Shares and Investor C Shares of the Fund and Acquiring Fund. The
Fund and Acquiring Fund have also adopted shareholder servicing plans with
respect to the Investor B Shares and Investor C Shares of the Fund and Acquiring
Fund. Pursuant to these shareholder servicing plans, the Fund and Acquiring Fund
may compensate or reimburse servicing agents that provide shareholder support
services to their customers who own shares of the Fund or Acquiring Fund.
Payments under these shareholder servicing plans will be calculated daily and
paid monthly and may not exceed 0.25% (on an annual basis) of the average daily
net assets of the Investor B Shares and Investor C Shares.
COMPARISON OF PURCHASE, REDEMPTION, DISTRIBUTION AND EXCHANGE POLICIES
AND OTHER SHAREHOLDER TRANSACTIONS AND SERVICES
As a result of the Reorganization Fund shareholders will hold shares of
the same class of the Acquiring Fund as they held in the Fund. For example, a
Fund shareholder who owns Investor A shares will, immediately after the
Reorganization, hold Investor A shares in the Acquiring Fund. Accordingly, all
of the purchase, redemption, distribution, exchange policies and other
shareholder transactions and services applicable to a shareholder's share class
will remain unaffected and unchanged by the Reorganization. As noted, no sales
charge or sales load will be imposed in connection with the exchange of shares
in the Reorganization.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
consequences of the Reorganization that are applicable to Fund shareholders. It
is based on the Code, applicable Treasury Regulations, judicial authority, and
administrative rulings and practice, all as of the date of this Proxy/Prospectus
and all of which are subject to change, including changes with retroactive
effect. The discussion below does not address any state, local or foreign tax
consequences of the Reorganization. A Fund shareholder's tax treatment may vary
depending upon its particular situation. A Fund shareholder may also be subject
to special rules not discussed below if you are a certain kind of shareholder,
including: an insurance company; a tax-exempt organization; a financial
institution or broker-dealer; a person who is neither a citizen nor resident of
the United States or entity that is not organized under the laws of the United
States or political subdivision thereof; a holder of Fund shares as part of a
hedge, straddle or conversion transaction; or a person that does not hold Fund
shares as a capital asset at the time of the Reorganization.
Neither the Company nor Reserves has requested or will request an
advance ruling from the Internal Revenue Service as to the federal income tax
consequences of the Reorganization or any related transaction. The Internal
Revenue Service may adopt positions contrary to that discussed below and such
positions could be sustained. A Fund shareholder is urged to consult with its
own tax advisors and financial planners as to the particular tax consequences of
the merger to the Fund shareholder, including the applicability and effect of
any state, local or foreign laws, and the effect of possible changes in
applicable tax laws.
The obligation of the Fund and the Acquiring Fund to consummate the
merger is conditioned upon the receipt by the Company and Reserves of an opinion
of Morrison & Foerster LLP reasonably acceptable to the Company and Reserves
substantially to the effect that, on the basis of the representations set forth
or referred to in the opinion, the Reorganization will be treated for federal
income tax purposes as a tax-free reorganization under
16
<PAGE>
Section 368(a) of the Code and that the Fund and the Acquiring Fund will each be
a party to a reorganization within the meaning of Section 368(b) of the Code.
Provided that the Reorganization so qualifies and the Fund and the Acquiring
Fund are so treated:
o Neither the Fund nor the Acquiring Fund will recognize any gain or
loss as a result of the Reorganization.
o A Fund shareholder will not recognize any gain or loss as a
result of the receipt of Acquiring Fund shares in exchange for
such shareholder's Fund shares pursuant to the Reorganization.
o A Fund shareholder's aggregate tax basis for the Acquiring
Fund shares received pursuant to the Reorganization will equal
such shareholder's aggregate tax basis in Fund shares held
immediately before the Reorganization.
o A Fund shareholder's holding period for the Acquiring Fund
shares received pursuant to the Reorganization will include
the period during which the Fund shares are held.
The tax opinion of Morrison & Foerster LLP described above is based
upon facts, representations and assumptions to be set forth or referred to in
the opinion and the continued accuracy and completeness of representations made
by the Company, on behalf of the Fund, and Reserves, on behalf of the Acquiring
Fund, including representations in certificates to be delivered to Morrison &
Foerster LLP by the management of each of the Company and Reserves, which if
incorrect in any material respect would jeopardize the conclusions reached by
Morrison & Foerster LLP in the opinion. In addition, in the event that the
Company and Reserves is unable to obtain the tax opinion, they are permitted
under the Reorganization Agreement to waive the receipt of such tax opinion as a
condition to their obligation to consummate the Reorganization.
Regardless of whether the acquisition of the assets and liabilities of
the Fund by the Acquiring Fund qualifies as a tax-free reorganization as
described above, the sale of securities by the Fund prior to the Reorganization,
whether in the ordinary course of business or in anticipation of the
Reorganization, could result in a taxable distribution to the Fund's
shareholders.
Since its formation, each of the Fund and the Acquiring Fund believes
it has qualified as a separate "regulated investment company" under the Code.
Accordingly, each of the Fund and the Acquiring Fund believes it has been, and
expects to continue to be, relieved of federal income tax liability on its
taxable income distributions to its shareholders.
CAPITALIZATION
The following table shows the total net assets, number of shares
outstanding and net asset value per share of the Fund and the Acquiring Fund.
This information is generally referred to as the "capitalization." The term "PRO
FORMA capitalization" means the expected capitalization of the Acquiring Fund
after it has combined with the Fund, I.E., as if the Reorganization had already
occurred.
These capitalization tables are based on figures as of March 31, 2000.
The ongoing investment performance and daily share purchase and redemption
activity of the Fund and Acquiring Fund affects capitalization. Therefore, the
capitalization on the Closing Date may vary from the capitalization shown in the
following table.
17
<PAGE>
<TABLE>
<CAPTION>
NET ASSET VALUE
TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE
<S> <C> <C> <C>
International Growth Fund $866,731,323 51,784,624 $16.74
(Primary A shares) (Primary A shares) (Primary A shares)
$43,111,512 2,611,087 $16.51
(Investor A shares) (Investor A shares) (Investor A shares)
$32,072,746 1,997,210 $16.06
(Investor B shares) (Investor B shares) (Investor B shares)
$986,856 62,776 $15.72
(Investor C shares) (Investor C shares) (Investor C shares)
International Equity Fund $96,459,769 6,786,026 $14.21
(Primary A shares) (Primary A shares) (Primary A shares)
$31,710,025 2,284,872 $13.88
(Investor A shares) (Investor A shares) (Investor A shares)
$1,493,168 111,280 $13.42
(Investor B shares) (Investor B shares) (Investor B shares)
$542,517 38,970 $13.92
(Investor C shares) (Investor C shares) (Investor C shares)
PRO FORMA International Equity Fund $963,191,092 57,547,809 $16.74
(Primary A shares) (Primary A shares) (Primary A shares)
$74,821,537 4,531,633 $16.51
(Investor A shares) (Investor A shares) (Investor A shares)
$33,565,914 2,090,191 $16.06
(Investor B shares) (Investor B shares) (Investor B shares)
$1,529,373 97,287 $15.72
(Investor C shares) (Investor C shares) (Investor C shares)
</TABLE>
The Acquiring Fund's financial highlights can be found in its
Prospectuses, which are incorporated by reference in this Proxy/Prospectus.
VOTING MATTERS
GENERAL INFORMATION
This Proxy/Prospectus is being furnished in connection with the
solicitation of proxies for the Meeting by the Board of Directors of the
Company. It is expected that the solicitation of proxies will be primarily by
mail. Officers and service contractors of the Company also may solicit proxies
by telephone or otherwise. In this connection, the Company has retained ADP
Proxy Services to assist in the solicitation of proxies. Shareholders may submit
their proxy: (1) by mail, by marking, signing, dating and returning the enclosed
Proxy Ballot in the enclosed postage-paid envelope; (2) by telefacsimile, by
marking, signing, dating and faxing the enclosed Proxy Ballot to ADP Proxy
Services at (704) 388-2641; (3) by phone at (800) 690-6903; or 4) by on-line
voting at www.proxyvote.com. Any shareholder submitting a proxy may revoke it at
any time before it is exercised by submitting to the Company a written notice of
revocation addressed to the Company at the address shown on the cover page of
this Proxy/Prospectus, or a subsequently executed proxy or by attending the
Meeting and voting in person.
Any expenses incurred as a result of hiring ADP Proxy Services or any
other proxy solicitation agent will be borne by BAAI, Gartmore and/or their
affiliates.
Only shareholders of record at the close of business on June 5, 2000
will be entitled to vote at the Meeting. On that date, __________ shares were
outstanding and entitled to be voted. Each whole and fractional share of a Fund
is entitled to a whole or fractional vote.
18
<PAGE>
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meeting.
QUORUM
A quorum is constituted with respect to the Fund 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 Meetings but which have not
been voted. Accordingly, abstentions will have the effect of a "no" vote for
purposes of obtaining the requisite approvals of the Interim Agreements and the
Reorganization Agreement. Broker "non-votes" (that is, proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owners or other persons entitled to vote shares on a particular
matter with respect to which the brokers or nominees do not have discretionary
power) will be treated the same as abstentions.
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
any Interim Agreement or the Reorganization Agreement are not received by the
Fund, one or more adjournment(s) may be proposed to permit further solicitation
of proxies. Under Maryland state law, any adjourned session or sessions may be
held after the date set for the original Meeting without notice except
announcement at the Meeting, provided that the Meeting is not adjourned beyond
the 120th day from June 5, 2000 (which is the record date). Any such
adjournment(s) will require the affirmative vote of a majority of those shares
affected by the adjournment(s) that are represented at the Meetings in person or
by proxy. If a quorum is present, the persons named as proxies will vote those
proxies which they are entitled to vote FOR the particular proposal for which a
quorum exists in favor of such adjournment(s), and will vote those proxies
required to be voted AGAINST such proposal against any adjournment(s).
SHAREHOLDER APPROVAL
The Interim Agreements and the Reorganization Agreement are being
submitted for approval at the Meeting by the Fund's shareholders pursuant to the
Company's Articles of Incorporation and By-Laws, and were unanimously approved
by the Company's Board of Directors at meetings held on March 3, 2000 and April
26, 2000. The 1940 Act requires that each Interim Agreement must be approved by
a "majority of the outstanding shares" of the Fund. The 1940 Act defines the
term "majority of the outstanding shares" to mean the lesser of: (i) 67% of the
shares of the Fund present at the Meeting if the holders of more than 50% of the
outstanding shares of the Fund are present; or (ii) more than 50% of the
outstanding shares of the Fund. The Reorganization Agreement must be approved by
a majority of the Fund's shares that are voted by proxy or in person at the
Meeting. The Acquiring Fund shareholders are not being solicited since their
approval or consent is not necessary for the Reorganization.
If an Interim Agreement is not approved by shareholders, Gartmore would
be entitled to receive for the period covered by such Interim Agreement a
portion of such compensation that equals its costs incurred in providing
services under the Interim Agreement (plus interest earned on that amount while
in escrow). If the Reorganization is not approved, the Board of Directors of the
Company will consider what further action is appropriate.
PRINCIPAL SHAREHOLDERS
The table below shows the name, address and share ownership of each
person known to the Company and Reserves to have ownership with respect to 5% or
more of a class of the Fund and Acquiring Fund, respectively, as of June 5,
2000. Each shareholder is known to own as of record the shares indicated below.
Any shareholder known to the Trust or Reserves to own such shares beneficially
is designated by an asterisk.
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PERCENTAGE OF
CLASS AMOUNT OF PERCENTAGE OF PERCENTAGE FUND POST
FUND NAME AND ADDRESS SHARES OWNED CLASS OF FUND CLOSING
INTERNATIONAL GROWTH FUND
FUND
INTERNATIONAL EQUITY FUND
</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. As of June 5, 2000, Bank of America had voting
control of xx.xx% of the Fund's outstanding shares. Accordingly, the Bank of
America may be considered to "control" the Fund. The address of Bank of America
is: 1401 Elm Street, 11th Floor, Dallas, TX 75202-2911. It is possible that the
effect of the bank's control would be the increased likelihood that the Fund's
shareholders will approve the Reorganization.
As of June 5, 2000, the officers and trustees of the Company, as a
group, owned less than 1% of any class of the Fund or Acquiring Fund.
ANNUAL MEETINGS AND SHAREHOLDER MEETINGS
The Company presently does not hold annual meetings of shareholders for
the election of Directors and other business unless otherwise required by the
1940 Act.
ADDITIONAL INFORMATION ABOUT THE COMPANY
Additional information about the Fund and Acquiring Fund is included in
their Prospectuses and Statements of Additional Information dated August 1,
1999, as supplemented, copies of which, to the extent not included herewith, may
be obtained without charge by writing or calling the Company at the address and
telephone number set forth on the first page of this Proxy/Prospectus. The proxy
materials, reports and other information filed by the Company can be inspected
and copied at the public reference facilities maintained by the SEC located at
450 5th Street N.W., Washington, D.C. 20549, and 7 World TradeCenter, Suite
1300, New York, NY 10048. Copies of such material 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.
Officers of the Trust are elected by, and serve at the pleasure of, the
Board of Directors. Officers of the Company receive no remuneration from the
Company for their services in such capacities.
FINANCIAL STATEMENTS
The audited financial statements and financial highlights for shares of
the Fund and Acquiring Fund for the annual period ended March 31, 2000 are
incorporated by reference in their prospectuses or statements of additional
information, or in the statement of additional information related to this
Proxy/Prospectus.
The annual financial statements and financial highlights of the Funds
for the year ended March 31, 2000 have been audited by PricewaterhouseCoopers
LLP, independent accountants, to the extent indicated in their reports thereon
and have been incorporated by reference in the Statement of Additional
Information to this Proxy/Prospectus, in reliance upon such reports given upon
the authority of such firm as an expert in accounting and auditing.
20
<PAGE>
OTHER BUSINESS
The Company's Board of Directors knows of no other business to be
brought before the Meeting. However, if any other matters properly come before
the Meeting, it is the intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Company in writing at the
address(es), or by phone at the phone number(s), on the cover page of this
Proxy/Prospectus.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE
REQUESTED TO MARK, SIGN AND DATE THE ENCLOSED PROXY BALLOT AND RETURN IT IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SHAREHOLDERS ALSO MAY SUBMIT PROXIES BY TELEFACSIMILE, TELEPHONE OR ON-LINE.
THE COMPANY WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS MARCH 31, 2000
ANNUAL REPORT TO ANY SHAREHOLDER UPON REQUEST ADDRESSED TO: NATIONS FUND, INC.,
ONE BANK OF AMERICA PLAZA, 101 SOUTH TRYON STREET, CHARLOTTE, N.C. 28255 OR
BY TELEPHONE AT 1-800-321-7854.
21
<PAGE>
APPENDIX I
EXPENSE SUMMARIES OF NATIONS INTERNATIONAL GROWTH FUND AND
NATIONS INTERNATIONAL EQUITY FUND
-----------------------------------------------
The following tables describe the fees and expenses associated with
holding Fund and Acquiring Fund shares. In particular, the tables (a) compare
the fees and expenses as of March 31, 2000, for each class of the Fund and the
corresponding class of the Acquiring Fund, and (b) show the estimated fees and
expenses for the combined Fund on a PRO FORMA basis after giving effect to the
Reorganization.
The fund operating expense levels shown in this Proxy/Prospectus assume
current net asset levels; PRO FORMA expense levels shown should not be
considered an actual representation of future expenses or performance. Such PRO
FORMA expense levels project anticipated levels but may be greater or less than
those shown.
I-1
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND AND
INTERNATIONAL EQUITY FUND
- ---------------------------------------------------------- ----------------- ------------------ ----------------
PRIMARY A SHARES INTERNATIONAL
EQUITY FUND
PRO FORMA
INTERNATIONAL INTERNATIONAL (AFTER
GROWTH FUND EQUITY FUND REORGANIZATION)
- ---------------------------------------------------------- ----------------- ------------------ ----------------
<S> <C> <C> <C>
SHAREHOLDER FEES
- ---------------------------------------------------------- ----------------- ------------------ ----------------
(Fees paid directly from your investment)
- ---------------------------------------------------------- ----------------- ------------------ ----------------
Maximum sales charge (load) imposed on purchases none none none
- ---------------------------------------------------------- ----------------- ------------------ ----------------
Maximum deferred sales charge (load) none none none
- ---------------------------------------------------------- ----------------- ------------------ ----------------
Redemption fee none none none
- ---------------------------------------------------------- ----------------- ------------------ ----------------
- ---------------------------------------------------------- ----------------- ------------------ ----------------
ANNUAL FUND OPERATING EXPENSES
- ---------------------------------------------------------- ----------------- ------------------ ----------------
(Expenses that are deducted from the Fund's assets)
- ---------------------------------------------------------- ----------------- ------------------ ----------------
Management fees 0.80% 0.80% 0.80%
- ---------------------------------------------------------- ----------------- ------------------ ----------------
Other expenses 0.47% 0.35% 0.35%
- ---------------------------------------------------------- ----------------- ------------------ ----------------
Total annual Fund operating expenses 1.27% 1.15% 1.15%
===== ===== ======
- ---------------------------------------------------------- ----------------- ------------------ ----------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you invest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
- --------------------------------------------------- ----------- -----------
PRIMARY A SHARES 1 year 3 years 5 years 10 years
- ----------------------------- --------- ------------ ---------- -----------
International Growth Fund $129 $403 $697 $1,534
- ----------------------------- --------- ------------ ---------- -----------
International Equity Fund $117 $365 $633 $1,398
- ----------------------------- --------- ------------ ---------- -----------
International Equity Fund PRO $117 $365 $633 $1,98
FORMA (after reorganization)
- ----------------------------- --------- ------------ ---------- -----------
I-2
<PAGE>
INTERNATIONAL GROWTH FUND AND
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------- ----------------- ------------------ -------------------
INVESTOR A SHARES INTERNATIONAL
EQUITY FUND
PRO FORMA
INTERNATIONAL INTERNATIONAL (AFTER
GROWTH FUND EQUITY FUND REORGANIZATION)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
<S> <C> <C> <C>
SHAREHOLDER FEES
- ---------------------------------------------------------- ----------------- ------------------ -------------------
(Fees paid directly from your investment)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Maximum sales charge (load) imposed on purchases, as a % 5.75% 5.75% 5.75%
of offering price
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Maximum deferred sales charge (load)* none none none
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Redemption fee none none none
- ---------------------------------------------------------- ----------------- ------------------ -------------------
- ---------------------------------------------------------- ----------------- ------------------ -------------------
ANNUAL FUND OPERATING EXPENSES
- ---------------------------------------------------------- ----------------- ------------------ -------------------
(Expenses that are deducted from the Fund's assets)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Management fees 0.80% 0.80% 0.80%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Other expenses 0.72% 0.60% 0.60%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Total annual Fund operating expenses 1.52% 1.40% 1.40%
===== ===== ======
- ---------------------------------------------------------- ----------------- ------------------ -------------------
</TABLE>
------------------------------
*A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A shares and sell them within 18 months of buying
them. Different charges may apply to purchases made prior to August 1, 1999.
Please see the Fund's or Acquiring Fund's prospectus for more details.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you invest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
---------------------------------- ------------- -------------- ------------- --------------
INVESTOR A SHARES 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
---------------------------------- ------------- -------------- ------------- --------------
International Growth Fund $721 $1,028 $1,358 $2,287
---------------------------------- ------------- -------------- ------------- --------------
International Equity Fund $709 $993 $1,298 $2,161
---------------------------------- ------------- -------------- ------------- --------------
International Equity Fund PRO $709 $993 $1,298 $2,161
FORMA (after reorganization)
---------------------------------- ------------- -------------- ------------- --------------
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND AND
INTERNATIONAL EQUITY FUND
- ---------------------------------------------------------- ----------------- ------------------ -------------------
INVESTOR B SHARES INTERNATIONAL
EQUITY FUND
PRO FORMA
INTERNATIONAL INTERNATIONAL (AFTER
GROWTH FUND EQUITY FUND REORGANIZATION)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
<S> <C> <C> <C>
SHAREHOLDER FEES
- ---------------------------------------------------------- ----------------- ------------------ -------------------
(Fees paid directly from your investment)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Maximum sales charge (load) imposed on purchases none none none
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Maximum deferred sales charge (load), as a % of net
asset value* 5.00% 5.00% 5.00%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Redemption fee none none none
- ---------------------------------------------------------- ----------------- ------------------ -------------------
- ---------------------------------------------------------- ----------------- ------------------ -------------------
ANNUAL FUND OPERATING EXPENSES
- ---------------------------------------------------------- ----------------- ------------------ -------------------
(Expenses that are deducted from the Fund's assets)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Management fees 0.80% 0.80% 0.80%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Other expenses 1.47% 1.35% 1.35%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Total annual Fund operating expenses 2.27% 2.15% 2.15%
===== ===== ======
- ---------------------------------------------------------- ----------------- ------------------ -------------------
</TABLE>
---------------------------------
*This charge decreases over time. Please see the Fund's or Acquiring
Fund's prospectus for more details.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor B Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you invest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
-------------------------------- --------- --------- ---------- --------
INVESTOR B SHARES 1 year 3 years 5 years 10 years
-------------------------------- --------- --------- ---------- --------
-------------------------------- --------- --------- ---------- --------
International Growth Fund $730 $1,009 $1,415 $2,417
-------------------------------- --------- --------- ---------- --------
-------------------------------- --------- --------- ---------- --------
International Equity Fund $718 $973 $1,354 $2,292
-------------------------------- --------- --------- ---------- --------
-------------------------------- --------- --------- ---------- --------
International Equity Fund PRO $718 $973 $1,354 $2,292
FORMA (after reorganization)
---------------------------------- ------------- -------------- --------
If you bought Investor B shares, you would pay the following expenses
if you didn't sell your shares:
------------------------------ --------- --------- --------- ----------
INVESTOR B SHARES 1 year 3 years 5 years 10 years
------------------------------ --------- --------- --------- ----------
------------------------------ --------- --------- --------- ----------
International Growth Fund $230 $709 $1,215 $2,417
------------------------------ --------- --------- --------- ----------
------------------------------ --------- --------- --------- ----------
International Equity Fund $218 $673 $1,154 $2,292
------------------------------ --------- --------- --------- ----------
------------------------------ --------- --------- --------- ----------
International Equity Fund PRO $218 $673 $1,154 $2,292
FORMA (after reorganization)
------------------------------ --------- --------- --------- ----------
I-4
<PAGE>
INTERNATIONAL GROWTH FUND AND
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------- ----------------- ------------------ -------------------
INVESTOR C SHARES INTERNATIONAL
EQUITY FUND
PRO FORMA
INTERNATIONAL INTERNATIONAL (AFTER
GROWTH FUND EQUITY FUND REORGANIZATION)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
<S> <C> <C> <C>
- ---------------------------------------------------------- ----------------- ------------------ -------------------
SHAREHOLDER FEES
- ---------------------------------------------------------- ----------------- ------------------ -------------------
(Fees paid directly from your investment)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Maximum sales charge (load) imposed on purchases none none none
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Maximum deferred sales charge (load), as a % of net
asset value* 1.00% 1.00% 1.00%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Redemption fee none none none
- ---------------------------------------------------------- ----------------- ------------------ -------------------
- ---------------------------------------------------------- ----------------- ------------------ -------------------
ANNUAL FUND OPERATING EXPENSES
- ---------------------------------------------------------- ----------------- ------------------ -------------------
(Expenses that are deducted from the Fund's assets)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Management fees 0.80% 0.80% 0.80%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Other expenses 1.47% 1.35% 1.35%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Total annual Fund operating expenses 2.27% 2.15% 2.15%
===== ===== ======
- ---------------------------------------------------------- ----------------- ------------------ -------------------
</TABLE>
---------------------------------
*This charge applies to investors who buy Investor C shares and sell
them within one year of buying them. Please see the Fund's or Acquiring Fund's
prospectus for more details.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor C Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you invest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
------------------------------- -------- -------- -------- ----------
INVESTOR C SHARES 1 year 3 years 5 years 10 years
------------------------------- -------- -------- -------- ----------
------------------------------- -------- -------- -------- ----------
International Growth Fund $328 $802 $1,303 $2,680
------------------------------- -------- -------- -------- ----------
------------------------------- -------- -------- -------- ----------
International Equity Fund $316 $766 $1,243 $2,558
------------------------------- -------- -------- -------- ----------
------------------------------- -------- -------- -------- ----------
International Equity Fund PRO $316 $766 $1,243 $2,558
FORMA (after reorganization)
------------------------------- -------- -------- -------- ----------
If you bought Investor C shares, you would pay the following expenses
if you didn't sell your shares:
------------------------------ ------- --------- -------- ---------
INVESTOR C SHARES 1 year 3 years 5 years 10 years
------------------------------ ------- --------- -------- ---------
------------------------------ ------- --------- -------- ---------
International Growth Fund $230 $709 $1,215 $2,605
------------------------------ ------- --------- -------- ---------
------------------------------ ------- --------- -------- ---------
International Equity Fund $218 $673 $1,154 $2,483
------------------------------ ------- --------- -------- ---------
------------------------------ ------- --------- -------- ---------
International Equity Fund PRO $218 $673 $1,154 $2,483
FORMA (after reorganization)
------------------------------ ------- --------- -------- ---------
I-5
<PAGE>
APPENDIX II--COMPARISON OF PERFORMANCE
NATIONS INTERNATIONAL EQUITY FUND PERFORMANCE
A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the fund has performed in the
past, and can help you understand the risks of investing in the Fund. A FUND'S
PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR PRIMARY A SHARES (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A shares has
varied from year to year. These returns do not reflect deductions of sales
charges or account fees, and would be lower if they did. returns for Investor B
and Investor C Shares are different because they have their own expenses,
pricing and sales charges.
.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Performance chart appears below:
1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
-8.86% 26.90% 2.21% 8.21% 8.14% 1.04% 16.40% 39.13%
* Return is from inception (6-3-92) to 12-31-92
YEAR-TO-DATE RETURN AS OF MARCH 31, 2000: 0.79%
Best: 3rd quarter 2000: 28.40%
Worst: 3rd quarter 1998: -13.88%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
The table shows the Fund's average annual total return for each period, compared
with the MSCI EAFE INDEX (Morgan Stanley Capital International Europe, Australia
and Far East Index), an index of over 1,100 stocks from 21 developed markets in
Europe, Australia, New Zealand and Asia. The index reflects the relative size of
each market.
1 Year 5 Years Since Inception
Primary A Shares 39.49% 14.12% 11.48%
Investor A Shares 39.13% 13.87% 11.38%
Investor B Shares 37.68% 12.97% 12.06%
II-1
<PAGE>
1 Year 5 Years Since Inception
Investor C Shares 37.64% 13.09% 11.02%
MSCI EAFE Index 26.96% 12.82% 13.29%
** Return is from inception of Investor A Shares. The inception dates for
classes shown may vary.
NATIONS INTERNATIONAL GROWTH FUND PERFORMANCE
A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed in the
past, and can help you understand the risks of investing in the Fund. A FUND'S
PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A Shares has
varied from year to year. These returns do not reflect deductions of sales
charges or account fees, and would be lower if they did. Returns for Investor B
and Investor C Shares are different because they have their own expenses,
pricing and sales charges.
Performance chart appears below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
22.99% -14.77% 11.81% -3.42% 28.48% -0.28% 13.73% 10.89% 1.88% 19.85% 25.97%
</TABLE>
YEAR-TO-DATE RETURN AS OF MARCH 31, 2000: -3.07%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 4th quarter 1998: 20.96%
Worst: 3rd quarter 1990: -21.73%
II-2
<PAGE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
The table shows the Fund's average annual total return for each period, compared
with the MSCI EAFE INDEX (Morgan Stanley Capital International Europe,
Australasia and Far East Index), an index of over 1,100 stock from 21 developed
markets in Europe, Australia, New Zealand and Asia. The index reflects the
relative size of each market.
1 Year 5 Years 10 Years Since Inception
Primary A Shares 26.17% 14.42% 13.55%
Investor A Shares 25.97% 14.17% 8.62% 12.10%
Investor B Shares 24.47% - - 12.22%
Investor C Shares 24.60% - - 16.38%
MSCI EAFE Index 26.96% 12.82% 7.01% 12.41%*
*Return is from inception of index (12-31-69).
II-3
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DATED JUNE 14, 2000
NATIONS FUND, INC.
One Bank of America Plaza, 33rd Floor
Charlotte, North Carolina 28255
1-800-321-7854
NATIONS RESERVES
One Bank of America Plaza, 33rd Floor
Charlotte, North Carolina 28255
1-800-321-7854
(AUGUST 1, 2000 SPECIAL MEETING OF SHAREHOLDERS OF NATIONS FUND, INC.)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Proxy/Prospectus dated the date hereof, for the
Special Meeting of Shareholders of Nations Fund, Inc. to be held on August 1,
2000. Copies of the Proxy/Prospectus may be obtained at no charge by writing or
calling Nations Fund, Inc. or Nations Reserves at the addresses or telephone
numbers set forth above. Unless otherwise indicated, capitalized terms used
herein and not otherwise defined have the same meanings as are given to them in
the Proxy/Prospectus.
INCORPORATION OF DOCUMENTS BY REFERENCE IN STATEMENT OF ADDITIONAL INFORMATION
Further information about the Primary A Shares, Investor A Shares,
Investor B Shares, and Investor C Shares of Nations International Growth Fund
and Nations International Equity Fund is contained in and incorporated herein by
reference to the Statement of Additional Information for Nations Fund, Inc. and
Nations Reserves dated August 1, 1999, as supplemented.
The audited financial statements and related Report of Independent
Accountants for the year ended March 31, 1999 for the Nations International
Growth Fund and Nations International Equity Fund are incorporated herein by
reference. No other parts of the annual and semi-annual reports are incorporated
herein by reference.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
General Information...........................................................................................3
Introductory Note to PRO FORMA Financial Information..........................................................4
</TABLE>
2
<PAGE>
GENERAL INFORMATION
The Reorganization contemplates the transfer of the assets and
liabilities of Nations International Growth Fund (the "International Growth
Fund") of Nations Fund, Inc. to the Nations International Equity Fund ( the
"International Equity Fund") of Nations Reserves in exchange for shares of
designated classes of the International Equity Fund of equal value.
The Shares issued by the International Equity Fund will have an
aggregate dollar value equal to the aggregate dollar value of the shares of the
International Growth Fund that are outstanding immediately before the closing of
the Reorganization.
Immediately after the Closing, the International Growth Fund will
distribute the Shares of the International Equity Fund received in the
Reorganization to its shareholders in liquidation of the International Growth
Fund. Each shareholder owning shares of the International Growth Fund at the
Closing will receive Shares of the designated class of the International Equity
Fund, and will receive any unpaid dividends or distributions that were declared
before the Closing on the International Growth Fund shares. Nations Reserves
will establish an account for each former shareholder of the International
Growth Fund reflecting the number of International Equity Fund Shares
distributed to that shareholder. If the Reorganization Agreement is approved and
consummated, the International Growth Fund will transfer all of its assets and
liabilities, as of the Closing, and all outstanding shares of the International
Growth Fund will be redeemed and canceled in exchange for shares of the
International Equity Fund.
The International Equity Fund's Master Portfolio utilizes a
multi-manager approach. One effect of this approach is that each investment
sub-adviser has a different investment style. Consequently, if the
Reorganization is approved by shareholders, Gartmore expects to sell over 60% of
the International Growth Fund's portfolio securities prior to the
Reorganization. When Gartmore sells these securities in order to allow the
multi-managers to implement their respective investment styles, the
International Growth Fund will have to pay brokerage commissions and may realize
certain capital gains (which are subject to tax) and/or losses. REGARDLESS OF
WHETHER THE ACQUISITION OF THE ASSETS AND LIABILITIES OF THE INTERNATIONAL
GROWTH FUND BY THE INTERNATIONAL EQUITY FUND QUALIFIES AS A TAX-FREE
REORGANIZATION AS DESCRIBED ABOVE, THE EXPECTED SALE OF SECURITIES BY THE
INTERNATIONAL GROWTH FUND PRIOR TO THE REORGANIZATION, IN ANTICIPATION OF THE
REORGANIZATION, COULD RESULT IN A TAXABLE DISTRIBUTION TO INTERNATIONAL GROWTH
FUND SHAREHOLDERS.
For further information about the transaction, see the
Proxy/Prospectus.
3
<PAGE>
INTRODUCTORY NOTE TO PRO FORMA FINANCIAL INFORMATION
The following unaudited PRO FORMA information gives effect to the
proposed transfer of the assets and liabilities of the International Growth Fund
to the International Equity Fund accounted for as if the transfer had occurred
as of March 31, 2000. In addition, the PRO FORMA combined statement of
operations has been prepared as if the transfer had occurred at the beginning of
the fiscal year ended March 31, 2000 and based upon the proposed fee and expense
structure of the International Equity Fund. The PRO FORMA combined statement of
operations has been prepared by adding the statement of operations for the
fiscal year ended March 31, 2000 for the International Growth Fund to the
statement of operations for the International Equity Fund and making adjustments
for changes in the expense structure of the combined fund.
The PRO FORMA financial information should be read in conjunction with
the historical financial statements and notes thereto of the International
Growth Fund and the International Equity Fund included or incorporated herein by
reference in this Statement of Additional Information. The combination of the
above International Growth Fund and the International Equity Fund will be
accounted for as a tax-free reorganization.
4
<PAGE>
Nations International Growth/Nations International Equity Master Portfolio
Pro Forma Combining Schedule of Investments (unaudited)
March 31, 2000
<TABLE>
<CAPTION>
Nations Nations Nations Nations
International International Combined Pro International International Combined Pro
Growth Equity Forma Growth Equity Forma
Shares Shares Shares Description Value (000) Value (000) Value (000)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stocks - 96.4%
Argentina - 0.1%
49,914 49,914 PC Holdings SA, ADR $ - $ 855 $ 855
--------------------------------------------
- 855 855
--------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Australia - 2.2%
250,000 250,000 Australia and New Zealand Banking Group 1,578 1,578
300,000 408,791 708,791 Cable and Wireless Optus 1,202 1,638 2,840
275,000 275,000 Cellnet Telecommunications 534 534
350,000 350,000 Colonial, Ltd. 1,608 1,608
18,000 18,000 Commonwealth Bank of Australia 246 246
82,000 82,000 Computershare Limited 389 389
321,901 321,901 National Australia Bank 4,138 4,138
250,000 410,992 660,992 News Corporation 3,493 5,743 9,236
150,000 150,000 Rio Tinto Ltd. 2,132 2,132
411,768 411,768 Southern Pacific Petroleum 427 427
38,700 38,700 Telstra Corporation 179 179
--------------------------------------------
8,842 14,465 23,307
--------------------------------------------
Belgium - 0.2%
5,569 5,569 Audiofina 685 685
43,119 43,119 Fortis, Series B 1,106 1,106
--------------------------------------------
1,791 1,791
--------------------------------------------
Brazil - 1.1%
45,500 45,500 Cemig CIA Energ, ADR 791 791
86,600 86,600 Companhia Vale do Rio Doce, ADR 2,306 2,306
34,630 34,630 Embratel Participacoes, ADR 887 887
8,800 8,800 Tele Centro Sul Participacoes, ADR 713 713
100,000 37,500 137,500 Tele Norte Leste Participacoes, ADR 2,663 998 3,661
33,783 33,783 Telecomunicacoes de Sao Paulo SA, ADR 1,003 1,003
42,380 42,380 Telesp Celular Participacoes SA, ADR 2,402 2,402
--------------------------------------------
2,663 9,100 11,763
--------------------------------------------
Canada - 1.6%
68,743 68,743 BCE, Inc. 8,570 8,570
100,000 100,000 200,000 Canada Life Financial Corporation 1,526 1,526 3,052
36,000 36,000 Nortel Networks Corporation 4,515 4,515
14,200 14,200 Suncor Energy, Inc. 615 615
--------------------------------------------
1,526 15,226 16,752
--------------------------------------------
Chile - 0.0%
8,189 8,189 Enersis, ADR 166 166
10,100 10,100 Telecom De Chile, ADR 230 230
--------------------------------------------
396 396
--------------------------------------------
Denmark - 0.4%
23,000 23,000 Den Danske Bank Group 2,409 2,409
30,000 30,000 Novo Nordisk A/S 2,058 2,058
--------------------------------------------
4,467 4,467
--------------------------------------------
Finland - 3.0%
4,300 4,300 Helsingin Puhelin Oyj-E 416 416
6,344 6,344 Hpy Holding Oyj-A Shares 266 266
109,747 109,747 Nokia AB Oy 23,209 23,209
10,000 100,467 110,467 Sonera YHTYMA Oyj 682 6,855 7,537
71,694 71,694 Stora Enso Oyj - R Shares 768 768
--------------------------------------------
682 31,514 32,196
--------------------------------------------
</TABLE>
<PAGE>
Nations International Growth/Nations International Equity Fund
Pro Forma Combining Schedule of Investments (unaudited)
March 31, 2000
<TABLE>
<CAPTION>
Nations Nations Nations Nations
International International Combined Pro International International Combined Pro
Growth Equity Forma Growth Equity Forma
Shares Shares Shares Description Value (000) Value (000) Value (000)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stocks - (continued)
France - 10.7%
<S> <C> <C> <C> <C>
40,000 40,000 Accor SA $ 1,569 $ - $ 1,569
9,174 9,174 Alcatel 2,013 2,013
100,000 100,000 Alcatel SA, ADR 4,381 4,381
89,502 89,502 Arentis 4,899 4,899
39,071 39,071 Axa 5,537 5,537
18,594 18,594 Banque Nationale de Paris (BNP) 1,468 1,468
5,569 5,569 Bouygues 4,412 4,412
285 285 Bouygues SA 220 220
5,180 5,180 Canal Plus 1,140 1,140
4,409 4,409 Cap Gemini 1,194 1,194
15,000 15,000 Carrefour SA 1,922 1,922
3,500 3,500 Castorama Dubois 752 752
9,139 9,139 Compagnie De Saint-Gobain 1,168 1,168
60,000 60,000 Compagnie Generale des
Establessements Michelin 1,926 1,926
40,000 40,000 Credit Commercial de France 4,995 4,995
8,604 8,604 Danone 1,902 1,902
8 8 Elf Aquitaine 1 1
15,392 15,392 Equant NV 1,277 1,277
47,496 47,496 France Telecom 8,181 8,181
12,080 12,080 GFI Informatique 2,103 2,103
5,094 5,094 Havas Advertising SA 2,754 2,754
19,528 19,528 Lafarge-Coppee 1,665 1,665
2,000 2,000 L'Oreal 1,292 1,292
2,698 2,698 Lvmh 1,129 1,129
7,626 7,626 Pinault-Printemps-Redoute SA 1,413 1,413
3,265 3,265 Publicis SA 1,750 1,750
12,052 12,052 Rexel SA 826 826
40,000 98,358 138,358 Sanofi-Synthelabo 1,525 3,751 5,276
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
20,006 20,006 Societe Generale 3,990 3,990
4,034 4,034 Societe Television Francaise I 2,972 2,972
13,337 13,337 St Microelectronics 2,450 2,450
4,930 4,930 Suez Lyonnaise des Eaux 846 846
166,326 166,326 Total Fina 24,909 24,909
70,443 70,443 Usinor 1,119 1,119
101,683 101,683 Vivendi 11,725 11,725
----------------------------------------
6,308 108,868 115,176
----------------------------------------
Germany - 5.6%
7,538 7,538 Allianz AG 3,105 3,105
83,800 83,800 BASF AG 3,985 3,985
60,000 60,000 Bayer AG 2,693 2,693
50,000 143,766 193,766 Bayersche Motoren Werke AG 1,577 4,533 6,110
1,097 1,097 Celanese AG 22 22
35,355 35,355 DaimlerChrysler AG 2,314 2,314
92,083 92,083 Deutsche Bank AG 6,120 6,120
47,739 47,739 Deutsche Lufthansa AG 1,074 1,074
20,000 20,000 Deutsche Pfandbrief-Und
Hypothekenbank AG (DePfa-Bank) 1,914 1,914
81,462 81,462 Deutsche Telekom AG (REGD) 6,291 6,291
32,000 32,000 Henkel Kgaa 1,843 1,843
11,144 11,144 Infineon Technologies AG 576 576
30,000 30,000 Kamps AG 1,679 1,679
25,000 25,000 PrimaCom 1,890 1,890
8,651 8,651 ProSieben Media AG 986 986
4,000 6,623 10,623 SAP AG 2,243 4,769 7,012
119,600 119,600 SAP AG 7,146 7,146
28,670 28,670 Siemens AG 4,129 4,129
19,935 19,935 Veba AG 1,019 1,019
----------------------------------------
7,577 52,331 59,908
----------------------------------------
</TABLE>
Nations International Growth/Nations International Equity Fund
Pro Forma Combining Schedule of Investments (unaudited)
March 31, 2000
<TABLE>
<CAPTION>
Nations Nations Nations Nations
International International Combined Pro International International Combined Pro
Growth Equity Forma Growth Equity Forma
Shares Shares Shares Description Value (000) Value (000) Value (000)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stocks - (continued)
Holland - 0.7%
<S> <C> <C> <C> <C> <C>
150,000 150,000 Unilever NV $ - $ 7,219 $ 7,219
-------------------------------------
7,219 7,219
-------------------------------------
Hong Kong - 3.1%
5,300 5,300 AsiaInfo Holdings, Inc. 321 321
330,800 330,800 Cable and Wire (HK Telecom) 867 867
406,000 406,000 Cheung Kong (Holdings) 6,074 6,074
1,173,000 1,173,000 China Telecom (HK) 10,282 10,282
132,500 132,500 CLP Holdings 594 594
49,000 49,000 Hang Seng Bank 428 428
650,000 650,000 HSBC Holdings 7,597 7,597
236,000 236,000 Hutchison Whampoa 4,258 4,258
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
636,000 636,000 Legend Holdings Ltd. 992 992
60,000 60,000 Li & Fung Ltd. 278 278
91,000 91,000 Pacific Century CyberWorks 213 213
138,000 138,000 Sun Hung Kai Properties 1,196 1,196
59,000 59,000 Television Broadcasting Limited 525 525
-------------------------------------
33,625 33,625
-------------------------------------
Ireland - 1.1%
25,000 142,218 167,218 Bank of Ireland 1,785 1,015 2,800
100,000 218,563 318,563 CRH plc Ord. 1,794 3,922 5,716
50,533 50,533 Elan Corporation plc 2,454 2,454
357,068 357,068 Smurfit (Jefferson) Ord. 837 837
-------------------------------------
3,579 8,228 11,807
-------------------------------------
Italy - 3.8%
22,083 22,083 Bipop-Carire SpA 2,322 2,322
67,300 67,300 Bulgari SpA 744 744
600,000 600,000 Enel SpA 2,687 2,687
218,726 218,726 Mediaset SpA 4,345 4,345
500,000 633,543 1,133,543 Olivetti SpA 1,794 2,273 4,067
101,612 101,612 San Paolo - IMI SpA 1,391 1,391
110,329 110,329 San Paolo-Imi SpA, ADR 3,144 3,144
287,340 287,340 Tecnost SpA 1,086 1,086
200,000 886,045 1,086,045 Telecom Italia Mobile 2,454 10,870 13,324
479,041 479,041 Telecom Italia SpA 7,151 7,151
-------------------------------------
4,248 36,013 40,261
-------------------------------------
Japan - 23.1%
12,900 12,900 Advantest Corporation 2,741 2,741
245,000 245,000 Asahi Bank 1,374 1,374
352,000 352,000 Asahi Chemical Industry Company, Ltd. 2,248 2,248
7,700 7,700 Asatsu-DK Inc. 391 391
58,000 58,000 Bridgestone Corporation 1,281 1,281
185,000 185,000 Canon, Inc. 8,027 8,027
120,000 188,000 308,000 Daiwa Securities 2,258 3,538 5,796
50 661 711 DDI Corporation 409 5,407 5,816
63 63 East Japan Railway 327 327
39,000 39,000 Eisai Company, Ltd. 1,029 1,029
4,000 4,000 Fugi Machine Mfg. Co., Ltd. 298 298
165,000 165,000 Fuji Photo Film 7,271 7,271
37 37 Fuji Television Network, Inc. 642 642
20,000 196,800 216,800 Fujitsu 614 6,045 6,659
261,000 261,000 Hitachi 3,102 3,102
122,000 122,000 Honda Motor Company 5,043 5,043
25,000 41,000 66,000 Ito-Yokado Company 1,789 2,934 4,723
1,600 1,600 Kadokawa Shoten Publishing Company, Ltd. 380 380
150,000 150,000 Kao Corporation 4,592 4,592
7,132 7,132 KDD Corporation 601 601
</TABLE>
<PAGE>
Nations International Growth/Nations International Equity Fund
Pro Forma Combining Schedule of Investments (unaudited)
March 31, 2000
<TABLE>
<CAPTION>
Nations Nations Nations Nations
International International Combined Pro International International Combined Pro
Growth Equity Forma Growth Equity Forma
Shares Shares Shares Description Value (000) Value (000) Value (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stocks - (continued)
Japan - (continued)
4,200 4,200 Kojima Company Limited $ - $ 121 $ 121
247,000 247,000 Komatsu 1,175 1,175
83,400 83,400 Kyocera Corporation 13,954 13,954
396,000 396,000 Marubeni Corporation 1,494 1,494
225,000 225,000 Matsushita Electric Industrial 6,735 6,735
900,000 900,000 Mitsubishi Heavy Industries, Ltd. 2,834 2,834
704,000 704,000 Mitsubishi Materials Corporation 2,402 2,402
243,000 243,000 Mitsui O.S.K. Lines, Ltd. 481 481
11,000 11,000 Murata Manufacturing Company, Ltd. 2,676 2,676
43,700 43,700 Namco, Ltd. 1,794 1,794
217,774 217,774 NEC Corporation 6,434 6,434
584,000 584,000 Nikko Securities Company, Ltd. 8,847 8,847
50,900 50,900 Nintendo Company, Ltd. 8,958 8,958
400,000 400,000 Nippon Express Company, Ltd. 2,975 2,975
389,000 389,000 Nippon Steel Corporation 929 929
286 1,428 1,714 Nippon Telegraph & Telephone Company 4,545 22,695 27,240
4,760 4,760 Nippon Television Network Corporation 3,383 3,383
232,000 232,000 Nomura Securities 7,578 7,578
83 83 NTT Mobile Communication 3,407 3,407
7,000 7,000 Rohm Company 2,437 2,437
55,000 55,000 Sankyo Company 1,386 1,386
58,000 58,000 Sanwa Bank 604 604
19,000 19,000 Secom Company 1,630 1,630
250,000 101,700 351,700 Sharp Corporation 5,351 2,176 7,527
60,000 60,000 Shin-Etsu Chemical Company, Ltd. 3,644 3,644
49,300 49,300 Shinko Electric Industries 2,562 2,562
151,000 151,000 Shiseido Company, Limited 2,054 2,054
2,600 2,600 Softbank Corporation 2,319 2,319
157,800 157,800 Sony Corporation 22,309 22,309
132,700 132,700 Sumitomo Corporation 1,610 1,610
65,000 65,000 Taiyo Yuden Company 4,202 4,202
20,100 20,100 Takefuji Corporation 2,156 2,156
506,000 506,000 The Bank of Tokyo - Mitsubishi 7,238 7,238
81,000 81,000 Tokyo Broadcasting System 3,198 3,198
65,600 65,600 Tokyo Electric Power Company 1,439 1,439
384,000 384,000 Toshiba Corporation 3,916 3,916
150,000 150,000 Toyota Motor Corporation 7,854 7,854
20,000 20,000 Trend Micro, Inc. 3,510 3,510
11,850 11,850 World Company 913 913
-----------------------------------------------------
28,969 219,297 248,266
-----------------------------------------------------
Malaysia - 0.1%
638,000 638,000 Malaysian Resources Corporation Berhad 722 722
83,000 83,000 The New Straits Times Press (M) Berhad 369 369
-----------------------------------------------------
1,091 1,091
-----------------------------------------------------
Mexico - 2.0%
391,460 391,460 Carso Global Telecom 1,270 1,270
524,400 524,400 Carso Global Telecom, ADR 3,540 3,540
83,100 83,100 Grupo Carso SA de CV 623 623
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
81,721 81,721 Grupo Televisa, GDR 5,557 5,557
119,438 119,438 Telefonos de Mexico, ADR 8,002 8,002
75,000 34,099 109,099 Walmart de Mexico SA de CV, ADR 1,875 852 2,727
-----------------------------------------------------
1,875 19,844 21,719
-----------------------------------------------------
</TABLE>
Nations International Growth/Nations International Equity Fund
Pro Forma Combining Schedule of Investments (unaudited)
March 31, 2000
<TABLE>
<CAPTION>
Nations Nations Nations Nations
International International Combined Pro International International Combined Pro
Growth Equity Forma Growth Equity Forma
Shares Shares Shares Description Value (000) Value (000) Value (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stocks - (continued)
Netherlands - 5.1%
160,000 160,000 ABN AMRO Holding NV $ - $ 3,566 $ 3,566
18,968 18,968 Aegon NV 1,516 1,516
103,622 103,622 Akzo Nobel NV 4,423 4,423
25,000 25,000 Getronics NV 1,911 1,911
13,217 13,217 Gucci Group NV 1,214 1,214
34,926 34,926 Gucci Group, ADR 3,106 3,106
28,971 28,971 Heineken NV 1,548 1,548
186,477 186,477 Internationale Nederlanden Group NV 10,101 10,101
17,104 17,104 Koninklijke Kpn NV 1,958 1,958
102,684 102,684 Philips Electronics NV 17,255 17,255
88,275 88,275 Royal Dutch Petroleum Company 5,154 5,154
9,300 9,300 Unilever NV 46 46
30,000 25,212 55,212 United Pan-Europe Communications NV 1,402 1,178 2,580
21,140 21,140 Wolters Kluwer NV 486 486
-----------------------------------------------------
3,313 51,551 54,864
-----------------------------------------------------
Portugal - 0.8%
200,000 200,000 Portugal Telecom SA (REGD) 2,565 2,565
500,000 500,000 Portugal Telecommunications, ADR 6,219 6,219
-----------------------------------------------------
2,565 6,219 8,784
-----------------------------------------------------
Singapore - 0.9%
295,000 295,000 Chartered Semiconductor 2,793 2,793
7,000 7,000 Creative Technology 222 222
150,000 100,895 250,895 DBS Group Holding Ltd. 1,982 1,333 3,315
217,000 217,000 OMNI Industries 510 510
38,160 38,160 Overseas Union Bank 172 172
70,850 70,850 Overseas-Chinese Banking Corporation Ltd. 439 439
30,000 30,000 Pacific Century Region Developments Limited 407 407
77,000 77,000 Sembcorp Logistics 545 545
33,000 33,000 Singapore Press Holdings, Ltd. 527 527
6,080 6,080 St Assembly Test, ADR 295 295
-----------------------------------------------------
1,982 7,243 9,225
-----------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
South Africa - 0.2%
15,000 15,000 Anglo American Platinum Corporation 399 399
1,200,000 1,200,000 Sanlam 1,524 1,524
-----------------------------------------------------
1,524 399 1,923
-----------------------------------------------------
South Korea - 1.8%
170,000 170,000 Korea Electric Power Corporation, ADR 2,688 2,688
2,800 2,800 Korea Telecom Free 223 223
103,910 103,910 Korea Telecom, ADR 4,546 4,546
1,700 1,700 Locus Corporation 220 220
28,973 28,973 Pohang Iron & Steel Company Ltd., ADR 797 797
31,905 31,905 Samsung Electronics 9,670 9,670
20,670 20,670 SK Telecom Company, ADR 806 806
-----------------------------------------------------
18,950 18,950
-----------------------------------------------------
Spain - 2.5%
94,500 94,500 Banco Bilbao Vizcaya 1,389 1,389
100,000 100,000 Banco Popular Espanol 3,062 3,062
15,996 15,996 Bankinter SA 1,009 1,009
190,245 190,245 Endessa 4,365 4,365
90,000 90,000 Gas Natural 1,756 1,756
</TABLE>
Nations International Growth/Nations International Equity Fund
Pro Forma Combining Schedule of Investments (unaudited)
March 31, 2000
<TABLE>
<CAPTION>
Nations Nations Nations Nations
International International Combined Pro International International Combined Pro
Growth Equity Forma Growth Equity Forma
Shares Shares Shares Description Value (000) Value (000) Value (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stocks - (continued)
Spain - (continued)
110,483 110,483 Iberdrola SA $ - $ 1,441 $ 1,441
100,000 100,000 Repsol SA 2,193 2,193
160,000 160,000 Repsol-YPF, SA 3,410 3,410
15,800 15,800 Telefonica Publicidad E
Informacion, S.A. 688 688
278,383 278,383 Telefonica SA 7,033 7,033
-----------------------------------------------------
3,949 22,397 26,346
-----------------------------------------------------
Sweden - 3.6%
60,000 60,000 Atlas Copco AB, Series "A" 1,458 1,458
42,000 42,000 Atlas Copco AB, Series "B" 977 977
45,000 207,195 252,195 Ericsson (L.M.) Telephone
Company, Series B 3,953 18,202 22,155
270,847 270,847 Investor AB 4,232 4,232
2,670 2,670 Netcom AB 230 230
23,997 23,997 Sandvik AB 622 622
21,002 21,002 Sandvik AB 540 540
40,000 17,000 57,000 SBS Broadcasting SA 2,460 1,046 3,506
27,272 27,272 Securitas AB 660 660
53,955 53,955 Skandia Forsakrings AB 2,554 2,554
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
27,040 27,040 SKF AB 585 585
33,485 33,485 SKF AB 744 744
-----------------------------------------------------
8,848 29,415 38,263
-----------------------------------------------------
Switzerland - 4.1%
1,277 1,277 Ares-Serono Group 4,808 4,808
4,046 4,046 Clariant AG 1,523 1,523
2,048 2,048 Compagnie Financiere Richemont AG 5,204 5,204
17,658 17,658 Credit Suisse Group 3,515 3,515
760 760 Julius Baer Holdings, Ltd. 2,861 2,861
250 70 320 Kudelski SA 3,120 874 3,994
1,000 1,750 2,750 Nestle SA (REGD) 1,792 3,136 4,928
1,000 3,367 4,367 Novartis AG (REGD) 1,368 4,605 5,973
175 175 Roche Holding AG 1,901 1,901
1,546 1,546 The Swatch Group AG 365 365
1,950 1,950 The Swatch Group AG 2,274 2,274
6,184 6,184 UBS AG (REGD) 1,625 1,625
10,000 10,000 Zurich Allied AG (REGD) 5,040 5,040
-----------------------------------------------------
6,280 37,731 44,011
-----------------------------------------------------
Taiwan - 0.6%
67,527 67,527 Advanced Semiconductor 255 255
19,000 19,000 Asustek Computer Inc. 238 238
17,000 17,000 Asustek Computer Inc., GDR 310 310
24 24 Asustek Computer, GDR - -
348,000 348,000 Bank Sinopac 220 220
178,000 178,000 DBTEL Inc. 690 690
298,000 298,000 Far Eastern Textile Ltd. 617 617
41,700 41,700 Hon Hai Precision Industry Company, Ltd., GDR 1,445 1,445
214,000 214,000 Nan Ya Plastic Corporation 496 496
64,000 64,000 President Chain Store Corporation 299 299
14,700 14,700 Synnex Technology International, GDR 463 463
146,000 146,000 Taiwan Semiconductor 984 984
2,000 2,000 Taiwan Semiconductor SP, ADR 114 114
160,000 160,000 United Microelectronics Corporation, Ltd. 620 620
-----------------------------------------------------
6,751 6,751
-----------------------------------------------------
Thailand - 0.0%
17,700 17,700 Advanced Info Services (FGN) 267 267
-----------------------------------------------------
267 267
-----------------------------------------------------
</TABLE>
Nations International Growth/Nations International Equity Fund
Pro Forma Combining Schedule of Investments (unaudited)
March 31, 2000
<TABLE>
<CAPTION>
Nations Nations Nations Nations
International International Combined Pro International International Combined Pro
Growth Equity Forma Growth Equity Forma
Shares Shares Shares Description Value (000) Value (000) Value (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stocks - (continued)
United Kingdom - 17.4%
209,000 209,000 3i Group $ - $ 4,391 $ 4,391
225,000 225,000 Abbey National plc 2,954 2,954
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
814,009 814,009 Aegis Group 2,526 2,526
160,000 160,000 Amvescap Ord. 2,176 2,176
19,949 19,949 Arm Holdings plc 1,216 1,216
58,000 58,000 AstraZeneca Group plc 2,343 2,343
88,100 88,100 AstraZeneca Group plc 3,554 3,554
600,000 600,000 Azlan Group Ord. 1,311 1,311
250,000 250,000 Bank of Scotland Ord. 2,831 2,831
118,357 118,357 Barclays 3,162 3,162
939,604 939,604 BP Amoco 8,596 8,596
179,803 179,803 British Aerospace 1,015 1,015
40,000 40,000 British Airways plc 2,150 2,150
36,180 36,180 British Sky Broadcasting
Group plc ("BSkyB") 1,026 1,026
537,986 537,986 British Telecommunications Ord. 10,083 10,083
214,181 214,181 Cable & Wireless plc 4,021 4,021
147,181 147,181 Cable and Wireless
Communications plc 2,484 2,484
32,223 32,223 Capita Group plc 822 822
408,030 408,030 Carlton Communications plc 4,888 4,888
42,490 42,490 Colt Telecom Group 2,060 2,060
143,434 143,434 Compass Group 1,872 1,872
125,800 125,800 Corus Group plc, ADR 2,107 2,107
61,760 61,760 Daily Mail and General Trust-A NV 1,195 1,195
631,297 631,297 Diageo plc 4,819 4,819
62,400 62,400 EMAP plc 1,115 1,115
227,617 227,617 EMI Group plc 2,473 2,473
217,960 217,960 Glaxo Wellcome Ord. 6,240 6,240
250,000 582,606 832,606 Granada Group 2,682 6,250 8,932
175,634 175,634 Hays 1,147 1,147
155,400 155,400 HSBC Holdings 1,837 1,837
284,993 284,993 Invensys plc 1,271 1,271
40,000 51,163 91,163 Logica 1,353 1,730 3,083
68,950 68,950 Marconi plc 823 823
680,211 680,211 Marks & Spencer plc 2,743 2,743
52,500 52,500 Misys plc 732 732
268,208 268,208 New Dixons Group plc 1,242 1,242
47,451 47,451 Ocean Group plc 889 889
400,000 400,000 PowerGen plc 2,345 2,345
527,706 527,706 ScottishPower plc 4,280 4,280
600,000 600,000 Securicor Ord. 1,211 1,211
250,000 1,809,644 2,059,644 Shell Transport and Trading
Company Ord. 2,074 15,011 17,085
245,000 466,707 711,707 Smithkline Beecham Ord. 3,236 6,164 9,400
119,638 119,638 Smiths Industries plc 1,462 1,462
618,509 618,509 Tesco plc 2,072 2,072
65,490 65,490 The Sage Group plc 735 735
200,000 200,000 Thus plc 1,523 1,523
142,909 142,909 Unilever 913 913
684,469 5,100,815 5,785,284 Vodafone AirTouch plc 3,805 28,357 32,162
42,200 42,200 Winbond Electronics Corporation 1,255 1,255
150,000 276,988 426,988 WPP Group Ord. 2,637 4,869 7,506
-----------------------------------------------------
24,839 163,239 188,078
-----------------------------------------------------
United States - 0.6%
1 1 NTL Incorporated - -
114,977 114,977 The News Corporation Ltd. 6,467 6,467
-----------------------------------------------------
6,467 6,467
-----------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Total Common stocks 119,569 914,959 1,034,528
-----------------------------------------------------
(Cost $74,974, $728,716 and $803,690, respectively)
</TABLE>
Nations International Growth/Nations International Equity Fund
Pro Forma Combining Schedule of Investments (unaudited)
March 31, 2000
<TABLE>
<CAPTION>
Nations Nations Nations Nations
International International Combined Pro International International Combined Pro
Growth Equity Forma Growth Equity Forma
Shares Shares Shares Description Value (000) Value (000) Value (00)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Preferred stocks - 0.1%
Japan - 0.1%
29,300 29,300 Tokyo Broadcasting Company $ - $ 1,165 $ 1,165
-----------------------------------------------------
Total Preferred stocks 1,165 1,165
-----------------------------------------------------
(Cost $0, $810 and $810, respectively)
Warrants - 0.0%
Japan - 0.0%
8,100 8,100 Tokyo Broadcasting Company 313 313
-----------------------------------------------------
Total Warrants 313 313
-----------------------------------------------------
(Cost $0, $245 and $245, respectively)
Investment companies - 11.3%
15,979,000 104,751,000 120,730,000 Nations Cash Reserves# 15,979 104,751 120,730
-----------------------------------------------------
Total Investment companies 15,979 104,751 120,730
-----------------------------------------------------
(Cost $15,979, $104,751 and $120,730, respectively)
-----------------------------------------------------
Total Investments - 107.8% $ 135,548 $ 1,021,188 $ 1,156,736
-----------------------------------------------------
(Cost $90,953, $834,522 and $925,475, respectively)
</TABLE>
<PAGE>
Nations International Growth Fund
Nations International Equity Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Combination
Nations Master Investment Trust (the "Trust"), Nations Fund, Inc. (the
"Company") and Nations Reserves ("Reserves") are each registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
investment company. As of March 31, 2000, the Trust offered seven separate
portfolios, the Company offered seven separate portfolios and Reserves offered
sixteen separate portfolios. The unaudited Pro Forma Combining Statement of Net
Assets assumes the exchange described in the next paragraph occurred as of March
31, 2000 and the unaudited Pro Forma Combining Statement of Operations for the
year ended March 31, 2000 assumes the exchange occurred as of April 1, 1999.
These statements have been derived from books and records utilized in
calculating daily net asset value of each fund at March 31, 2000 and for the
twelve month period then ended.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the Nations International Growth Fund in exchange for
shares of Nations International Equity Fund. Under generally accepted accounting
principles, the market value of investment securities of the Nations
International Growth Fund will be carried forward at the cost basis to the
surviving entity and the results of operations of the Nations International
Equity Fund for pre-combination periods will not be restated. The pro forma
statements do not reflect the expenses of either fund in carrying out its
obligations under the proposed Agreement and Plan of Reorganization, which are
not considered to be material.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
2. Pro Forma Operations
Pro forma operating expenses include the actual expenses of each fund and the
combined fund, with certain expenses adjusted to reflect the expected expenses
of the combined entity.
<PAGE>
NATIONS RESERVES
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
1-800-626-2275
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification.
---------------
Article VIII of the Agreement and Declaration of Trust filed as
Exhibit 1 to the Registration Statement is incorporated by reference.
Indemnification of Registrant's administrators, principal underwriter, custodian
and transfer agent is provided for, respectively, in the:
1. Co-Administration Agreement with Stephens Inc. and Banc of
America Advisors, Inc.;
2. Distribution Agreement with Stephens Inc.;
3. Custody Agreement with The Bank of New York; and
4. Transfer Agency Agreement with PFPC Inc.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant by the Registrant pursuant to the Agreement and
Declaration of Trust or otherwise, the Registrant is aware that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and, therefore, is unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by trustees, directors,
officers or controlling persons of the Registrant in connection with the
successful defense of any act, suit or proceeding) is asserted by such trustees,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 16. Exhibits.
--------
All references to the "Registration Statement" in the following
list of Exhibits refer to the Registrant's Registration Statement on Form N-1A
(File Nos. 33-33144; 811-6030). All references to the "Nations Fund, Inc.
Registration Statement" in the following list of Exhibits refer to Nations Fund,
Inc.'s Registration Statement on Form N-1A (File Nos. 33-4038; 811-4614 ).
EXHIBIT NUMBER DESCRIPTION
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(1) Declaration of Trust date January 22, 1990, is incorporated by reference to
Post-Effective Amendment No. 22 to the Registration Statement, filed on
August 27, 1998.
(2) By-Laws dated January 22, 1990, are incorporated by reference to
Post-Effective Amendment No. 22 to the Registration Statement, filed on
August 27, 1998.
(3) Not Applicable.
(4) Form of Agreement and Plan of Reorganization, filed herewith.
(5) Not Applicable.
(6)(a) Investment Advisory Agreement with Banc of America Advisors, Inc. (formerly,
NationsBanc Advisors, Inc.) incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement, filed on March 7, 2000.
(6)(b) Sub-Advisory Agreement with Gartmore Global Partners incorporated by
reference to Post-Effective Amendment No. 30 to the Registration Statement,
filed on March 7, 2000.
(7) Distribution Agreement with Stephens, Inc. incorporated by reference to
Post-Effective Amendment No. 30 to the Registration Statement, filed on March
7, 2000.
(8) Not Applicable.
(9) Custody Agreement with The Bank of New York is incorporated by reference to
Post-Effective Amendment No. 30 to the Registration Statement, filed on March
7, 2000.
(10)(a) Shareholder Servicing Plan for Investor Shares is incorporated by reference
to Post-Effective Amendment No. 30 to the Registration Statement, filed on
March 7, 2000.
(10)(b) Transfer Agency and Services Agreement with PFPC Inc. (formerly, First Data
Investor Services Group, Inc.), is incorporated by reference to
Post-Effective Amendment No. 30 to the Registration Statement, filed on March
7, 2000.
(10)(c) Sub-Transfer Agency Agreement between PFPC Inc. (formerly, First Data
Investor Services Group, Inc.) and Bank of America, N.A., is incorporated by
reference to Post-Effective Amendment No. 30 to the Registration Statement,
filed on March 7, 2000.
(11) Opinion and Consent of Counsel- Morrison & Foerster LLP, filed herewith.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(12) See Item 17(3) of this Part C.
(13)(a) Co-Administration Agreement among Nations Reserves, Stephens Inc., and Banc
of America Advisors, Inc. dated December 1, 1998, is incorporated by
reference to Post-Effective Amendment No. 30 to the Registration Statement,
filed on March 7, 2000.
(13)(b) Sub-Administration Agreement among Nations Reserves, Bank of New York and
Banc of America Advisors, Inc. dated December 1, 1998, is incorporated by
reference to Post-Effective Amendment No. 30 to the Registration Statement,
filed on March 7, 2000.
(14) Consent of Independent Accountants- PricewaterhouseCoopers LLP, to be filed
by amendment.
(15) Not Applicable.
(16) Powers of Attorney, filed herewith.
(17)(a) Plan entered into by Registrant pursuant to Rule 18f-3 under the Investment
Company Act of 1940, dated April 12, 1995, is incorporated by reference
to Post-Effective Amendment No. 22 to the Registration Statement, filed on
August 27, 1998.
(17)(b) Form of Proxy Ballot, filed herewith.
17(c)(i) Prospectus for the Primary A, Investor A, Investor B, and Investor C Shares
of Nations International Equity Fund, dated August 1, 1999, is incorporated
by reference to Post-Effective Amendment No. 29 to the Registration
Statement, as filed on July 30, 1999.
17(c)(ii) Statement of Additional Information for the Primary A and Investor Shares of
Nations International Equity Fund, dated August 1, 1999, as supplemented,
filed as part of Post-Effective Amendment No. 29 to the Registration
Statement on Form N-1A filed on July 30, 1999.
17(c)(v) Prospectus for the Primary A, Investor A, Investor B and Investor C Shares
of Nations International Growth Fund, dated August 1, 1999, is incorporated
by reference to Nations Fund, Inc.'s Registration Statement, filed as part
of the Post-Effective Amendment No. 45 on July 30, 1999.
17(c)(vi) Statement of Additional Information for the Primary A and Investor Shares
of Nations International Growth Fund, dated August 1, 1999, is incorporated
by reference to Nations Fund, Inc.'s Registration Statement, filed as part of
the Post-Effective Amendment No. 45 on July 30, 1999.
Item 17. Undertakings.
------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(1) Registrant agrees that, prior to any public reoffering
of the securities registered through the use of a
prospectus which is a part of this registration
statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, the reoffering prospectus will
contain the information called for by the applicable
registration form for the reofferings by persons who
may be deemed underwriters, in addition to the
information called for by the other items of the
applicable form.
(2) The undersigned registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed
as part of an amendment to the registration statement
and will not be used until the amendment is effective,
and that, in determining any liability under the
Securities Act of 1933, each post-effective amendment
shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the
securities at that time shall be deemed to be the
initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by
post-effective amendment, an opinion of counsel or a
copy of an IRS ruling supporting the tax consequences
of the Reorganization within a reasonable time after
receipt of such opinion or ruling.
</TABLE>
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on N-14 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Little
Rock, State of Arkansas on the 10th day of May, 2000.
NATIONS RESERVES
By: *
------------------------------------------
A. Max Walker
President and Chairman
of the Board of Trustees
By: /s/ Richard H. Blank, Jr.
------------------------------------------
Richard H. Blank, Jr.
*Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
* President and Chairman May 10, 2000
- ---------------------------------------- of the Board of Trustees
(A. Max Walker) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Treasurer and Secretary May 10, 2000
- ------------------------------- (Principal Financial and
(Richard H. Blank, Jr.) Accounting Officer)
* Trustee May 10, 2000
- ----------------------------------------
(Edmund L. Benson, III)
* Trustee May 10, 2000
- ----------------------------------------
(James Ermer)
* Trustee May 10, 2000
- ----------------------------------------
(William H. Grigg)
* Trustee May 10, 2000
- ----------------------------------------
(Thomas F. Keller)
* Trustee May 10, 2000
- ----------------------------------------
(Carl E. Mundy, Jr.)
* Trustee May 10, 2000
- ----------------------------------------
(Cornelius J. Pings)
* Trustee May 10, 2000
- ----------------------------------------
(Charles B. Walker)
* Trustee May 10, 2000
- ----------------------------------------
(Thomas S. Word)
* Trustee May 10, 2000
- ----------------------------------------
(James B. Sommers)
/s/ Richard H. Blank, Jr.
- -------------------------------
Richard H. Blank, Jr.
*Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
NATIONS RESERVES
FILE NO. 333-________
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
EX-99.4 Form of Agreement and Plan of
Reorganization
EX.-99.11 Opinion and Consent of Counsel -- Morrison &
Foerster LLP
EX-99.16 Powers of Attorney
EX-99.17 Form of Proxy Ballot
</TABLE>
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this __ day of _____, 2000 by and between Nations Fund, Inc. (the "Company"),
a Maryland corporation, for itself and on behalf of its Nations International
Growth Fund, and Nations Reserves ("Reserves"), a Massachusetts business trust,
for itself and on behalf of its 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 Growth Fund (the "Acquired
Fund") be conveyed to and be acquired and assumed, by Reserves's Nations
International Equity Fund (the "Acquiring Fund") in exchange for shares of equal
U.S. dollar value of such Acquiring Fund which shall thereafter promptly be
distributed to the shareholders of the Acquired Fund 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 Fund and the
Acquired Fund 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 Fund and Acquiring Fund shall be consolidated as follows:
1. Conveyance of Fund Assets and Liabilities of the Acquired Fund.
--------------------------------------------------------------
(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 Fund (the "Fund Assets"), subject to all liabilities
of the Acquired Fund existing as of the Effective Time of the
Reorganization (the "Liabilities"), shall be transferred by
the Acquired Fund to the Acquiring Fund and shall be accepted
and assumed by the 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 Fund shall become the assets of the Acquiring Fund;
and (ii) all Liabilities of the Acquired Fund shall attach to
the Acquiring Fund, enforceable against the Acquiring Fund 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
Fund, and any deferred or prepaid expenses shown as an asset
on the Acquired Fund's books, that the Liabilities of the
Acquired Fund 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 Fund will provide to,
or cause to be provided to, the Acquiring Fund, a schedule of
its securities, other assets and its known liabilities. It is
understood and agreed that the Acquired Fund 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 Fund, acquire any
additional securities other than securities that the Acquiring
Fund is permitted to purchase in accordance with its stated
<PAGE>
investment objective and policies. At least ten (10) business
days prior to the Closing Date, the Acquiring Fund will advise
the Acquired Fund of any investments of the Acquired Fund
shown on such schedule that the Acquiring Fund would not be
permitted to hold, pursuant to its stated investment objective
and policies or otherwise. The Acquired Fund, if requested by
the Acquiring Fund, 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 Fund
and Acquiring Fund, when aggregated, would contain investments
exceeding certain percentage limitations applicable to the
Acquiring Fund, the Acquired Fund, if requested by the
Acquiring Fund, 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 Fund on the following basis:
(1) In exchange for the transfer of the Fund Assets, the
Acquiring Fund shall simultaneously issue to the Acquired
Fund at the Effective Time of the Reorganization full and
fractional Shares of the Acquiring Fund, 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 Fund
delivered to the Acquired Fund 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 Fund 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 Fund, and the net value of the Fund Assets minus
Liabilities to be conveyed by the Acquired Fund and
assumed by the Acquiring Fund, 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 Fund
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 Fund's
then current valuation procedures.
2. Liquidation of the Acquired Fund. At the Effective Time of the
Reorganization, the Acquired Fund shall make a liquidating
distribution to its shareholders as follows: Shareholders of
record of the Acquired Fund shall be credited with full and
fractional shares of the respective Shares that are issued by the
Acquiring Fund in connection with the Reorganization corresponding
to the Acquired Fund 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
Fund 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 Fund shares by
such shareholders (the "Transferor Record Holders"). All of the
issued and outstanding shares of the Acquired Fund 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 Fund 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 Fund, and also shall take
all other steps as are necessary
<PAGE>
and proper to effect the termination or declassification of the
Acquired Fund in accordance with all applicable laws.
3. Valuation Time. The "Valuation Time" shall be the time as of which
the net asset value of each class of shares of the Acquired Fund
and the Acquiring Fund 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 Fund. The Company, on behalf of itself
and, where appropriate, its Acquired Fund, represents and warrants
to, and agrees with, Reserves on behalf of the Acquiring Fund as
follows, with such representations, warranties and agreements made
on behalf of the Acquired Fund on a several (and not joint, or
joint and several) basis:
(a) The Company is a corporation, duly incorporated, 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
Directors of the Company on behalf of its Acquired Fund, 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 Fund 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 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 Fund 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, or the Acquired Fund (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 applicable
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.
<PAGE>
(g) All of the issued and outstanding shares of the Company's
Acquired Fund 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.
(h) The Company shall operate the business of the Acquired Fund 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 Fund 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 Fund 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 Fund. Reserves, on behalf of itself
and where appropriate, the Acquiring Fund, represents and
warrants to, and agrees with, the Company on behalf of the
Acquired Fund as follows, with such representations, warranties
and agreements made on behalf of the Acquiring Fund 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 of
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 Fund, 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 Fund 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.
<PAGE>
(e) Reserves has valued, and will continue to value, the portfolio
securities and other assets of the Acquiring Fund 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 Fund, or
the Primary A Shares, Investor A Shares, Investor B Shares or
Investor C Shares of the Acquiring Fund 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 Fund to be issued and delivered to
the Acquired Fund for the account of the shareholders of the
Acquired Fund, 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 Fund shall have any preemptive right of
subscription or purchase in respect thereto.
(h) All of the issued and outstanding shares of the Acquiring Fund
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 Fund 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 Fund prior
to the Effective Time of the Reorganization to ensure that the
Reorganization qualifies 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 Fund 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.
6. Shareholder Action. As soon as practicable after the effective
date of the Proxy Statement the Company shall hold a meeting(s) of
the shareholders of the Acquired Fund 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
Directors of the Company.
7. 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.
8. Closing Date, Effective Time of the Reorganization. The "Closing
Date" shall be _________, 2000, 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 Fund to be
issued pursuant to Section 1 and the liquidation of the Acquired
Fund pursuant to Section 2 shall occur on the
<PAGE>
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.
9. Conditions to the Reserves's Obligations on Behalf of its
Acquiring Fund. The obligations of the Reserves hereunder shall be
subject to the following conditions precedent:
(a) This Agreement and the Reorganization shall have been approved
by the Board of Directors of the Company and by a majority of
the shareholders of its Acquired Fund in the manner required
by the Company's Articles of Incorporation, 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 to Reserves a statement of
assets and liabilities of the Acquired Fund, showing the tax
costs of such securities by lot and the holding periods of
such securities, as of the Valuation Time.
(d) The Company shall have duly executed and delivered to the
Company such bills of sale, assignments, certificates and
other instruments of transfer ("Transfer Documents") as
Reserves may deem necessary or desirable to transfer all of
the Acquired Fund's rights, title and interest in and to the
Fund Assets.
(e) 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 Fund 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 Reserves's Acquiring Fund may
properly acquire under its investment objectives, policies and
limitations and may otherwise be lawfully acquired by such
Acquiring Fund.
(f) 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
Acquiring Fund to be delivered to the Company's Acquired Fund
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,
<PAGE>
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.
(g) The Company shall have received an opinion of Morrison &
Foerster LLP, based upon reasonable representations made in
certificates provided by the Company, its affiliates and/or
principal shareholders of the Company's Acquired Fund to
Morrison & Foerster LLP, 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).
(h) 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.
(i) 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.
(j) 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.
(k) The Company on behalf of the Acquired Fund 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.
(l) The Company shall have received a duly executed instrument
whereby the Acquiring Fund assumes all of the liabilities of
the Company's Acquired Fund.
10. Conditions to the Company's Obligations on behalf of the Acquired
Fund. 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 Reserves on behalf of the
Acquiring Fund and by a majority of the shareholders of the
Acquired Fund in the manner required by its charter documents,
applicable law and this Agreement.
(b) 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.
(c) 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 the
Company and dated as of the Closing Date, to the effect that
the representations and warranties of the Acquired Fund made
in this Agreement are true and correct at and as of the
Valuation Time.
(d) 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
<PAGE>
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.
(e) 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 Fund and/or the
Acquiring Fund, addressed to Reserves in a form reasonably
satisfactory to them, 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 Fund and the Acquiring Fund will each
be a "party to a reorganization," within the meaning of
Section 368(b) of the Code, with respect to the
Reorganization.
(f) The Fund Assets to be transferred to the Acquiring Fund under
this Agreement shall include no assets which the Acquiring
Fund may not properly acquire pursuant to its investment
objective, policies or restrictions or may not otherwise
lawfully acquire.
(g) 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.
(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) Reserves on behalf of the Acquiring Fund 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.
11. Survival of Representations and Warranties. The representations
and warranties of Reserves on behalf of the Acquiring Fund set
forth in this Agreement shall survive the delivery of the Fund
Assets to the Acquiring Fund and the issuance of the shares of the
Acquiring Fund at the Effective Time of the Reorganization.
12. 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:
<PAGE>
(a) By Reserves on behalf of the Acquiring Fund 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 Fund if the
conditions set forth in Section 9 are not satisfied as
specified in said Section;
(c) By mutual written consent of Reserves and the Company.
13. 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.
14. 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) Banc of America Advisors, Inc. and/or its affiliates will be
responsible for the expenses related to entering into and
carrying out the provisions of this Agreement, whether or not
the transactions contemplated hereby are consummated.
15. 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 the Acquired Fund or
Reserves, acting on behalf of the Acquiring Fund; provided,
however, that following the meeting of the shareholders of the
Acquired Fund, no such amendment may have the effect of changing
the provisions for determining the number of shares of the
Acquiring Fund 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 Fund,
without the Acquired Fund obtaining its shareholders' further
approval:
(a) At any time prior to or (to the fullest extent permitted by
law) after approval of this Agreement by the shareholders of
the Acquired Fund, the Company on behalf of its Acquired Fund,
may waive any breach by Reserves, on behalf of the Acquiring
Fund, 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);
(b) At any time prior to or (to the fullest extent permitted by
law) after approval of this Agreement by the shareholders of
the Acquired Fund, Reserves, on behalf of the Acquiring Fund,
may waive any breach by the Company on behalf of its Acquired
Fund, 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).
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 Fund identified on Schedule A
By:____________________________________________
<PAGE>
Richard H. Blank, Jr.
Secretary and Treasurer
NATIONS RESERVES
On behalf of its Acquiring Fund identified on Schedule A
By:____________________________________________
Richard H. Blank, Jr.
Secretary and Treasurer
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDERS OWNING SHARES OF THE WOULD RECEIVE SHARES OF THE
FOLLOWING ACQUIRED FUND AND CLASSES OF FOLLOWING ACQUIRING FUND AND
THE COMPANY: CLASSES OF RESERVES:
Nations International Growth Fund |_| Nations International Equity Fund
Primary A Shares Primary A Shares
Investor A Shares Investor A Shares
Investor B Shares Investor B Shares
Investor C Shares Investor C Shares
</TABLE>
EX-99.11
[MORRISON & FOERSTER LLP LETTERHEAD]
May 12, 2000
Nations Reserves
One Bank of America Plaza
33rd Floor
Charlotte, NC 28255
Re: Units of Beneficial Interest of Nations Reserves
Ladies/Gentlemen:
We refer to the Registration Statement on Form N-14 (the "Registration
Statement") of Nations Reserves ("Reserves") relating to the registration of an
indefinite number of units of beneficial interest (the "Shares"), of certain
Funds of Reserves (the "Funds").
We have been requested by Reserves to furnish this opinion as Exhibit
11 to the Registration Statement.
We have examined documents relating to the organization of Reserves and
the authorization and issuance of the Shares. We have also made such inquiries
of Reserves and examined such questions of law as we have deemed necessary for
the purpose of rendering the opinion set forth herein. We have assumed the
genuineness of all signatures and the authenticity of all items submitted to us
as originals and the conformity with originals of all items submitted to us as
copies.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance of the Shares by Reserves has been duly and validly
authorized by all appropriate action and, assuming delivery in accordance with
the description set forth in the Combined Proxy Statement/Prospectus included in
the Registration Statement, the Shares will be legally issued, fully paid and
nonassessable by Reserves.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
<PAGE>
Nations Reserves
May 12, 2000
Page Two
In addition, we hereby consent to the use of our name and to the
description of advice rendered by our firm under the heading "The
Consolidation--Federal Income Tax Considerations" in the Combined Proxy
Statement/Prospectus. We also consent to the use of our name and to the
reference to our firm under the heading "Counsel" in the Statement of Additional
Information, which is incorporated by reference into this Registration
Statement.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
POWER OF ATTORNEY
Edmund L. Benson, III, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Reserves (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a trustee of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: May 12, 2000
/s/ Edmund L. Benson, III
-------------------------
Edmund L. Benson, III
<PAGE>
POWER OF ATTORNEY
James Ermer, whose signature appears below, does hereby constitute
and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco
E. Adelfio and Steven G. Cravath, each individually, his true and lawful
attorneys and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Reserves (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a trustee of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: May 12, 2000
/s/ James Ermer
---------------
James Ermer
<PAGE>
POWER OF ATTORNEY
William H. Grigg, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Reserves (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a trustee of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: May 12, 2000
/s/ William H. Grigg
--------------------
William H. Grigg
<PAGE>
POWER OF ATTORNEY
Thomas F. Keller, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Reserves (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a trustee of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: May 12, 2000
/s/ Thomas F. Keller
--------------------
Thomas F. Keller
<PAGE>
POWER OF ATTORNEY
A. Max Walker, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Reserves (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as an officer of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: May 12, 2000
/s/ A. Max Walker
-----------------
A. Max Walker
<PAGE>
POWER OF ATTORNEY
Charles B. Walker, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Reserves (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a trustee of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: May 12, 2000
/s/ Charles B. Walker
---------------------
Charles B. Walker
<PAGE>
POWER OF ATTORNEY
Thomas S. Word, Jr., whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Reserves (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a trustee of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: May 12, 2000
/s/ Thomas S. Word, Jr.
-----------------------
Thomas S. Word, Jr.
<PAGE>
POWER OF ATTORNEY
Carl E. Mundy, Jr., whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Reserves (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as an officer of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: May 12, 2000
/s/ Carl E. Mundy, Jr.
----------------------
Carl E. Mundy, Jr.
<PAGE>
POWER OF ATTORNEY
James B. Sommers, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Reserves (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as an officer of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: May 12, 2000
/s/ James B. Sommers
--------------------
James B. Sommers
<PAGE>
POWER OF ATTORNEY
Dr. Cornelius J. Pings, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Reserves (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as an officer of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: May 12, 2000
/s/ Cornelius J. Pings
----------------------
Cornelius J. Pings
EXH. 99.17(B)
NATIONS INTERNATIONAL GROWTH FUND
NATIONS FUND, INC.
PROXY CARD
SPECIAL MEETING OF SHAREHOLDERS-AUGUST 1, 2000
The undersigned hereby appoints Robert B. Carroll, Richard H. Blank,
Jr. and Carolyn Wyse (the "Proxies") and each of them, attorneys and proxies of
the undersigned, each with power of substitution and resubstitution, to attend,
vote and act for the undersigned at the Special Meeting of Shareholders of
Nations International Growth Fund (the "Fund") of Nations Fund, Inc. (the
"Company") to be held at One Bank of America Plaza, 33rd Floor, Charlotte, North
Carolina at 10:00 a.m. (Eastern time), on Tuesday, August 1, 2000, and at any
adjournment or adjournments thereof. The proxies will cast votes according to
the number of shares of the Fund which the undersigned may be entitled to vote
with respect to the proposals set forth below, in accordance with the
specification indicated, if any, and with all the powers which the undersigned
would possess if personally present. The undersigned hereby revokes any prior
proxy to vote at such meeting, and hereby ratifies and confirms all that said
attorneys and Proxies, or either of them, may lawfully do by virtue thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED JUNE 14, 2000.
YOU 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. YOU 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.
Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies
should be signed in full corporate name by an authorized officer. Each joint
owner should sign personally. Fiduciaries should give full titles as such.
<PAGE>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
NATIONS INTERNATIONAL GROWTH FUND
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL
BE VOTED IN FAVOR OF THE PROPOSAL.
Vote On Proposal
To ratify and approve an interim investment sub-advisory agreement
among Nations Fund, Inc., on behalf of Nations International Growth
Fund, Banc of America Advisors, Inc. and Gartmore Global Partners for
the period beginning on March 6, 2000 and ending on May [15], 2000.
|_|FOR |_|AGAINST |_|ABSTAIN
Vote On Proposal
To ratify and approve an interim investment sub-advisory agreement
among Nations Fund, Inc., on behalf of Nations International Growth
Fund, Banc of America Advisors, Inc. and Gartmore Global Partners for
the period beginning on May [15], 2000 and ending on May [31], 2000.
|_|FOR |_|AGAINST |_|ABSTAIN
Vote On Proposal
To ratify and approve an an interim investment sub-advisory agreement
among Nations Fund, Inc., on behalf of Nations International Growth
Fund, Banc of America Advisors, Inc. and Gartmore Global Partners for
the period beginning on May [31], 2000 and ending on the date of the
reorganization described below (or, if the reorganization does not
occur, on May [30], 2001).
|_|FOR |_|AGAINST |_|ABSTAIN
Vote On Proposal
To approve a proposed agreement and plan of reorganization, dated as of
June 14, 2000 (the "Reorganization Agreement"), between Nations Fund,
Inc., on behalf of Nations International Growth Fund, and Nations
Reserves, on behalf of Nations International Equity Fund.
|_|FOR |_|AGAINST |_|ABSTAIN
<PAGE>
In their discretion, the Proxies, and either of them, are authorized to
vote upon any other business that may properly come before the meeting, or any
adjournment(s) thereof, including any adjournment(s) necessary to obtain
requisite quorums and/or approvals.
------------------------------- -----------
Signature Date
------------------------------- -----------
Signature (Joint Owners) Date