NATIONS FUND, INC.
One Bank of America Plaza
101 South Tryon Street
Charlotte, N.C. 28255
Telephone: 800-653-9427
June 15, 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 and 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 substantially similar to the
investment sub-advisory agreement previously approved by shareholders.
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 exchange of shares in the
Reorganization is expected to be tax-free
<PAGE>
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 their 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.
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 us 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 FAX AT (704) 388-2641. YOU MAY ALSO SUBMIT YOUR
PROXY BY A TOLL-FREE PHONE CALL OR BY VOTING ON-LINE, AS INDICATED BELOW.
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.
<TABLE>
<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 PROXY BALLOT* at hand. your 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 PROXY BALLOT. your PROXY BALLOT.
4. Submit your proxy using the easy-to-follow 4. Submit your proxy using the easy-to-follow
instructions. instructions.
</TABLE>
* DO NOT MAIL THE PROXY BALLOT IF SUBMITTING YOUR PROXY BY INTERNET, FAX OR
TELEPHONE.
<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 with 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 with Gartmore Global Partners for the period beginning on May 15,
2000 and ending on May 31, 2000.
ITEM 3. Ratification and approval of an interim investment sub-advisory
agreement with 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).
ITEM 4. Approval of a proposed agreement and plan of reorganization, dated
as of June 15, 2000 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
MEETING. SHAREHOLDERS ALSO MAY SUBMIT THEIR PROXIES BY: 1) FAX 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
June 15, 2000
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
Dated June 15, 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 below:
ITEM 1. Ratification and approval of an interim investment sub-advisory
agreement with 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 with Gartmore Global Partners for the period beginning on May 15,
2000 and ending on May 31, 2000.
ITEM 3. Ratification and approval of an interim investment sub-advisory
agreement with 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).
ITEM 4. Approval of a proposed agreement and plan of reorganization, dated
as of June 15, 2000 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).
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.
1
<PAGE>
All of this information is in documents filed with the 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. The statement of additional
information relating to this Proxy/Prospectus is incorporated by reference into
this Proxy/Prospectus and is dated June 15, 2000. Additional copies of any of
these documents are available without charge by writing the address given above
or by calling 1-800-321-7854. 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 15, 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.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY .................................................................................. 4
Interim Investment Sub-Advisory Agreements .............................................. 4
The Reorganization ...................................................................... 4
Fee Tables ............................................................................ 4
Overview of the Reorganization Agreement .............................................. 5
Overview of Investment Objective and Principal Investment Strategies .................. 6
Overview of Service Providers ......................................................... 7
Overview of Purchase, Redemption, Distribution, Exchange and Other Procedures ......... 7
Federal Income Tax Consequences ....................................................... 7
Principal Risk Factors ................................................................ 7
THE INTERIM AGREEMENTS ................................................................... 9
Transaction 1 and the Interim 1 Agreement ............................................... 9
Transaction 2 and the Interim 2 Agreement; and Transaction 3 and the Interim 3 Agreement 10
Board Consideration ..................................................................... 11
Information Regarding Gartmore .......................................................... 11
Other Information ....................................................................... 13
THE REORGANIZATION ....................................................................... 13
Description of the Reorganization Agreement ............................................. 13
Reasons for the Reorganization .......................................................... 14
Board Consideration ..................................................................... 15
Comparison of Investment Management, Investment Objective and Principal Investment
Strategies ............................................................................. 16
The Master Feeder Structure ............................................................. 18
Comparison of Forms of Business Organization ............................................ 20
Comparison of Fund and Acquiring Fund Performance ....................................... 20
Comparison of Advisory and Other Service Arrangements and Fees .......................... 21
Comparison of Purchase, Redemption, Distribution and Exchange Policies and Other
Shareholder Transactions and Services .................................................... 22
Federal Income Tax Considerations ....................................................... 23
Capitalization .......................................................................... 24
VOTING MATTERS ........................................................................... 25
General Information ..................................................................... 25
Quorum .................................................................................. 26
Shareholder Approval .................................................................... 26
Principal Shareholders .................................................................. 27
Annual Meetings and Shareholder Meetings ................................................ 30
ADDITIONAL INFORMATION ABOUT THE COMPANY AND RESERVES .................................... 30
FINANCIAL STATEMENTS ..................................................................... 31
OTHER BUSINESS ........................................................................... 31
SHAREHOLDER INQUIRIES .................................................................... 31
</TABLE>
APPENDICES
I. EXPENSE SUMMARIES OF THE FUND AND THE ACQUIRING FUND
II. COMPARISON OF PERFORMANCE OF THE FUND AND THE ACQUIRING FUND
III. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
3
<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 Global Partners ("Gartmore"). As described below in more detail,
Gartmore has recently experienced three changes in ownership. These changes
relate only to the ownership of Gartmore and 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 Group plc ("RBS") 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
4
<PAGE>
annualized total operating expense ratios of the Fund; and (ii) 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 after the Reorganization will be 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 class of Fund shares involved in the Reorganization is included in
Appendix I.
TOTAL OPERATING EXPENSE INFORMATION
<TABLE>
<CAPTION>
PRO FORMA
TOTAL TOTAL
OPERATING COMBINED FUND/CLASS OPERATING
FUND/SHARE CLASS RATIOS EXPENSE POST-REORGANIZATION RATIO EXPENSE
---------------------------------- ----------- --------------------------- ----------
<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, Fund shareholders will become
shareholders of the 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 or about 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."
5
<PAGE>
OVERVIEW OF 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 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 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 than
those held by the Fund which they believe will better serve acquired Fund
shareholder interests.
Accordingly, although the Acquiring Fund is expected to have a portfolio
of securities of similar type as those held by the Fund, it in many
instances will not hold exactly the same securities. If Gartmore sells
these securities in anticipation of the Reorganization, the Fund will
incur brokerage commissions and such sales may result in taxable capital
gain or other distributions to the Fund's shareholders. The plan for the
Fund to sell securities prior to the Reorganization could result in
selling securities at a disadvantageous time and could result in the Fund
realizing losses that would not otherwise have been realized. The proceeds
of any such sale are expected to be held in temporary investments until
the Reorganization.
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
Investment Management, the Investment Objective and Principal Investment
Strategies."
6
<PAGE>
OVERVIEW OF 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 fee rates charged to the Fund and the Acquiring Fund
(or its corresponding master portfolio) relating to other service providers are
the same.
OVERVIEW OF PURCHASE, REDEMPTION, DISTRIBUTION, EXCHANGE AND OTHER
PROCEDURES
The purchase, redemption, distribution, 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
of 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.
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 investments may be riskier than U.S. investments
because of political and economic conditions, changes in
7
<PAGE>
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; 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 United States; political, economic or social instability; and
difficulty enforcing legal rights outside the United States.
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.
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 costs 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.
8
<PAGE>
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 Fund's and the Acquiring Fund's
investment strategies and restrictions, see the Fund's and the Acquiring Fund's
Prospectuses and Statements of Additional Information.
THE INTERIM AGREEMENTS
The Investment Company Act of 1940, as amended (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 is automatically terminated. Shareholders
must then approve a new agreement in order for the fund to continue to receive
sub-advisory services. In order to 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 May 31, 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 approved by the Board and put in place, as described
below in more detail, and Fund shareholders are now being asked to approve and
ratify each Interim Agreement.
Each Interim Agreement is substantially similar to the investment
sub-advisory agreement previously approved by shareholders (the "Previous
Agreement"), 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 fee rates payable under the second and
third Interim Agreements are lower than those payable under both the first
Interim Agreement and the Previous Agreement.
It is important to note that the changes in Gartmore's ownership and the
related Interim Agreements will not result in any change to the aggregate
advisory fees payable by the Fund.
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, RBS acquired NatWest in a tender-offer
9
<PAGE>
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 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.
Rule 15a-4 under 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 3, 2000, the Board 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 not more than 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 assets 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. Following Transaction 2, Bank of America
Corporation no longer held any direct or indirect interest in Gartmore. 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 May 31, 2000.
At a special meeting held on April 26, 2000, the Board 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.
10
<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 May 31, 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 May 31, 2000
to the date of the Reorganization (or, if the Reorganization does not occur, on
May 30, 2001) and continuing thereafter so long as the Board approves it
annually.
BOARD CONSIDERATION
At an in-person meeting held on March 3, 2000, 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 Board also determined that the
scope and quality of services to be provided to the Fund 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 Board also determined that the
scope and quality of services to be provided to the Fund 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 is registered as an investment adviser under the Investment
Advisers Act of 1940, with principal offices at Gartmore House, 8 Fenchurch
Place, London EC3M 4PH England. It currently serves as investment sub-adviser
to the Fund pursuant to the Interim 3 Agreement.
Under the Interim 1 Agreement, Gartmore's indirect parents were Bank of
America Corporation and RBS. Bank of America Corporation is a Delaware
financial holding company that provides banking and non-banking financial
services and products through various subsidiaries. Its subsidiary, Bank of
America, N.A., is the nation's largest banking institution.
11
<PAGE>
Under the Interim 2 Agreement, Gartmore's indirect parent was RBS. RBS is
a publicly owned company with its registered office at 36 St. Andrew Square,
Edinburgh EH2 2YB, Scotland, which provides banking, insurance, and related
financial services with a core market in the United Kingdom, but is also active
in Europe and the north-eastern United States.
Under the Interim 3 Agreement, Gartmore's indirect parent was Nationwide.
Nationwide is an Ohio mutual insurance company with its principal executive
offices located at One Nationwide Plaza, Columbus, Ohio 43215. Nationwide is
the controlling company of the Nationwide Insurance Enterprise, an insurance
and financial services organization (the "Enterprise"). In 1997, Nationwide had
$5.1 billion of net written premium. Nationwide is a party to the Nationwide
Intercompany Pooling Agreement (the "Nationwide Pooling Agreement") with 12
other property and casualty insurance companies within the Enterprise which
provides that Nationwide shares in a specified percentage of the combined
underwriting results and dividends to policyholders incurred by such companies
(the "Nationwide Pool"). The insurance companies comprising the Nationwide Pool
were the sixth largest property and casualty insurance group and were the
fourth largest automobile insurance group in the United States, with
approximately $8.4 billion in total net written premium at December 31, 1997
and approximately a 3.3% market share. Nationwide was originally chartered in
the State of Ohio in 1925 as the Farm Bureau Mutual Automobile Insurance
Company and it adopted its present name in 1955.
The principal executive officers of Gartmore are listed below.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION AT GARTMORE PRINCIPAL OCCUPATION
-------------------------- -------------------------- ------------------------------------------
<S> <C> <C>
Chris Russell Director Director and Head of Overseas Businesses,
8 Fenchurch Place, Gartmore Investment Management plc
London EC3M 4PH, England
Peter Chambers Director Director and Chief Investment Officer,
8 Fenchurch Place, Gartmore Investment Management plc
London EC3M 4PH, England
Stephen Watson Chief Investment Officer Chief Investment Officer of Gartmore
8 Fenchurch Place,
London EC3M 4PH, England
Dick Hoag Managing Director, Managing Director, Business Development
335 Madison Avenue, Business Development of Gartmore
New York, NY 10017
James Donatell Director Executive Vice President, Sales and
1200 River Road, Distribution, Villanova Capital
Conshohocken, PA 19428
</TABLE>
The aggregate amount paid to Gartmore by BAAI for the Fund for the period
April 1, 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 April 1, 1999 through March 31, 2000 was $3,477,041.
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
12
<PAGE>
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 following annual rates:
<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 Master $913,062,878
Portfolio 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 $2000,000,000
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 0.66% of average daily net assets $ 62,164,212
Nations International Growth $ 8,527,324
Portfolio 0.54% of average daily net assets
</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.
James B. Sommers, a director of the Company, owns shares of Bank of
America Corporation. No other officer or trustee of the Company, Reserves or
Nations Master Investment Trust is an officer, employee, director, general
partner or shareholder of BAAI, Gartmore or any of their affiliates.
OTHER INFORMATION
BAAI serves as the Fund's and Acquiring Fund's investment adviser, except
for the Nations International Equity Fund, whose investment advisory services
are provided at the Master Portfolio level. BAAI also serves as the Fund's and
Acquiring Fund's co-administrator. Its address is 101 South Tryon Street,
Charlotte, North Carolina 28255. Stephens Inc. ("Stephens") serves as the
Fund's and Acquiring Fund's principal underwriter and co-administrator. Its
address is 111 Center Street, Little Rock, Arkansas 72201.
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 Morrison & Foerster LLP
that the exchange of shares contemplated under the Reorganization will be
tax-free under federal income tax law. The
13
<PAGE>
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 transferred to the Master Portfolio.
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, and the
Board'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 generally 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 and the Board of Directors of the Company believe
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.
14
<PAGE>
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 Fund's
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 between the Fund and the
Acquiring Fund. 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 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.
15
<PAGE>
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, 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 is
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 that one investment sub-adviser.
day-to-day investment decisions for the INVESCO, Putnam and Gartmore each
Fund. manage 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 portions of
the Master Portfolio.
Investment The Fund seeks long-term capital growth The Acquiring Fund seeks long-term
Objective: by 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.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND INTERNATIONAL EQUITY FUND
----------------------------------------------- ---------------------------------------------
<S> <C> <C>
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 has
Strategies: major exchanges in Europe and the Pacific the same investment objective as the Fund.
Basin. These companies can be of any size. The Master Portfolio normally invests at
The Fund may invest up to 35% of its least 65% of its assets in established
assets in securities of issuers located in companies located in at least three
developing countries in the Asia and countries other than the United States. The
Pacific regions, Africa, Latin America and portfolio managers select countries,
Eastern Europe. The Fund will generally including emerging market or developing
hold 50 to 80 securities invested in countries, and companies they believe have
approximately 10 industry sectors within the potential for growth.
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 depositary
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
securities. These securities are described in type of securities. These securities are
the SAI. described in the SAI.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND INTERNATIONAL EQUITY FUND
----------------------------------------------- --------------------------------------------
<S> <C> <C>
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 all
o high growth potential over a two-year 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 that
Throughout the investment process, the focuses on investing in securities when
portfolio manager balances the Fund's growth is likely to be higher, or sustained
emphasis on growth companies with a longer, than other investors expect.
sensitivity to securities prices. 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.
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
As noted, the Acquiring Fund is a feeder fund in a master/feeder
structure, which means that it invests all of its assets in the Master
Portfolio, which has an identical investment objective and principal investment
strategies. The Master Portfolio is a series of Nations Master Investment Trust
-- another registered investment company in the Nations Funds family.
One potential 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 and administering a larger combined pool of
assets. Another potential advantage of such a structure is that the master
portfolio may 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
18
<PAGE>
Nations International Equity Fund (Offshore). In addition, other feeder funds
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 realized (I.E., "passed-through") to its
interestholders, regardless of whether any amounts are actually distributed by
the Master Portfolio. Each interestholder 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 interestholder
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.
19
<PAGE>
COMPARISON OF FORMS OF BUSINESS 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 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.
COMPARISON OF FUND AND ACQUIRING FUND PERFORMANCE
For a comparison of the performance of the Fund and the Acquiring Fund, 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.
20
<PAGE>
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 FUND AND THE ACQUIRING FUND
<TABLE>
<S> <C>
Investment Adviser BAAI
Investment Sub-Adviser Gartmore for the Fund; INVESCO, Putnam
and Gartmore for the Acquiring Fund's Master
Portfolio
Distributor 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
</TABLE>
INVESTMENT ADVISORY AND SUB-ADVISORY 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, as amended.
21
<PAGE>
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 1940 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 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
22
<PAGE>
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
As noted, the exchange of shares in the Reorganization is expected to be
tax free under federal income tax law. 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 Reorganization 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
Reorganization 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 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.
23
<PAGE>
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.
24
<PAGE>
<TABLE>
<CAPTION>
NET ASSET VALUE
TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE
---------------------- --------------------- ----------------------
<S> <C> <C> <C>
International Equity 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 Growth 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 $963,191,092 57,547,809 $ 16.74
Equity Fund (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 fax, by
marking, signing, dating and faxing the enclosed Proxy Ballot to ADP Proxy
Services care of (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
25
<PAGE>
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, 6,856,583 shares of the Fund
were outstanding and entitled to be voted. Each whole and fractional share of a
Fund is entitled to a whole or fractional vote.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meeting.
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 Meeting 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 Meeting in person or
by proxy. If a quorum is present, the persons named as proxies will vote those
proxies which they are entitled to vote FOR the particular proposal for which a
quorum exists in favor of such adjournment(s), and will vote those proxies
required to be voted AGAINST such proposal against any adjournment(s).
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
26
<PAGE>
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% or more 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 Company or Reserves to own such shares beneficially is
designated by an asterisk.
<TABLE>
<CAPTION>
PERCENTAGE OF
CLASS AMOUNT OF PERCENTAGE PERCENTAGE FUND POST
FUND NAME AND ADDRESS SHARES OWNED OF CLASS OF FUND CLOSING
---------------------------- -------------------------- ----------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
International Growth Fund Kleinwort Benson Invest Investor A; 8.43% 2.10% 0.18%
Mgt. Ltd. 145,988.998
Attn: Andy Poile
PO Box 191 20
Fenchurch Street
London England EC3P 3DB
FISERV Securities, INC Investor A; 5.29% 1.32% 0.12%
FAO 58900009 91,707.785
Attn: Mutual Funds
One Commerce Square
20005 Market Street
Suite 1200
Philadelphia, PA 19103
NFSC FEBO W38-718491 Investor B; 17.51% 0.30% 0.00%
William E Prettyman, Jr. 21,211.652
5393 Royal Mile Blvd
Salisbury, MD 21801
MLPF&S For the Sole Investor B; 5.56% 0.00% 0.00%
Benefit of its Customers 6,735.885
Attn: Service Team
4800 Deer Lake Drive,
East 3rd Floor
Jacksonville, FL 32246
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
CLASS AMOUNT OF PERCENTAGE PERCENTAGE FUND POST
FUND NAME AND ADDRESS SHARES OWNED OF CLASS OF FUND CLOSING
---------------------------- ---------------------------- ----------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
NFSC FEBO W52-006904 Investor C; 19.98% 0.00% 0.00%
NFSC/FMTC IRA Rollover 6,529.529
FBO Richard E Snowbarger
6800 Del Norte Lane Apt 220
Dallas, TX 75225
Jean F Baechlin Investor C; 6.78% 0.00% 0.00%
222 Natoma Avenue Apt. A 2,215.069
Santa Barbara, CA 93101
Dean Witter Reynolds, Investor C; 5.74% 0.00% 0.00%
CUST 1,876.981
For Evelyn L Baker
PO Box 250 Church Street
Station
New York, NY 10008-0250
Bank of America, NA Primary A; 89.58% 65.18% 5.71%
Attn: Tony Farrer 4,398,503.829
1401 Elm Street 11th Floor
Dallas, TX 75202-2911
Bankers Trust Services TN Primary A; 7.53% 5.48% 0.48%
Air Canada College Fund 369,787.345
Attn: Jennifer Cobb
648 Grassmere Park
Nashville, TN 37211-3658
Stephens, Inc. Primary B; 100.00% 0.00% 0.00%
Attn: Cindy Cole 1.355
111 Center Street
Little Rock, AR 72201
International Equity Fund Bank of America, NA Investor A; 9.30% 0.55% 0.50%
Attn: Tony Farrer 353,089.225
1401 Elm Street 11th Floor
Dallas, TX 75202-2911
Mellon Bank NA TTEE Investor A; 8.91% 0.52% 0.48%
SMM Trust 1999-J 338,056.976
U/A DTD 12/8/99
429 SM Blvd #470
Santa Monica, CA 90401
Oasis Capital Management Investor A; 5.91% 0.35% 0.32%
Operations 224,391.838
4111 East 37th St, N
Wichita, KS 67220
H Grayson Mitchell Jr. and Investor C; 12.71% 0.00% 0.00%
John Rawls, TTEE FBO 9,724.459
Grayson Mitchell Inc.
401K Plan
PO Box 128
Emporia, VA 23847
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
CLASS AMOUNT OF PERCENTAGE PERCENTAGE FUND POST
FUND NAME AND ADDRESS SHARES OWNED OF CLASS OF FUND CLOSING
------ ---------------------------- ----------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
CA Porterfield & Rosalee Investor C; 9.97% 0.00% 0.00%
Moxley & Frank Minton 7,624.908
TTEES FBO
Starmount Company
Employees Tax Deferred
Savings Plan
PO Box 10349
Greensboro, NC 27404-0349
E Larry Fonts TTE FBO Investor C; 9.15% 0.00% 0.00%
Central Dallas Association 6,998.760
Profit Sharing Plan
1201 Elm Street Suite 5310
Dallas, TX 75270
Tatsushi T Kubo, Max W Investor C; 8.25% 0.00% 0.00%
Dahlgren & John Dahlgren 6,314.813
TTEES FBO
Epic Products International
Corporation 401K Plan
PO Box 5808
Arlington, TX 76005-5808
BNY CUST IRA FBO Investor C; 7.82% 0.00% 0.00%
Celestine A Thelen 5,982.371
8501 Manastash Rd
Ellensburg, WA 98926
CA Porterfield & Rosalee Investor C; 6.70% 0.00% 0.00%
Moxley & Frank Minton 5,122.748
TTEES FBO
Starmount Company Capital
Accumulation Plan
PO Box 10349
Greensboro, NC 27404-0349
NFSC FEBO W17-662862 Investor C; 6.38% 0.00% 0.00%
NFSC/FMTC IRA Rollover 4,879.445
FBO Linda G Walker
7 Sally Street
Spartanburg, SC 29301
Donald R Atkins and Investor C; 5.11% 0.00% 0.00%
David R Morgan TTEES 3,907.599
Lyndon Steel 401K Profit
Sharing Plan
1947 Union Cross Road
Winston-Salem, NC 27107
Bank of America, NA Primary A; 90.07% 81.80% 75.13%
Attn: Tony Farrer 51,905,368.401
1401 Elm Street 11th Floor
Dallas, TX 75202-2911
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
CLASS AMOUNT OF PERCENTAGE PERCENTAGE FUND POST
FUND NAME AND ADDRESS SHARES OWNED OF CLASS OF FUND CLOSING
------ ----------------------- ----------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Bank of America, NA Primary A; 5.48% 4.98% 4.57%
TTEE NB 401K Plan 3,159,419.515
U/A DTD 01/01/1983
PO Box 2518/TX4-
213-03-13
Houston, TX 77252-2518
Stephens, Inc. Primary B; 100.00% 0.00% 0.00%
Attn: Cindy Cole 1.735
111 Center Street
Little Rock, AR 72201
</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 63.92% of the Fund's outstanding shares. Accordingly, 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 Directors 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 AND RESERVES
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
30
<PAGE>
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 Company 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 Fund and
Acquiring Fund 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.
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, or by phone at the phone number, 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 FAX, 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.
31
<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>
INTERNATIONAL GROWTH FUND AND
INTERNATIONAL EQUITY FUND
PRIMARY A SHARES
<TABLE>
<CAPTION>
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
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
International Growth Fund ........................................... $129 $403 $697 $1,534
International Equity Fund ........................................... $117 $365 $633 $1,398
International Equity Fund PRO FORMA (after reorganization) .......... $117 $365 $633 $1,398
</TABLE>
I-2
<PAGE>
INTERNATIONAL GROWTH FUND AND
INTERNATIONAL EQUITY FUND
INVESTOR A SHARES
<TABLE>
<CAPTION>
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 % of
offering price .......................................... 5.75% 5.75% 5.75%
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:
INVESTOR A SHARES
<TABLE>
<CAPTION>
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 FORMA (after reorganization) .......... $709 $ 993 $1,298 $2,161
</TABLE>
I-3
<PAGE>
INTERNATIONAL GROWTH FUND AND
INTERNATIONAL EQUITY FUND
INVESTOR B SHARES
<TABLE>
<CAPTION>
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
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
International Growth Fund ........................................... $730 $1,009 $1,415 $2,417
International Equity Fund ........................................... $718 $ 973 $1,354 $2,292
International Equity Fund PRO FORMA (after reorganization) .......... $718 $ 973 $1,354 $2,292
</TABLE>
If you bought Investor B shares, you would pay the following expenses if
you didn't sell your shares:
INVESTOR B SHARES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
International Growth Fund ........................................... $230 $709 $1,215 $2,417
International Equity Fund ........................................... $218 $673 $1,154 $2,292
International Equity Fund PRO FORMA (after reorganization) .......... $218 $673 $1,154 $2,292
</TABLE>
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
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
International Growth Fund ........................................... $328 $802 $1,303 $2,680
International Equity Fund ........................................... $316 $766 $1,243 $2,558
International Equity Fund PRO FORMA (after reorganization) .......... $316 $766 $1,243 $2,558
</TABLE>
If you bought Investor C shares, you would pay the following expenses if
you didn't sell your shares:
INVESTOR C SHARES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
International Growth Fund ........................................... $230 $709 $1,215 $2,605
International Equity Fund ........................................... $218 $673 $1,154 $2,483
International Equity Fund PRO FORMA (after reorganization) .......... $218 $673 $1,154 $2,483
</TABLE>
I-5
<PAGE>
APPENDIX II -- COMPARISON OF PERFORMANCE OF THE FUNDS
NATIONS INTERNATIONAL EQUITY FUND PERFORMANCE
A LOOK AT THE ACQUIRING FUND'S PERFORMANCE
The following bar chart and table show you how the Acquiring Fund has
performed in the past, and can help you understand the risks of investing in
the Acquiring 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 Acquiring Fund's
Primary 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 A, Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS BELOW WITH THE FOLLOWING PLOT POINTS:]
1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
-8.57% 27.21% 2.60% 8.45% 8.47% 1.27% 16.46% 39.49%
YEAR-TO-DATE RETURN AS OF MARCH 31, 2000: 0.83%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1999: 28.59%
Worst: 3rd quarter 1998: -13.94%
</TABLE>
II-1
<PAGE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
The table shows the Acquiring 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.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE INCEPTION
----------- ----------- ----------------
<S> <C> <C> <C>
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%
Investor C Shares 37.64% 13.09% 11.02%
MSCI EAFE Index 26.96% 12.82% 13.29%
</TABLE>
II-2
<PAGE>
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 PRIMARY A SHARES (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary 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
A, Investor B and Investor C Shares are different because they have their own
expenses, pricing and sales charges.
[BAR CHART APPEARS BELOW WITH THE FOLLOWING PLOT POINTS:]
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
-0.02% 14.00% 11.18% 2.04% 20.19% 26.17%
YEAR-TO-DATE RETURN AS OF MARCH 31, 2000: -3.07%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 4th quarter 1998: 21.00%
Worst: 3rd quarter 1990: -14.55%
II-3
<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.
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
----------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
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%*
</TABLE>
*Return is from inception of index (12-31-69).
II-4
<PAGE>
APPENDIX III -- MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
NATIONS INTERNATIONAL EQUITY FUND
MANAGEMENT TEAMS COMMENTARY*
PORTFOLIO MANAGEMENT
The Fund is a "multi-manager" fund, meaning that it is managed by more than one
sub-adviser. Each sub-adviser manages approximately one-third of Fund's assets.
The three sub-advisers to the Fund are Gartmore Global Partners, INVESCO Global
Asset Management (N.A.), Inc., and Putnam Investment Management, Inc.
INVESTMENT OBJECTIVE
The 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.
PERFORMANCE REVIEW
For the 12-month period ended March 31, 2000, Nations International Equity Fund
Investor A Shares provided shareholders with a total return of 39.54%.**
During the past year, the Fund changed its investment management approach by
adding two sub-advisers: Putnam Investment Management, Inc. (Putnam), and
INVESCO Global Asset Management (N.A.), Inc. (INVESCO) in addition to Gartmore
Global Partners. The intent of this change is to diversify away from specific
manager risk and to enhance return potential. We believe that managing the
Fund's assets with multiple managers, each with a distinct yet complementary
investment the style, may result in better performance and greater consistency
of returns over time.
IN THE FOLLOWING INTERVIEW, THE TEAMS SHARE THEIR VIEWS ON NATIONS INTERNATIONAL
EQUITY FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 2000 AND THEIR
OUTLOOK FOR THE FUTURE.
PLEASE DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY AND STYLE.
Nations International Equity Fund's intention is to provide shareholders with
long-term growth by investing in equity securities of companies located outside
the U.S. The Fund is an "extended" EAFE vehicle, meaning that in addition to
investing in the countries contained in the Morgan Stanley Capital International
Europe, Australasia, Far East (MSCI EAFE) Index,*** it also invests in lesser
developed countries. The Fund is designed to be a core international holding
with a strong tilt toward growth.
The Fund features:
o A combination of top-down regional allocation and bottom-up stock selection;
o Large capitalization securities; and
o "Extended" EAFE exposure seeking to enhance performance through investments in
emerging markets.
* THE OUTLOOK FOR THIS FUND MAY DIFFER FROM THAT PRESENTED FOR OTHER NATIONS
FUNDS MUTUAL FUNDS.
** THE PERFORMANCE SHOWN DOES NOT REFLECT THE MAXIMUM FRONT-END SALES CHARGE OF
5.75%, WHICH MAY BE CHARGED ON PURCHASES OF INVESTOR A SHARES. FOR
STANDARDIZED PERFORMANCE, PLEASE REFER TO THE PERFORMANCE TABLE. PERFORMANCE
SHOWN INCLUDES THE EFFECT OF FEE WAIVERS BY THE INVESTMENT ADVISER, WHICH
HAVE THE EFFECT OF INCREASING TOTAL RETURN.
***THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST (MSCI
EAFE)
III-1
<PAGE>
NATIONS INTERNATIONAL EQUITY FUND
MANAGEMENT TEAMS COMMENTARY* CONTINUED
Gartmore considers its primary goal to be identifying opportunities for
unexpected and above-average future earnings growth. The team attempts to
achieve this by screening regions, countries, sectors and individual stocks to
determine areas of emphasis to achieve earnings growth that is consistently
higher than consensus forecasts. By combining active regional and country
allocations with theme-based sector and stock selection, the team seeks to
maintain a portfolio that strategically emphasizes growing markets. At the same
time, Gartmore seeks to avoid those markets with less favorable prospects. The
process is driven by fundamental research that combines analysis from the
macroeconomic to the individual company level.
The Putnam team considers its primary goal to be seeking consistent,
above-average returns and low relative risk by investing in a diversified
portfolio of non-U.S. companies which Putnam believes are selling significantly
below their long-term worth. To attempt to achieve this, Putnam uses a
style-neutral, systematic approach that blends top-down country and sector
allocation and bottom-up stock selection driven by valuation, fundamental
research, and quantitative analysis.
The INVESCO team uses a bottom-up style of management with a primary focus on
stock selection. INVESCO favors high-quality, stable growth companies that
appear to be attractively priced based on a discounted cash flow approach to
investing.
PLEASE COMMENT ON FUND PERFORMANCE FOR THE PERIOD.
Nations International Equity Fund (Investor A Shares) provided shareholders with
a return of 39.54%, substantially outperforming its
INDEX IS AN UNMANAGED, CAPITALIZATION-WEIGHTED INDEX THAT TRACKS STOCKS TRADED
IN TWENTY COUNTRIES IN EUROPE, AUSTRALIA AND THE FAR EAST. IT IS UNAVAILABLE FOR
INVESTMENT. SOURCE FOR ALL STATISTICAL DATA -- GARTMORE GLOBAL PARTNERS, INVESCO
AND PUTNAM.
INVESTMENTS IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL RISKS, INCLUDING
FOREIGN TAXATION, CURRENCY RISKS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN
FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATED WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
III-2
<PAGE>
NATIONS INTERNATIONAL EQUITY FUND
MANAGEMENT TEAMS COMMENTARY* CONTINUED
benchmark, the Morgan Stanley Capital International Europe, Australasia, Far
East (MSCI EAFE) Index, which returned 25.09%.
WHAT WAS THE INVESTMENT ENVIRONMENT FOR INTERNATIONAL EQUITY INVESTING DURING
THE FISCAL YEAR?
International equity markets thrived over the period amid a broad recovery in
economic growth and corporate profitability. After a slow start early in 1999,
investors became increasingly convinced that economies outside the United
States, previously perceived as stagnant or even contracting, had begun to show
signs of recovery. The improving international economic conditions were
highlighted by larger-than-expected European interest rate cuts and the apparent
revival of Asian economies, which assured investors that the international
markets' deceleration in profit growth was coming to an end.
In Europe, there was increasing evidence during the period of a broad-based
recovery, from the peripheral countries to the larger, core economies of France,
Italy, and Germany. After a successful launch, the euro weakened steadily during
1999, providing exporters with a competitive edge. Mergers and corporate
restructurings also persisted throughout the period, as European companies
pursued cost-cutting initiatives and increased shareholder value.
Economic growth in many Pacific Basin countries was surprisingly vibrant
throughout the period. The improvement of the Japanese economy, in particular,
sparked a significant strengthening of the yen against the U.S. dollar. Many
newer, faster growing telecommunications, computer, and information technology
companies, and an expanding service sector fueled the expansion of the Japanese
economy. In stark contrast, there was significant consolidation in Japan's older
industries, which struggled to compete.
Markets in Latin America were also vibrant. In particular, Brazil, Argentina,
and Mexico enjoyed strong growth, driven by competitive currencies, robust
merger-and-acquisition activity, and compelling valuations. Moreover, pro-growth
monetary policies by central banks around the world have reduced risk on a
global basis, boosting investor tolerance for emerging markets.
III-3
<PAGE>
NATIONS INTERNATIONAL EQUITY FUND
MANAGEMENT TEAMS COMMENTARY* CONTINUED
WHAT AREAS AND HOLDINGS CONTRIBUTED TO THE PERFORMANCE OF THE FUND?+
Investments in the technology and telecommunications sectors were the leading
contributors to performance. Leading performers among the technology holdings
included SAP AG (Germany), Philips Electronics NV (Netherlands), Murata and NTT
DoCoMo (Japan), Samsung Electronics (Korea) and STMicroelectronics (France). The
Fund's telecommunications holdings performed exceptionally well, led by Nokia
(Finland), Ericsson (L.M.) Telephone Company (Sweden), Nortel Networks
Corporation (Canada), Telmex (Mexico), Telecom Italia SpA (Italy), and
Mannesmann AG (Germany). Other strong contributors included media companies such
as News Corporation of Australia and Nippon Television of Japan. Sony
Corporation, the diversified electronics products company based in Japan, also
had stellar performance.
Investments in Latin America's emerging markets, notably Brazil and Mexico, did
very well, although the Fund did not take large positions in them.
The exceptionally strong performance by the yen in international currency
markets helped returns, although the yen's positive effects were somewhat offset
by the weak performance of the euro, which muted the results from European
investments.
WHAT IS THE OUTLOOK FOR THE YEAR AHEAD?
In Gartmore's view, accelerating economic activity should continue to support
international equity markets over the next 12 months. Rising interest rates are
a concern, particularly in Europe, and there may be some inflationary pressures.
However, healthy corporate earnings growth is expected in all regions -- even in
Japan.
Putnam believes the prospects for investment opportunities are bright,
especially in France, where the equity market is bolstered by a healthy economy
and a burgeoning technology and telecommunications sector. Putnam also has a
favorable view of opportunities in Germany and Japan,
+PORTFOLIO HOLDINGS AND CHARACTERISTICS ARE SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS AND CHARACTERISTICS.
III-4
<PAGE>
NATIONS INTERNATIONAL EQUITY FUND
MANAGEMENT TEAMS COMMENTARY* CONTINUED
and has a positive view about the prospects in emerging markets. However, the
firm believes the market in the United Kingdom may continue to be vulnerable.
INVESCO is reasonably optimistic about the outlook for international stocks,
particularly in relation to the domestic market. Supporting this view are the
low levels of inflation and interest rates abroad, the coordinated recovery of
economies in Europe and Asia, and the substantial amount of merger and
acquisition activity occurring overseas. The inclination of foreign investors to
shift more of their assets from fixed-income vehicles into equities is also
contributing to a favorable climate for stocks. INVESCO believes that offsetting
this, to some degree, is the tightening stance of the U.S. Federal Reserve Board
and the high valuations in certain areas of the market.
III-5
<PAGE>
NATIONS INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/00)
[PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
Sweden 3.2%
Finland 3.4%
Hong Kong 3.6%
Italy 3.9%
Switzerland 4.1%
Netherlands 5.6%
Germany 5.6%
France 11.7%
United Kingdom 17.7%
Japan 23.6%
Other 17.6%
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2000, ARE SUBJECT TO CHANGE AND
MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS.
TOP 10 HOLDINGS
1 Vodafone AirTouch plc 3.1%
2 Total Fina 2.7%
3 Nokia AB Oy 2.5%
4 Nippon Telegraph and Telephone Company 2.4%
5 Sony Corporation 2.4%
6 Ericsson (L.M.) Telephone Company, Series B 2.0%
7 Shell Transport & Trading Company Ord. 1.6%
8 Kyocera Corporation 1.5%
9 Telecom Italia Mobile SpA 1.2%
10 Internationale Nederlanden Groep NV 1.1%
THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
III-6
<PAGE>
NATIONS INTERNATIONAL EQUITY FUND
PERFORMANCE
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
[LINE CHARTS APPEAR BELOW WITH THE FOLLOWING INFORMATION:]
INVESTOR A SHARES AT MOP* (AS OF 3/31/00)
ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
Jun. 3 Mar. 31
1992 1993 1995 1997 1999 2000
---- ---- ---- ---- ---- ----
PLEASE SUPPLY PLOT POINTS
INVESTOR A SHARES AT NAV** (AS OF 3/31/00)
ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
Jun. 3 Mar. 31
1992 1993 1995 1997 1999 2000
---- ---- ---- ---- ---- ----
PLEASE SUPPLY PLOT POINTS
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
SINCE INCEPTION NAV** MOP*
(6/3/92 through
3/31/00) 11.12% 10.28%
THE CHARTS TO THE LEFT SHOW THE GROWTH IN VALUE OF A HYPOTHETICAL $10,000
INVESTMENT IN INVESTOR A SHARES OF NATIONS INTERNATIONAL EQUITY FUND FROM THE
INCEPTION OF THE SHARE CLASS. THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE,
AUSTRALASIA AND FAR EAST (MSCI EAFE) INDEX IS AN UNMANAGED, CAPITALIZATION-
WEIGHTED INDEX THAT TRACKS STOCKS TRADED ON 20 EXCHANGES IN EUROPE, AUSTRALIA
AND THE FAR EAST. FUNDS INCLUDED IN THE LIPPER INTERNATIONAL FUNDS UNIVERSE
INVEST THEIR ASSETS IN SECURITIES WITH PRIMARY TRADING MARKETS OUTSIDE OF THE
U.S. IT IS NOT POSSIBLE TO INVEST IN THE INDEX OR LIPPER UNIVERSE. THE
PERFORMANCE OF PRIMARY A, INVESTOR B AND INVESTOR C SHARES MAY VARY BASED ON THE
DIFFERENCES IN SALES LOADS AND FEES PAID BY THE SHAREHOLDERS INVESTING IN EACH
CLASS.
[GRAPHIC] Nations International Equity Fund
[GRAPHIC] Lipper International
Funds Universe
[GRAPHIC] MSCI EAFE Index
III-7
<PAGE>
NATIONS INTERNATIONAL EQUITY FUND
------------------------------------------------------------------------------
TOTAL RETURN (AS OF 3/31/00)
<TABLE>
<CAPTION>
PRIMARY A INVESTOR A INVESTOR B INVESTOR C
NAV** MOP* NAV** CDSC*** NAV CDSC***
Inception date 12/2/91 6/3/92 6/7/93 6/17/92
----------------------- ----------- ------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 YEAR PERFORMANCE 39.85% 39.54% 31.53% 38.14% 33.14% 38.12% 37.12%
----------------------- ----- ----- ----- ----- ----- ----- -----
AVERAGE ANNUAL RETURNS
3 YEARS 18.94% 18.72% 16.41% 17.68% 16.95% 17.71% 17.71%
5 YEARS 15.35% 15.10% 13.75% 14.20% 13.96% 14.30% 14.30%
SINCE INCEPTION 11.22% 11.12% 10.28% 11.70% 11.70% 10.74% 10.74%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY
WITH MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. AVERAGE ANNUAL RETURNS ARE
HISTORICAL IN NATURE AND MEASURE NET INVESTMENT INCOME AND CAPITAL GAIN OR LOSS
FROM PORTFOLIO INVESTMENTS ASSUMING REINVESTMENT OF DISTRIBUTIONS.
*FIGURES AT MAXIMUM OFFERING PRICE (MOP) REFLECT THE MAXIMUM FRONT-END SALES
CHARGE OF 5.75%.
**FIGURES AT NET ASSET VALUE (NAV) DO NOT REFLECT ANY SALES CHARGES. INVESTOR A
SHARES ARE AVAILABLE WITH A REDUCED OR WAIVED SALES CHARGE ONLY UNDER CERTAIN
CIRCUMSTANCES AS DESCRIBED IN THE PROSPECTUS.
***FIGURES AT CDSC REFLECT THE MAXIMUM APPLICABLE CONTINGENT DEFERRED SALES
CHARGE.
THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS BY THE INVESTMENT
ADVISER AND THE CO-ADMINISTRATOR, WHICH HAVE THE EFFECT OF INCREASING TOTAL
RETURN.
III-8
<PAGE>
NATIONS INTERNATIONAL GROWTH FUND
PORTFOLIO MANAGER COMMENTARY*
IN THE FOLLOWING INTERVIEW, MR. O'NEILL SHARES HIS VIEWS ON NATIONS
INTERNATIONAL GROWTH FUND'S PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31,
2000 AND HIS OUTLOOK FOR THE FUTURE.
PORTFOLIO MANAGEMENT
Brian O'Neill is Portfolio Manager of Nations International Growth Fund and is
the Principal Senior Investment Manager of the Global Portfolio Team for
Gartmore Global Partners, investment sub-adviser to the Fund.
INVESTMENT OBJECTIVE
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.
PERFORMANCE REVIEW
For the 12-month period ended March 31, 2000, Nations International Growth Fund
Investor A Shares provided shareholders with a total return of 22.18%.**
PLEASE DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY AND STYLE.
The Fund's investment philosophy is that a diversified portfolio of equity
securities of established non-United States companies can provide long-term
growth of capital and income. The portfolio will generally hold 50-to-80
securities invested in approximately 10 sectors within 15-to-20 markets. The
manager uses a bottom-up approach to selecting securities, looking for companies
with high quality and sustainable earnings. The manager also seeks companies
with high growth potential over a two-year investment horizon, quality
management teams, the ability to finance growth internally and strong
financial results. Throughout the investment process, the manager balances the
portfolio's emphasis on growth companies with sensitivity to securities' prices.
PLEASE COMMENT ON FUND PERFORMANCE FOR THE PERIOD.
Nations International Growth Fund (Investor A Shares) provided shareholders with
a return of 22.18%, underperforming its benchmark, the Morgan Stanley Capital
International Europe, Australasia, Far East (MSCI EAFE) Index.***
HOW WOULD YOU DESCRIBE THE INTERNATIONAL ECONOMIC AND MARKET ENVIRONMENT DURING
THE FISCAL YEAR?
Economic activity -- and equity markets -- picked up around the world in the
12-month period ended March 31, 2000. Japan and the rest of the Pacific region
led the equity market performance earlier in the year. Continental European
equity markets strengthened towards the end of the period. Brazil and Mexico
exceeded expectations, rising by substantially more than the developed markets
in U.S. dollar terms over the period. In general, a combination of strong
economic growth, subdued inflation, low
*THE OUTLOOK FOR THIS FUND MAY DIFFER FROM THAT PRESENTED FOR OTHER NATIONS
FUNDS MUTUAL FUNDS.
**THE PERFORMANCE SHOWN DOES NOT REFLECT THE MAXIMUM FRONT-END SALES CHARGE OF
5.75%, WHICH MAY BE CHARGED ON PURCHASES OF INVESTOR A SHARES. FOR STANDARDIZED
PERFORMANCE, PLEASE REFER TO THE PERFORMANCE TABLE. PERFORMANCE SHOWN INCLUDES
THE EFFECT OF FEE WAIVERS BY THE INVESTMENT ADVISER AND THE CO-ADMINISTRATOR,
WHICH HAVE THE EFFECT OF INCREASING TOTAL RETURN.
***THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST (MSCI
EAFE) INDEX
III-9
<PAGE>
NATIONS INTERNATIONAL GROWTH FUND
PORTFOLIO MANAGER COMMENTARY* CONTINUED
unemployment and enthusiasm for technology combined to push markets to new
highs, helping the MSCI EAFE Index outpace the Standard & Poor's 500 Composite
Stock Price Index, in U.S. dollar terms, by a considerable margin+. Clearly, the
most noteworthy development of the past twelve months was the emergence of
so-called TMT (telecommunications, media and technology) stocks as the driving
force of markets, while financials, pharmaceuticals and energy stocks all lost
ground.
European markets suffered early in the period as bond yields rose and currencies
weakened in anticipation of rising interest rates in the U.S. and U.K.
Elsewhere, concern about the effects of higher interest rates on both inflation
and the currency prompted the European Central Bank to notch up its policy rate
(an administered rate similar to the Federal Funds rate in the U.S.) to 3.25%
over the period, while interest rates in the U.K. rose to 6.0%. Against this
background, however, corporate profits also rose strongly while GDP (gross
domestic product) growth kept pace with or exceeded expectations. This provided
an underpinning to equity markets, particularly later in the reporting period.
As in most of the rest of the world, much of the rise was attributable to the
TMT sectors. This resulted in extraordinary outperformance in the smaller
markets of Finland and Sweden because of the dominance of Nokia (mobile handsets
manufacturer) and Ericsson (telecom infrastructure) in their respective markets.
In contrast, Switzerland was a notable loser due to the predominance of
financials and pharmaceuticals in its stock market.
Markets across the Pacific outside Japan rose strongly during the period,
although they began losing steam in December as concerns over interest rates and
regional politics cast shadows over investor sentiment. Australia
IS AN UNMANAGED, CAPITALIZATION-WEIGHTED INDEX THAT TRACKS STOCKS TRADED IN
TWENTY COUNTRIES IN EUROPE, AUSTRALIA AND THE FAR EAST. IT IS UNAVAILABLE FOR
INVESTMENT. SOURCE FOR ALL STATISTICAL DATA -- GARTMORE GLOBAL PARTNERS. +THE
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX IS AN UNMANAGED INDEX OF 500
WIDELY HELD COMMON STOCKS. IT IS UNAVAILABLE FOR INVESTMENT.
INVESTMENTS IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL RISKS, INCLUDING
FOREIGN TAXATION, CURRENCY RISKS, RISKS ASSOCIATED WITH POSSIBLE DIFFERENCES IN
FINANCIAL STANDARDS AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATES WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
III-10
<PAGE>
NATIONS INTERNATIONAL GROWTH FUND
PORTFOLIO MANAGER COMMENTARY* CONTINUED
fared less well initially as investors, who had been attracted by its appeal as
a safe haven, shifted assets back into the recovering markets of East Asia.
However, more recently, Australia has proved more resilient than the region as a
whole, helped by a strong economy and the fact that valuations there were not
excessively high. Also, telecommunications and media stocks such as News
Corporation Ltd. and Cable & Wireless Optus Ltd. have outperformed over the
year. Hong Kong appears to have been less affected by interest rate fears than
in the past because the interest-rate sensitive property and financial sectors
have been supplanted by China-related technology and telecom plays.
Nevertheless, given the low level of interest rates generally in the region,
fears of monetary tightening are mounting as economic growth continues, bringing
with it the possibility of inflation. Australia is already on a tightening
course as its government moves to tame inflation, now 4.2%, against a background
of strong economic growth, expected to be 4.0% this year.
The Japanese economy continued to be weak with GDP falling 1.0% in the third
quarter of 1999 and a greater-than-expected 1.4% in the fourth quarter. In U.S.
dollar terms, the Japanese equity market outperformed Europe and the Pacific
ex-Japan region over the reporting period. However, this was purely a function
of currency. The market continued to be extremely narrow in focus as investors
concentrated on the "new Japan" sector. Mixed consumption indicators suggested
that consumer spending remained subdued in January and the Bank of Japan's zero
interest rate policy remained unchanged. On a slightly brighter note, a recent
surge in machinery orders points to better times ahead and capital spending is
expected to turn positive from September.
The strongest earnings signals appear now to be coming out of Latin America. The
huge rises in the dominant markets of Brazil and Mexico over the past 12 months
demonstrated the extraordinary potential of emerging markets when prudent
government policy, falling interest rates and global economic growth combine to
drive up corporate earnings. In both countries, interest rates broke through the
20% barrier in the final quarter of 1999 and Brazil recently initiated a further
0.50% cut in late March.
III-11
<PAGE>
NATIONS INTERNATIONAL GROWTH FUND
PORTFOLIO MANAGER COMMENTARY* CONTINUED
WHAT PARTICULAR STOCKS PROVED ESPECIALLY FAVORABLE FOR THE FUND?++
The Fund's bottom-up investment strategy emphasizes growth stocks. In general,
the Fund's telecommunications, media and technology investments performed
strongly over the 12-month period. These included Sweden's Ericsson and
Germany's Mannesmann AG (recently acquired by Vodafone Airtouch of the U.K.),
Australia's News Corporation and Cable & Wireless Optus.
WHAT IMPACT DID CURRENCY HAVE ON FUND PERFORMANCE?
The biggest currency-related impact to Fund performance was a strong yen which
helped the Fund. However, a continued weakening of the euro over the period
offset much of the benefit the Fund derived from yen strength.
WHAT IS YOUR INTERNATIONAL ECONOMIC AND MARKET OUTLOOK FOR THE YEAR AHEAD?
Accelerating economic activity should continue to support international equity
markets over the next 12 months. Rising interest rates are a concern,
particularly in Europe, and there may be some inflationary pressures. However,
firm earnings growth is expected in all regions -- even in Japan. Specifically,
we are projecting increases in corporate earnings of 17% for Continental Europe
and 12% for the U.K. in 2000. We have raised our estimated GDP growth rate for
the U.K. in 2000 from 2.7% to 2.9%, while in Continental Europe we are
forecasting GDP growth of 3.1%. In Japan, we continue to wait for some sign of
an end to deflation. Moribund as it appears relative to other regions, the
Japanese economy should show some life this year with estimated GDP growth of
1.0%, rising to 2.0% in 2001. While markets of the Pacific ex-Japan region have
recently fallen back, corporate earnings growth should continue and we are
encouraged by the progress in corporate restructuring, particularly in Korea. In
Latin America, the recent upgrading of Mexico's debt and improved outlook for
Brazil's can only speed the region's economic progress. Overall, the consensus
forecast for earnings growth in the region is for 27% in 2000, rising from 23.5%
in 1999. However, we believe there is room for unexpected positive earnings,
given the falling interest rate environment and record number of prudent
government economic policies.
++PORTFOLIO HOLDINGS AND CHARACTERISTICS ARE SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS AND CHARACTERISTICS.
III-12
<PAGE>
NATIONS INTERNATIONAL GROWTH FUND
PORTFOLIO MANAGER COMMENTARY* CONTINUED
WHAT INVESTMENT OPPORTUNITIES DO YOU ANTICIPATE IN THIS MARKET ENVIRONMENT?
From a bottom-up perspective, the influence of technology, e-commerce in
particular, will remain a key theme in stock markets. International markets
offer a wide range of opportunities, from telecommunications companies with
expertise in fixed-line and mobile infrastructure to specialty semiconductor
manufacturers. In addition, companies engaged in large-scale buying and selling
in sectors such as oil, pharmaceuticals, utilities and electronic component
manufacturing should stand to benefit from emerging business-to-business (B2B)
strategies, facilitated by electronic intermediaries. In general, a buoyant
global economy should provide a positive tone to equity markets.
HOW ARE YOU POSITIONING THE FUND TO TAKE ADVANTAGE OF THESE OPPORTUNITIES?
We are maintaining an overweight position in technology and telecom stocks.
However, we generally avoid so-called direct plays on the internet such as
internet service providers (ISPs) and dot.coms with little track record and
heavy cash demands. Instead we focus on the indirect plays, those companies
which stand to benefit from the enormous expenditure companies will have to make
over the next several years as they put e-commerce strategies in place. These
include both fixed-line and mobile telecom companies providing everything from
handsets to infrastructures, as well as the companies that provide software and
hardware to facilitate electronic communication. At the same time, our bottom-up
stock selection process will continue to identify companies in other sectors
with strong franchises and the prospect of positive unexpected earnings.
III-13
<PAGE>
NATIONS INTERNATIONAL GROWTH FUND
--------------------------------------------------------------------------------
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/00)
[PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
United Kingdom 19.2%
Japan 22.3%
Sweden 6.8%
Australia 6.8%
Germany 5.8%
France 4.8%
Switzerland 4.8%
Italy 3.3%
Spain 3.0%
Ireland 2.7%
Other 20.5%
PORTFOLIO HOLDINGS WERE CURRENT AS OF MARCH 31, 2000, ARE SUBJECT TO CHANGE AND
MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS.
TOP 10 HOLDINGS
1 Matsushita Electric Industrial Company, Ltd. 5.2%
2 Sharp Corporation 4.1%
3 Kao Corporation 3.5%
4 Nippon Telegraph and Telephone Company 3.5%
5 Ericsson (L.M.) Telephone Company Series B 3.0%
6 Vodafone AirTouch plc 2.9%
7 News Corporation Ltd. 2.7%
8 Smithkline Beecham plc 2.5%
9 Kudelski SA 2.4%
10 Bank of Scotland Ord. 2.2%
THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
III-14
<PAGE>
NATIONS INTERNATIONAL GROWTH FUND
PERFORMANCE
--------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
[LINE CHARTS APPEAR BELOW WITH THE FOLLOWING INFORMATION:]
INVESTOR A SHARES AT MOP* (AS OF 3/31/00)
ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
Mar. 31 Mar. 31
1990 1991 1993 1995 1997 1999
---- ---- ---- ---- ---- ----
PLEASE SUPPLY PLOT POINTS
INVESTOR A SHARES AT NAV** (AS OF 3/31/00)
ASSUMES THE REINVESTMENT OF ALL DISTRIBUTIONS.
Mar. 31 Mar. 31
1990 1991 1993 1995 1997 1999
---- ---- ---- ---- ---- ----
PLEASE SUPPLY PLOT POINTS
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
SINCE INCEPTION NAV** MOP*
(6/3/92 through
3/31/00) 11.90% 11.69%
THE CHARTS TO THE LEFT SHOW THE GROWTH IN VALUE OF A HYPOTHETICAL $10,000
INVESTMENT IN INVESTOR A SHARES OF NATIONS INTERNATIONAL GROWTH FUND OVER THE
LAST 10 YEARS. THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND
FAR EAST (MSCI EAFE) INDEX IS AN UNMANAGED, CAPITALIZATION-WEIGHTED INDEX THAT
TRACKS STOCKS TRADED ON 20 EXCHANGES IN EUROPE, AUSTRALIA AND THE FAR EAST.
FUNDS INCLUDED IN THE LIPPER INTERNATIONAL FUNDS UNIVERSE INVEST THEIR ASSETS IN
SECURITIES WITH PRIMARY TRADING MARKETS OUTSIDE OF THE U.S. IT IS NOT POSSIBLE
TO INVEST IN THE INDEX OR LIPPER UNIVERSE. THE PERFORMANCE OF PRIMARY A,
INVESTOR B AND INVESTOR C SHARES MAY VARY BASED ON THE DIFFERENCES IN SALES
LOADS AND FEES PAID BY THE SHAREHOLDERS INVESTING IN EACH CLASS.
[GRAPHIC] Nations International Growth Fund
[GRAPHIC] Lipper International
Funds Universe
[GRAPHIC] MSCI EAFE Index
III-15
<PAGE>
NATIONS INTERNATIONAL GROWTH FUND
CONTINUED
--------------------------------------------------------------------------------
TOTAL RETURN (AS OF 3/31/00)
<TABLE>
<CAPTION>
PRIMARY A INVESTOR A INVESTOR B INVESTOR C
NAV** MOP* NAV** CDSC*** NAV** CDSC***
Inception date 7/26/93 1/2/68 7/1/96 9/19/97
----------------------- ----------- ------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 YEAR PERFORMANCE 22.22% 22.18% 15.16% 20.66% 16.19% 20.67% 19.77%
----------------------- ----- ----- ----- ----- ----- ----- -----
AVERAGE ANNUAL RETURNS
3 YEARS 14.26% 14.08% 11.86% 12.96% 12.34%
5 YEARS 13.94% 13.72% 12.39%
10 YEARS 9.02% 8.38%
SINCE INCEPTION 12.48% 11.90% 11.69% 10.37% 9.90% 13.11% 13.11%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY
WITH MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. AVERAGE ANNUAL RETURNS ARE
HISTORICAL IN NATURE AND MEASURE NET INVESTMENT INCOME AND CAPITAL GAIN OR LOSS
FROM PORTFOLIO INVESTMENTS ASSUMING REINVESTMENT OF DISTRIBUTIONS.
*FIGURES AT MAXIMUM OFFERING PRICE (MOP) REFLECT THE MAXIMUM FRONT-END SALES
CHARGE OF 5.75%.
**FIGURES AT NET ASSET VALUE (NAV) DO NOT REFLECT ANY SALES CHARGES. INVESTOR A
SHARES ARE AVAILABLE WITH A REDUCED OR WAIVED SALES CHARGE ONLY UNDER CERTAIN
CIRCUMSTANCES AS DESCRIBED IN THE PROSPECTUS.
***FIGURES AT CDSC REFLECT THE MAXIMUM APPLICABLE CONTINGENT DEFERRED SALES
CHARGE.
THE PERFORMANCE SHOWN INCLUDES THE EFFECT OF FEE WAIVERS BY THE INVESTMENT
ADVISER AND THE CO-ADMINISTRATOR, WHICH HAVE THE EFFECT OF INCREASING TOTAL
RETURN.
III-16
<PAGE>
Statement of Additional Information
Dated June 15, 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, 2000 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
General Information.......................................................... 3
Introductory Note to Pro Forma Financial Information......................... 4
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 no more than 66% 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 Fund/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)*
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common Stocks - 96.4%
Argentina - 0.1%
49,914 49,914 PC Holdings SA, ADR $ - $ 855 $ 855
-------------------------------------------
-------------------------------------------
- 855 855
-------------------------------------------
Australia - 2.2%
250,000 (a) 250,000 Australia and New Zealand
Banking Group 1,578 1,578
300,000 (a) 408,791 708,791 Cable and Wireless Optus Ltd. 1,202 1,638 2,840
275,000 (a) 275,000 Cellnet Telecommunications 534 534
350,000 (a) 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 Ltd. 3,493 5,743 9,236
150,000 150,000 Rio Tinto Ltd. 2,132 2,132
411,768 (a) 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 SA, ADR 887 887
8,800 8,800 Tele Centro Sul Participacoes
SA, ADR 713 713
100,000 (a) 37,500 137,500 Tele Norte Leste Participacoes
SA, 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 (a) 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 SA, 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 (a) 100,467 110,467 Sonera 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 Fund/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)*
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common Stocks - (continued)
France - 10.7%
40,000 (a) 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 SA 1,194 1,194
15,000 (a) 15,000 Carrefour SA 1,922 1,922
3,500 3,500 Castorama Dubois
Investissement SA 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 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
8,604 8,604 Groupe Danone 1,902 1,902
5,094 5,094 Havas Advertising SA 2,754 2,754
19,528 19,528 Lafarge-Coppee 1,665 1,665
2,000 (a) 2,000 L'Oreal 1,292 1,292
2,698 2,698 Louis Vuitton Moet Hennessy
(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 (a) 98,358 138,358 Sanofi-Synthelabo 1,525 3,751 5,276
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 (a) 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 (a) 20,000 Deutsch Pfandbrief-Und
Hypothekenbank AG
(DePfa-Bank) 1,914 1,914
81,462 81,462 Deutsche Telekom AG (REGD) 6,291 6,291
32,000 (a) 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 AG 1,890 1,890
8,651 8,651 ProSieben Media AG 986 986
4,000 (a) 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>
<PAGE>
Nations International Growth Fund/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)*
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common Stocks - (continued)
Holland - 0.7%
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 Ltd. (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
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
Ltd. 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%
250,000 (a) 142,218 392,218 Bank of Ireland 1,785 1,015 2,800
100,000 (a) 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 (a) 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 SpA 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 (a) 188,000 308,000 Daiwa Securities Group Inc. 2,258 3,538 5,796
50 (a) 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 (a) 196,800 216,800 Fujitsi Ltd. 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 (a) 41,000 66,000 Ito-Yokado Company, Ltd. 1,789 2,934 4,723
1,600 1,600 Kadokawa Shoten Publishing
Company, Ltd. 380 380
150,000 (a) 150,000 Kao Corporation 4,592 4,592
7,132 7,132 KDD Corporation 601 601
</TABLE>
<PAGE>
Nations International Growth Fund/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)*
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common Stocks - (continued)
Japan - (continued)
4,200 4,200 Kojima Company Limited $ - $ 121 $ 121
247,000 247,000 Komatsu Ltd. 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 (a) 225,000 Matsushita Electric
Industrial Company,
Ltd. 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 (a) 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
Network, Inc. 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 (a) 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 Ltd. 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
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 (a) 34,099 109,099 Walmart de Mexico SA de
CV, ADR 1,875 852 2,727
---------------------------------------------
1,875 19,844 21,719
---------------------------------------------
</TABLE>
<PAGE>
Nations International Growth Fund/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)*
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 (a) 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
Groep 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 (a) 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 (a) 200,000 Portugal Telecom SA (REGD) 2,565 2,565
500,000 500,000 Portugal Telecommunications
SA, 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 Ltd. 222 222
150,000 (a) 100,895 250,895 DBS Group Holding Ltd. 1,982 1,333 3,315
217,000 217,000 OMNI Industries Ltd. 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 Ltd. 545 545
33,000 33,000 Singapore Press Holdings, Ltd. 527 527
6,080 6,080 St Assembly Test Ltd., ADR 295 295
--------------------------------------------
1,982 7,243 9,225
--------------------------------------------
South Africa - 0.2%
15,000 15,000 Anglo American Platinum
Corporation 399 399
1,200,000 (a) 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 Corporation,
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 SA 4,365 4,365
90,000 (a) 90,000 Gas Natural 1,756 1,756
</TABLE>
<PAGE>
Nations International Growth Fund/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)*
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common Stocks - (continued)
Spain - (continued)
110,483 110,483 Iberdrola SA $ - $ 1,441 $ 1,441
100,000(a) 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 (a) 60,000 Atlas Copco AB, Series "A" 1,458 1,458
42,000 (a) 42,000 Atlas Copco AB, Series "B" 977 977
45,000 (a) 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
21,002 21,002 Sandvik AB - A Shares 540 540
23,997 23,997 Sandvik AB - B Shares 622 622
40,000 (a) 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
27,040 27,040 SKF AB - A Shares 585 585
33,485 33,485 SKF AB - B Shares 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 (a) 70 320 Kudelski SA 3,120 874 3,994
1,000 (a) 1,750 2,750 Nestle SA (REGD) 1,792 3,136 4,928
1,000 (a) 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 (REGD) 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
Engineering Inc. 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>
<PAGE>
Nations International Growth Fund/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)*
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common Stocks - (continued)
United Kingdom - 17.4%
209,000 209,000 3I Group plc $ - $ 4,391 $ 4,391
225,000 225,000 Abbey National plc 2,954 2,954
814,009 814,009 Aegis Group plc 2,526 2,526
160,000 (a) 160,000 Amvescap plc 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 (a) 600,000 Azlan Group Ord. 1,311 1,311
250,000 (a) 250,000 Bank of Scotland Ord. 2,831 2,831
118,357 118,357 Barclays plc 3,162 3,162
939,604 939,604 BP Amoco plc 8,596 8,596
179,803 179,803 British Aerospace 1,015 1,015
40,000 40,000 British Airways plc, ADR 2,150 2,150
36,180 36,180 British Sky Broadcasting
Group plc ("BSkyB") 1,026 1,026
537,986 537,986 British Telecommunications
plc 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 plc 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 plc 6,240 6,240
250,000 (a) 582,606 832,606 Granada Group plc 2,682 6,250 8,932
175,634 175,634 Hays plc 1,147 1,147
155,400 155,400 HSBC Holdings plc 1,837 1,837
284,993 284,993 Invensys plc 1,271 1,271
40,000 (a) 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 (a) 600,000 Securicor Ord. 1,211 1,211
250,000 (a) 1,809,644 2,059,644 Shell Transport and Trading
Company Ord. 2,074 15,011 17,085
245,000 (a) 466,707 711,707 Smithkline Beecham plc 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 (a) 200,000 Thus plc 1,523 1,523
142,909 142,909 Unilever plc 913 913
684,469 (a) 5,100,815 5,785,284 Vodafone AirTouch plc 3,805 28,357 32,162
42,200 42,200 Winbond Electronics
Corporation, GDR 1,255 1,255
150,000 (a) 276,988 426,988 WPP Group plc 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
----------------------------------------------
Total Common stocks 119,569 914,959 1,034,528
----------------------------------------------
(Cost $74,975, $728,716
and $803,690,
respectively)
</TABLE>
<PAGE>
Nations International Growth Fund/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)*
-----------------------------------------------------------------------------------------------------------------------------------
<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
Expire 11/17/00 313 313
---------------------------------------------
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 $90,954, $834,522 and
$925,475, respectively)
</TABLE>
* Investments reflect those held at the Master Portfolio level.
# Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by Banc of America Capital Mangement, Inc.
(a) It is expected that all or a portion of these securities will be sold at the
time of the closing of the reorganization. It is also expected that no more
than 66% of the International Growth Fund's investments will be converted to
cash.
<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 following shareholders were invested in the Master Portfolios at March 31,
2000:
International Equity Master Portfolio:
Nations International Equity Fund.................................... 98.0%
Nations International Equity Fund (Offshore)......................... 2.0%
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 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. Upon the closing of the reorganization, the assets received, including
the securities received in the transaction, will be contributed to the
International Equity Master Portfolio.
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 International Growth Fund / Nations International Equity Fund
Pro Forma Combining Statement of Net Assets (unaudited)
March 31, 2000
<TABLE>
<CAPTION>
Pro Forma
Nations Nations Combined
International International Adjustments to International
Growth Fund Equity Fund Pro Forma Equity Fund
(in 000's) (in 000's) (in 000's) (in 000's)
------------------------------------------------ -------------
<S> <C> <C> <C> <C>
Total Investments in Securities $ 135,548 $ (135,548) $ -
Nations Master Investment Trust, International Equity Portfolio
Investments in securities - $ 913,638 135,548 (a) 1,049,186
Other Assets and Liabilities:
Cash 335 - 335
Receivable for investment securities sold 6,685 - 6,685
Receivable for Fund shares sold 11,618 31,262 42,880
Dividend and interest receivable 304 - 304
Other receivables - 246 246
Collateral on securities loaned (15,979) - (15,979)
Payable for Fund shared redeemed (1,230) (2,012) (3,242)
Investment advisory fee payable (104) - (104)
Administration fee payable (28) (135) (163)
Shareholder servicing and distribution
fees payable (9) (37) (46)
Payable for investment securities purchased (6,864) - (6,864)
Accrued Directors' fees and expenses (16) (60) (76)
Other (54) - (54)
------------------------------------------------ -------------
Total Other Assets and Liabilities (5,342) 29,264 - 23,922
------------------------------------------------ -------------
Net Assets $ 130,206 $ 942,902 $ - $ 1,073,108
================================================= =============
Net Assets by Class:
Primary A $ 96,460 $ 866,731 $ - $ 963,191
Primary B - - - -
Investor A 31,710 43,111 - 74,821
Investor B 1,493 32,073 - 33,566
Investor C 543 987 - 1,530
------------------------------------------------ -------------
$ 130,206 $ 942,902 $ - $ 1,073,108
------------------------------------------------ -------------
Shares Outstanding by Class:
Primary A 6,786 51,785 (1,024)(b) 57,547
Primary B - - - -
Investor A 2,285 2,611 (364)(b) 4,532
Investor B 111 1,997 (18)(b) 2,090
Investor C 39 63 (5)(b) 97
------------------------------------------------ -------------
9,221 56,456 (1,411) 64,266
------------------------------------------------ -------------
Net Asset Value per Share by Class:
Primary A $ 14.21 $ 16.74 $ - $ 16.74
Primary B $ - $ - $ - $ -
Investor A $ 13.88 $ 16.51 $ - $ 16.51
Investor B $ 13.42 $ 16.06 $ - $ 16.06
Investor C $ 13.92 $ 15.72 $ - $ 15.72
</TABLE>
(a) Investment securities from International Growth invested in the
International Equity Master Portfolio
(b) Reflects the issuance of Nations International Equity Fund shares to holders
of shares of Nations International Growth Fund.
See Notes to Pro Forma Financial Statements
<PAGE>
Nations International Growth Fund / Nations International Equity Fund
Pro Forma Combining Statement of Operations (unaudited)
Twelve Month Period Ending March 31, 2000
<TABLE>
<CAPTION>
Pro Forma
Nations Nations Combined
International International Adjustments to International
Growth Fund Equity Fund Pro Forma Equity Fund
(in 000's) (in 000's) (in 000's) (in 000's)
------------------------------------------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $457 $355 $ - $812
Interest allocated from Portfolio - 778 778
Dividends (net of foreign withholding taxes of $268 and $1,140) 1,953 10,260 - 12,213
Dividends allocated from Portfolio (net of foreign
withholding taxes of $0 and $311) - 3,476 3,476
Securities lending 61 - - 61
Expenses allocated from Portfolio - (3,760) (4,698)(a) (8,458)
------------------------------------------------- -------------
Total Investment Income 2,471 11,109 (4,698) 8,882
------------------------------------------------- -------------
EXPENSES:
Investment advisory fee 1,459 3,366 (4,825)(a) -
Administration fee 368 1,492 125 (b) 1,985
Transfer agent fee 74 294 - 368
Custodian fees 78 261 (66)(c) 273
Legal and audit fees 159 87 (86)(c) 160
Registration & filing fees 31 65 (20)(c) 76
Directors' fees and expenses 19 19 (19)(c) 19
Interest expense 25 - (25)(e) -
Printing 42 97 (20)(c) 119
Other expenses 288 36 (302)(d) 22
------------------------------------------------- -------------
Subtotal 2,543 5,717 (5,238) 3,022
------------------------------------------------- -------------
Shareholder servicing and distribution fees
Primary B - - - -
Investor A 71 74 - 145
Investor B 13 295 - 308
Investor C 4 10 - 14
------------------------------------------------- -------------
Subtotal 88 379 - 467
------------------------------------------------- -------------
Fees waived and/or reimbursed by investment
advisor, administrator and/or distributor (30) (215) 245 (f) -
------------------------------------------------- -------------
Total Expenses 2,601 5,881 (4,993) 3,489
------------------------------------------------- -------------
NET INVESTMENT INCOME (130) 5,228 295 5,393
------------------------------------------------- -------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) from:
Security transactions 65,606 99,733 165,339
Security transactions allocated from Portfolio - 91,305 91,305
Futures contracts (187) - (187)
Forward foreign exchange contracts and foreign
currency transactions (238) (37) (275)
Forward foreign exchange contracts and foreign
currency transactions allocated from Portfolio - (1,129) (1,129)
------------------------------------------------- -------------
Net realized gain/(loss) on investments 65,181 189,872 255,053
------------------------------------------------- -------------
Change in unrealized appreciation/(depreciation) of:
Securities (22,928) (20,551) (43,479)
Securities allocated from Portfolio - 104,091 104,091
Futures contracts - - -
Forward foreign exchange contracts, foreign
currencies and other net assets (10) (62) (72)
------------------------------------------------- -------------
Net change in unrealized appreciation/
(depreciation) of investments (22,938) 83,478 60,540
------------------------------------------------- -------------
Net realized and unrealized gain/(loss)
on investments 42,243 273,350 - 315,593
------------------------------------------------- -------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $42,113 $278,578 $295 $320,986
================================================= =============
</TABLE>
Legend:
(a) Investment advisory fee charged at the Master Portfolio level. Amount
represents allocation from Master Portfolio to Feeder Fund.
(b) Adjustment for reallocating advisory to admin fees.
(c) Adjustment reflects expected savings when the two funds become one.
(d) Adjustment for duplication of expenses due to consolidation of the funds.
(e) Adjustment for interest expense since this is dependent upon portfolio
decision-making.
(f) Adjustment for inapplicability of expense cap.
See Notes to Pro Forma Financial Statements
<PAGE>
EXHIBIT INDEX
Nations Reserves
File No. 333-37006
Exhibit Number Description
-------------- -----------
EX.-99.17 Proxy Card
