-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Um5cpgdL9iMp4vqfumVEUHXKhlKOaNmzfksG9RhBOhJ0kyg6BdyjcfiqBVhQ921W GLEqOCLPAzbYLs+Kfb1Vlw== 0000950168-99-000666.txt : 19990317 0000950168-99-000666.hdr.sgml : 19990317 ACCESSION NUMBER: 0000950168-99-000666 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19990305 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONS INSTITUTIONAL RESERVES CENTRAL INDEX KEY: 0000859750 STANDARD INDUSTRIAL CLASSIFICATION: STATE OF INCORPORATION: MA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 333-70027 FILM NUMBER: 99558459 BUSINESS ADDRESS: STREET 1: ONE NATIONSBANK PLZ CITY: CHARLOTTE STATE: NC ZIP: 28255 BUSINESS PHONE: 8003425734 MAIL ADDRESS: STREET 1: ONE NATIONSBANK PLAZA CITY: CHARLOTTE STATE: NC ZIP: 28255 FORMER COMPANY: FORMER CONFORMED NAME: CAPITOL MUTUAL FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SEI CAPITOL FUNDS DATE OF NAME CHANGE: 19900318 497 1 NATIONS FUND INSTITUTIONAL RESERVES 497 PACIFIC HORIZON FUNDS, INC. Asset Allocation Fund Blue Chip Fund California Municipal Bond Fund California Tax-Exempt Money Market Fund Capital Income Fund Government Fund Intermediate Bond Fund Prime Fund Tax-Exempt Money Fund Treasury Fund Treasury Only Fund 400 Bellevue Parkway Wilmington, Delaware 19809 February 8, 1999 Dear Shareholder: On behalf of the Board of Directors of Pacific Horizon Funds, Inc. ("Pacific Horizon"), we are pleased to invite you to a special meeting of shareholders of Pacific Horizon, including the Pacific Horizon funds named above (each a "Pacific Horizon Fund") to be held at 10:00 a.m. (Eastern time) on April 12, 1999, at 400 Bellevue Parkway, Wilmington, Delaware (the "Meeting"). At the Meeting, you will be asked to approve a proposed Agreement and Plan of Reorganization, dated as of February 8, 1999 (the "Reorganization Agreement"), by and between Pacific Horizon and Nations Institutional Reserves ("Nations"), which contemplates the reorganization of your Pacific Horizon Fund into a corresponding fund of Nations (each a "Nations Fund"), and the reorganization of Pacific Horizon as a whole. Shareholders of the Blue Chip Fund and the Intermediate Bond Fund, which are structured as master-feeder funds, also will be asked to approve a proposed Agreement and Plan of Reorganization, dated as of February 8, 1999 (the "Master Trust Reorganization Agreement") by and between Master Investment Trust, Series I ("MIT") and Nations Master Investment Trust, which contemplates the reorganization of the Master Portfolios in which these Funds invest. BACKGROUND. As you may recall, BankAmerica Corporation recently merged with NationsBank Corporation to form the new BankAmerica Corporation ("BankAmerica"). As a result of the merger, both Bank of America National Trust and Savings Association ("Bank of America"), the investment adviser to the Pacific Horizon Funds, and NationsBanc Advisors, Inc. ("NBAI"), the investment adviser to Nations, are indirect, wholly owned subsidiaries of BankAmerica. Bank of America has decided to consolidate its mutual fund investment advisory operations with those of NBAI. At the upcoming Meeting, you will be asked to approve the reorganization of your Pacific Horizon Fund into a corresponding Nations Fund (the "Reorganization"). If all approvals are obtained, the Pacific Horizon Funds will be reorganized into corresponding Nations Funds in May 1999, when your Pacific Horizon Fund shares will be exchanged for shares of the corresponding Nations Funds of equal value. With respect to the Blue Chip Fund and Intermediate Bond Fund, a corresponding reorganization would occur at the master portfolio level. PACIFIC HORIZON'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE THE PROPOSED REORGANIZATION. MIT'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE BLUE CHIP FUND AND INTERMEDIATE BOND FUND VOTE TO APPROVE THE PROPOSED MASTER TRUST REORGANIZATION AGREEMENT. In considering these matters, you should note: o THE SAME OR SIMILAR OBJECTIVES AND POLICIES Five of the Pacific Horizon Funds are proposed to be reorganized into existing Nations Funds with investment policies and objectives that are, in general, similar to those of the corresponding Pacific Horizon Funds. Six of the Pacific Horizon Funds are proposed to be reorganized into shell Nations Funds that have been created for the purpose of the Reorganization and that will continue the investment policies and objectives of the corresponding Pacific Horizon Funds. o SIMILAR ACCESS AND SERVICE ARRANGEMENTS Following the Reorganization, you will enjoy access to Nations Funds through similar distribution, transaction and shareholder servicing arrangements. The new BankAmerica has one of the most comprehensive distribution networks of any banking organization in the country. o SAME VALUE OF SHARES The total dollar value of the Nations Fund shares you receive in the Reorganization will be the same as the total dollar value of the Pacific Horizon Fund shares that you held immediately before the Reorganization. THE EXCHANGE OF PACIFIC HORIZON FUND SHARES FOR NATIONS FUND SHARES WILL BE TAX-FREE UNDER FEDERAL LAW, AND NO FRONT-END OR CONTINGENT DEFERRED SALES LOADS WILL BE CHARGED AS A RESULT OF THE EXCHANGE. o THE PROPOSED REORGANIZATION IS EXPECTED TO BENEFIT PACIFIC HORIZON FUND SHAREHOLDERS BY: o Offering actual or potential reductions in total operating expense ratios for most shareholders; o Offering shareholders the opportunity to become part of a larger and more diverse family of more than seventy mutual funds. Many of you will be able to exchange your shares among most or all of those funds; o Offering access to a broader array of investment products, including a line of fund-of-funds; and o Providing opportunities for enhanced returns through combined investment portfolios. 2 The formal Notice of Special Meeting, a Combined Proxy Statement/Prospectus and a Proxy Ballot are enclosed. If you own shares in more than one of the Pacific Horizon Funds named above, more than one Proxy Ballot accompanies these materials. If you own shares in one or more of the Pacific Horizon Funds not named above, you will be receiving separately a set of proxy materials (including Proxy Ballot(s)) for the other fund(s). Please be sure to vote and return each Proxy Ballot. Whether or not you plan to attend the Special Meeting, you may vote by proxy in any of the following ways: 1. Mark, sign, date and return the enclosed Proxy Ballot(s) in the enclosed postage-paid envelope; 2. Mark, sign, date and fax the enclosed Proxy Ballot(s) to ADP Proxy Services at (704) 388-2641; or 3. Follow the instructions below to vote on-line or by telephone. Please return your Proxy Ballot(s), fax it to us or follow the instructions below to vote on-line or by telephone so that your vote will be counted. YOUR VOTE IS IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN. PLEASE VOTE BY RETURNING YOUR PROXY BALLOT(S) TODAY, EITHER IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR BY TELEFACSIMILE AT (704) 388-2641. YOU MAY ALSO VOTE YOUR PROXY BY A TOLL-FREE PHONE CALL OR BY VOTING ON-LINE, AS INDICATED ON THE ATTACHED INSERT. The proposed Reorganization and the reasons for the Pacific Horizon Board's and MIT Board's unanimous recommendations are discussed in detail in the enclosed materials, which you should read carefully. If you have any questions about the Reorganization, please do not hesitate to contact Pacific Horizon toll free at 1-800-653-9427. We look forward to your attendance at the Meeting or receiving your Proxy Ballot(s) or your on-line or telephone instructions so that your shares may be voted at the Meeting. Sincerely, Dr. Cornelius J. Pings President 3 TWO QUICK AND EASY WAYS TO VOTE YOUR PROXY PACIFIC HORIZON FUNDS As a valued Pacific Horizon Funds shareholder, your proxy vote is important to us. That's why we've made it faster and easier to vote your proxy at YOUR convenience, 24 hours a day. After reviewing the enclosed PROXY STATEMENT/PROSPECTUS ("PROXY STATEMENT"), which outlines important issues affecting your funds, select one of the following quick and easy methods to register your vote - ACCURATELY and QUICKLY.
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(S)* at hand. your PROXY BALLOT(S)* 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 your 3. Enter the 12-digit Control Number found on your PROXY BALLOT(S). PROXY BALLOT(S). 4. Cast your vote using the easy-to-follow 4. Cast your vote using the easy-to-follow instructions. instructions
* DO NOT MAIL THE PROXY BALLOT(S) IF VOTING BY INTERNET OR TELEPHONE. 4 NATIONS INSTITUTIONAL RESERVES February 8, 1999 QUESTIONS & ANSWERS FOR SHAREHOLDERS OF PACIFIC HORIZON FUNDS: The following questions and answers provide an overview of the proposal to reorganize your Pacific Horizon Fund into a corresponding portfolio of Nations Institutional Reserves. We also encourage you to read the full text of the combined proxy statement/prospectus (the "Proxy/Prospectus") that follows. - - -------------------------------------------------------------------------------- Q: WHAT ARE PACIFIC HORIZON FUND SHAREHOLDERS BEING ASKED TO VOTE UPON? A: Pacific Horizon Fund shareholders are being asked to consider and approve a proposal to reorganize the Pacific Horizon Funds into corresponding portfolios within the Nations Funds family of mutual funds. Q: WHY HAS THE REORGANIZATION OF THE PACIFIC HORIZON FUNDS INTO NATIONS FUNDS BEEN RECOMMENDED? A: The Board of Directors of the Pacific Horizon Funds, Inc. ("Pacific Horizon") and the Boards of Trustees/Directors of Nations Institutional Reserves, Nations Fund Trust and Nations Fund, Inc. (collectively, "Nations Funds") have each determined that the consolidation of the Pacific Horizon Funds into corresponding portfolios of Nations Funds is in the best interests of their respective shareholders. Among the benefits for Pacific Horizon Fund shareholders considered by the Pacific Horizon Board were access to a broader array of mutual funds and the possibility of improved investment performance from the combining of investment portfolios. A more detailed discussion of the factors considered by the Pacific Horizon Board of Directors in approving the reorganization is included in the Proxy/Prospectus. Q: WHAT IS THE ANTICIPATED TIMING OF THE REORGANIZATION? A: The meeting of shareholders to consider the proposal is scheduled to occur on April 12, 1999. If all necessary approvals are obtained, the proposed reorganization will likely take place in May 1999. Q: WHO WILL RECEIVE THE PROXY/PROSPECTUS MATERIALS? A: The Proxy/Prospectus has been mailed to all Pacific Horizon Fund shareholders that held shares of record on January 14, 1999. Please note that in some cases record ownership of and/or voting authority over Pacific Horizon Fund shares may reside with a fiduciary or other agent. In these cases, the fiduciary or other agent may receive the combined Proxy/Prospectus. Q: HOW WILL THE PACIFIC HORIZON FUNDS BE REORGANIZED? A: As you may know, Pacific Horizon consists of seventeen separate mutual funds, including 6 money market funds. The Proxy/Prospectus that accompanies these materials, however, relates only to the eleven Pacific Horizon Funds listed below. Shareholders of the other Pacific Horizon Funds are receiving similar but separate documents. The proposed plan of reorganization for these eleven funds, approved by the Pacific Horizon Board of Directors, contemplates the reorganization of five of these Pacific Horizon Funds into four corresponding Nations Funds portfolios having similar investment objectives and policies. The remaining six Pacific Horizon Funds listed below will be reorganized into shell Nations Funds that are being created to continue the current operations of these Pacific Horizon Funds. The investment objectives and strategies of these shell portfolios will be substantially the same as those of the corresponding Pacific Horizon Funds. Under the proposed plan of reorganization, the Pacific Horizon Funds covered by this Proxy/Prospectus would be reorganized into the following Nations Funds portfolios:
PACIFIC HORIZON FUNDS CORRESPONDING NATIONS FUNDS PORTFOLIO --------------------- ------------------------------------- Asset Allocation Fund Nations Asset Allocation Fund (SHELL PORTFOLIO) Blue Chip Fund Nations Blue Chip Fund (SHELL PORTFOLIO) California Municipal Bond Fund Nations California Municipal Bond Fund (SHELL PORTFOLIO) California Tax-Exempt Money Market Fund Nations California Tax-Exempt Reserves (SHELL PORTFOLIO) Capital Income Fund Nations Capital Income Fund (SHELL PORTFOLIO) Government Fund Nations Government Reserves Intermediate Bond Fund Nations Intermediate Bond Fund (SHELL PORTFOLIO) Prime Fund Nations Cash Reserves Tax-Exempt Money Fund Nations Municipal Reserves Treasury Fund Nations Treasury Reserves Treasury Only Fund Nations Government Reserves
Please refer to Table I of the accompanying Proxy/Prospectus for information regarding the specific classes of shares of the Pacific Horizon Funds and Nations Funds involved in the Reorganization. Q: WHAT ARE THE COSTS AND FEDERAL TAX IMPLICATIONS TO SHAREHOLDERS IN CONNECTION WITH THE PROPOSED REORGANIZATION? A: The customary costs of the reorganization will not be borne by Pacific Horizon Fund shareholders. Also, no sales charge will be imposed on the shares of the Nations Funds issued to you in the reorganization, which means that the aggregate value of the Nations Fund shares issued to you will be equal to the aggregate value of the Pacific Horizon Fund shares that you own immediately prior to the reorganization. In addition, the exchange of Pacific Horizon Funds shares for Nations Funds shares will be tax-free under federal law. 2 Q: WHAT WILL HAPPEN TO PACIFIC HORIZON FUND ACCOUNT FEATURES SUCH AS SYSTEMATIC INVESTMENT PLANS OR AUTOMATIC WITHDRAWAL PLANS? A: After the reorganization, Nations Funds will generally continue to honor standing instructions regarding Pacific Horizon Fund accounts, such as systematic investment plans, automatic withdrawal plans or dividend reinvestment plans. However, those instructions will be subject to the requirements in place for the Nations Funds and shareholders will accordingly be notified of any differences that impact their accounts. Please refer to Appendix IV of the Proxy/Prospectus for a detailed comparison of Pacific Horizon Funds/Nations Funds shareholder services. 3 PACIFIC HORIZON FUNDS, INC. Asset Allocation Fund Blue Chip Fund California Municipal Bond Fund California Tax-Exempt Money Market Fund Capital Income Fund Government Fund Intermediate Bond Fund Prime Fund Tax-Exempt Money Fund Treasury Fund Treasury Only Fund 400 Bellevue Parkway Wilmington, Delaware 19809 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 12, 1999 To Pacific Horizon Fund Shareholders: NOTICE IS GIVEN THAT a special meeting of the shareholders (the "Meeting") of Pacific Horizon Funds, Inc. ("Pacific Horizon"), including the Pacific Horizon Funds named above (each a "Pacific Horizon Fund" and together, the "Pacific Horizon Funds"), each of which is a portfolio of Pacific Horizon, will be held at 10:00 a.m., Eastern time, on April 12, 1999, at 400 Bellevue Parkway, Wilmington, Delaware, for purpose of considering and voting upon: ITEM 1. A proposal to approve an Agreement and Plan of Reorganization, which provides for and contemplates: (a) the transfer of the assets and liabilities of each Pacific Horizon Fund to a corresponding fund of Nations Institutional Reserves in exchange for shares of designated classes of the corresponding Nations fund of equal value; (b) the distribution of the shares of designated classes of the corresponding Nations fund to shareholders of each Pacific Horizon Fund; (c) the transfer of all of the assets and liabilities of Pacific Horizon; and (d) the dissolution under state law and the deregistration under the Investment Company Act of 1940, as amended, of Pacific Horizon. In the case of Pacific Horizon Blue Chip Fund and Pacific Horizon Intermediate Bond Fund only, shareholders are also being asked, as part of a combined vote, to approve an additional proposed Agreement and Plan of Reorganization for Master Investment Trust, Series I, which provides for: (a) the transfer of assets and liabilities of the Blue Chip and Investment Grade Bond Portfolios of Master Investment Trust, Series I in exchange for shares of corresponding portfolios of Nations Master Investment Trust of equal value; (b) the distribution of shares of the corresponding portfolio of Nations Master Investment Trust to shareholders of the portfolios of Master Investment Trust, Series I; and (c) the termination under state law and deregistration under the 1940 Act of Master Investment Trust, Series I. ITEM 2. Such other business as may properly come before the Meeting or any adjournment(s). Item 1 is described in the attached Combined Proxy Statement/Prospectus. YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSAL. Shareholders of record as of the close of business on January 14, 1999 are entitled to notice of, and to vote at, the Meeting or any adjournment(s) thereof. SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY BALLOT(S), WHICH IS BEING SOLICITED BY THE PACIFIC HORIZON BOARD OF DIRECTORS. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. SHAREHOLDERS ALSO MAY RETURN PROXIES BY: 1) FACSIMILE AT (704) 388-2641; OR 2) TOUCHTONE VOTING BY DIALING (800) 690-6903; OR 3) VOTING ON-LINE AT WEBSITE WWW.PROXYVOTE.COM. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO PACIFIC HORIZON A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON. By Order of the Board of Directors, W. Bruce McConnel, III Secretary WE NEED YOUR PROXY VOTE IMMEDIATELY. A SHAREHOLDER MAY THINK HIS OR HER VOTE IS NOT IMPORTANT, BUT IT IS VITAL. BY LAW, THE SPECIAL MEETING WILL HAVE TO BE ADJOURNED WITHOUT CONDUCTING ANY BUSINESS IF LESS THAN A MAJORITY OF THE SHARES ELIGIBLE TO VOTE ARE REPRESENTED. IN THAT EVENT, PACIFIC HORIZON WOULD CONTINUE TO SOLICIT VOTES IN AN ATTEMPT TO ACHIEVE A QUORUM. YOUR VOTE COULD BE CRITICAL IN ALLOWING PACIFIC HORIZON TO HOLD THE MEETING AS SCHEDULED, SO PLEASE RETURN YOUR PROXY BALLOT(S) IMMEDIATELY OR VOTE ON-LINE OR BY TELEPHONE. 2 COMBINED PROXY STATEMENT/PROSPECTUS FEBRUARY 8, 1999 PACIFIC HORIZON FUNDS, INC. 400 BELLEVUE PARKWAY WILMINGTON, DELAWARE 19809 1-800-653-9427 NATIONS INSTITUTIONAL RESERVES ONE NATIONSBANK PLAZA, 33RD FLOOR CHARLOTTE, NORTH CAROLINA 28255 1-800-321-7854 This combined proxy statement/prospectus ("Proxy/Prospectus") is being sent to shareholders of the Pacific Horizon Asset Allocation Fund, Pacific Horizon Blue Chip Fund, Pacific Horizon California Municipal Bond Fund, Pacific Horizon California Tax-Exempt Money Market Fund, Pacific Horizon Capital Income Fund, Pacific Horizon Government Fund, Pacific Horizon Intermediate Bond Fund, Pacific Horizon Prime Fund, Pacific Horizon Tax-Exempt Money Fund, Pacific Horizon Treasury Fund and Pacific Horizon Treasury Only Fund (each a "Pacific Horizon Fund" and collectively the "Pacific Horizon Funds"). The Board of Directors of Pacific Horizon Funds, Inc. ("Pacific Horizon") has called a Special Meeting of Shareholders (the "Meeting") at 10:00 a.m. (Eastern time) on April 12, 1999 at 400 Bellevue Parkway, Wilmington, Delaware. At the Meeting, shareholders will be asked: o To approve a proposed Agreement and Plan of Reorganization dated as of February 8, 1999 (the "Reorganization Agreement"), by and between Pacific Horizon and Nations Institutional Reserves ("Nations"), which provides for and contemplates (a) the transfer of the assets and liabilities of each Pacific Horizon Fund to a corresponding fund of Nations (each a "Nations Fund" and collectively, the "Nations Funds") in exchange for the shares of designated classes of the corresponding Nations Fund of equal value; (b) the distribution of the shares of designated classes of the corresponding Nations Fund to shareholders of each Pacific Horizon Fund; (c) the transfer of all of the assets and liabilities of Pacific Horizon; and (d) the dissolution under state law and the deregistration under the Investment Company Act of 1940, as amended (the "1940 Act"), of Pacific Horizon. In the case of Pacific Horizon Blue Chip Fund and Pacific Horizon Intermediate Bond Fund only, shareholders are also being asked, as part of a combined vote, to approve an additional proposed Agreement and Plan of Reorganization dated as of February 8, 1999 (the "Master Trust Reorganization Agreement"), by and between Master Investment Trust, Series I and Nations Master Investment Trust, which provides for (a) the transfer of the assets and liabilities of the Blue Chip and Investment Grade Bond Portfolios of Master Investment Trust, Series I in exchange for shares of corresponding portfolios of Nations Master Investment Trust of equal value; (b) the distribution of shares of the corresponding portfolios of Nations Master Investment Trust to shareholders of the portfolios of Master Investment Trust, Series I; and (c) the termination under state law and deregistration under the 1940 Act of Master Investment Trust, Series I. 1 The Reorganization Agreement, the form of which is attached as Appendix I(A), provides for the transfer of assets and liabilities of each Pacific Horizon Fund to a corresponding Nations Fund in exchange for shares ("Shares") of designated classes of the corresponding Nations Fund of equal value. Pacific Horizon and Nations are both registered open-end management investment companies (mutual funds). The Master Trust Reorganization Agreement (which applies only to shareholders of the Pacific Horizon Blue Chip Fund and Pacific Horizon Intermediate Bond Fund), the form of which is attached as Appendix I(B), provides for the transfer of assets and liabilities of the Blue Chip Master Portfolio and the Investment Grade Bond Master Portfolio (each an "MIT Master Portfolio" and collectively, the "MIT Master Portfolios") of Master Investment Trust, Series I ("MIT") to corresponding master portfolios with substantially the same investment objectives and policies as the MIT Master Portfolios (each a "Nations Master Portfolio" and collectively, the "Nations Master Portfolios") of a shell registered investment company -- Nations Master Investment Trust ("NMIT"). The Master Trust Reorganization Agreement further provides for NMIT to issue interests in each Nations Master Portfolio to its investors equal in value to the assets and liabilities transferred to it. The transactions contemplated by both the Reorganization Agreement and the Master Trust Reorganization Agreement are referred to collectively as the "Reorganization." As a result of the Reorganization, shareholders of the Pacific Horizon Funds will become shareholders of the Nations Funds (the Pacific Horizon Funds and Nations Funds are sometimes referred to as "Funds") and the MIT Master Portfolios will transfer all of their assets and liabilities to corresponding master portfolios of NMIT. Table I(A) shows each class of each Pacific Horizon Fund and the designated class of each corresponding Nations Fund: TABLE I(A)
PACIFIC HORIZON FUND/SHARE CLASS CORRESPONDING NATIONS FUND/SHARE CLASS ASSET ALLOCATION FUND NATIONS ASSET ALLOCATION FUND (shell) A Shares Investor A Shares B Shares Investor B Shares K Shares Investor C Shares SRF Shares Seafirst Shares 2 PACIFIC HORIZON FUND/SHARE CLASS CORRESPONDING NATIONS FUND/SHARE CLASS BLUE CHIP FUND NATIONS BLUE CHIP FUND (shell) A Shares Investor A Shares B Shares Investor B Shares K Shares Investor C Shares SRF Shares Seafirst Shares CALIFORNIA MUNICIPAL BOND FUND NATIONS CALIFORNIA MUNICIPAL BOND FUND (shell) A Shares Investor A Shares B Shares Investor B Shares CALIFORNIA TAX-EXEMPT MONEY MARKET FUND NATIONS CALIFORNIA TAX-EXEMPT RESERVES (shell) Horizon Service Shares Adviser Shares Pacific Horizon Shares Investor Shares S Shares Daily Shares X Shares Daily Shares CAPITAL INCOME FUND NATIONS CAPITAL INCOME FUND (shell) A Shares Investor A Shares B Shares Investor B Shares K Shares Investor C Shares GOVERNMENT FUND NATIONS GOVERNMENT RESERVES Horizon Shares Capital Shares Horizon Service Shares Adviser Shares Pacific Horizon Shares Investor Shares INTERMEDIATE BOND FUND NATIONS INTERMEDIATE BOND FUND (shell) A Shares Investor A Shares K Shares Investor C Shares SRF Shares Seafirst Shares PRIME FUND NATIONS CASH RESERVES Horizon Shares Capital Shares Horizon Service Shares Adviser Shares Pacific Horizon Shares Investor Shares S Shares Daily Shares X Shares Daily Shares Y Shares Service Shares TAX-EXEMPT MONEY FUND NATIONS MUNICIPAL RESERVES Horizon Shares Capital Shares Horizon Service Shares Adviser Shares Pacific Horizon Shares Investor Shares S Shares Daily Shares 3 PACIFIC HORIZON FUND/SHARE CLASS CORRESPONDING NATIONS FUND/SHARE CLASS TREASURY FUND NATIONS TREASURY RESERVES Horizon Shares Capital Shares Horizon Service Shares Adviser Shares Pacific Horizon Shares Investor Shares X Shares Daily Shares Y Shares Service Shares TREASURY ONLY NATIONS GOVERNMENT RESERVES Horizon Shares Capital Shares Horizon Service Shares Adviser Shares Pacific Horizon Shares Investor Shares
Table I(B) below shows each MIT Master Portfolio and the corresponding Nations Master Portfolio: TABLE I(B)
MIT MASTER PORTFOLIO CORRESPONDING NMIT MASTER PORTFOLIO (SHELL) Blue Chip Master Portfolio Nations Blue Chip Master Portfolio (shell) Investment Grade Bond Master Portfolio Nations Intermediate Bond Master Portfolio (shell)
Pacific Horizon also offers shares in other funds that are not part of this Proxy/Prospectus. Pacific Horizon shareholders of those funds are voting on similar agreements and plans of reorganization that, in a like manner, would provide for their reorganization into designated classes and corresponding portfolios of two other registered investment companies - Nations Funds, Inc. and Nations Fund Trust (together with Nations, the "Nations Funds Family"). If the Reorganization Agreement and the agreements and plans of reorganization affecting the other funds of Pacific Horizon are approved and consummated, Pacific Horizon will transfer all of its assets and liabilities, deregister as a registered investment company and dissolve under Maryland law. For more information about this aspect of the Reorganization, see "Voting Matters." This Proxy/Prospectus sets forth concisely the information that a Pacific Horizon Fund shareholder should know before voting, and should be retained for future reference. It is both Pacific Horizon's proxy statement for the Meeting and a prospectus for Nations Cash Reserves, Nations Government Reserves, Nations Municipal Reserves and Nations Treasury Reserves (the "Operating Nations Funds"). It is not a prospectus for Nations Asset Allocation Fund, Nations Blue Chip Fund, Nations California Municipal Bond Fund, Nations California Tax-Exempt Reserves, Nations Capital Income Fund, Nations Intermediate Bond Fund (the "Shell Nations Funds") or the Nations Master Portfolios because these funds were created to continue the business of their corresponding Pacific Horizon Funds and MIT Master Portfolios, respectively. The Shell Nations Funds and Nations Master Portfolios will have substantially the same investment objectives, policies and restrictions as the corresponding Pacific Horizon Funds and MIT Master Portfolios, respectively. 4 Additional information is set forth in the Statement of Additional Information relating to this Proxy/Prospectus and in the prospectuses dated July 1, 1998, as supplemented, for the Pacific Horizon Funds, both of which are incorporated herein by reference. Each of these documents is on file with the Securities and Exchange Commission (the "SEC"), and is available without charge by calling or writing Pacific Horizon at the telephone number or address stated above. The information contained in the Operating Nations Funds' current prospectuses for the designated share classes, dated September 1, 1998 or January 25, 1999, as supplemented, also is incorporated by reference into this Proxy/Prospectus. In addition, a current prospectus for the designated share classes of the Operating Nations Funds accompanies this Proxy/Prospectus. The Annual Report for the year ended April 30, 1998 and the Semi-Annual Report for the period ended October 31, 1998 for the Operating Nations Funds are available without charge by calling or writing Nations at the telephone number or address stated above. Each of these documents is also available on the SEC's website at www.sec.gov. This Proxy/Prospectus is expected to be first sent to shareholders on or about February 8, 1999. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE PACIFIC HORIZON FUNDS AND NATIONS FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED BY BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, NATIONSBANK, N.A. OR ANY OF THEIR AFFILIATES OR ANY OTHER BANK. SUCH SHARES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THE DISTRIBUTOR OF THE PACIFIC HORIZON FUNDS IS PROVIDENT DISTRIBUTORS, INC. THE DISTRIBUTOR OF THE NATIONS FUNDS IS STEPHENS INC. MONEY MARKET FUNDS SEEK TO MAINTAIN A NET ASSET VALUE OF $1.00 PER SHARE. AN INVESTMENT IN A MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. NATIONS BLUE CHIP FUND AND NATIONS INTERMEDIATE BOND FUND INVEST ALL OF THEIR NET INVESTABLE ASSETS IN CORRESPONDING MASTER PORTFOLIOS WHICH, IN TURN, INVEST IN INDIVIDUAL SECURITIES. 5 TABLE OF CONTENTS
FEE TABLES.............................................................................................7 Table II.................................................................................8 SUMMARY................................................................................................9 Proposed Reorganization.......................................................................9 Special Consideration for Shareholders of the Pacific Horizon Blue Chip Fund and the Pacific Horizon Intermediate Bond Fund...........................10 Overview of the Funds........................................................................11 Federal Income Tax Consequences..............................................................11 Pacific Horizon, MIT, Nations and NMIT Board Consideration...................................11 Principal Risk Factors.......................................................................12 Voting Information...........................................................................12 THE REORGANIZATION....................................................................................13 Reasons for the Reorganization...............................................................13 Description of the Reorganization Agreement..................................................13 Description of the Master Trust Reorganization Agreement.....................................15 Pacific Horizon and MIT Board Consideration..................................................15 Capitalization...............................................................................16 Table III...............................................................................16 Federal Income Tax Considerations............................................................22 Other Matters................................................................................23 COMPARISON OF PACIFIC HORIZON AND NATIONS.............................................................23 Investment Objectives and Policies...........................................................23 Investment Advisory Services ................................................................23 Table IV................................................................................24 Other Service Providers for the Pacific Horizon Funds and Nations Funds......................25 Sales Load, Distribution, Shareholder Servicing Arrangements for the Pacific Horizon Funds...........................................................25 Sales Load, Distribution and Shareholder Servicing Arrangements for the Nations Funds...................................................................28 Administration Agreements....................................................................29 Shareholder Transactions and Services........................................................30 Fees and Expenses............................................................................30 Share Structure..............................................................................30 Comparison of Corporate/Trust Structure......................................................31 VOTING MATTERS........................................................................................31 General Information..........................................................................31 Shareholder and Board Approvals..............................................................32 Special Consideration for Shareholders of the Pacific Horizon Blue Chip Fund and the Pacific Horizon Intermediate Bond Fund..........................................33 Principal Shareholders.......................................................................33 Table V(A)..............................................................................34 Table V(B)..............................................................................44 Quorum.......................................................................................47 Annual Meetings and Shareholder Meetings.....................................................47 6 ADDITIONAL INFORMATION ABOUT NATIONS..................................................................47 ADDITIONAL INFORMATION ABOUT PACIFIC HORIZON..........................................................48 FINANCIAL STATEMENTS..................................................................................48 OTHER BUSINESS........................................................................................48 SHAREHOLDER INQUIRIES.................................................................................49
APPENDICES I(A) FORM OF REORGANIZATION AGREEMENT I(B) FORM OF MASTER TRUST REORGANIZATION AGREEMENT II EXPENSE SUMMARIES OF PACIFIC HORIZON FUNDS AND CORRESPONDING NATIONS FUNDS III INVESTMENT OBJECTIVES, LIMITATIONS AND CERTAIN SIGNIFICANT INVESTMENT POLICIES OF THE OPERATING NATIONS FUNDS AND CORRESPONDING PACIFIC HORIZON FUNDS IV SHAREHOLDER TRANSACTIONS AND SERVICES OF THE NATIONS FUNDS AND CORRESPONDING PACIFIC HORIZON FUNDS 7 FEE TABLES The following table shows (i) the current annualized total expense ratio as of September 30, 1998, of those Pacific Horizon Funds to be reorganized into Shell Nations Funds, and as of October 31, 1998 of those Pacific Horizon Funds to be reorganized into Operating Nations Funds, and also the Operating Nations Funds, both before and after fee waivers and/or expense reimbursements; and (ii) the PRO FORMA annualized total expense ratio of the Shell Nations Funds or Combined Funds, as the case may be, both before and after fee waivers and/or expense reimbursements, as of the same dates, based upon the fee arrangements and commitments that will be in place upon consummation of the Reorganization. This table shows that the following funds and classes are projected to experience lower annualized per share total operating expense ratios, after fee waivers and/or reimbursements, based upon the fee arrangements and commitments that will be in place upon consummation of the Reorganization. California Municipal Bond Fund - A & B Shares California Tax-Exempt Money Market Fund -- Horizon Service and Pacific Horizon Shares Government Fund -- Horizon and Horizon Service Shares Prime Fund -- Horizon, Horizon Service, Pacific Horizon and Y Shares Tax-Exempt Money Fund -- Horizon, Horizon Service, Pacific Horizon and S Shares Treasury Fund -- Horizon, Horizon Service, Pacific Horizon and Y Shares Treasury Only Fund -- Horizon, Horizon Service and Pacific Horizon Shares 8 The following funds and classes are projected to experience higher annualized per share total operating expense ratios, after fee waivers and/or reimbursements, based upon the fee arrangements and commitments that will be in place upon consummation of the Reorganization: Asset Allocation Fund -- A, B and K Shares Blue Chip Fund -- K Shares California Tax-Exempt Money Market Fund -- S and X Shares Capital Income Fund -- A, B and K Shares Intermediate Bond Fund -- A and K Shares Prime Fund -- S and X Shares Treasury Fund -- X Shares The following funds and classes are projected to experience no change in annualized per share total operating expense ratios, after fee waivers and/or reimbursements, based upon the arrangements and commitments that will be in place upon consummation of the Reorganization: Asset Allocation Fund -- SRF Shares Blue Chip Fund -- A, B & SRF Shares Government Fund--Pacific Horizon Shares Intermediate Bond Fund -- SRF Shares TABLE II TOTAL EXPENSE INFORMATION
PRO FORMA PACIFIC HORIZON FUND/ TOTAL CORRESPONDING TOTAL COMBINED FUND/SHARE TOTAL SHARE CLASS OPERATING NATIONS FUND/SHARE CLASS OPERATING CLASS POST-REORGANIZATION OPERATING EXPENSES EXPENSES EXPENSES BEFORE/AFTER BEFORE/AFTER BEFORE/AFTER WAIVERS AND/OR WAIVERS AND/OR WAIVERS AND/OR REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS $ $ $ ASSET ALLOCATION FUND NATIONS ASSET ALLOCATION FUND (SHELL) NATIONS ASSET ALLOCATION FUND (SHELL) A Shares 0.97%/0.97% Investor A Shares n/a Investor A Shares 1.22%/1.20% B Shares 1.72%/1.72% Investor B Shares n/a Investor B Shares 1.97%/1.95% K Shares 1.72%/1.47% Investor C Shares n/a Investor C Shares 1.97%/1.95% SRF Shares 0.97%/0.95% Seafirst Shares n/a Seafirst Shares 1.22%/0.95% 9 PACIFIC HORIZON FUND/ TOTAL CORRESPONDING TOTAL COMBINED FUND/SHARE TOTAL SHARE CLASS OPERATING NATIONS FUND/SHARE CLASS OPERATING CLASS POST-REORGANIZATION OPERATING EXPENSES EXPENSES EXPENSES BEFORE/AFTER BEFORE/AFTER BEFORE/AFTER WAIVERS AND/OR WAIVERS AND/OR WAIVERS AND/OR REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS $ $ $ BLUE CHIP FUND NATIONS BLUE CHIP FUND (SHELL) NATIONS BLUE CHIP FUND (SHELL) A Shares 1.23%/1.20% Investor A Shares n/a Investor A Shares 1.28%/1.20% B Shares 1.98%/1.95% Investor B Shares n/a Investor B Shares 2.03%/1.95% K Shares 1.98%/1.70% Investor C Shares n/a Investor C Shares 2.03%/1.95% SRF Shares 1.23%/0.95% Seafirst Shares n/a Seafirst Shares 1.28%/0.95% CALIFORNIA MUNICIPAL BOND FUND NATIONS CALIFORNIA MUNICIPAL BOND FUND NATIONS CALIFORNIA MUNICIPAL BOND FUND A Shares 0.94%/0.94% (SHELL) (SHELL) B Shares 1.69%/1.69% Investor A Shares n/a Investor A Shares 1.07%/0.80% Investor B Shares n/a Investor B Shares 1.82%/1.45% CALIFORNIA TAX-EXEMPT MONEY MARKET FUND NATIONS CALIFORNIA TAX-EXEMPT RESERVES NATIONS CALIFORNIA TAX-EXEMPT RESERVES Horizon Serv. Shares 0.49%/0.49% (SHELL) (SHELL) Pac. Horizon Shares 0.59%/0.56% Adviser Shares n/a Adviser Shares 0.54%/0.45% S Shares 1.24%/0.79% Investor Shares n/a Investor Shares 0.64%/0.55% X Shares 0.81%/0.79% Daily Shares n/a Daily Shares 0.89%/0.80% Daily Shares n/a Daily Shares 0.89%/0.80% CAPITAL INCOME FUND NATIONS CAPITAL INCOME FUND NATIONS CAPITAL INCOME FUND A Shares 1.21%/1.21% Investor A Shares n/a Investor A Shares 1.23%/1.23% B Shares 1.96%/1.96% Investor B Shares n/a Investor B Shares 1.98%/1.98% K Shares 1.96%/1.71% Investor C Shares n/a Investor C Shares 1.98%/1.98% GOVERNMENT FUND NATIONS GOVERNMENT RESERVES NATIONS GOVERNMENT RESERVES Horizon Shares 0.28%/0.23% Capital Shares 0.29%/0.20% Capital Shares 0.29%/0.20% Horizon Serv. Shares 0.53%/0.48% Adviser Shares 0.54%/0.45% Adviser Shares 0.54%/0.45% Pac. Horizon Shares 0.60%/0.55% Investor Shares (shell) n/a Investor Shares (shell) 0.64%/0.55% INTERMEDIATE BOND FUND NATIONS INTERMEDIATE BOND FUND (SHELL) NATIONS INTERMEDIATE BOND FUND (SHELL) A Shares 1.00%/0.96% Investor A Shares n/a Investor A Shares 1.06%/1.06% K Shares 1.75%/1.46% Investor C Shares n/a Investor C Shares 1.81%/1.81% SRF Shares 1.00%/.0.95% Seafirst Shares n/a Seafirst Shares 1.06%/0.95% PRIME FUND NATIONS CASH RESERVES NATIONS CASH RESERVES Horizon Shares 0.24%/0.24% Capital Shares 0.28%/0.20% Capital Shares 0.28%/0.20% Horizon Serv. Shares 0.49%/0.49% Adviser Shares 0.53%/0.45% Adviser Shares 0.53%/0.45% Pac. Horizon Shares 0.56%/0.56% Investor Shares (shell) n/a Investor Shares (shell) 0.63%/0.55% S Shares 1.24%/0.79% Daily Shares (shell) n/a Daily Shares (shell) 0.88%/0.80% X Shares 0.79%/0.79% Daily Shares (shell) n/a Daily Shares (shell) 0.88%/0.80% Y Shares 1.24%/1.24% Service Shares (shell) n/a Service Shares (shell) 1.28%/1.20% TAX-EXEMPT MONEY FUND NATIONS MUNICIPAL RESERVES NATIONS MUNICIPAL RESERVES Horizon Shares 0.27%/0.27% Capital Shares 0.30%/0.20% Capital Shares 0.30%/0.20% Horizon Serv. Shares 0.52%/0.52% Adviser Shares 0.55%/0.45% Adviser Shares 0.55%/0.45% Pac. Horizon Shares 0.59%/0.59% Investor Shares (shell) n/a Investor Shares (shell) 0.65%/0.55% S Shares 1.27%/0.82% Daily Shares (shell) n/a Daily Shares (shell) 0.90%/0.80% 10 TREASURY FUND NATIONS TREASURY RESERVES NATIONS TREASURY RESERVES Horizon Shares 0.24%/0.24% Capital Shares 0.29%/0.20% Capital Shares 0.29%/0.20% Horizon Serv. Shares 0.49%/0.49% Adviser Shares 0.54%/0.45% Adviser Shares 0.54%/0.45% Pac. Horizon Shares 0.56%/0.56% Investor Shares (shell) n/a Investor Shares (shell) 0.64%/0.55% X Shares 0.79%/0.79% Daily Shares (shell) n/a Daily Shares (shell) 0.89%/0.80% Y Shares 1.24%/1.24% Service Shares (shell) n/a Service Shares (shell) 1.29%/1.20% TREASURY ONLY FUND NATIONS GOVERNMENT RESERVES NATIONS GOVERNMENT RESERVES Horizon Shares 0.27%/0.27% Capital Shares 0.29%/0.20% Capital Shares 0.29%/0.20% Horizon Serv. Shares 0.52%/0.52% Adviser Shares 0.54%/0.45% Adviser Shares 0.54%/0.45% Pac. Horizon Shares 0.59%/0.59% Investor Shares (shell) n/a Investor Shares (shell) 0.64%/0.55%
Detailed PRO FORMA expense information for each proposed reorganization is included in Appendix II. SUMMARY The following is a summary of certain information relating to the proposed Reorganization. More complete information is contained elsewhere in this Proxy/Prospectus, the Prospectuses and Statements of Additional Information of Pacific Horizon and Nations, and the Appendices attached hereto. PROPOSED REORGANIZATION. The Reorganization Agreement provides for and contemplates: (1) the transfer of all of the assets and liabilities of each Pacific Horizon Fund to a corresponding Nations Fund in exchange for Shares of the designated classes of the corresponding Nations Fund of equal value; (2) the distribution of the Nations Fund Shares to the shareholders of the Pacific Horizon Funds in liquidation of the Pacific Horizon Funds; (3) the transfer of all the assets and liabilities of Pacific Horizon; and (4) the dissolution under state law and the deregistration under the 1940 Act, of Pacific Horizon. The Reorganization is subject to a number of conditions, including Pacific Horizon Fund shareholder approval. The exchange of shares in the Reorganization will be tax-free under federal law and shareholders will not pay any sales charge as a result of the exchange of the shares in the Reorganization. As a result of the proposed Reorganization, a Pacific Horizon Fund shareholder will become a shareholder of the corresponding Nations Fund and will hold, immediately after the Reorganization, Nations Fund Shares having a total dollar value equal to the total dollar value of the shares of the Pacific Horizon Fund that the shareholder held immediately before the Reorganization. The Reorganization is expected to occur in May 1999 or such later date as may be determined pursuant to the Reorganization Agreement. For more information about the Reorganization and the Reorganization Agreement, see "The Reorganization--Description of the Reorganization Agreement." 11 NationsBanc Advisors, Inc. ("NBAI") has advised Pacific Horizon and Nations Funds that NationsBank, N.A. ("NationsBank"), Bank of America National Trust and Savings Association ("Bank of America") and their affiliates intend, with respect to certain of their fiduciary accounts that currently hold A Shares of a Pacific Horizon Fund that is not a money market fund, to exchange the Investor A Shares that such accounts will receive as a result of the Reorganization for Primary A Shares of the same Nations Fund of equal value at or shortly after Closing. Similarly, NBAI has advised Pacific Horizon and Nations Funds that NationsBank, Bank of America and their affiliates intend, with respect to certain of their fiduciary accounts that currently hold Horizon or Horizon Service shares of a Pacific Horizon money market fund, to exchange the Capital or Adviser Shares that such accounts will receive as a result of the Reorganization for Trust Shares of the same Nations Fund of equal value at or shortly after Closing. SPECIAL CONSIDERATION FOR SHAREHOLDERS OF THE PACIFIC HORIZON BLUE CHIP FUND AND PACIFIC HORIZON INTERMEDIATE BOND FUND. The Blue Chip Fund and Intermediate Bond Fund are feeder funds (each a "Feeder" and collectively, the "Feeders") in a master/feeder structure whereby each Feeder invests all of its net investable assets in the securities of a corresponding MIT Master Portfolio, which has substantially the same investment objective and policies as its corresponding Feeder. It is proposed that the master/feeder structure continue within Nations Funds. Therefore, shareholders of each Feeder are being asked to approve not only the Reorganization Agreement, which governs the reorganization of the Feeders, but also the Master Trust Reorganization Agreement, which governs the reorganization of the MIT Master Portfolios. The Master Trust Reorganization Agreement contemplates the reorganization of the MIT Master Portfolios into corresponding Nations Master Portfolios of NMIT which will have substantially the same investment objective and policies as the MIT Master Portfolios. After the Reorganization, and the transaction contemplated by the Master Trust Reorganization Agreement, the Nations Feeders would invest all of their net investable assets in the Nations Master Portfolios. For more information about this aspect of the Reorganization, see "The Reorganization -- Description of the Master Trust Reorganization Agreement" and "Voting Matters -- Special Voting Considerations for Shareholders of the Pacific Horizon Blue Chip Fund and the Pacific Horizon Intermediate Bond Fund." OVERVIEW OF THE FUNDS. 12 COMPARISON OF INVESTMENT OBJECTIVES
PACIFIC HORIZON FUND CORRESPONDING NATIONS FUND - - -------------------- -------------------------- PACIFIC HORIZON GOVERNMENT FUND: seeks current NATIONS GOVERNMENT RESERVES: seeks to preserve income, a stable share price and daily liquidity. principal value and maintain a high degree of liquidity while providing current income. PACIFIC HORIZON PRIME FUND: seeks current income, a NATIONS CASH RESERVES: seeks to preserve principal stable share price and daily liquidity. value and maintain a high degree of liquidity while providing current income. PACIFIC HORIZON TAX-EXEMPT MONEY FUND: seeks current NATIONS MUNICIPAL RESERVES: seeks to preserve income exempt from Federal taxes, a stable price and principal value and maintain a high degree of daily liquidity. liquidity while providing current income exempt from Federal income taxes. PACIFIC HORIZON TREASURY FUND: seeks current income, NATIONS TREASURY RESERVES: seeks to preserve a stable share price and daily liquidity. principal value and maintain a high degree of liquidity while providing current income. PACIFIC HORIZON TREASURY ONLY FUND: seeks current NATIONS GOVERNMENT RESERVES: seeks to preserve income, a stable share price and daily liquidity. principal value and maintain a high degree of liquidity while providing current income.
The investment objective, policies and restrictions of the Pacific Horizon Asset Allocation Fund, Pacific Horizon Blue Chip Fund, Pacific Horizon California Municipal Bond Fund, Pacific Horizon California Tax-Exempt Money Market Fund, Pacific Horizon Capital Income Fund and Pacific Horizon Intermediate Bond Fund are substantially the same as those of the corresponding Shell Nations Funds, because the Shell Nations Funds are being created to continue the business of their corresponding Pacific Horizon Funds. The investment objectives, policies and restrictions of the other Pacific Horizon Funds are, in general, similar to those of their corresponding Operating Nations Funds. While all of the Operating Nations Funds are money market funds and therefore are subject to the general restrictions and limitations of Rule 2a-7 under the 1940 Act, there are certain differences between the investment policies and restrictions of the Operating Nations Funds and their corresponding Pacific Horizon Funds. For example, while the Pacific Horizon Prime Fund concentrates its investments (I.E., invests at least 25% of its assets) in the banking and finance industries, the corresponding Nations Cash Reserves merely reserves the right to concentrate its investments in obligations of U.S. banks, foreign branches of U.S. banks and U.S. branches of foreign banks. In addition, while the Pacific Horizon Treasury Only Fund invests solely in obligations of the U.S. Treasury, the corresponding Nations Government Reserves may invest not only in obligations of the U.S. Treasury, but also in general U.S. Government obligations and repurchase agreements. However, in order to more closely align the investment policies and restrictions of the two Funds, NBAI has committed that Nations Government Reserves will not invest in repurchase agreements after the Reorganization. For additional information, see "Comparison of Pacific Horizon and Nations -- Investment Objectives and Policies" and Appendix III. 13 NBAI currently serves or will serve as the investment adviser to the Nations Funds and Nations Master Portfolios. TradeStreet Investment Associates, Inc. ("TradeStreet") currently serves or will serve as investment sub-adviser to the Nations Funds and Nations Master Portfolios, except Nations Blue Chip Master Portfolio, for which Chicago Equity Partners ("Chicago Equity) will serve as investment sub-adviser and Nations Asset Allocation Fund, for which TradeStreet and Chicago Equity will serve as co-investment sub-advisers. Bank of America currently serves as the investment adviser to the Pacific Horizon Funds and MIT Master Portfolios. NBAI, TradeStreet, Chicago Equity and Bank of America are all indirect wholly owned subsidiaries of BankAmerica Corporation. Each Nations Fund's and Nations Master Portfolio's contractual advisory fee is higher than the corresponding Pacific Horizon Fund's and MIT Master Portfolio's contractual advisory fee, though advisory fees are only one type of fees and expenses paid by mutual funds. With respect to thirty-two of the forty-one share classes described in this Proxy/Prospectus, total operating expense ratios (after waivers and reimbursements) are currently substantially the same as or lower for the Nations Fund classes compared with corresponding Pacific Horizon Fund classes. NBAI has agreed that it will commit to waive fees and/or reimburse expenses as needed to ensure that, for one year from the Reorganization, the Nations Funds total expense ratios will not exceed the PRO FORMA after waiver expense rations shown in Table II, absent a determination by the Nations Board that extraordinary circumstances or a material reduction in Fund assets has occurred that has made it appropriate to permit an increase in expense ratios. There can be no assurance that such expense ratios will continue after this commitment expires. For a more detailed summary of fees and expenses, see Appendix II. The Pacific Horizon Funds and Nations Funds have different administrators, distributors, transfer agents and other service providers. For a detailed description of the management of the Nations Funds, including NBAI, TradeStreet, Chicago Equity and other service providers to the Nations Funds, see "Comparison of Pacific Horizon and Nations-Investment Advisory Services" and the Nations Fund prospectus which accompanies this Proxy/Prospectus. The purchase, redemption, dividend and other policies and procedures of the Pacific Horizon Funds and the Nations Funds are generally similar. There are, however, some differences, such as with respect to categories of shareholders eligible for sales charge waivers. See "Comparison of Pacific Horizon and Nations--Shareholder Transactions and Services," "Comparison of Pacific Horizon and Nations--Share Structure" anD Appendix IV to this Proxy/Prospectus. PLEASE NOTE THAT NO CONTINGENT DEFERRED SALES LOADS WILL BE IMPOSED ON ANY OF THE SHAREHOLDERS OF THE PACIFIC HORIZON FUNDS SHARES AS A RESULT OF THE EXCHANGE OF SHARES IN THE REORGANIZATION. IN ADDITION, NO FRONT-END SALES LOADS WILL BE IMPOSED ON ANY OF THE NATIONS FUND SHARES ISSUED IN THE REORGANIZATION. 14 FEDERAL INCOME TAX CONSEQUENCES. The exchange of shares in the Reorganization is not expected to result in the recognition, for federal income tax purposes, of gain or loss by the Pacific Horizon Funds, the Nations Funds or their respective shareholders. The sale of securities by the Pacific Horizon Funds prior to the Reorganization, whether in the ordinary course of business or in anticipation of the Reorganization, could result in a taxable capital gains distribution prior to the Reorganization. See "The Reorganization -- Federal Income Tax Considerations" for additional information. PACIFIC HORIZON, MIT, NATIONS AND NMIT BOARD CONSIDERATION. During its deliberations, Pacific Horizon's Board of Directors (with the advice and assistance of its counsel) reviewed, among other things: (1) the potential effect of the Reorganization on the shareholders of the Pacific Horizon Funds; (2) the capabilities, practices and resources of NBAI and the Nations Funds' other service providers; (3) the investment advisory and other fees paid by the Nations Funds, and the historical and projected expense ratios of the Nations Funds as compared with those of the Pacific Horizon Funds and industry peer groups; (4) the expected cost-savings for certain of the Pacific Horizon Funds, including other Pacific Horizon funds not described in this Proxy/Prospectus, as a result of the reorganization of Pacific Horizon; (5) the investment objectives, policies and limitations of the Nations Funds and their relative compatibility with those of the Pacific Horizon Funds; (6) the historical investment performance records of the Pacific Horizon Funds and the Nations Funds, relative to each other and relative to peer groups; (7) the shareholder services offered by the Nations Funds Family; (8) the terms and conditions of the Reorganization Agreement, including those provisions that were intended to avoid dilution of the interests of Pacific Horizon Fund shareholders; (9) the anticipated tax consequences of the Reorganization for the respective Pacific Horizon Funds and their shareholders; (10) the number of investment portfolio options that would be available to shareholders after the Reorganization; (11) the viability of any Pacific Horizon Fund on a stand-alone basis apart from the Nations Funds Family; and (12) the potential benefits of the Reorganization to other persons, especially NBAI and its affiliates. The Pacific Horizon Board also considered NBAI's belief that the Reorganization would eliminate certain duplicative shareholder costs and market overlap, facilitate consolidation of NBAI's managerial resources and enhance generally operational efficiencies and focus with respect to the mutual funds advised by NBAI. It also was noted that NBAI or an affiliate would assume all customary expenses associated with the Reorganization and that NBAI would commit to waive fees and/or reimburse expenses as needed to ensure that, for one year from the date of the Reorganization, the Nations Funds total operating expense ratios will not exceed the PRO FORMA after waiver expense ratios shown in Table II, absent a determination by the Nations' Board that extraordinary circumstances or a material reduction in Fund assets has occurred that has made it appropriate to permit an increase in expense levels. For additional information, see "The Reorganization--Pacific Horizon and MIT Board Consideration." 15 Based upon their evaluation of the information presented to them, and in light of their fiduciary duties under federal and state law, the Board of Directors of Pacific Horizon, including all of the non-interested members of the Board, determined that participation in the Reorganization, as contemplated by the Reorganization Agreement, was in the best interests of Pacific Horizon and that the interests of the existing shareholders of Pacific Horizon will not be diluted as a result of the Reorganization. PACIFIC HORIZON'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PACIFIC HORIZON FUND SHAREHOLDERS APPROVE THE REORGANIZATION AGREEMENT. During its deliberations, MIT's Board of Trustees (with the advice and assistance of its counsel) reviewed, among other things, each of the matters described above as they applied to MIT, the Master Trust Reorganization Agreement and the MIT Master Portfolios. Based upon their evaluation of the information presented to them, and in light of their fiduciary duties under federal and state law, the Board of Trustees of MIT, including all of the non-interested members of the Board, determined that the proposed Reorganization is in the best interests of MIT, and that the interests of existing interestholders of MIT will not be diluted as a result of the Reorganization. MIT'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE ITS INTERESTHOLDERS APPROVE THE MASTER TRUST REORGANIZATION AGREEMENT. After considering the relevant factors, the Nations Board and the NMIT Board similarly found that participation in the Reorganization is in the best interests of the shareholders of the Nations Funds and the Nations Master Portfolios, respectively, and that the interests of the shareholders of the Nations Funds and the interestholders of the Nations Master Portfolios will not be diluted as a result of the Reorganization. PRINCIPAL RISK FACTORS. Because the Shell Nations Funds are being created to continue the business of their corresponding Pacific Horizon Funds, an investment in a New Nations Fund involves risks that are substantially the same as those of the corresponding Pacific Horizon Fund. With respect to the Operating Nations Funds, their investment objectives, policies and restrictions are, in general, similar to those of the corresponding Pacific Horizon Funds. Accordingly, an investment in an Operating Nations Fund involves risks that are similar to those of the corresponding Pacific Horizon Fund. Because all of the Operating Nations Funds (and their corresponding Pacific Horizon Funds) are money market funds, the risks are those typically associated with investing in a portfolio of high quality, short-term money market instruments. For example, while money market funds attempt to maintain a stable net asset value of $1.00, there is no assurance that they will be able to do so. Additionally, while the Funds all may invest in instruments backed by the full faith and credit of the U.S. Government, neither shares of the Operating Nations Funds nor the corresponding Pacific Horizon Funds are themselves issued or guaranteed by the U.S. Government or any of its agencies. 16 VOTING INFORMATION. This Proxy/Prospectus is being furnished in connection with the solicitation of proxies by Pacific Horizon's Board of Directors. Only shareholders of record at the close of business on January 14, 1999 will be entitled to vote at the Meeting. Shares represented by a properly executed proxy will be voted in accordance with the instructions thereon. If no instruction is made, the named proxies will vote in favor of each proposal set forth in the Notice of Meeting. Proxies may be revoked at any time before they are exercised by submitting to Pacific Horizon a written notice of revocation or a subsequently executed proxy or by attending the Meeting and voting in person. For additional information, see "Voting Matters." SPECIAL VOTING CONSIDERATIONS FOR SHAREHOLDERS OF THE PACIFIC HORIZON BLUE CHIP FUND AND THE PACIFIC HORIZON INTERMEDIATE BOND FUND. Because the Feeders invest all of their assets in shares of the corresponding MIT Master Portfolios, shareholders of the Feeders are being asked to vote not only on the Reorganization Agreement but also the Master Trust Reorganization Agreement. Therefore, a vote for or against the Reorganization Agreement will include a vote for or against the Master Trust Reorganization Agreement. The votes cast by the Feeders' shareholders with respect to the Master Trust Reorganization Agreement will, in turn, be cast by the Feeders, as the direct interestholders in MIT, in the same proportion. The Master Trust Reorganization Agreement is subject to approval by its interestholders, which includes two offshore funds managed by Bank of America (the "World Horizon Funds") that also invest in the MIT Master Portfolios. Shareholders of the World Horizon Funds also will be asked to cast votes on the Master Trust Reorganization Agreement. The Reorganization, with respect to MIT and the MIT Master Portfolios, will only be consummated if a majority of all outstanding interests in the MIT Master Portfolios approve the Master Trust Reorganization Agreement. For details concerning this aspect of the Reorganization, see "Voting Matters -- Special Consideration for Shareholders of the Pacific Horizon Blue Chip Fund and the Pacific Horizon Intermediate Bond Fund." THE REORGANIZATION REASONS FOR THE REORGANIZATION. Significant features of the Reorganization are summarized below. This summary is qualified in its entirety by reference to the Reorganization Agreement, the form of which is attached as Appendix I(A) and the Master Trust Reorganization Agreement, the form of which is attached as Appendix I(B). The proposed Reorganization is expected to benefit Pacific Horizon Fund shareholders by, among other things: (i) Offering shareholders the opportunity to become part of a larger and more diverse family of more than seventy mutual funds. Many of you will be able to exchange your shares among most or all of those funds; 17 (ii) Offering access to a broader array of investment products, including a line of fund-of-funds; (iii) Offering similar access and servicing arrangements; and (iv) Providing opportunities for enhanced returns through combined investment portfolios. DESCRIPTION OF THE REORGANIZATION AGREEMENT. The Reorganization Agreement provides that, at the Closing, the assets and liabilities of the Pacific Horizon Funds will be transferred to Nations in exchange for full and fractional Shares of the designated classes of the corresponding Nations Funds, as shown in Table I(A) (see pages 4-5 of this Proxy/Prospectus). The Shares issued by each Nations Fund will have an aggregate dollar value equal to the aggregate dollar value of the shares of the respective Pacific Horizon Fund that are outstanding immediately before the Closing. Immediately after the Closing, each Pacific Horizon Fund will distribute the Shares of the Nations Fund received in the Reorganization to its shareholders in liquidation of the Pacific Horizon Fund. Each shareholder owning shares of a particular Pacific Horizon Fund at the Closing will receive Shares of the designated class of the corresponding Nations Fund, and will receive any unpaid dividends or distributions that were declared before the Closing on Pacific Horizon Fund shares. Nations will establish an account for each former shareholder of the Pacific Horizon Funds reflecting the number of Nations Fund Shares distributed to that shareholder. The Shares issued in the Reorganization will be in uncertificated form. NBAI has advised Pacific Horizon and Nations Funds that NationsBank, Bank of America and their affiliates intend, with respect to certain of their fiduciary accounts that currently hold A Shares of a Pacific Horizon Fund that is not a money market fund, to exchange the Investor A Shares that such accounts will receive as a result of the Reorganization for Primary A Shares of the same Nations Fund of equal value at or shortly after Closing. Similarly, NBAI has advised Pacific Horizon and Nations Funds that NationsBank and its affiliates intend, with respect to certain of their fiduciary accounts that currently hold Horizon or Horizon Service shares of a Pacific Horizon money market fund, to exchange the Capital or Adviser Shares that such accounts will receive as a result of the Reorganization for Trust Shares of the same Fund of equal value at or shortly after Closing. As indicated above, shareholders of other Pacific Horizon funds are voting on similar agreements and plans of reorganization that, in a like manner, would provide for the reorganization of those Pacific Horizon funds into designated classes of corresponding portfolios of Nations Fund, Inc. and Nations Funds Trust--other registered investment companies that, together with Nations, comprise a significant part of the "Nations Funds Family." Please note that a vote for or against the approval of the Reorganization Agreement includes a vote for or against the reorganization of Pacific Horizon into the Nations Funds Family. If the Reorganization Agreement and the agreements and plans of reorganization affecting the other Pacific Horizon funds are approved and consummated, Pacific Horizon will transfer all of its assets and liabilities, as of the Closing, and all outstanding shares of the Pacific Horizon Funds will be redeemed and canceled in exchange for shares of the Nations Funds Family, and Pacific Horizon will wind up its affairs and apply to be deregistered as an investment company under the 1940 Act and thereafter dissolve under Maryland law. 18 The Reorganization is subject to a number of conditions, including approval of the Reorganization Agreement and the related matters described in this Proxy/Prospectus by Pacific Horizon Fund shareholders; approval of the Reorganization of Pacific Horizon by a majority of all of the shares of the funds of Pacific Horizon voting in the aggregate; the receipt of certain legal opinions described in the Reorganization Agreement (which include an opinion of Nations' counsel addressed to Pacific Horizon that the Nations Fund Shares issued in the Reorganization will be validly issued, fully paid and non-assessable); the receipt of certain certificates from the parties concerning the continuing accuracy of the representations and warranties in the Reorganization Agreement; the receipt of certain letters from independent accountants regarding various financial matters; the receipt of any necessary exemptive relief or no-action assurances requested from the SEC or its staff with respect to Section 17(a) and 17(d) of the 1940 Act and Rule 17d-1 thereunder; the receipt of a certificate relating to the transition of certain administrative servicing responsibilities to The Bank of New York ("BNY"); the receipt of an exemptive order with respect to Section 9(a) of the 1940 Act by Stephens Inc. ("Stephens"); and the parties' performance in all material respects of their respective covenants and undertakings in the Reorganization Agreement. It is possible that a majority of a Pacific Horizon Fund's shareholders may approve the Reorganization Agreement while a sufficient majority of all shareholders of all Pacific Horizon funds does not approve the reorganization of Pacific Horizon. In such a case, the Pacific Horizon Board of Directors will contemplate what further action is appropriate. The Reorganization Agreement also provides that NBAI or an affiliate has agreed to assume all customary expenses associated with the Reorganization. The Reorganization Agreement also provides, among other things, that the Reorganization may be abandoned at any time prior to the Closing upon the mutual consent of both Pacific Horizon and Nations, or by either Nations or Pacific Horizon under certain conditions; and that officers of Nations and of Pacific Horizon may amend, modify or supplement the Reorganization Agreement, provided however, that following the Meeting, no such amendment may have the effect of changing the provisions for determining the number of Shares of the corresponding Nations Fund to be issued to the shareholders of any Pacific Horizon Fund without obtaining the Pacific Horizon Fund shareholders' further approval. The Reorganization Agreement further provides that Nations, on behalf of each Nations Fund will use its best efforts to satisfy the conditions of Section 15(f) of the 1940 Act. Section 15(f) of the 1940 Act provides that when a change in the control of an investment adviser occurs, the investment adviser or any of its affiliated persons may receive any amount or benefit in connection therewith as long as two conditions are satisfied. First, no "unfair burden" may be imposed on the investment company as a result of the transaction relating to the change of control, or any express or implied terms, conditions or understandings applicable thereto. The term "unfair burden," as defined in the 1940 Act, includes any arrangement during the two-year period after the change in control whereby the investment adviser (or predecessor or successor adviser), or any interested person of any such adviser, receives or is entitled to receive any compensation, directly or indirectly, from the investment company or its security holders (other than fees for bona fide investment advisory or other services) or from any person in connection with the purchase or sale of securities or other property to, from, or on behalf of the investment company (other than fees for bona fide principal underwriting services). The second condition is that, during the three-year period immediately following consummation of the transaction, at least 75% of the investment company's board of directors or trustees must not be "interested persons" of the investment adviser, within the meaning of the 1940 Act. Nations' agreement in this regard is an assumption of the stated expectation of Pacific Horizon as set forth in the Pacific Horizon proxy statement dated May 15, 1998 relating to the change in control, if any, of Bank of America -- the Pacific Horizon Funds' investment adviser -- which occurred when NationsBank Corporation and BankAmerica Corporation merged on September 30, 1998. 19 DESCRIPTION OF THE MASTER TRUST REORGANIZATION AGREEMENT (FOR CONSIDERATION BY SHAREHOLDERS OF THE PACIFIC HORIZON BLUE CHIP FUND AND PACIFIC HORIZON INTERMEDIATE BOND FUND ONLY). Like the Reorganization Agreement, the Master Trust Reorganization Agreement provides that, at the Closing, the assets and liabilities of the MIT Master Portfolios will be transferred to NMIT in exchange for full and fractional shares of beneficial interest of the corresponding Nations Master Portfolios, as shown in Table I(B) (see page 3 of this Proxy/Prospectus). The interests issued by each Nations Master Portfolio will have an aggregate dollar value equal to the aggregate dollar value of the interests of the respective MIT Master Portfolio that are outstanding immediately before the Closing. Immediately after the Closing, each MIT Master Portfolio will distribute the interests of the Nations Master Portfolio received in the Reorganization to MIT's interestholders, which, at such time, will be Nations Blue Chip Fund and Nations Intermediate Bond Fund and the two corresponding World Horizon Funds (the two offshore funds that also invest in each MIT Master Portfolio), in proportion to their interests, in liquidation of the MIT Master Portfolios. Thus, following the Reorganization, Feeder shareholders will own shares of Nations Blue Chip Fund and Nations Intermediate Bond Fund equal in value to their holdings in Pacific Horizon Blue Chip Fund and Pacific Horizon Intermediate Bond Fund. Nations Blue Chip Fund and Nations Intermediate Bond Fund in turn will own Master Portfolio interests that correspond to the holdings of Pacific Horizon Blue Chip and Intermediate Bond Fund in the MIT Master Portfolios immediately prior to the reorganization. Feeder shareholders thus will own substantially the same portfolio securities and will be subject to substantially the same investment objectives, policies and restrictions as before. The value and composition of the portfolio securities held by the MIT Master Portfolios and transferred to the Master Portfolios will not be affected by the exchange of shares in the Reorganization. Please note that a vote for or against the approval of the Reorganization Agreement, described above, includes a vote for or against the Master Trust Reorganization Agreement. The Master Trust Reorganization Agreement is subject to a number of conditions, and contains a number of terms, that basically correspond to the conditions and terms applicable to the Reorganization Agreement. It is possible that shareholders of the Feeders will approve the Reorganization Agreement, but interestholders of the Master Portfolios voting separately or in the aggregate do not approve the Master Trust Reorganization Agreement. In such a case, the Board of Trustees of MIT and the Board of Directors of Pacific Horizon will contemplate what further action is appropriate. 20 PACIFIC HORIZON AND MIT BOARD CONSIDERATION. At meetings held on July 26 and 27, 1998, the Pacific Horizon Board of Directors and the MIT Board of Trustees were advised that Bank of America and NBAI were considering recommending a consolidation of Pacific Horizon with the Nations Funds Family following the September 30, 1998, merger of NationsBank Corporation with BankAmerica Corporation. The Pacific Horizon and the MIT Board of Trustees then met again several times in late 1998 and early 1999, to consider the Reorganization proposal offered by management of Nations, NBAI and its affiliates. In preparation for each meeting, the Directors and Trustees were provided with detailed information about the Reorganization, the Nations Funds and NBAI. These materials summarized the principal features of the Reorganization, including the intention that the Reorganization be consummated on a tax-free basis for each Fund and its shareholders and each Master Portfolio and its interestholders. In addition, the Pacific Horizon Directors and MIT Trustees received comparative information about the Pacific Horizon Funds and the corresponding Nations Funds, including but not limited to the following matters: (1) investment objectives and policies; (2) advisory, distribution and other servicing arrangements; (3) expenses (with and without giving effect to current expense limitations), including PRO FORMA expenses relative to peer groups; and (4) performance relative to peer groups. The Pacific Horizon Board also was provided with information about NationsBank and its investment advisory organizations, including information regarding those individuals or teams of individuals with responsibility for managing each Nations Fund (or Nations Master Portfolio, as applicable). The Reorganization was unanimously approved by the Pacific Horizon Board of Directors and by the MIT Board of Trustees on January 14, 1999. During its deliberations, Pacific Horizon's Board of Directors (with the advice and assistance of its counsel) reviewed, among other things: (1) the potential effect of the Reorganization on the shareholders of the Pacific Horizon Funds; (2) the capabilities, practices and resources of NBAI and the Nation Funds' other service providers; (3) the investment advisory and other fees paid by the Nations Funds, and the historical and projected expense ratios of the Nations Funds as compared with those of the Pacific Horizon Funds and industry peer groups; (4) the expected cost-savings for certain of the Pacific Horizon Funds, including other Pacific Horizon funds not described in this Proxy/Prospectus, as a result of the reorganization of Pacific Horizon; (5) the investment objectives, policies and limitations of the Nations Funds and their relative compatibility with those of the Pacific Horizon Funds; (6) the historical investment performance records of the Pacific Horizon Funds and the Nations Funds, relative to each other and relative to peer groups; (7) the shareholder services offered by Nations; (8) the terms and conditions of the Reorganization Agreement, including those provisions that were intended to avoid dilution of the interests of Pacific Horizon Fund shareholders; (9) the anticipated tax consequences of the Reorganization for the respective Pacific Horizon Funds and their shareholders; (10) the number of investment portfolio options that would be available to shareholders after the Reorganization; (11) the viability of any Pacific Horizon Fund on a stand-alone basis apart from the Nations Funds Family; and (12) the potential benefits of the Reorganization to other persons, especially NBAI and its affiliates. The Pacific Horizon Board also considered NBAI's belief that the Reorganization would eliminate certain duplicative shareholder costs and market overlap, facilitate consolidation of NBAI's managerial resources and enhance generally operational efficiencies and focus with respect to the mutual funds advised by NBAI. 21 Pacific Horizon's Directors further noted that, with respect to thirty-three of the forty-two share classes of the Pacific Horizon Funds described in this Proxy/Prospectus, the per share annualized total operating expense ratios after the Reorganization, taking into account voluntary fee waivers and expense reimbursements, would be substantially the same as or lower than those of the corresponding Pacific Horizon Funds before the Reorganization. See "Table II - Total Expense Information" and Appendix II for more information. It also noted that NBAI or an affiliate would assume all customary expenses associated with the Reorganization and that it would commit to waive fees and/or reimburse expenses as needed to ensure that, for one year from the date of the Reorganization, the Nations Funds total operating expense ratios will not exceed the PRO FORMA after waiver expense ratios shown in Table II, absent a determination by the Nations Board that extraordinary circumstances or a material reduction in Fund assets has occurred that has made it appropriate to permit an increase in expense ratios. In addition, it noted that NBAI would agree to waive fees and/or reimburse expenses, as needed, to ensure that the total operating expense ratio of any Pacific Horizon Fund that is not reorganized into a corresponding Nations Fund on the closing date of the reorganization of the other Pacific Horizon Funds into corresponding Nations Funds will not, for one year from such date, exceed such Fund's current expense ratio as shown in Table II, absent a determination by the Pacific Horizon Board that extraordinary circumstances or a material reduction in Fund assets that impacts expense levels has occurred that has made it appropriate to permit an increase in expense levels. After consideration of the foregoing and other factors, the Pacific Horizon Directors unanimously determined that the Reorganization is in the best interest of Pacific Horizon, and that the interest of the existing shareholders of Pacific Horizon will not be diluted as a result of such Reorganization. During its deliberations, MIT's Board of Trustees considered among other things, the same factors as the Pacific Horizon Board of Directors in its review of the merits of the Reorganization. After doing so, the MIT Trustees unanimously determined that the Reorganization is in the best interest of MIT, and that the interests of the existing interestholders of MIT will not be diluted as a result of the Reorganization. CAPITALIZATION. The following table sets forth, as of September 30, 1998 (for the Shell Nations Funds and their corresponding Pacific Horizon Funds) and as of October 31, 1998 (for the Operating Nations Funds and their corresponding Pacific Horizon Funds): (1) the capitalization of each of the Pacific Horizon Funds; (2) the capitalization of each of the corresponding Nations Funds; and (3) the PRO FORMA capitalization of each of the Nations Funds as adjusted to give effect to the Reorganization. The capitalization of each Pacific Horizon Fund and Nations Fund is likely to be different at the Closing as a result of daily share purchase and redemption activity in the Pacific Horizon Funds and Nations Funds as well as the effects of the other ongoing operations of the respective Funds prior to Closing. 22 Nations Asset Allocation Fund, Blue Chip Fund, California Municipal Bond Fund, California Tax-Exempt Reserves, Capital Income Fund and Intermediate Bond Fund have not yet commenced operations, but will do so at the time the Reorganization occurs. TABLE III CAPITALIZATION 1. The table below reflects current and PRO FORMA capitalization information for the combination of the Pacific Horizon Asset Allocation Fund with Nations Asset Allocation Fund.
NET ASSET VALUE TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE ---------------- ------------------ --------- Pacific Horizon Asset Allocation Fund $67,056,441 3,163,843 $21.19 (A Shares) (A Shares) (A Shares) $1,211,236 57,167 $21.19 (B Shares) (B Shares) (B Shares) $1,359,810 64,236 $21.17 (K Shares) (K Shares) (K Shares) $190,245,872 11,659,887 $16.32 (SRF Shares) (SRF Shares) (SRF Shares) PRO FORMA Combined Fund $67,056,441 3,163,843 $21.19 (A Shares/ Investor A) (A Shares/ Investor (A Shares/ Investor A) $1,211,236 A) $21.19 (B Shares/ Investor B) 57,167 (B Shares/Investor B) $1,359,810 (B Shares/Investor B) $21.17 (K Shares/Investor C) 64,236 (K Shares/Investor C) $190,245,872 (K Shares/Investor C) $16.32 (SRF/Seafirst Shares) 11,659,887 (SRF/Seafirst) (SRF/Seafirst)
23 2. The table below reflects current and PRO FORMA capitalization information for the combination of the Pacific Horizon Blue Chip Fund with Nations Blue Chip Fund.
NET ASSET VALUE TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE ---------------- ------------------ --------- Pacific Horizon Blue Chip Fund $340,350,591 12,180,427 $27.94 (A Shares) (A Shares) (A Shares) $4,284,442 153,210 $27.96 (B Shares) (B Shares) (B Shares) $8,500,765 305,456 $27.83 (K Shares) (K Shares) (K Shares) $345,398,724 13,969,916 $24.72 (SRF Shares) (SRF Shares) (SRF Shares) PRO FORMA Combined Fund $340,350,591 12,180,427 $27.94 (A Shares/ Investor A) (A Shares/ Investor A) (A Shares/ Investor A) $4,284,442 153,210 $27.96 (B Shares/Investor B) (B Shares/Investor B) (B Shares/Investor B) $8,500,765 305,456 $27.83 (K shares/Investor C) (K Shares/Investor C) (K shares/Investor C) $345,398,724 $13,969,916 $24.72 (SRF/Seafirst) (SRF/Seafirst) (SRF/Seafirst)
3. The table below reflects current and PRO FORMA capitalization information for the combination of the Pacific Horizon California Municipal Bond Fund with Nations California Municipal Bond Fund.
NET ASSET VALUE TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE ---------------- ------------------ --------- Pacific Horizon California Municipal $226,190,221 29,257,875 $7.73 Bond Fund (A Shares) (A Shares) (A Shares) $1,155,896 149,417 $7.74 (B Shares) (B Shares) (B Shares) PRO FORMA Combined Fund $226,190,221 29,257,875 $7.73 (A Shares/ Investor A) (A Shares/ Investor A) (A Shares/ Investor A) $1,155,896 149,417 $7.74 (B Shares/ Investor B) (B Shares/Investor B) (B Shares/ Investor B)
24 4. The table below reflects current and PRO FORMA capitalization information for the combination of the Pacific Horizon California Tax-Exempt Money Market Fund with Nations California Tax-Exempt Reserves.
NET ASSET VALUE TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE ---------------- ------------------ --------- Pacific Horizon California Tax-Exempt $746,840,011 746,903,947 $1.00 Money Market Fund (Horizon Service (Horizon Service (Horizon Service Shares) Shares) Shares) $581,414,409 581,454,871 $1.00 (Pacific Horizon (Pacific Horizon (Pacific Horizon Shares) Shares) Shares) $294,292,298 294,301,253 $1.00 (S Shares) (S Shares) (S Shares) $34,848,675 34,851,625 $1.00 (X Shares) (X Shares) (X Shares) PRO FORMA Combined Fund $746,840,011 746,903,947 $1.00 (Horizon Service (Horizon Service (Horizon Service Shares/ Shares/ Shares/ Adviser Class) Adviser Class) Adviser Class) $581,414,409 581,454,871 $1.00 (Pacific Horizon (Pacific Horizon (Pacific Horizon Shares/Investor Class) Shares/Investor Shares/Investor Class) $294,292,298 Class) $1.00 (S Shares/Daily 294,301,253 (S Shares/Daily Shares) Shares) (S Shares/Daily $1.00 $34,848,675 Shares) (X Shares/Daily Shares) (X Shares/Daily 34,851,625 Shares) (X Shares/Daily Shares)
25 5. The table below reflects current and PRO FORMA capitalization information for the combination of the Pacific Horizon Capital Income Fund with Nations Capital Income Fund.
NET ASSET VALUE TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE ---------------- ------------------ --------- Pacific Horizon Capital Income Fund $347,714,125 22,611,398 $15.38 (A Shares) (A Shares) (A Shares) $1,755,221 114,197 $15.37 (B Shares) (B Shares) (B Shares) $3,109,374 202,001 $15.39 (K Shares) (K Shares) (K Shares) PRO FORMA Combined Fund $347,714,125 22,611,398 $15.38 (A Shares/Investor A) (A Shares/ Investor A) (A Shares/ Investor A $1,755,221 114,197 $15.37 (B Shares/Investor B) (B Shares/Investor B) (B Shares/Investor B) $3,109,374 202,001 $15.39 (K Shares/Investor C) (K Shares/Investor C) (K Shares/Investor C)
6. The table below reflects current and PRO FORMA capitalization information for the combination of the Pacific Horizon Intermediate Bond Fund with Nations Intermediate Bond Fund.
NET ASSET VALUE TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE ---------------- ------------------ --------- Pacific Horizon Intermediate Bond Fund $67,798,192 6,838,079 $9.91 (A Shares) (A Shares) (A Shares) $498,073 49,906 $9.98 (K Shares) (K Shares) (K Shares) $34,842,467 3,119,515 $11.17 (SRF Shares) (SRF Shares) (SRF Shares) PRO FORMA Combined Fund $67,798,192 6,838,079 $9.91 (A Shares/Investor A) (A Shares/Investor (A Shares/Investor A) $498,073 A) $9.98 (K Shares/Investor C) 49,906 (K Shares/Investor C) $34,842,467 (K Shares/Investor C) $11.17 (SRF/Seafirst) 3,119,515 (SRF/Seafirst) (SRF/Seafirst)
26 7. The table below reflects current and PRO FORMA capitalization information for the combination of the Pacific Horizon Prime Fund with Nations Cash Reserves.
NET ASSET VALUE TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE ---------------- ------------------ --------- Pacific Horizon Prime Fund $3,437,949,798 3,438,901,907 $1.00 (Horizon Shares) (Horizon Shares) (Horizon Shares) $4,078,140,208 4,078,814,566 $1.00 (Horizon Service (Horizon Service (Horizon Service Shares) Shares) Shares) $2,883,219,107 2,883,995,489 $1.00 (Pacific Horizon (Pacific Horizon (Pacific Horizon Shares) Shares) Shares) $1,201,778,801 1,201,983,445 $1.00 (S Shares) (S Shares) (S Shares) $1,489,825,987 $1,490,063,377 $1.00 (X Shares) (X Shares) (X Shares) $184,076,527 $184,110,931 $1.00 (Y Shares) (Y Shares) (Y Shares) Nations Cash Reserves $3,808,855,000 3,808,850,249 $1.00 (Capital Class) (Capital Class) (Capital Class) $810,617,000 810,616,096 $1.00 (Adviser Class) (Adviser Class) (Adviser Class) PRO FORMA Combined Fund $7,246,804,789 7,247,752,156 $1.00 (Horizon Shares/ (Horizon Shares/ (Horizon Shares/ Capital Class) Capital Class) Capital Class) $4,888,757,208 4,889,430,662 $1.00 (Horizon Service/ (Horizon Service/ (Horizon Service/ Adviser Class) Adviser Class) Adviser Class) $2,883,219,107 2,883,995,489 $1.00 (Pacific Horizon/ (Pacific Horizon/ (Pacific Horizon/ Investor Class) Investor Class) Investor Class) $1,201,778,801 1,201,983,445 $1.00 (S Shares/Daily (S Shares/Daily (S Shares/Daily Shares) Shares) Shares) $1.00 $1,489,825,987 1,490,063,377 (X Shares/Daily Shares) (X Shares/Daily (X Shares/Daily $1.00 Shares) Shares) (Y Shares/Service $184,076,527 184,110,931 Class) (Y Shares/Service (Y Shares/Service Class) Class)
27 8. The table below reflects current and PRO FORMA capitalization information for the combination of the Pacific Horizon Tax-Exempt Money Fund with Nations Municipal Reserves.
NET ASSET VALUE TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE ---------------- ------------------ --------- Pacific Horizon Tax-Exempt Money Fund $338,925,765 339,075,558 $1.00 (Horizon Shares) (Horizon Shares) (Horizon Shares) $191,121,913 191,151,142 $1.00 (Horizon Service) (Horizon Service) (Horizon Service) $144,280,499 144,306,769 $1.00 (Pacific Horizon) (Pacific Horizon) (Pacific Horizon) $54,547,508 54,547,470 $1.00 (S Shares) (S Shares) (S Shares) Nations Municipal Reserves $117,664,000 117,664,588 $1.00 (Capital Class) (Capital Class) (Capital Class) $49,969,000 49,969,376 $1.00 (Adviser Class) (Adviser Class) (Adviser Class) PRO FORMA Combined Fund $456,589,765 456,740,146 $1.00 (Horizon Shares/ (Horizon Shares/ (Horizon Shares/ Capital Class) Capital Class) Capital Class) $241,090,913 241,120,518 $1.00 (Horizon Service/ (Horizon Service/ (Horizon Service/ Adviser Class) Adviser Class) Adviser Class) $144,280,499 144,306,769 $1.00 (Pacific Horizon/ (Pacific Horizon/ (Pacific Horizon/ Investor Class) Investor Class) Investor Class) $54,547,508 54,547,470 $1.00 (S Shares/ (S Shares/ (S Shares/ Daily Shares) Daily Shares) Daily Shares)
28 9. The table below reflects current and PRO FORMA capitalization information for the combination of the Pacific Horizon Treasury Fund with Nations Treasury Reserves.
NET ASSET VALUE TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE ---------------- ------------------ --------- Pacific Horizon Treasury Fund $704,991,899 705,088,100 $1.00 (Horizon Shares) (Horizon Shares) (Horizon Shares) $1,777,221,778 1,777,331,147 $1.00 (Horizon Service (Horizon Service Shares) (Horizon Service Shares) 432,816,395 Shares) $432,672,305 (Pacific Horizon ) $1.00 (Pacific Horizon ) 414,459,631 (Pacific Horizon ) $414,462,658 (X Shares) $1.00 (X Shares) 99,146,971 (X Shares) $99,148,339 (Y Shares) $1.00 (Y Shares) (Y Shares) Nations Treasury Reserves $466,959,000 466,882,129 $1.00 (Capital Class) (Capital Class) (Capital Class) $345,679,000 345,699,380 $1.00 (Adviser Class) (Adviser Class) (Adviser Class) PRO FORMA Combined Fund $1,171,950,899 1,171,970,229 $1.00 (Horizon Shares/ (Horizon Shares/ (Horizon Shares/ Capital Class) Capital Class) Capital Class) $2,122,900,778 2,123,030,527 $1.00 (Horizon Service/ (Horizon Service/ (Horizon Service/ Adviser Class) Adviser Class) Adviser Class) $432,672,305 432,816,395 $1.00 (Pacific Horizon/ (Pacific Horizon/ (Pacific Horizon/ Investor Class) Investor Class) Investor Class) $414,462,658 414,459,631 $1.00 (X Shares/Daily (X Shares/Daily Shares) (X Shares/Daily Shares) 99,146,971 Shares) $99,148,339 (Y Shares/ Service $1.00 (Y Shares/ Service Class) (Y Shares/ Service Class) Class)
29 10. The table below reflects current and PRO FORMA capitalization information for the combination of the Pacific Horizon Government Fund and the Pacific Horizon Treasury Only Fund with Nations Government Reserves.
NET ASSET VALUE TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE ---------------- ------------------ --------- Pacific Horizon Government Fund $80,154,845 80,182,972 $1.00 (Fund A) (Horizon Shares) (Horizon Shares) (Horizon Shares) $233,934,621 234,029,786 $1.00 (Horizon Service) (Horizon Service) (Horizon Service) $152,448,005 152,584,355 $1.00 (Pacific Horizon) (Pacific Horizon) (Pacific Horizon) Pacific Horizon Treasury Only Fund $43,786,026 43,787,489 $1.00 (Fund B) (Horizon Shares) (Horizon Shares) (Horizon Shares) $257,223,848 257,238,569 $1.00 (Horizon Service) (Horizon Service) (Horizon Service) $227,237,891 227,268,646 $1.00 (Pacific Horizon) (Pacific Horizon) (Pacific Horizon) Nations Government Reserves $160,300,000 160,300,511 $1.00 (Fund C) (Capital Class) (Capital Class) (Capital Class) $115,769,000 115,769,079 $1.00 (Adviser Class) (Adviser Class) (Adviser Class) PRO-FORMA Combined Fund $240,454,845 240,483,483 $1.00 (Fund A+ Fund C) (Horizon Shares/ (Horizon Shares/ (Horizon Shares/ Capital Class) Capital Class) Capital Class) $349,703,621 349,798,865 $1.00 (Horizon Service/ (Horizon Service/ (Horizon Service/ Adviser Class) Adviser Class) Adviser Class) $152,448,005 152,584,355 $1.00 (Pacific Horizon/ (Pacific Horizon/ (Pacific Horizon/ Investor Class) Investor Class) Investor Class) PRO-FORMA Combined Fund $204,086,026 204,088,000 $1.00 (Fund B + Fund C) (Horizon Shares/ (Horizon Shares/ (Horizon Shares/ Capital Class) Capital Class) Capital Class) $372,992,848 373,007,648 $1.00 (Horizon Service/ (Horizon Service/ (Horizon Service/ Adviser Class) Adviser Class) Adviser Class) $227,237,891 227,268,646 $1.00 (Pacific Horizon/ (Pacific Horizon/ (Pacific Horizon/ Investor Class) Investor Class) Investor Class) 30 NET ASSET VALUE TOTAL NET ASSETS SHARES OUTSTANDING PER SHARE ---------------- ------------------ --------- PRO FORMA Combined Fund $284,240,871 284,270,972 $1.00 (Fund A + Fund B + (Horizon (Horizon (Horizon Fund C) Shares/Horizon Shares/Horizon Shares/Horizon Shares/Capital Class) Shares/Capital Class) Shares/Capital Class) $606,927,469 607,037,434 $1.00 (Horizon Service/ (Horizon Service/ (Horizon Service/ Horizon Service/ Horizon Service/ Horizon Service/ Adviser Class) Adviser Class) Adviser Class) $379,685,896 379,853,001 $1.00 (Pacific (Pacific (Pacific Horizon/Pacific Horizon/Pacific Horizon/Pacific Horizon/ Investor Horizon/ Investor Horizon/ Investor Class) Class) Class)
FEDERAL INCOME TAX CONSIDERATIONS. Each Nations Fund and each Pacific Horizon Fund intends to qualify as of the Closing, as a separate "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, each Pacific Horizon Fund and each corresponding Nations Fund has been, and expects to continue to be, relieved of federal income tax liability. Consummation of the Reorganization with respect to each Pacific Horizon Fund and the corresponding Nations Fund is subject to the condition that Pacific Horizon and Nations receive an opinion from Morrison & Foerster LLP substantially to the effect that, for federal income tax purposes: (i) the transfer of all of the assets and liabilities of a Pacific Horizon Fund to the corresponding Nations Fund in exchange for the Nations Fund Shares, and the distribution of those Nations Fund Shares to shareholders of the Pacific Horizon Fund, will constitute a "reorganization" within the meaning of Section 368(a) of the Code, and the Pacific Horizon Fund and the Nations Fund will each be a "party to a reorganization" within the meaning of Section 368(b) of the Code in respect of the Reorganization; (ii) no gain or loss will be recognized by the Pacific Horizon Fund upon the transfer of its assets and liabilities to the Nations Fund solely in exchange for the Nations Fund Shares; (iii) no gain or loss will be recognized by the Nations Fund upon the receipt of the assets and assumption of liabilities of the Pacific Horizon Fund solely in exchange for the Nations Fund Shares; (iv) the basis of the Pacific Horizon Fund's assets received by the Nations Fund pursuant to the Reorganization will be the same as the basis of those assets in the hands of the Pacific Horizon Fund immediately prior to the Reorganization; (v) the holding period of the Pacific Horizon Fund's assets in the hands of the Nations Fund will include the period for which such assets have been held by the Pacific Horizon Fund; (vi) no gain or loss will be recognized by the Pacific Horizon Fund on the distribution to its shareholders of the Nations Fund Shares; (vii) no gain or loss will be recognized by the shareholders of the Pacific Horizon Fund upon their receipt of the Nations Fund Shares in exchange for such shareholders' shares of the Pacific Horizon Fund; (viii) the basis of the Nations Fund Shares received by the shareholders of the Pacific Horizon Fund will be the same as the basis of the Pacific Horizon Fund shares surrendered by such shareholders pursuant to the Reorganization; (ix) the holding period for the Nations Fund Shares received by the Pacific Horizon Fund shareholders will include the period during which such shareholders held the Pacific Horizon Fund shares surrendered in exchange therefor, provided that such Pacific Horizon Fund shares are held as a capital asset in the hands of the Pacific Horizon Fund shareholders on the date of the exchange; and (x) each Nations Fund will succeed to and take into account the tax attributes described in Section 381(c) of the Code of the Pacific Horizon Fund as of the Closing Date, subject to the conditions and limitations specified in the Code. Shareholders of the Pacific Horizon Funds should note, however, that the sale of securities by the Pacific Horizon Funds prior to the Closing whether in the ordinary course of business or in anticipation of the Closing, could result in a taxable capital gains distribution prior to the Closing. 31 Consummation of the consolidation of the Blue Chip and Investment Grade Portfolio of MIT into corresponding portfolios of NMIT is subject to the condition that Pacific Horizon and Nations receive an opinion from Morrison & Foerster LLP substantially to the effect that, among other things: the consolidation will not result in the recognition of gain or loss by the Blue Chip and Investment Grade Portfolio of MIT or corresponding portfolios of NMIT, or their respective interestholders; the basis of the Blue Chip and Investment Grade Portfolios' assets received by corresponding portfolios of NMIT will be the same as the basis of those assets in the hands of Blue Chip and Investment Grade Portfolios of MIT immediately prior to the consolidation; and the holding period of NMIT's Master Portfolios in the assets received from MIT will be the same as the MIT's holding period immediately prior to the consolidation. Pacific Horizon, Nations, NMIT and MIT have not sought, and will not seek, a private ruling from the Internal Revenue Service ("IRS") with respect to the federal income tax consequences of the Reorganization. The opinions of Morrison & Foerster LLP with respect to the federal income tax consequences of the Reorganization and consolidation of MIT and NMIT are not binding on the IRS and does not preclude the IRS from adopting contrary positions. Shareholders should consult their own advisers concerning the potential tax consequences of the Reorganization to them, including any applicable foreign, state or local income tax consequences. OTHER MATTERS. NBAI has recommended to the Nations Board that two Directors from the Pacific Horizon Board be added to the Nations Board. The Nations Board is expected to consider such recommendation shortly. In addition, under a retirement plan approved by the Pacific Horizon Board, several Pacific Horizon Directors who have been in office for a specified period of time are entitled to retirement benefits following death, resignation or termination. The payment terms and the formula for calculating the amount of the retirement benefits are set forth in Pacific Horizon's statement of additional information. Because the Reorganization contemplates the dissolution of Pacific Horizon, it is being considered a termination for all the Pacific Horizon Directors who will, therefore, receive retirement benefits following the Reorganization. NBAI will contribute to Pacific Horizon the amount of any shortfall to the extent that payment of benefits exceed what was accrued. It also is currently contemplated that, certain additional mutual funds if shareholder approval is obtained, would be reorganized into the Nations Asset Allocation Fund after the Reorganization. These reorganizations, if approved, would increase the total assets of the Nations Asset Allocation Fund. 32 COMPARISON OF PACIFIC HORIZON AND NATIONS INVESTMENT OBJECTIVES AND POLICIES. The investment objectives, policies and restrictions of the Pacific Horizon Funds are, in general, similar to those of their corresponding Nations Fund. They are summarized in Appendix III. There are, however, certain differences. A brief summary of the more significant differences follows. In addition, it is expected that Nations Funds shareholders will be asked in mid-1999 to approve certain changes to the investment policies and restrictions of certain Nations Funds. These changes, if approved, would not alter the primary investment strategy of any such Nations Funds. The investment objective, policies and restrictions of the Pacific Horizon Asset Allocation Fund, Pacific Horizon Blue Chip Fund, Pacific Horizon California Municipal Bond Fund, Pacific Horizon California Tax-Exempt Money Market Fund, Pacific Horizon Capital Income Fund and Pacific Horizon Intermediate Bond Fund are substantially the same as those of the corresponding Shell Nations Funds, because the Shell Nations Funds are being created to continue the business of their corresponding Pacific Horizon Funds. The investment objectives, policies and restrictions of the other Pacific Horizon Funds are, in general, similar to those of their corresponding Operating Nations Funds. While all of the Operating Nations Funds are money market funds and therefore are subject to the general restrictions and limitations of Rule 2a-7 under the 1940 Act, there are certain differences between the investment policies and restrictions of the Operating Nations Funds and their corresponding Pacific Horizon Funds. For example, while the Pacific Horizon Prime Fund concentrates its investments (I.E., invests at least 25% of its assets) in the banking and finance industries, the corresponding Nations Cash Reserves merely reserves the right to so concentrate its investments in obligations of U.S. banks, foreign branches of U.S. banks and U.S. branches of foreign banks. In addition, while the Pacific Horizon Treasury Only Fund invests solely in obligations of the U.S. Treasury, the corresponding Nations Government Reserves may invest not only in obligations of the U.S. Treasury, but also in general U.S. Government obligations and repurchase agreements. However, in order to more closely align the investment policies and restrictions of the two Funds, NBAI has committed that Nations Government Reserves will not invest in repurchase agreements after the Reorganization. The investment objectives, strategies and policies of the Pacific Horizon Funds and Nations Funds are more fully discussed in Appendix III. Additional information about the investment policies and restrictions of the Nations Funds and the Pacific Horizon Funds is included in their respective prospectuses and statements of additional information, which have been incorporated herein by reference. 33 INVESTMENT ADVISORY SERVICES. NBAI will serve as investment adviser to the Nations Funds and Nations Master Portfolios and TradeStreet will serve as investment sub-adviser to the Nations Funds and Nations Master Portfolios (except for Nations Blue Chip Master Portfolio and Nations Asset Allocation Fund). Chicago Equity will serve as co-investment sub-adviser, along with TradeStreet, to Nations Asset Allocation Fund and will serve as investment sub-adviser to Nation Blue Chip Master Portfolio. NBAI, TradeStreet and Chicago Equity are indirect wholly owned subsidiaries of NationsBank, which in turn is a wholly owned subsidiary of BankAmerica Corporation. The following table shows the contractual investment advisory and, where applicable, sub-advisory fee ratios. The table also shows the respective investment advisory and sub-advisory fee rates paid to the investment adviser and sub-adviser after taking into account voluntary fee waivers, for each Pacific Horizon Fund (as of September 30, 1998) and corresponding Nations Fund (as of September 30, 1998 or October 31, 1998, as the case may be). The Nations Funds' investment advisory fees as of September 30, 1998, however, have been adjusted to reflect a Board-approved reduction in the advisory fee rates under the investment advisory contracts. The investment advisory fees shown are expected to become effective in May 1999, at or prior to the closing of the Reorganization. TABLE IV INVESTMENT ADVISORY AND SUB-ADVISORY FEE INFORMATION
PACIFIC HORIZON FUND ADVISORY FEES CORRESPONDING NATIONS FUND ADVISORY & SUB- BEFORE/ AFTER WAIVERS ADVISORY FEES BEFORE/ AFTER WAIVERS - - --------------------------------------------------------------------------------------------------------- Pacific Horizon Asset Allocation Fund Nations Asset Allocation Fund (shell) Advisory Fee 0.40%/0.40% Advisory Fee 0.65%%/0.65% Sub-Advisory Fee 0.25%/0.25% (paid by Advisor) Pacific Horizon Blue Chip Fund Nations Blue Chip Fund (shell) Advisory Fee 0.50%/0.50% Advisory Fee 0.65%%/0.65% Sub-Advisory Fee 0.25%/0.25% (paid by Advisor) Pacific Horizon California Municipal Bond Fund Nations California Municipal Bond Fund (shell) Advisory Fee 0.30%/0.30% Advisory Fee 0.50%/0.28% Sub-Advisory Fee 0.07%/0.07% (paid by Advisor) 34 PACIFIC HORIZON FUND ADVISORY FEES CORRESPONDING NATIONS FUND ADVISORY & SUB- BEFORE/ AFTER WAIVERS ADVISORY FEES BEFORE/ AFTER WAIVERS - - --------------------------------------------------------------------------------------------------------- Pacific Horizon California Tax-Exempt Money Market Fund Nations California Tax-Exempt Reserves (shell) Advisory Fee 0.10%/0.10% Advisory Fee 0.15%/0.10% Sub-Advisory Fee 0.033%/0.033% (paid by Advisor) Pacific Horizon Capital Income Fund Nations Capital Income Fund (shell) Advisory Fee 0.45%/0.45% Advisory Fee 0.65%/0.65% Sub-Advisory Fee 0.25%/0.25% (paid by Advisor) Pacific Horizon Government Fund Nations Government Reserves Advisory Fee 0.10%/0.05% Advisory Fee 0.15% 0.10% Sub-Advisory Fee 0.033%/0.033% (paid by Advisor) Pacific Horizon Intermediate Bond Fund Nations Government Reserves Advisory Fee 0.30%/0.26% Advisory Fee 0.15% 0.10% Sub-Advisory Fee 0.033%/0.033% (paid by Advisor) Pacific Horizon Prime Fund Nations Cash Reserves Advisory Fee 0.09%/0.09% Advisory Fee 0.15%/0.10% Sub-Advisory Fee 0.033%/0.033% (paid by Advisor) Pacific Horizon Treasury Fund Nations Treasury Reserves Advisory Fee 0.10%/0.10% Advisory Fee 0.15%/0.10% Sub-Advisory Fee 0.033%/0.033% (paid by Advisor) Pacific Horizon Treasury Only Fund Nations Government Reserves Advisory Fee 0.10%/0.10% Advisory Fee 0.15% 0.10% Sub-Advisory Fee 0.033%/0.033% (paid by Advisor) Pacific Horizon Tax-Exempt Money Fund Nations Municipal Reserves Advisory Fee 0.10%/0.10% Advisory Fee 0.15% 0.10% Sub-Advisory Fee 0.033%/0.033% (paid by Advisor)
35 OTHER SERVICE PROVIDERS FOR THE PACIFIC HORIZON FUNDS AND NATIONS FUNDS Pacific Horizon Funds, MIT Master Portfolios, Nations Funds and Nations Master Portfolios have different service providers. Upon completion of the Reorganization, Nations Funds will continue to engage its existing service providers. In all cases, the types of services provided to the Funds under these service arrangements are substantially similar.
Pacific Horizon Funds Nations Funds --------------------- ------------- Distributor Provident Distributors, Inc. Stephens (Pacific Horizon Funds Only) Administrator Bank of America Stephens and NBAI PFPC, Inc. (MIT Master Portfolios) Sub-Administrator PFPC, Inc. NationsBank Transfer Agent PFPC, Inc. First Data Investor Services Group, Inc. Sub-Transfer Agent N/A NationsBank, N.A. Custodian PFPC Trust Company (Asset Allocation BNY Fund and MIT Master Portfolios Only) BNY (All Others) Independent Accountants PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP
Stephens currently serves as the Nations Funds' distributor. Pursuant to Section 9(a) of the 1940 Act, Stephens could be disqualified from serving as such. The SEC has granted a temporary exemption from the provisions of Section 9(a). Stephens has applied for a permanent exemption and anticipates receiving such an exemption shortly. SALES LOAD, DISTRIBUTION AND SHAREHOLDER SERVICING ARRANGEMENTS FOR THE PACIFIC HORIZON FUNDS A SHARES. Pacific Horizon has adopted a Shareholder Services Plan for A Shares, under which the A Shares of each Pacific Horizon Fund reimburse Pacific Horizon's distributor--Provident Distributors, Inc. ("Provident")--for shareholder servicing fees that Provident pays to various service organizations whose customers own A Shares. Payments made under the Shareholder Services Plan for A Shares also cover shareholder services provided by Provident and for support services provided to the beneficial owners of A shares. Under the Plan, payments by a Pacific Horizon Fund may not exceed 0.25% (annualized) of the average daily net assets of such Fund's A Shares. Excluded from this calculation, however, are all shares acquired via a transfer of assets from trust and agency accounts at Bank of America. 36 Class A Shares charge a front-end sales load. The maximum front-end sales load charged for each Pacific Horizon Fund's A Shares is set forth in Appendix II. Sales load reduction and waiver categories, which differ from those applicable to Investor A Shares of the corresponding Nations Funds, are described in Appendix III. Certain purchases of A Shares of $1,000,000 or more are subject to a contingent deferred sales charge ("CDSC") of 1% on redemptions made within 18 months of purchases made before November 16, 1998 or 1% on redemptions made within one year of purchases made on or after November 16, 1998, declining to .50% in the second year and eliminated thereafter; Investor A shares of the corresponding Nations Fund received in exchange for such shares will be subject to the same CDSC of 1% on redemptions made within one year of purchase, declining to .50% in the second year and eliminated thereafter. For all cases, former Class A shareholders will be credited for the period of time from the original date of purchase of their shares for purposes of determining the amount of their CDSC, if any. B SHARES. Pacific Horizon has adopted a Distribution and Services Plan for B Shares, under which the B Shares of each Pacific Horizon Fund reimburse Bank of America for distribution related expenses and for shareholder servicing expenses. Distribution expenses include expenses incurred in connection with advertising and marketing the Funds' B Shares; payments to service organizations for assistance in connection with the distribution of B Shares; and expenses incurred in connection with preparing, printing and distributing prospectuses for the Funds (except those used for regulatory purposes or distributed to existing shareholders). Shareholder Servicing expenses include expenses incurred in connection with Shareholder Services provided by Bank of America and Provident and payments to service organizations for the provision of support services with respect to beneficial owners of B Shares. Under the Distribution and Services Plan, payments by a Pacific Horizon Fund for distribution expenses may not exceed 0.75% (annualized), of the average daily net assets of such Fund's B Shares and payments for Shareholder Servicing may not exceed 0.25% (annualized) of the average daily net assets of a Fund's B Shares. Class B Shares are offered at net asset value per share without the imposition of a front-end sales load. There is a maximum CDSC of 5% on redemptions of B Shares made within 1 year of purchase declining to 1% in the sixth year and eliminated thereafter; Investor B Shares of the corresponding Nations Fund received in exchange for such shares will be subject to the same CDSC. For all cases, former Class B shareholders will be credited for the period of time from the original date of purchase of their shares for the purposes of determining the amount of their CDSC, if any. K SHARES. Pacific Horizon has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act, under which K Shares of a Pacific Horizon Fund reimburse Provident for services rendered and costs incurred in connection with distribution of K Shares. Distribution expenses include expenses incurred in connection with advertising and marketing the Funds' K Shares; payments to service organizations for assistance in connection with the distribution of K Shares; and expenses incurred in connection with preparing, printing and distributing prospectuses for the Funds (except those used for regulatory purposes or distributed to existing shareholders). Under the Distribution Plan, payments by a Pacific Horizon Fund for distribution expenses may not exceed 0.75% (annualized), of the average daily net assets of such Fund's K Shares. 37 Pacific Horizon also has adopted an Administrative and Shareholder Services Plan for K Shares, under which K Shares of a Pacific Horizon Fund reimburse Provident for administrative and shareholder servicing fees that Provident pays to various services organizations whose customers own K Shares. Administrative servicing expenses include expenses incurred in connection with administrative services provided by Provident and payments to service organizations for the provision of administrative services to beneficial owners of K shares, such as establishing and maintaining accounts and records relating to their clients who invest in K Shares, providing information to the Funds necessary for accounting or sub-accounting and providing statements periodically to clients showing their position in K Shares. Under the Administrative and Shareholder Services Plan for K Shares, payments for shareholder servicing expenses may not exceed 0.25% (annualized) of the average daily net assets of a Fund's K Shares, and payments for administrative servicing expenses may not exceed 0.75% (annualized) of the average daily net assets of the Fund's K Shares. The total of all fees, under the distribution plan and the administrative and shareholder services plan may not exceed, in the aggregate, 1.00% (annualized) of the average daily net assets of a Fund's K Shares. Class K Shares are offered at net asset value per share with no front-end sales load or contingent deferred sales charge. SRF SHARES. Pacific Horizon has adopted a Shareholder Services Plan for SRF Shares under which the SRF Shares of each Pacific Horizon Fund reimburse Pacific Horizon's distributor--Provident--for shareholder servicing fees that Provident pays to various service organizations whose customers own SRF Shares. Payments made under the Shareholder Services Plan for SRF Shares also cover shareholder services provided by Provident and for support services provided to the beneficial owners of SRF shares. Under the Plan, payments by a Pacific Horizon Fund may not exceed 0.25% (annualized) of the average daily net assets of such Fund" SRF Shares. Excluded from this calculation, however, are all shares acquired via a transfer of assets from trust and agency accounts at Bank of America. SRF Shares are offered at net asset value per share with no front-end sales load or contingent deferred sales charge. HORIZON SERVICE SHARES. Pacific Horizon has adopted a Shareholder Services Plan for Horizon Service Shares, under which the Horizon Service Shares of each Pacific Horizon Fund reimburse Bank of America and its affiliates for shareholder services provided to holders of such shares. Payments made under the Shareholder Services Plan for Horizon Service Shares, also cover shareholder services provided by Bank of America and for support services provided to the beneficial owners of Pacific Horizon Fund shares. Under the Plan, payments by a Pacific Horizon Fund may not exceed 0.25% (annualized) of the average daily net assets of such Fund's Horizon Service Shares. Horizon Service Shares are offered at net asset value per share with no front-end sales load or contingent deferred sales charge. 38 PACIFIC HORIZON SHARES. Pacific Horizon has adopted a Special Management Services Plan for Pacific Horizon Shares, under which the Pacific Horizon Shares of each Pacific Horizon Fund reimburse Bank of America and its affiliates, securities dealers, financial institutions and other industry professionals for services provided to holders of Pacific Horizon Shares. Payments made under the Special Management Services Plan for Pacific Horizon Shares, also cover shareholder services provided by Bank of America and for support services provided to the beneficial owners of Pacific Horizon Fund shares. Under the Plan, payments by a Pacific Horizon Fund may not exceed 0.32% (0.35% of the California Tax-Exempt Money Market Fund) (annualized) of the average daily net assets of such Fund's Horizon Service Shares. Pacific Horizon Shares are offered at net asset value per share with no front-end sales load or contingent deferred sales charge. X SHARES. Pacific Horizon has adopted a Distribution and Services Plan for X Shares, under which the X Shares of each Pacific Horizon Fund reimburse Provident for distribution related expenses and for shareholder servicing expenses. Distribution expenses include expenses incurred in connection with advertising and marketing the Funds' X Shares; payments to service organizations for assistance in connection with the distribution of X Shares; and expenses incurred in connection with preparing, printing and distributing prospectuses for the Funds (except those used for regulatory purposes or distributed to existing shareholders). Shareholder servicing expenses include payment for support services to beneficial owners of X Shares. Under the Distribution and Services Plan, payments by a Pacific Horizon Fund for distribution expenses and shareholder servicing may not exceed 0.30% and 0.25%, respectively, of the average daily net assets of such Fund's X Shares. Class X Shares are offered at net asset value per share with no front-end sales load or contingent deferred sales charge. Y SHARES. Pacific Horizon has adopted a Distribution and Services Plan for Y Shares, under which the Y Shares of each Pacific Horizon Fund reimburse Provident for distribution related expenses and for shareholder servicing expenses. Distribution expenses include expenses incurred in connection with advertising and marketing the Funds' Y Shares; payments to service organizations for assistance in connection with the distribution of Y Shares; and expenses incurred in connection with preparing, printing and distributing prospectuses for the Funds (except those used for regulatory purposes or distributed to existing shareholders). Shareholder servicing expenses include payment for support services to beneficial owners of Y Shares. Under the Distribution and Services Plan, payments by a Pacific Horizon Fund for distribution expenses and shareholder servicing expenses may not exceed 0.75% and 0.25%, respectively, of the average daily net assets of such Fund's Y Shares. Class Y Shares are offered at net asset value per share with no front-end sales load or contingent deferred sales charge. 39 S SHARES. Pacific Horizon has adopted a Distribution and Services Plan for S Shares, under which the S Shares of each Pacific Horizon Fund reimburse Provident for distribution related expenses and for shareholder servicing expenses. Distribution expenses include expenses incurred in connection with advertising and marketing the Funds' S Shares; payments to service organizations for assistance in connection with the distribution of S Shares; and expenses incurred in connection with preparing, printing and distributing prospectuses for the Funds. Shareholder servicing expenses include payments for support services to beneficial owners of S Shares. Under the Distribution and Services Plan, payments by a Pacific Horizon Fund for distribution expenses and shareholder servicing expenses may not exceed 0.75% and 0.25%, respectively, of the average daily net assets of such Fund's S Shares. Class S Shares are offered at net asset value per share with no front-end sales load or contingent deferred sales charge. SALES LOAD, DISTRIBUTION AND SHAREHOLDER SERVICING ARRANGEMENTS FOR THE NATIONS FUNDS. INVESTOR A SHARES. Nations has adopted a Shareholder Servicing and Distribution Plan (the "Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to each Fund's Investor A Shares. The Investor A Plan provides that each Fund may pay its distributor Stephens, and banks, broker/dealers or other financial institutions that offer Shares of the Fund and that have entered into a Sales Support Agreement with Stephens ("Selling Agents") or a Shareholder Servicing Agreement with Nations ("Servicing Agents"), up to 0.25% (annualized) of the average daily net asset value of the Investor A Shares. Investor A Shares charge a front-end sales load. The maximum front-end sales load charged for each Nations Fund's Investor A Shares is set forth in Appendix II. Sales load reduction and waiver categories, which differ from those applicable to Class A Shares of the corresponding Pacific Horizon Funds, are described in Appendix III and the accompanying Prospectus(es). Purchases of $1 million or more of Investor A Shares that are purchased at net asset value are subject to a maximum deferred sales charge of 1% of the lower of the original purchase price or redemption proceeds, if redeemed within 1 year of purchase declining to .50% in the second year and eliminated thereafter. Investor A Shares that were purchased by investors investing $1 million or more between July 31, 1997 and November 15, 1998 are subject to a 1% redemption fee if the Investor A Shares are held less than 18 months. Investor A Shares of the Nations Fund received in exchange for Class A Shares will be subject to the CDSC. For all cases, former Class A shareholders will be credited for the period of time from the original date of purchase of their shares for the purposes of determining the amount of their CDSC, if any. 40 INVESTOR B SHARES. Nations has adopted a Distribution Plan and a Shareholder Servicing Plan with respect to Investor B Shares of the Nations Funds. Pursuant to the Distribution Plan, the Funds may compensate or reimburse Stephens for any activities or expenses primarily intended to result in the sale of the Funds' Investor B Shares. Payments under the Distribution Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Trustees, provided that the annual rate may not exceed 0.75% of the average daily net asset value of the Funds' Investor B Shares. The fees payable under the Distribution Plan are used to, among other things, compensate Selling Agents for providing sales support assistance relating to Investor B Shares. The Trustees of Nations also have approved a Shareholder Servicing Plan for the Nations Funds which permits the Fund to compensate Servicing Agents for services provided to their customers that own Investor B Shares. Payments under the Shareholder Servicing Plan are calculated daily and paid monthly at a rate or rates set from time to time by the Funds, provided that the annual rate may not exceed 0.25% of the average daily net asset value of the Funds' Investor B Shares. Investor B Shares are offered at net asset value per share without the imposition of a front-end sales load. There is a maximum CDSC of 5% on redemptions of Investor B Shares made within 1 year of purchase declining to 1% in the sixth year and eliminated thereafter; Investor B Shares of the Nations Fund received in exchange for Class B Shares will be subject to the CDSC. For all cases, former Class B shareholders will be credited for the period of time from the original date of purchase of their shares for the purposes of determining the amount of their CDSC, if any. INVESTOR C SHARES. Nations has adopted a Distribution Plan with respect to Investor C Shares of the Nations Funds. Pursuant to the Distribution Plan, the Funds may compensate or reimburse Stephens for any activities or expenses primarily intended to result in the sale of the Funds' Investor C Shares. Payments under the Distribution Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Trustees of Nations, provided that the annual rate may not exceed 0.75% of the average daily net assets of the Funds' Investor C Shares. The fees payable under the Distribution Plan are used to, among other things, compensate Selling Agents for providing sales support assistance relating to Investor C Shares. The Trustees of Nations also have approved a shareholder servicing plan ("Servicing Plan") for the Funds which permits the Fund to compensate Servicing Agents for services provided to their customers that own Investor C Shares. Payments under the Servicing Plan are calculated daily and paid monthly at a rate or rates set from time to time by the Funds, provided that the annual rate may not exceed 0.25% of the average daily net asset value of the Funds' Investor C Shares. Investor C Shares purchased after January 19, 1999 are subject to a CDSC of 1% if redeemed within one year of purchase. However, no CDSC will apply to Investor C Shares issued in the Reorganization. 41 ADVISER SHARES. Nations has adopted a Shareholder Servicing Plan with respect to Adviser Shares of the Nations Funds. Pursuant to the Shareholder Servicing Plan, the Funds may compensate Servicing Agents for any activities or expenses for certain activities and or expenses of the Shareholder Servicing Plan in connection with shareholder services that they provide. Payments under the Shareholder Servicing Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Trustees, provided that the annual rate may not exceed 0.25% of the average daily net asset value of the Funds' Adviser Shares. Adviser Shares are offered at net asset value per share with no front-end sales load or contingent deferred sales charge. SEAFIRST SHARES. It is anticipated that Nations will adopt a Shareholder Servicing Plan with respect to Seafirst Shares of the Nations Funds. Pursuant to the Shareholder Servicing Plan, the Funds may compensate or reimburse Servicing Agents for any activities or expenses primarily intended to result in connections with shareholder services that they provide. Payments under the Shareholder Servicing Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Trustees, provided that the annual rate may not exceed 0.25% of the average daily net asset value of the Funds' Seafirst Shares. Seafirst Shares are offered at net asset value per share with no front-end sales load or contingent deferred sales charge. INVESTOR SHARES. Nations has adopted a Distribution Plan and a Shareholder Servicing Plan with respect to Investor Shares of the Nations Funds. Pursuant to the Distribution Plan, the Funds may compensate or reimburse Stephens for any activities or expenses primarily intended to result in the sale of the Funds' Investor Shares. Payments under the Distribution Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Directors, provided that the annual rate may not exceed 0.10% of the average daily net asset value of the Funds' Investor Shares. The fees payable under the Distribution Plan are used to, among other things, compensate Selling Agents for providing sales support assistance relating to Investor Shares. The Trustees of Nations also have approved a Shareholder Servicing Plan for the Nations Funds which permits the Fund to compensate Servicing Agents for services provided to their customers that own Investor Shares. Payments under the Shareholder Servicing Plan are calculated daily and paid monthly at a rate or rates set from time to time by the Funds, provided that the annual rate may not exceed 0.25% of the average daily net asset value of the Funds' Investor Shares. Investor Shares are offered at net asset value per share with no front-end sales load or contingent deferred sales charge. DAILY SHARES. Nations has adopted a Distribution Plan and a Shareholder Servicing Plan with respect to Daily Shares of the Nations Funds. Pursuant to the Distribution Plan, the Funds may compensate or reimburse Stephens for any activities or expenses primarily intended to result in the sale of the Funds' Daily Shares. Payments under the Distribution Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Trustees, provided that the annual rate may not exceed 0.35% of the average daily net asset value of the Funds' Daily Shares. The fees payable under the Distribution Plan are used to, among other things, compensate Selling Agents for providing sales support assistance relating to Daily Shares. The Trustees of Nations also have approved a Shareholder Servicing Plan for the Nations Funds which permits the Fund to compensate Servicing Agents for services provided to their customers that own Daily Shares. Payments under the Shareholder Servicing Plan are calculated daily and paid monthly at a rate or rates set from time to time by the Funds, provided that the annual rate may not exceed 0.25% of the average daily net asset value of the Funds' Daily Shares. Daily Shares are offered at net asset value per share with no front-end sales load or contingent deferred sales charge. 42 SERVICE SHARES. Nations has adopted a Distribution Plan and a Shareholder Servicing Plan with respect to Service Shares of the Nations Funds. Pursuant to the Distribution Plan, the Funds may compensate or reimburse Stephens for any activities or expenses primarily intended to result in the sale of the Funds' Service Shares. Payments under the Distribution Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Trustees, provided that the annual rate may not exceed 0.75% of the average daily net asset value of the Funds' Service Shares. The fees payable under the Distribution Plan are used to, among other things, compensate Selling Agents for providing sales support assistance relating to Service Shares. The Trustees of Nations also have approved a Shareholder Servicing Plan for the Nations Funds which permits the Fund to compensate Servicing Agents for services provided to their customers that own Service Shares. Payments under the Shareholder Servicing Plan are calculated daily and paid monthly at a rate or rates set from time to time by the Trustees, provided that the annual rate may not exceed 0.25% of the average daily net asset value of the Funds' Service Shares. Service Shares are offered at net asset value per share with no front-end sales load or contingent deferred sales charge. ADMINISTRATION AGREEMENTS. The Pacific Horizon Funds have entered into an administration agreement with Bank of America. Stephens serves as co-administrator to Nations Funds. Effective December 1, 1998, NBAI began serving as co-administrator to Nations Funds with Stephens, and BNY began serving as sub-administrator. Under the new administration arrangements, which become effective for the Nations Funds on a Fund by Fund basis during the fourth quarter of 1998 and the first quarter of 1999, Stephens and NBAI provide various administrative, accounting and corporate secretarial services and BNY assists NBAI in performing certain administrative and accounting services. SHAREHOLDER TRANSACTIONS AND SERVICES. The Pacific Horizon Funds and the corresponding Nations Funds offer generally similar shareholder services and transactions. There are, however, some differences. For example, the minimum initial investment for A and K Shares of the Pacific Horizon Funds is generally $500 while the minimum initial investment for the Investor A Shares and Investor C Shares of the Nations Funds is generally $1,000. Also, each Pacific Horizon Fund generally requires a $500 minimum account balance, while Nations requires a $1,000 minimum account balance. Another difference is that Pacific Horizon provides check-writing privileges on all A and K Shares of its fixed income funds, while Nations does not provide check-writing privileges on Investor A and Investor C Shares of the Nations Funds (although Nations does provide check-writing privileges on certain shares of its money market funds). Additionally, Nations does not offer Teletrade - a service currently offered Pacific Horizon Fund shareholders that allows shareholders to authorize electronic transfers of money to purchase shares in or redeem shares from an established Fund account. For a detailed comparison of shareholder transactions and services, see Appendix IV. 43 The Pacific Horizon Funds and the corresponding Nations Funds also offer generally similar exchange privileges, with some differences. One difference is that not all Pacific Horizon Fund shares that may currently be exchanged for shares of Pacific Horizon California Tax-Exempt Money Market Fund will, following the Reorganization, be exchangeable for shares of Nations California Tax-Exempt Reserves. Another difference is that shares of Pacific Horizon money market funds acquired in an exchange from shares of Pacific Horizon non-money market funds that were subject to a sales load at the time of original purchase, will no longer be freely exchangeable into a Nations Funds non-money market fund following the Reorganization. Accordingly, certain shareholders seeking to sell such money market fund shares and purchase shares of Nations non-money market funds may be subject to an additional sales load. In addition, shares of Time Horizon Funds will no longer be available for exchange following the Reorganization. FEES AND EXPENSES. A substantial majority of Pacific Horizon Fund share classes will experience substantially the same or lower total operating expense ratios (after waivers and expense reimbursements) on a PRO FORMA basis. Moreover, NBAI has undertaken to waive fees and/or reimburse expenses as needed to ensure that, for at least one year after the Reorganization, the Nations Funds' total operating expense ratios will not exceed the PRO FORMA after waiver ratios shown in Table II above, absent a determination by the Nations Funds Board that extraordinary circumstances or a material reduction in Fund assets has occurred that has made it appropriate to permit an increase in expense levels. There can be no assurance that such expense ratios will continue after this commitment expires. For detailed PRO FORMA expense information, see Appendix II. SHARE STRUCTURE. Both Pacific Horizon and Nations are registered as open-end management investment companies under the 1940 Act. Currently, Pacific Horizon offers seventeen funds. The Nations Funds Family, which includes several registered investment companies, currently offers sixty-one funds and will offer over seventy funds immediately after the Reorganization. Pacific Horizon was organized as a Maryland corporation on October 27, 1982. It is subject to the provisions of its Charter and By-Laws. Nations was organized as a Massachusetts business trust on January 22, 1990 and is subject to the provisions of its Declaration of Trust, as amended and supplemented, and By-Laws. Pacific Horizon's Charter authorizes the Board of Directors to issue full and fractional shares of capital stock ($0.001 par value per share) and to classify and reclassify any authorized and unissued shares into one or more classes of shares. Shares of Nations are sold without par value, and each share represents an equal proportionate interest in a portfolio of Nations with other shares of the same class. Nations' Declaration of Trust authorizes the Board of Trustees to classify shares into one or more series or classes. Shares of both the Pacific Horizon Funds and Nations Funds are entitled to one vote for each full share held and fractional votes for fractional shares held. 44 Pacific Horizon Fund shareholders generally have cumulative voting rights to the extent that may be required by applicable law. Additionally, shareholders will vote in the aggregate and not by class or series, except as required by law (or when permitted by the Pacific Horizon Board of Directors). In accordance with Nations' Agreement and Declaration of Trust, all shares of a series of Nations are entitled to vote by individual series, except (1) when required by the 1940 Act, shares will be voted in the aggregate and not by individual series, and (2) when the Trustees have determined that the matter affects only the interests of one or more series, then only shareholders of such series shall be entitled to vote thereon. There is no cumulative voting in the election of Trustees for Nations. Additional information concerning the attributes of the shares issued by Pacific Horizon and Nations is included in their respective prospectuses, which are incorporated herein by reference. Information about the dividend and distribution policies of both the Pacific Horizon Funds and Nations Funds can be found in Appendix IV. COMPARISON OF CORPORATE/TRUST STRUCTURE. Pacific Horizon is organized as a Maryland corporation. Nations is organized as a Massachusetts business trust. In general, the charter documents governing Pacific Horizon are similar to those documents governing Nations. Although the rights of a shareholder of a Maryland corporation vary in certain respects from the rights of an interestholder of a Massachusetts business trust, 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. It should be noted that under Maryland law, Pacific Horizon Fund shareholders have no personal liability for Pacific Horizon's acts or obligations. By contrast, under Massachusetts law, interestholders of a Massachusetts business trust like Nations could, under certain circumstances, be held personally liable for the obligations of the trust. However, Nations has provisions in its Declarations of Trust that endeavor 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. In addition, Nations Funds shareholders may be asked to approve certain changes to the corporate structure of Nations, including, possibly changing Nations from a Massachusetts business trust to a Delaware business trust. This change, if required approvals are obtained, will allow the several registered investment companies in the Nations Funds Family to operate under a single registered investment company thereby permitting the Nations Funds Family to operate with increased efficiency. 45 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 Pacific Horizon. It is expected that the solicitation of proxies will be primarily by mail. OFFICERS AND SERVICE CONTRACTORS OF PACIFIC HORIZON AND NATIONS MAY ALSO SOLICIT PROXIES BY TELEPHONE OR OTHERWISE. In this connection, Pacific Horizon has retained ADP Proxy Services to assist in the solicitation of proxies for the Reorganization. Shareholders may vote (1) by mail, by marking, signing, dating and returning the enclosed Proxy Ballot in the enclosed postage-paid envelope; (2) by telefacsimile, by marking, signing, dating and faxing the enclosed Proxy Ballot to ADP Proxy Services at (704) 388-2641; or (3) by touchtone voting at (800) 690-6903; or 4) by on-line voting at www.proxyvote.com. Any shareholder giving a proxy may revoke it at any time before it is exercised by submitting to Pacific Horizon a written notice of revocation or a subsequently executed proxy or by attending the Meeting and voting in person. Any expenses incurred as a result of hiring ADP Proxy Services or any other proxy solicitation agent will be borne by NBAI or its affiliates. Only shareholders of record at the close of business on January 14, 1999 will be entitled to vote at the Meeting. On that date, the following Pacific Horizon Shares were outstanding and entitled to be voted. NAME OF PACIFIC HORIZON FUND AND CLASS SHARES ENTITLED TO VOTE - - -------------------------------------- ----------------------- ASSET ALLOCATION FUND A Shares 3,226,763.17 B Shares 170,419.24 K Shares 80,935.10 SRF Shares 12,346,171.24 BLUE CHIP FUND A Shares 11,936,562.48 B Shares 291,681.75 K Shares 378,920.92 SRF Shares 14,274,285.54 CALIFORNIA MUNICIPAL BOND FUND A Shares 28,909,675.83 B Shares 246,705.13 CALIFORNIA TAX-EXEMPT MONEY MARKET FUND Horizon Service Shares 726,981,000.28 Pacific Horizon Shares 574,847,823.54 S Shares 299,332,058.48 X Shares 34,944,197.16 46 NAME OF PACIFIC HORIZON FUND AND CLASS SHARES ENTITLED TO VOTE - - -------------------------------------- ----------------------- CAPITAL INCOME FUND A Shares 21,202,563.92 B Shares 163,269.53 K Shares 225,277.76 GOVERNMENT FUND Horizon Shares 173,838,398.51 Horizon Service Shares 201,684,643.25 Pacific Horizon Shares 139,075,898.93 INTERMEDIATE BOND FUND A Shares 6,762,516.10 K Shares 51,402.79 SRF Shares 3,120,935.37 PRIME FUND Horizon Shares 3,928,634,945.13 Horizon Service Shares 4,398,620,097.13 Pacific Horizon Shares 2,931,913,169.44 S Shares 1,436,409,926.58 X Shares 1,859,315,383.25 Y Shares 214,930,420.74 TAX-EXEMPT MONEY FUND Horizon Shares 349,794,173.87 Horizon Service Shares 189,829,041.40 Pacific Horizon Shares 162,699,967.64 S Shares 61,150,711.05 TREASURY FUND Horizon Shares 813,687,978.13 Horizon Service Shares 1,668,841,214.25 Pacific Horizon Shares 366,005,205.04 X Shares 557,699,132.10 Y Shares 117,557,093.79 TREASURY ONLY Horizon Shares 39,615,302.71 Horizon Service Shares 281,112,181.19 Pacific Horizon Shares 189,420,127.86 Each whole and fractional share of a Pacific Horizon Fund is entitled to a whole or fractional vote. 47 If the accompanying proxy is executed and returned in time for the Meeting, the Shares covered thereby will be voted in accordance with the proxy on all matters that may properly come before the Meeting. SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement is being submitted for approval at the Meeting by Pacific Horizon's shareholders pursuant to Pacific Horizon's Charter and By-Laws, and was unanimously approved by the Pacific Horizon Board of Directors at a meeting held on January 14, 1999. The Reorganization Agreement must be approved by a majority of the outstanding shares of each Pacific Horizon Fund and the reorganization of Pacific Horizon must be approved by a majority of the outstanding shares of all the funds of Pacific Horizon, including those funds that are not part of this Proxy/Prospectus. A vote for the Reorganization Agreement includes a vote for the reorganization of Pacific Horizon; correspondingly, a vote against the Reorganization Agreement is a vote against the reorganization of Pacific Horizon. Separate proxy solicitation materials are being mailed to the shareholders of all other series of Pacific Horizon seeking the approval of similar agreements and plans of reorganization and also Pacific Horizon's reorganization. The Reorganization Agreement provides that in the event the Reorganization Agreement is approved with respect to less than all of the Pacific Horizon Funds, the failure of a Pacific Horizon Fund to consummate the transactions contemplated by the Reorganization Agreement shall not affect the consummation or validity of the Reorganization with respect to any other Pacific Horizon Funds. It is possible that a majority of a Pacific Horizon Fund's shares may approve the Reorganization Agreement while a sufficient majority of all shares of Pacific Horizon funds voting in the aggregate do not vote to approve the reorganization of Pacific Horizon. In such a case, the Board of Directors will contemplate what further action is appropriate. With respect to the approval of the Reorganization Agreement, the term "majority of the outstanding shares" of Pacific Horizon or a Pacific Horizon Fund means more than 50% of the outstanding shares of Pacific Horizon or the particular Pacific Horizon Fund. The vote of the shareholders of the Nations Funds is not being solicited, since their approval or consent is not necessary for the Reorganization. SPECIAL CONSIDERATIONS FOR THE SHAREHOLDERS OF THE PACIFIC HORIZON BLUE CHIP FUND AND THE PACIFIC HORIZON INTERMEDIATE BOND FUND. Because the Feeders invest all of their assets in shares of the corresponding MIT Master Portfolios, shareholders of the Feeders are being asked to vote not only on the Reorganization Agreement but also the Master Trust Reorganization Agreement. Therefore, a vote for or against the Reorganization Agreement will include a vote for or against the Master Trust Reorganization Agreement. The votes cast by the Feeders' shareholders with respect to the Master Trust Reorganization Agreement will, in turn, be cast by the Feeders, as the direct interestholders in MIT, in the same proportion. The Master Trust Reorganization Agreement is subject to approval by its interestholders, which includes two World Horizon Funds that also invest in each MIT Master Portfolio. The Reorganization, with respect to MIT and the MIT Master Portfolios, will only be consummated if a majority of all outstanding interests in the MIT Master Portfolios approve the Master Trust Reorganization Agreement. 48 With respect to the approval of the MIT Reorganization Agreement, the term "majority of the outstanding shares" of Pacific Horizon or a Pacific Horizon Fund means more than 50% of the outstanding shares of Pacific Horizon or the particular Pacific Horizon Fund. The vote of the shareholders of the Nations Funds is not being solicited, since their approval or consent is not necessary for the Reorganization. PRINCIPAL SHAREHOLDERS. As of January 14, 1999, the officers and Directors of Pacific Horizon and the Trustees of MIT as a group owned or controlled less than 1% or more of any of the Pacific Horizon Funds. As of January 14, 1999, the officers and Trustees of Nations as a group owned or controlled less than 1% of any of the Nations Funds. Table V(A) shows the name, address and share ownership of each person known to Pacific Horizon to have ownership with respect to 5% or more of a class of a Pacific Horizon Fund as of January 14, 1999. Table V(B) shows the name, address and share ownership of each person known to Nations to have ownership with respect to 5% or more of a class of a Nations Fund as of January 14, 1999. The type of ownership of each entry listed on Tables V(A) and V(B) is record ownership. TABLE V(A)
PERCENTAGE PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING Pacific Horizon Corelink Financial Inc. A; 327,696.61 10.15% 2.07% 2.07% Asset Allocation Fund PO Box 4054 Concord, CA 94524 Bank of America MT&SA A; 268,724.42 8.33% 1.70% 1.70% FBO PACO Attn Mutual Funds Unit R 38615 PO Box 3577 Terminal Annex Los Angeles, CA 90051 Vanguard Fiduciary Trust A; 162,187.09 5.02% 1.02% 1.02% Company FBO Kirkland & Ellis Def Contribution Retirement Plan 91926 PO Box 2600 VN 421 Valley Forge, PA 19482- 2600 49 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING BA Investment Services Inc. B; 9,794.26 5.92% 0.06% 0.06% FBO 434216501 185 Berry St. 3rd Floor 12640 San Francisco, CA 94107 Corelink Financial Inc. K; 79,339.29 100% 0.50% 0.50% PO Box 4054 Concord, CA 94524 Seafirst Bank SRF; 12,351,014.31 100% 78.05% 78.05% FBO Retirement Services PO Box 84248 CSC-11 Seattle, WA 98124 Pacific Horizon Blue Bank of America MT&SA A; 775,730.88 6.48% 2.89% 2.89% Chip Fund The Private Bank Attn Common Trust Funds Unit 38329 PO Box 513577 Terminal Annex Los Angeles, CA 90051 Corelink Financial Inc. A; 602,236.58 5.03% 2.24% 2.24% PO Box 4054 Concord, CA 94524 Corelink Financial Inc. K; 326,829.02 99.31% 1.37% 1.37% PO Box 4054 Concord, CA 94524 Seafirst Bank SRF; 14,275,619.10 100% 53.11% 53.11% FBO Retirement Services PO Box 84248 CSC-11 Seattle, WA 98124 Pacific Horizon BA Investment Services Inc. B; 19,936.12 8.08% 0.07% 0.07% California Municipal FBO 423463871 Bond Fund 185 Berry Street 3rd Floor 12640 San Francisco, CA 94107 BA Investment Services Inc. B; 13,143.19 5.32% 0.05% 0.05% FBO 433206391 185 Berry Street 3rd Floor 12640 San Francisco, CA 94107 50 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING BA Investment Services Inc. B; 23,804.59 9.64% 0.08% 0.08% FBO 350054041 185 Berry Street 3rd Floor 12640 San Francisco, CA 94107 BA Investment Services Inc. B; 17,668.70 7.16% 0.06% 0.06% FBO 432872421 185 Berry Street 3rd Floor 12640 San Francisco, CA 94107 BA Investment Services Inc. B; 27,135.64 10.99% 0.09% 0.09% FBO 426864851 185 Berry Street 3rd Floor 12640 San Francisco, CA 94107 BA Investment Services Inc. B; 14,136.36 5.73% 0.05% 0.05% FBO 426314811 185 Berry Street 3rd Floor 12640 San Francisco, CA 94107 BA Investment Services Inc. B; 13,932.26 5.64% 0.05% 0.05% FBO 432980251 185 Berry Street 3rd Floor 12640 San Francisco, CA 94107 BA Investment Services Inc. B; 13,529.53 5.48% 0.05% 0.05% FBO 320001191 185 Berry Street 3rd Floor 12640 San Francisco, CA 94107 BA Investment Services Inc. B; 13,700.68 5.55% 0.05% 0.05% FBO 424327321 185 Berry Street 3rd Floor 12640 San Francisco, CA 94107 Pacific Horizon BA Investment Services Inc. S; 299,260,834.25 99.98% 18.29% 18.29% California For the Benefit of Tax-Exempt Money Customers Market Fund Unit 17852 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 51 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING BA Investment Services Inc. X; 34,944,197.16 100% 2.14% 2.14% For the Benefit of Customers Unit 17852 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 BA Investment Services Inc. Pacific Horizon; 49.74% 17.47% 17.47% For the Benefit of 285,898,234.44 Customers Unit 17852 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 BancAmerica Robertson Pacific Horizon; 44.78% 15.73% 15.73% Stephens 257,427,533.23 For the Benefit of Customers Attn H. David Jones III PO Box 7042 San Francisco, CA 94120 Bank of America MT&SA Horizon Service;; 63.13% 25.69% 25.69% Trst/Cus 420,297,706.56 Attn Common TR FDS Unit 38329 Terminal Annex PO Box 513577 Los Angeles, CA 90051-1577 BA Investment Services Inc. Horizon Service;; 35.36% 14.39% 14.39% For the Benefit of 235,403,780.67 Customers Attn H. David Jones III PO Box 7042 San Francisco, CA 94120 H. Joseph Horowitz Horizon Service; 9.86% 0.37% 0.37% and Joele L. Horowitz 6,029,332.48 Trst The Horowitz Family Trust U/A DTD 11-6-89 52 Isabella Avenue Atherton, CA 94025 52 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING Leo Zuckerman Horizon Service; 6.54% 0.24% 0.24% Trst Leo Zuckerman Trust 3,997,714.63 DTD 12-11-91 4444 Viewridge Avenue San Diego, CA 92123 R. C. Johnstone, Jr. Horizon Service; 5.62% 0.21% 0.21% PO Box 938 3,438,599.64 Drinda, CA 94563 Lakeshore Learning Natl's Horizon Service; 10.75% 0.40% 0.40% 2695 E. Dominquez St. 6,574,562.22 Carson, CA 90749 Allan G. Byer Horizon Service; 7.53% 0.28% 0.28% and Marian Byer 4,607,244.69 Tenants in Common Attn Ed Hamburg Byer California 66 Potrero Avenue San Francisco, CA 94103 Pacific Horizon Corelink Financial Inc. K; 204,088.84 91.79% 0.95% 0.95% Capital Income Fund PO Box 4054 Concord, CA 94524 Pacific Horizon Bank of America MT&SA Cus Horizon; 7.62% 2.57% 0.98% Government Fund PO Box 513577 13,247,948.92 Attn Common TA FDS Unit 38329 Terminal Annex Los Angeles, CA 90051-1577 Skinner Corporation Horizon; 6.99% 2.36% 0.90% Attn Debbie Sokvitne 12,148,145.58 1326 Fifth Ave., Ste 711 Seattle, WA 98101-0000 Imperial Thrift and Loan Horizon; 5.56% 1.88% 0.71% Association 9,657,275.54 Attn Steve Cooper 700 N. Central Ave, #600 Glendale, CA 91203 53 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING Cypress Insurance Co. Horizon; 8.89% 3.01% 1.14% Attn Larry Tetzloff 15,468,153.19 9290 W. Dodge Rd. Omaha, NE 68124-0000 E-Tek Dynamics Horizon ; 11.54% 3.90% 1.48% Cont Jeff Chase 20,066,483.30 Attn General Accounting 1865 Lundy Ave. San Jose, CA 95101 Lone Star Technologies Inc. Horizon ; 10.83% 3.66% 1.39% Attn Charles J. Keszler 18,822,092.63 PO Box 803546 Dallas, TX 75380-3546 Chase Manhattan Bank Horizon; 36.91% 12.47% 4.74% FBO Global Trust 64,168,687.10 Attn Dave Sturman 450 W. 33rd St., 15th Flr. New York, NY 10001 Wall Data Incorporated Pacific Horizon; 5.98% 1.61% 0.61% 11332 NE 122nd Way 8,302,960.89 Kirkland, WA 98034 Hare & Co. Pacific Horizon; 5.31% 1.43% 0.54% Attn Bank of New York 7,383,276.70 Short Term Investment Funds One Wall Street, 2nd Fl. New York, NY 10286 BA Investment Services Inc. Pacific Horizon; 64.33% 17.38% 6.61% For the Benefit of 89,467,284.80 Customers Unit 17852 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 BancAmerica Robertson Pacific Horizon; 11.44% 3.09% 1.18% Stephens 15,908,350.13 For the Benefit of Customers Attn H. David Jones III PO Box 7042 San Francisco, CA 94120 54 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING Bank of America MT&SA Horizon Service; 78.93% 7.66% 2.91% Trst Financial Management 39,423,822.88 & Trust Srvcs Attn Common TR FDS Unit 38329 PO Box 513577 Terminal Annex Los Angeles, CA 90051-1577 Security Pacific Cash Horizon Service; 13.86% 1.35% 0.51% Management 6,922,700.00 c/o Bank of America GPO M/C 5533 Attn Regina Olsen 1850 Gateway Blvd. M/C 5533 Concord, CA 94520-0000 Charlotte Russe Inc. Horizon Service; 6.41% 1.89% 0.72% Attn Accounting Department 9,731,596.64 4645 Morena Blvd. San Diego, CA 92117-3650 Lone Star Northwest Inc. Horizon Service; 5.30% 1.56% 0.59% Attn Troy Lucas 8,026,735.60 PO Box 1730 Seattle, WA 98111 Viejas Band of Kumevaay Horizon Service; 8.01% 2.36% 0.89% Indians 12,155,086.94 A Federally Recognized Indian Tribe 5000 Willows Rd. Alpine, CA 91901 Viejas Band of Kumevaay Horizon Service; 5.73% 1.69% 0.64% Indians 8,694,999.81 5005 Willow Rd., Ste 229 Alpine, CA 91901 Hometown Health Prov. Ins. Horizon Service; 5.70% 1.68% 0.64% Co. 8,650,000.00 Attn Jackie Drews 240 S. Rock, Ste. 123 Reno, NV 89502 55 Pacific Horizon PACO A; 749,200.41 11.08% 7.54% 7.54% Intermediate Bond Attn Mutual Funds Fund PO Box 513577 Los Angeles, CA 90051 Bank of America MT&SA A; 4,091,475.28 60.49% 41.18% 41.18% The Private Bank Attn Common Trust Funds Unit 38329 PO Box 3577 Terminal Annex Los Angeles, CA 90051 PACO A; 431,389.74 6.38% 4.34% 4.34% PO Box 513577 Los Angeles, CA 90051 Corelink Financial Inc. K; 50,718.19 99.99% 0.51% 0.51% PO Box 4054 Concord, CA 94524 Seafirst Bank SRF; 3,123,953.28 100.% 31.44% 31.44% FBO Retirement Services PO Box 84248 CSC-11 Seattle, WA 98124 Pacific Horizon Bank of America MT&SA Horizon; 28.77% 7.65% 4.76% Prime Fund Private Bank 1,130,283,259.08 Attn Common TR FDS Unit 38329 PO Box 513577 Terminal Annex Los Angeles, CA 90051-1577 Ceridian Corporation Horizon; 14.38% 3.83% 2.38% Trst Ceridian Corp Tax 565,000,000.00 Filing Trust Attn Michael Yietz 17390 Brookhurst St. Fountain Valley, CA 92708-3737 Bank of America MT&SA Horizon Service; 42.26% 6.73% 4.19% Financial Management & 994,555,917.66 Trust Services Attn Common TR FDS Unit 38329 PO Box 513577 Terminal Annex Los Angeles, CA 90051-1577 56 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING BancAmerica Robertson Horizon Service; 5.07% 0.81% 0.50% Stephens 119,370,558.73 For the Benefit of Customers Attn H. David Jones III PO Box 7042 San Francisco, CA 94120 BA Investment Services Inc. Horizon Service; 15.61% 2.49% 1.55% For the Benefit of 367,259,020.18 Customers Attn H. David Jones III PO Box 7042 San Francisco, CA 94120 Security Pacific Cash Horizon Service; 34.71% 5.53% 3.44% Management 816,808,100.00 c/o Bank of America-GPO M/C 5533 Attn Regina Olsen 1850 Gateway Blvd. M/C 5533 Concord, CA 94520-0000 BA Investment Services Inc. S; 99.67% 9.69% 6.03% For the Benefit of 1,431,765,366.95 Customers Unit 17852 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 Hare & Co. Pacific Horizon; 5.31% 1.05% 0.66% Attn Bank of New York 155,637,987.35 Short Term Investment Funds One Wall Street, 2nd Fl. New York, NY 10286 BA Investment Services Inc. Pacific Horizon; 77.51% 15.39% 9.57% For the Benefit of 2,272,823,240.53 Customers Unit 17852 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 57 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING BancAmerica Robertson Pacific Horizon; 11.32% 2.25% 1.40% Stephens 331,807,437.18 For the Benefit of Customers Attn H. David Jones III PO Box 7042 San Francisco, CA 94120 BA Investment Services Inc. X; 892,286,128.52 48.00% 6.04% 3.76% For the Benefit of Customers Unit 17852 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 BA Investment Services Inc. Y; 5,419.39 100% 0.00% 0.00% FBO 330085411 185 Berry St. 3rd Floor 12640 San Francisco, CA 94107 BofA California Prime Y Y; 12,347,720.78 5.75% 0.10% 0.05% Class Sean Ehrlich 2044 Franklin St. Oakland, CA 94612 Pacific Horizon Bank of America MT&SA Horizon; 95.21% 43.62% 28.25% Tax-Exempt Money Fund The Private Bank 33,022,640.44 Attn Common TR FDS Unit 38329 PO Box 513577 Terminal Annex Los Angeles, CA 90051-1577 BA Investment Services Inc. Pacific Horizon; 97.15% 20.70% 13.41% For the Benefit of 158,065,692.45 Customers Unit 17852 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 58 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING Sleep Country USA Horizon Service; 8.68% 0.32% 0.21% Attn Sunny Kobe Coon 2,458,131.23 7029 SD 220th Kent, WA 98032 Jack Kirk Horizon Service; 10.56% 0.39% 0.25% 1533 NW Blue Ridge Dr. 2,992,204.58 Seattle, WA 98177 The McGregor Co. Horizon Service; 10.88% 0.40% 0.26% PO Box 740 3,082,437.01 Colfax, WA 99111 Ashon Kumar Shah Horizon Service; 6.08% 0.23% 0.15% and Indu Shah 1,723,620.10 10714 Durland Ave., NE Seattle, WA 98125-6945 Dale F. Nagy Horizon Service; 6.78% 0.25% 0.16% DBA Picadilly Investment 1,919,906.75 Properties 410 S. Orchard 128 Boise, ID 83705 Black Hills Energy Horizon Service; 5.69% 0.21% 0.14% Resources Inc. 1,610,927.99 2323 S. Shepherd, Ste 1150 Houston, TX 77019-7024 Lynn E. Barr Horizon Service; 10.68% 0.40% 0.26% and Linda D. Barr 3,026,068.23 Trustees for L.E. & L.D. Barr Rev. Trst PO Box 2000 Benica, CA 94510 BA Investment Services Inc. S; 61,150,711.05 100% 8.01% 5.19% For the Benefit of Customers Unit 17852 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 59 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING BA Investment Services Inc. Horizon Service; 14.41% 3.05% 1.97% For the Benefit of 23,273,222.51 Customers Unit 17852 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 Bank of America FM&TS Oper Horizon Service; 85.49% 18.08% 11.71% CA 138,065,936.17 Attn Common TR FDS Unit 38329 PO Box 513577 Terminal Annex Los Angeles, CA 90051-1577 Pacific Horizon Bank of America MT&SA Horizon; 27.33% 6.31% 3.77% Treasury Fund The Private Banking 222,387,640.64 Attn Common TR FDS Unit 38329 PO Box 513577 Terminal Annex Los Angeles, CA 90051-1577 Hare & Co. Horizon; 30.98% 7.15% 4.28% Attn Binal Saha 252,098,402.73 c/o Bank of New York One Wall Street, 2nd Fl. New York, NY 10005-2501 KMPG Peat Marwick LLP Horizon; 8.36% 1.93% 1.15% Attn Harvey Skolnick 68,000,000.00 3 Chestnut Ridge Rd. Montvale, NJ 07645-0000 Los Angeles Department of Horizon; 6.49% 1.50% 0.89% Airports 52,776,601.21 Attn Sandee Parks 515 South Flower St. Los Angeles, CA 90071-2291 Abbey Properties LLC Horizon; 5.90% 1.36% 0.81% Attn Matt Gambetta 48,000,000.00 12383 Lewis St., Ste 200 Garden Grove, CA 92840 60 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING Hare & Co Horizon Service; 9.68% 1.58% 0.94% c/o Bank of New York 55,689,342.99 One Wall Street, 2nd Fl. New York, NY 10005-2501 Security Pacific Cash Horizon Service; 34.62% 5.65% 3.38% Management 199,089,300.00 c/o Bank of America GPO M/C 5533 Attn Regina Olsen 1850 Gateway Blvd. M/C 5533 Concord, CA 94520-0000 Bank of America FM&TS Horizon Service; 49.07% 8.01% 4.79% Operat. CA 282,216,729.01 Attn Common TR FDS Unit 38329 PO Box 513577 Terminal Annex Los Angeles, CA 90051-1577 BofA California Treasury Y Y; 7,133,853.68 6.07% 0.20% 0.12% Class Sean Ehrlich 2044 Franklin Street Oakland, CA 94612 BA Arizona Treasury Y Class Y; 10,087,642.20 8.58% 0.29% 0.17% 2044 Franklin St. Oakland, CA 94612 BA Nevada Treasury Y Class Y; 7,404,809.00 6.30% 0.21% 0.13% 2044 Franklin St. Oakland, CA 94612 Hare & Co. Pacific Horizon; 24.55% 2.55% 1.52% Attn Bank of New York 89,873,418.84 Short Term Investment Funds One Wall Street, 2nd Fl. New York, NY 10286 BA Investment Services Inc. Pacific 51.65% 5.37% 3.21% For the Benefit of Horizon;189,076,066.74 Customers Unit 17852 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 61 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING BancAmerica Robertson Pacific Horizon; 11.72% 1.22% 0.73% Stephens 42,891,584.88 For the Benefit of Customers Attn H. David Jones III PO Box 7042 San Francisco, CA 94120 Hellman & Friedman Capital Pacific Horizon; 5.68% 0.59% 0.35% Partners III 20,785.197.26 Limited Partnership 1 Maritime Plz 12th Floor San Francisco, CA 94111 BA Investment Services Inc. X; 28,387,125.13 5.09% 0.81% 0.48% For the Benefit of Customers Unit 178582 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 BofA California Treasury X X; 78,783,831.34 14.13% 2.24% 1.34% Class Sean Ehrlich 2044 Franklin St. Oakland, CA 94612 Clark County Treasurer X; 59,100,806.32 10.59% 1.68% 1.00% Attn Rick Phillips PO Box 55120 Las Vegas, NV 89155-1220 Pacific Horizon Bank of America Illinois Horizon; 12.82% 1.00% 0.38% Treasury Only Fund Treas. Stan 5,077,000.00 Attn Jewel James 231 S. LaSalle St. Chicago, IL 60697-0000 Bank of America MT&SA Horizon; 62.46% 4.85% 1.83% Trst/Cus 24,743,503.82 Attn Common TR FDS Unit 38329 Terminal Annex PO Box 513577 Los Angeles, CA 90051-1577 62 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING City and County of San Horizon; 12.16% 0.94% 0.36% Francisco 4,817,845.02 Mayors Office of Community Development MOCO 25 Van Ness Ave., Suite 700 San Francisco, CA 94102 First American Title Horizon; 7.72% 0.60% 0.23% Trst Toll Brothers Inc. 3,057,504.30 Attn Nikki 2520 Financial Sq., Ste 20 Oxnard, CA 93030 Foothill Eastern Horzion Service; 5.12% 1.29% 0.49% Transportation Corridor 6,592,704.67 Agency Attn Laura Barker 201 East Sand Pointe, Ste. 200 Santa Ana, CA 92707 Bank of America MT&SA Horizon Service; 62.17% 15.70% 5.94% Trst/Cus 80,107,244.28 Attn Common TR FDS Unit 38329 PO Box 513577 Terminal Annex Los Angeles, CA 90051-1577 BA Investment Services Inc. Horizon Service; 21.72% 5.49% 2.08% For the Benefit of 27,992,571.52 Customers Attn H. David Jones III PO Box 7042 San Francisco, CA 94120 San Joaquin Hills Horizon Service; 5.62% 1.42% 0.54% Transportation Corridor 7,237,953.34 Agency Attn Marybeth Hudson 201 E. Sand Pointe, Suite 200 PO Box 28870 Santa Ana, CA 92799-8870 63 PACIFIC HORIZON NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING Hare & Co. Pacific Horizon; 7.58% 2.81% 1.06% Attn Bank of New York 14,349,148.21 Short Term Investment Funds One Wall Street, 2nd Fl. New York, NY 10286 BA Investment Services Inc. Pacific Horizon; 56.83% 21.10% 7.98% For the Benefit of 107,641,490.89 Customers Unit 178582 Attn H. David Jones 3rd PO Box 7042 San Francisco, CA 94120 BancAmerica Robertson Pacific Horizon; 31.30% 11.62% 4.40% Stephens 59,292,327.98 For the Benefit of Customers Attn H. David Jones III PO Box 7042 San Francisco, CA 94120 The Torrance Company Horizon Service; 12.46% 3.72% 1.41% Attn Harry Komsky 18,966,883.65 3 Del and Fashion Ctr. Torrance, CA 90503 Carson-Madrona Co. Horizon Service; 9.07% 2.71% 1.02% 3 Del and Fashion Ctr. 13,808,178.62 Torrance, CA 90503 Penn-Cal Co. Horizon Service; 12.48% 3.72% 1.41% Attn Harry Komsky 19,001,404.52 3 Del land Fashion Ctr. Torrance, CA 90503
64 TABLE V(B)
PERCENTAGE NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND NATIONS FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING - - ------------ ------- --------------- -------- ------- ------------ Nations Cash Reserves The Bank of New York Capital; 14.58% 8.60% 3.25% as Agent for its 773,000,000.00 Securities Lending Customers 101 Barclay St. New York, NY 10286 NationsBank of Texas, NA Capital; 11.39% 6.72% 2.54% Attn: David Thayer 603,589,295.18 1401 Elm Street, 11th Floor Dallas, TX 75202 Adelphia Communications Capital; 10.55% 6.22% 2.35% Corp. #2 559,000,000.00 5 West 3rd St. Coudersport, PA 16915 Republic Services Inc. Capital; 9.49% 5.60% 2.11% 110 SE 6th St., Ste 2800 503,000,000.00 Ft. Lauderdale, FL 33301 Bankers Trust FBO Adviser; 10.65% 1.03% 0.39% Tenneco Salary - 193024 93,083,351.47 PO Box 9014 Church Street Station New York, NY 10008 Nations Treasury NationsBank of Texas NA Capital; 32.23% 6.89% 2.77% Reserves Attn: David Thayer 163,695,220.59 1401 Elm Street, 11th Floor Dallas, TX 75202 Mindspring Enterprises Inc. Capital; 27.62% 5.91% 2.37% 1430 W. Peachtree St., NW 140,272,097.56 Atlanta, GA 30309 Community Care Foundation Capital; 10.90% 2.33% 0.93% Inc. 55,341,655.85 Operating Account PO Box Drawer 207 Springdale, AR 72765-0207 65 PERCENTAGE NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND NATIONS FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING - - ------------ ------- --------------- -------- ------- ------------ Commercial Financial Svcs Capital; 7.97% 1.70% 0.68% Inc. 40,562,049.82 Operating Account Attn Accounting Department 2448 E. 81st St., Ste 5200 Tulsa, OK 74137-4248 Radiant Systems Inc. Capital; 5.17% 1.10% 0.44% Attn Paul Ilse 26,244,767.79 100 Alderman Dr., Ste. B Alpharetta, GA 30202 Central Carolina Bank Capital; 12.42% 1.80% 0.72% Attn Cash management 42,749,668.67 111 Corcoran Street, 2nd Flr MO 2-1 Durham, NC 27701 Hare & Co., Bank of New Capital; 6.75% 0.97% 0.39% York 23,218,273.96 Attn Stif/Master Note One Wall Street, 2nd Fl. New York, NY 10286 Carr Realty LP Capital; 6.67% 0.96% 0.38% 1850 K Street, NW 22,956,793.49 Washington, DC 20006 Michael R. Bloomberg Capital; 5.67% 0.82% 0.33% Family Foundation 19,504,830.28 17 East 79th Street New York, NY 10027 Group Health Plan Inc. Capital; 5.39% 0.78% 0.31% Attn Catina Warren 18,550,755.14 940 West Port Plaza, Suite 300 St. Louis, MO 63146-3108 NationsBank NA F/A/O Capital; 5.33% 0.77% 0.31% 1201 F Street LLC 18,350,000.00 Cash Collateral Account 6610 Rockledge Drive, 6th Fl. Bethesda, MD 20817 66 PERCENTAGE NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND NATIONS FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING - - ------------ ------- --------------- -------- ------- ------------ Nations Government Flagler Co. Board of Capital; 20.17% 4.91% 3.04% Reserves Commissioners #1 Fund 41,190,241.93 PO Box 787 201 East Moody Blvd. Bunnell, FL 32110 Reese M. Rowlins Capital; 15.56% 3.78% 2.34% 500 N. Water St., Suite 31,761,894.68 1100N Corpus Christi, TX 78471-0000 Arkansas State Treasury Capital; 14.09% 3.43% 2.12% Attn Treasury Management 28,772,546.44 State Capitol Building, Rm. 220 Little Rock, AR 72201 Dallas ISD I&S Fund Capital; 11.23% 2.73% 1.69% 3700 Ross Ave., Room 218C 22,934,153.95 Dallas, TX 75204 The Nemours Foundation Capital; 10.12% 2.46% 1.52% Attn Ron Malloy 20,657,518.49 1650 Prudential Dr., Ste. 300 Jacksonville, FL 32207-8147 Community Care Foundation Capital; 8.41% 2.04% 1.26% Inc. 17,176,412.05 Operating Account PO Box Drawer 207 Springdale, AR 72765-0207 AARP Financial Services Capital; 5.52% 1.34% 0.83% Corp. 11,262,644.69 Attn Linda Wiegano 601 E Street, NW Washington, DC 20049 Hunt Memorial Hospital Adviser; 20.22% 2.38% 1.48% Dist. 20,041,289.74 Attn Van Tucker PO Box 1059 Greenville, TX 75403 67 PERCENTAGE NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND NATIONS FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING - - ------------ ------- --------------- -------- ------- ------------ Collins & 194th Associates Adviser; 10.61% 1.25% 0.77% Ltd. 10,516,500.59 By Chicago Title Insurance Co. as Escrow Agent c/o State Accounting 1818 S. Australian Ave., Suite 210 West Palm Beach, FL 33409 Norwest Bank as TTEE for Adviser; 9.65% 1.14% 0.70% Pace Academy 9,562,835.69 6 St. Marquette Ave. Minneapolis, MN 55479 Tuesday Morning Inc. Adviser; 5.85% 0.69% 0.42% Attn Alan Openheimer 5,800,000.00 14621 Inwood Road Dallas, TX 75224 Hunt Memorial Hosp. Adviser; 5.53% 0.65% 0.40% District Construction Fund 5,486,550.07 PO Box 1059 Greenville, TX 75403 Nations Municipal NationsBank of Texas, N.A. Capital; 69.39% 20.32% 7.15% Reserves Attn David Thayer 84,372,461.96 1401 Elm Street, 11th Floor Dallas, TX 75202 William K. Warren Jr. Capital; 6.17% 1.80% 0.63% Trust B-3 7,504,108.33 Attn John-Kelly C. Warren 6585 S. Yale Avenue, Ste 900 Tulsa, OK 74136 G&D Systems LP Adviser; 14.04% 2.89% 1.02% 11419 Sunset Hills Rd. 12,001,228.20 Reston, VA 22090 Phil McDaniel Adviser; 9.20% 1.89% 0.67% 51 Water Street 7,862,787.13 St. Augustine, FL 32084-0000 68 PERCENTAGE NAME AND CLASS; AMOUNT PERCENTAGE PERCENTAGE OF FUND NATIONS FUND ADDRESS OF SHARES OWNED OF CLASS OF FUND POST-CLOSING - - ------------ ------- --------------- -------- ------- ------------ Sieben Inc. Adviser; 8.88% 1.83% 0.63% c/o Gary Schulz 7,584,392.21 PO Box 419121 St. Louis, MO 63141 Dean Desantis Adviser; 8.55% 1.76% 0.62% 7600 Hyannis Ln. 7,307,527.11 Parkland, FL 33067-1672 Timothy A. Braswell Adviser; 6.34% 1.30% 0.46% 17925 S.E. Village Circle 5,414,896.10 Tequesta, FL 33469
For purposes of the 1940 Act, any person who owns directly or through one or more controlled companies more than 25% of the voting securities of a company is presumed to "control" such company. Accordingly, to the extent that a shareholder identified in the foregoing table is identified as the beneficial holder of more than 25% of a class, or is identified as the holder of record of more than 25% of a class and has voting and/or investment power, it may be presumed to control such class. Nations and Pacific Horizon have been advised by Bank of America that with respect to the shares of each Pacific Horizon Fund over which Bank of America and its affiliates have voting power may be voted by Bank of America itself as in its capacity as fiduciary and that it has engaged an independent third party to evaluate the Reorganization proposal and make a recommendation as to how to vote the shares. QUORUM. In the event that a quorum is not present at the Meeting, or in the event that a quorum is present at the Meeting but sufficient votes to approve the Reorganization Agreement are not received by Pacific Horizon or by one or more of the Pacific Horizon Funds, one or more adjournment(s) may be proposed to permit further solicitation of proxies. Any adjourned session or sessions may be held after the date set for the original Meeting without notice except announcement at the meeting, but, under Maryland law, no more than 120 days after the record date. Any such adjournment(s) will require the affirmative vote of a majority of those shares affected by the adjournment(s) that are represented at the Meeting in person or by proxy. If a quorum is present, the persons named as proxies will vote those proxies which they are entitled to vote FOR the particular proposal for which a quorum exists in favor of such adjournment(s), and will vote those proxies required to be voted AGAINST such proposal against any adjournment(s). A shareholder vote may be taken with respect to one or more Pacific Horizon Funds (but not the other Pacific Horizon Funds) on some or all matters before any such adjournment(s) if a quorum is present and sufficient votes have been received for approval with respect to such Funds. 69 A quorum is constituted with respect to Pacific Horizon or a Pacific Horizon Fund by the presence in person or by proxy of the holders of more than 50% of the outstanding shares of Pacific Horizon or the Pacific Horizon Fund entitled to vote at the Meeting. For purposes of determining the presence of a quorum for transacting business at the Meeting, abstentions will be treated as shares that are present at the Meeting but which have not been voted. Abstentions will have the effect of a "no" vote for purposes of obtaining the requisite approvals of the Reorganization Agreement and the Master Trust 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 as abstentions. ANNUAL MEETINGS AND SHAREHOLDER MEETINGS. Neither Nations nor Pacific Horizon presently intends to hold annual meetings of shareholders for the election of trustees/directors and other business unless otherwise required by the 1940 Act. Under certain circumstances, however, holders of at least 10% of the outstanding shares of either Pacific Horizon or Nations have the right to call a meeting of shareholders. ADDITIONAL INFORMATION ABOUT NATIONS Additional information about the Nations Funds is included in their prospectuses and statements of additional information dated September 1, 1998, as supplemented through the date hereof, copies of which, to the extent not included herewith, may be obtained without charge by writing or calling Nations at the address and telephone number set forth on the first page of this Proxy/Prospectus. Nations is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and the 1940 Act, and in accordance therewith it files reports, proxy materials and other information with the SEC. Reports and other information filed by Nations can be inspected and copied at the Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the offices of Nations listed above. In addition, these materials can be inspected and copied at the SEC's Regional Offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials also can be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates. Officers of Nations are elected by, and serve at the pleasure of, the Board of Trustees. Officers of Nations receive no remuneration from Nations for their services in such capacities. Information included in this Proxy/Prospectus concerning Nations was provided by Nations. 70 ADDITIONAL INFORMATION ABOUT PACIFIC HORIZON Additional information about the Pacific Horizon Funds is included in their prospectuses and statements of additional information, dated July 1, 1998 as supplemented through the date hereof, which have been filed with the SEC. Copies of these prospectuses and the related statements of additional information may be obtained without charge by writing or calling Pacific Horizon at the address and telephone number set forth on the first page of this Proxy/Prospectus. Reports and other information filed by Pacific Horizon can be inspected and copied at the Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the offices of Pacific Horizon listed above. In addition, these materials can be inspected and copied at the SEC's Regional Offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials also can be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates. Information included in this Proxy/Prospectus concerning Pacific Horizon was provided by Pacific Horizon. FINANCIAL STATEMENTS The unaudited financial statements and financial highlights for shares of the Operating Nations Funds for the semi-annual period ended October 31, 1998, are included or incorporated by reference in their prospectuses or statements of additional information, or in the statement of additional information related to this Proxy/Prospectus. The unaudited financial statements and financial highlights for shares of the Pacific Horizon Funds for the semi-annual period ended August 31, 1998 are included or incorporated by reference in their prospectuses or statements of additional information or in the statement of additional information related to this Proxy/Prospectus, or are included herein. The annual financial statements and financial highlights of the Operating Nations Funds for the year ended April 30, 1998 have been audited by PricewaterhouseCoopers LLP, independent accountants, to the extent indicated in their reports thereon, 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. The annual financial statements and financial highlights of the Pacific Horizon Funds and MIT Master Portfolios for the year ended February 28, 1998 have been audited by PricewaterhouseCoopers LLP, independent accountants, to the extent indicated in their reports thereon, 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. 71 OTHER BUSINESS Pacific Horizon'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 Pacific Horizon or to Nations in writing at the address(es), or by phone at the phone number(s), on the cover page of this Proxy/Prospectus. * * * SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS ALSO MAY RETURN PROXIES BY TELEFACSIMILE OR VOTE ON-LINE OR BY TELEPHONE. PACIFIC HORIZON WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS FEBRUARY 28, 1998 ANNUAL REPORTS, OR AUGUST 31, 1998 SEMI-ANNUAL REPORTS, TO ANY SHAREHOLDER UPON REQUEST ADDRESSED TO: PACIFIC HORIZON FUNDS AT P.O. BOX 8968, WILMINGTON, DE 19899 OR BY TELEPHONE AT 1-800-346-2087. 72 APPENDIX I(A) AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of this 8th day of February, 1999, by and between Nations Institutional Reserves ("Nations Funds"), a Massachusetts business trust, for itself and on behalf of Nations Cash Reserves, Nations Government Reserves, Nations Treasury Reserves, Nations California Tax-Exempt Reserves (Shell), Nations Municipal Reserves, Nations Asset Allocation Fund (Shell), Nations Capital Income Fund (Shell), Nations California Municipal Bond Fund (Shell), Nations Intermediate Bond Fund (Shell), and Nations Blue Chip Fund (Shell) (each an "Acquiring Fund" and collectively the "Acquiring Funds"), each a portfolio of Nations Funds, and Pacific Horizon Funds, Inc. ("Pacific Horizon Funds"), a Maryland corporation, for itself and on behalf of the Pacific Horizon Prime Fund, Pacific Horizon Government Fund, Pacific Horizon Treasury Fund, Pacific Horizon Treasury Only Fund, Pacific Horizon California Tax-Exempt Money Market Fund, Pacific Horizon Tax Exempt Money Fund, Pacific Horizon Asset Allocation Fund, Pacific Horizon Capital Income Fund, Pacific Horizon California Municipal Bond Fund, Pacific Horizon Intermediate Bond Fund and Pacific Horizon Blue Chip Fund (each an "Acquired Fund" and collectively the "Acquired Funds"), each a portfolio of Pacific Horizon Funds. In accordance with the terms and conditions set forth in this Agreement, the parties desire that all of the Fund Assets (as defined in paragraph 1.2.a.) of each Acquired Fund be transferred to each Acquiring Fund corresponding thereto, as set forth in the table attached hereto as Schedule A, in exchange for shares of specified classes of the corresponding Acquiring Fund ("Acquiring Fund Shares") and the assumption by each Acquiring Fund of the Liabilities (as defined in paragraph 1.3) of each corresponding Acquired Fund, and that such Acquiring Fund Shares be distributed immediately after the Closing(s), as defined in this Agreement, by each Acquired Fund to its shareholders in liquidation of each Acquired Fund. The parties intend that the following Acquiring Funds -- Nations California Tax-Exempt Reserves, Nations Asset Allocation Fund, Nations Capital Income Fund, Nations California Municipal Bond Fund, Nations Intermediate Bond Fund and Nations Blue Chip Fund shall have nominal assets and liabilities before the Reorganization(s), as defined in this Agreement, and shall continue the investment operations of the following corresponding Acquired Fund -- Pacific Horizon California Tax-Exempt Money Market Fund -- Pacific Horizon Asset Allocation Fund Pacific Horizon Capital Income Fund, Pacific Horizon California Municipal Bond Fund, Pacific Horizon Intermediate Bond Fund and Pacific Horizon Blue Chip Fund thereafter, and that in this regard certain actions should be taken as described in this Agreement. This Agreement is intended to be and is adopted as a plan of reorganization for each Acquired Fund each Reorganization (as defined herein) qualify as a "reorganization", within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that each of the Acquiring Funds and the Acquired Funds qualify as a "party to a reorganization," within the meaning of Section 368(b) of the Code, with respect to such Reorganization. In consideration of the promises and of the covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound hereby, covenant and agree as follows: I(A)-1 1. REORGANIZATION OF ACQUIRED FUNDS 1.1. Subject to the terms and conditions herein set forth, and on the basis of the representations and warranties contained herein, each Acquired Fund shall assign, deliver and otherwise transfer the Fund Assets to its corresponding Acquiring Fund identified in Schedule A, and such corresponding Acquiring Fund shall, as consideration therefor, on the Closing Date (as defined in paragraph 3.1), (i) deliver to each corresponding Acquired Fund the full and fractional number of shares of each of its share classes calculated by dividing the value of the Fund Assets less the Liabilities of the corresponding Acquired Fund that are so conveyed and are attributable to each of the Acquiring Fund's respective share classes set forth in Schedule A, computed in the manner and as of the time and date set forth in this Agreement, by the net asset value of one Acquiring Fund share of the particular share class that is to be delivered with respect thereto, computed in the manner and as of the time and date set forth in this Agreement; and (ii) assume all of such Acquired Fund's Liabilities. Such transfer, delivery and assumption shall take place at the closing(s) provided for in paragraph 3.1 (hereinafter sometimes referred to as the "Closing(s)"). Promptly after the Closing(s), each Acquired Fund shall distribute the Acquiring Fund Shares to the shareholders of the respective share classes of the Acquired Fund in liquidation of the Acquired Fund as provided in paragraph 1.4 hereof. Such transaction(s) are hereinafter sometimes collectively referred to as the "Reorganization(s)." 1.2.a. With respect to each Acquired Fund, the Fund Assets shall consist of all property and assets of any nature whatsoever, including, without limitation, all cash, cash equivalents, securities, claims (whether absolute or contingent, known or unknown, accrued or unaccrued) and receivables (including dividend and interest receivables) owned by each Acquired Fund, and any prepaid expenses shown as an asset on each Acquired Fund's books on the Closing Date. 1.2.b. At least fifteen (15) business days prior to the Closing Date, each Acquired Fund will provide the corresponding Acquiring Fund with a schedule of its securities and other Assets and Liabilities of which it is aware, and such Acquiring Fund will provide the Acquired Fund with a copy of the current investment objective and policies applicable to each Acquiring Fund. Each Acquired Fund reserves the right to sell any of the securities or other assets shown on the list of the Fund's Assets prior to the Closing Date but will not, without the prior approval of the corresponding Acquiring Fund, acquire any additional securities other than securities which the Acquiring Fund is permitted to purchase in accordance with its stated investment objective and policies. At least ten (10) business days prior to the Closing Date, the Acquiring Fund will advise the corresponding Acquired Fund of any investments of such Acquired Fund shown on such schedule which the Acquiring Fund would not be permitted to hold, pursuant to its stated investment objective and policies or otherwise. In the event that the Acquired Fund holds any investments that its corresponding Acquiring Fund would not be permitted to hold under its stated investment objective or policies, the Acquired Fund, if requested by the Acquiring Fund and, to the extent permissible and consistent with the Acquired Fund's own investment objective and policies, will dispose of such securities prior to the Closing Date. In addition, if it is determined that the portfolios of the Acquired Fund and the Acquiring Fund, when aggregated, would contain investments exceeding certain percentage limitations to which the Acquiring Fund is or will be subject with respect to such investments, the Acquired Fund, if requested by the Acquiring Fund and, to the extent permissible and consistent with the Acquired Fund's own investment objective and policies, will dispose of and/or reinvest a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date. 1.3. Each Acquired Fund will endeavor to discharge all of its known liabilities and obligations prior to the Closing Date. Each Acquiring Fund will assume all liabilities and obligations of the corresponding Acquired Fund, accrued, absolute, contingent or otherwise existing, as of the Closing Date, which liabilities and obligations shall include any obligation of the Pacific Horizon Funds to indemnify Pacific Horizon Funds' current and former Directors and officers, acting in their capacities as such, to the fullest extent permitted by law and the Pacific Horizon Funds' Charter, as in effect as of the date of this Agreement and any obligations of the Pacific Horizon Funds to pay any retirement benefits to current and former Directors pursuant to Pacific Horizon Fund's retirement plan ("Liabilities"). Without limiting the foregoing, each Acquiring Fund agrees that all rights to indemnification and retirement benefits and all limitations of liability existing in favor of the Pacific Horizon Funds' current and former Directors and officers, acting in their capacities as such, under Pacific Horizon Funds' Charter as in effect as of the date of this Agreement shall survive the Reorganization as obligations of the respective Acquiring Fund, and shall continue in full force and effect, without any amendment thereto, and shall constitute rights which may be asserted against Nations Funds, its successors or assigns. The Liabilities assumed by Nations Funds, its successors or assigns, on behalf of an Acquiring Fund shall be separate Liabilities of such Acquiring Fund, and not joint or joint and several liabilities of any other Acquiring Fund. I(A)-2 1.4. Prior to the Closing(s), Nations Funds and Pacific Horizon Funds shall file appropriate Articles of Transfer pursuant to the laws of the State of Maryland, effective as of the Closing(s). 1.5. Promptly after the Closing(s) with respect to each Acquired Fund, the Acquired Fund will distribute the shares of the Acquiring Fund class received by the Acquired Fund pursuant to paragraph 1.1 to its shareholders of record determined as of the close of business on the Closing Date ("Acquired Fund Investors") in complete liquidation of the Acquired Fund. Acquired Fund Investors will be credited with full and fractional shares of the class that is issued by the corresponding Acquiring Fund under this Agreement with respect to the shares of the Acquired Fund that are held by the Acquired Fund Investors. Such distribution will be accomplished by an instruction, signed by an appropriate officer of Pacific Horizon Funds, to transfer the Acquiring Fund Shares then credited to the Acquired Fund's account on the books of the Acquiring Fund and to open accounts on the books of the Acquiring Fund established and maintained by the Acquiring Fund's transfer agent in the names of record of the Acquired Fund Investors and representing the respective number of shares of the Acquiring Fund due such Acquired Fund Investors. In exchange for Acquiring Fund Shares distributed, all issued and outstanding shares of common stock of the Acquired Fund will be redeemed and canceled simultaneously therewith on the Acquired Fund's books; any outstanding share certificates representing interests in the Acquired Fund thereafter will represent the right to receive such number of Acquiring Fund Shares after the Closing(s) as determined in accordance with Section 1.1. 1.6. If a request shall be made for a change of the registration of shares of an Acquiring Fund to another person from the account of the shareholder in which name the shares are registered in the records of the corresponding Acquired Fund, it shall be a condition of such registration of shares that there be furnished to the Acquiring Fund an instrument of transfer properly endorsed, accompanied by appropriate signature guarantees and otherwise in proper form for transfer and, if any of such shares are outstanding in certificated form, the certificates representing such shares, and that the person requesting such registration shall pay to such Acquiring Fund any transfer or other taxes required by reason of such registration or establish to the reasonable satisfaction of the Acquiring Fund that such tax has been paid or is not applicable. 1.7. Following the transfer of assets by each Acquired Fund to the corresponding Acquiring Fund, the assumption of the Acquired Fund's Liabilities by the Acquiring Fund, and the distribution by the Acquired Fund of the Acquiring Fund Shares received by it pursuant to paragraph 1.4, Pacific Horizon Funds shall terminate the qualification, classification and registration of such Acquired Fund at all appropriate federal and state agencies. All reporting and other obligations of Pacific Horizon Funds shall remain the exclusive responsibility of Pacific Horizon Funds up to and including the date on which the particular Acquired Fund is terminated and deregistered, subject to any reporting or other obligations described in paragraph 4.9. Subject to the provisions of Section 1.8 and comparable provisions of similar Agreements and Plans of Reorganizations being entered into between Pacific Horizon Funds and Nations Funds Trust and Nations Funds, Inc., at an appropriate time as determined by Pacific Horizon Funds, upon the advice of counsel, Pacific Horizon Funds will be dissolved under the laws of the State of Maryland. 1.8. Subject to the conditions set forth in this Agreement, the failure of one Acquired Fund to consummate the transactions contemplated hereby shall not affect the consummation or validity of a Reorganization with respect to any other Acquired Fund, and the provisions of this Agreement shall be construed to effect this intent, including, without limitation, as the context requires, construing the terms "Acquiring Fund" and "Acquired Fund" as meaning only those series of Nations Funds and Pacific Horizon Funds, respectively, which are involved in a Reorganization as of a Closing Date. I(A)-3 2. VALUATION 2.1.a. With respect to each Acquired Fund, the value of the Fund Assets shall be the value of such assets computed as of the time at which its net asset value is calculated on the Closing Date (such time and date being herein called the "Applicable Valuation Date"). The net asset value of the Fund Assets to be transferred by the Acquired Funds shall be computed by Pacific Horizon Funds and shall be subject to adjustment by the amount, if any, agreed to by Nations Funds and the respective Acquired Funds. In determining the value of the securities transferred by the Acquired Funds to the Acquiring Funds, except as provided in sub-paragraph 2.1.b., each security shall be priced in accordance with the pricing policies and procedures of the Acquiring Funds as described in its then current prospectuses and statements of additional information. For such purposes, price quotations and the security characteristics relating to establishing such quotations shall be determined by Pacific Horizon Funds, provided that such determination shall be subject to the approval of Nations Funds. Pacific Horizon Funds and Nations Funds agree to use all commercially reasonable efforts to resolve any material pricing differences between the prices of portfolio securities determined in accordance with the pricing policies and procedures of Pacific Horizon Funds and those determined in accordance with the pricing policies and procedures of the Acquiring Funds prior to the Applicable Valuation Date. 2.1.b. It is understood and agreed that the net asset value of the Fund Assets of those Pacific Horizon Funds that are money market funds shall be based on the amortized cost valuation procedures that have been adopted by the Board of Directors of Pacific Horizon Funds; provided that if the difference between the per share net asset values of such Acquired Funds, and the corresponding Acquiring Funds equals or exceeds $.0025 on the Applicable Valuation Date, as computed by using market values in accordance with the policies and procedures established by Nations Funds (or as otherwise mutually determined by the Board of Directors of Pacific Horizon Funds and Board of Trustees of Nations Funds), either party shall have the right to postpone the Applicable Valuation Date and Closing Date with respect to the Pacific Horizon Funds until such time as the per share difference is less than $.0025. 2.2. The net asset value of the share of a class of shares of an Acquiring Fund shall be the net asset value per share of such class computed on the Applicable Valuation Date, using the valuation procedures set forth in the Acquiring Fund's then current prospectus and statement of additional information. 3. CLOSING(S) AND CLOSING DATE 3.1. Prior to the Closing(s), Nations Funds and Pacific Horizon Funds shall execute and file Articles of Transfer, effective as of the Closing(s) with respect to the transactions contemplated hereby with the Department of Assessments and Taxation of the State of Maryland (the "Department of Assessments"). The Closing for the Acquiring Funds and their corresponding Acquired Fund(s), shall occur on May 14, 1999, and/or on such other date(s) as may be mutually agreed upon in writing by the officers of the parties hereto (a "Closing Date"). With respect to Nations California Tax-Exempt Reserves (Shell), Nations Asset Allocation Fund (Shell), Nations Capital Income Fund (Shell), Nations California Municipal Bond Fund (Shell), Nations Intermediate Bond Fund (Shell) and Nations Blue Chip Fund (Shell), and the corresponding Acquired Fund, the Closing Date shall occur on May 21, 1999, and/or on such other date(s) as may be mutually agreed upon in writing by the officers of the parties hereto. The Closing(s) shall be held at the offices of Stephens Inc., 111 Center Street, Suite 300, Little Rock, Arkansas 72201 or at such other location as is mutually agreeable to the parties. All acts taking place at the Closing(s) shall be deemed to take place simultaneously as of 4:00 p.m. Eastern time on the Closing Date unless otherwise provided. I(A)-4 3.2. Each Acquiring Fund's custodian shall deliver at the Closing(s) a certificate of an authorized officer stating that: (a) each Acquired Fund's portfolio securities, cash and any other assets have been delivered in proper form to the corresponding Acquiring Fund on the Closing Date and (b) all necessary taxes including all applicable federal and state stock transfer stamps, if any, have been paid, or provision for payment shall have been made, by such Acquired Fund in conjunction with the delivery of portfolio securities. Proper delivery of cash shall be by wire to The Bank of New York, the Acquiring Funds' Custodian, pursuant to instruction to be delivered prior to the Closing(s). 3.3. Notwithstanding anything herein to the contrary, in the event that on the Applicable Valuation Date (a) the New York Stock Exchange shall be closed to trading or trading thereon shall be restricted or (b) trading or the reporting of trading on such exchange or elsewhere shall be disrupted so that, in the judgment of Nations Funds and Pacific Horizon Funds, accurate appraisal of the value of the net assets of an Acquiring Fund or an Acquired Fund is impracticable, the Applicable Valuation Date and Closing Date shall be postponed until the first business day after the day when trading shall have been fully resumed without restriction or disruption and reporting shall have been restored. 3.4. With respect to each Acquired Fund, Pacific Horizon Funds shall provide Nations Funds and its transfer agents with immediate access from and after the Closing Date to (a) the computer, electronic or such other forms of records containing the names, addresses and taxpayer identification numbers of all of the Acquired Fund Investors and the number and percentage ownership of outstanding Acquired Fund shares owned by such Acquired Fund Investor, all as of the Applicable Valuation Date, and (b) all original documentation (including all applicable Internal Revenue Service forms, certificates, certifications and correspondence) relating to the Acquired Fund Investors' taxpayer identification numbers and their liability for or exemption from back-up withholding. Each corresponding Acquiring Fund shall issue and deliver to the Secretary or Assistant Secretary of Pacific Horizon Funds, acting on behalf of the Acquired Fund, a confirmation evidencing the Acquiring Fund Shares credited on the Closing Date or shall provide evidence satisfactory to each Acquired Fund that such Acquiring Fund Shares have been credited to each Acquired Fund's account on the books of each Acquiring Fund. At the Closing(s), each party shall deliver to the other such bills of sale, checks, assignments, assumptions of liability share certificates, if any, receipts or other documents of transfer, assignment or conveyance as such other party or its counsel may reasonably request. 3.5. Within twenty (20) days after the Closing Date, each Acquired Fund shall deliver, in accordance with Article 1 hereof, to the corresponding Acquiring Fund a statement of the Fund Assets and Liabilities, together with a list of such Acquired Fund's portfolio securities and other assets showing the respective adjusted bases and holding periods thereof for income tax purposes, as of the Closing Date, certified by an appropriate officer of Pacific Horizon Funds. I(A)-5 4. COVENANTS WITH RESPECT TO THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS 4.1. Pacific Horizon Funds has called or will call a meeting of the Acquired Fund shareholders to consider and act upon this Agreement, and to take such other actions reasonably necessary to obtain the approval of the transactions contemplated herein, including approval for each Acquired Fund's liquidating distribution of the Acquiring Fund Shares contemplated hereby, and for Pacific Horizon Funds to terminate each Acquired Fund's qualification, classification and registration if requisite approvals are obtained with respect to each Acquired Fund. Nations Funds and Pacific Horizon Funds will jointly prepare the notice of meeting, form of proxy and proxy statement (collectively, "Proxy Materials") to be used in connection with such meeting; provided that Nations Funds has furnished or will furnish Pacific Horizon Funds, except for those Acquired Funds which are to be reorganized into a new shell Acquiring Fund, with a current, effective prospectus, including any supplements, relating to the class of shares of each Acquiring Fund corresponding to the class of shares of each Acquired Fund then outstanding for incorporation within and/or distribution with the Proxy Materials, and with such other information relating to the Acquiring Funds as is reasonably necessary for the preparation of the Proxy Materials. 4.2. Pacific Horizon Funds, on behalf of each Acquired Fund, covenants that each Acquired Fund shall not sell or otherwise dispose of any Acquiring Fund Shares to be received in the transactions contemplated herein, except in distribution to its shareholders in accordance with the terms of this Agreement. 4.3. Pacific Horizon Funds, on behalf of each Acquired Fund, will assist the corresponding Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the record and beneficial ownership of shares of each class of each Acquired Fund. 4.4. Subject to the provisions hereof, Nations Funds, on its own behalf and on behalf of each Acquiring Fund, and Pacific Horizon Funds, on its own behalf and on behalf of each Acquired Fund, will take, or cause to be taken, all actions, and do, or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated herein. 4.5. Pacific Horizon Funds, on behalf of each Acquired Fund, shall furnish to its corresponding Acquiring Fund on the Closing Date, a statement of the total amount of each Acquired Fund's Assets and Liabilities as of the Closing Date, which statement shall be certified by an appropriate officer of Pacific Horizon Funds as being determined in accordance with generally accepted accounting principles consistently applied and as being valued in accordance with paragraph 2.1 hereof. As promptly as practicable, but in any case within sixty (60) days after the Closing Date, Pacific Horizon Funds, on behalf of each Acquired Fund, shall furnish its corresponding Acquiring Fund, in such form as is reasonably satisfactory to Nations Funds, on behalf of each Acquiring Fund, a statement certified by an officer of Pacific Horizon Funds of such Acquired Fund's federal income tax attributes and the tax basis in its assets that will be carried over to the corresponding Acquiring Fund in the Reorganization pursuant to Section 381 of the Code. 4.6. Nations Funds has prepared and filed, or will prepare and file, with the Securities and Exchange Commission ("SEC") and the appropriate state securities commissions a post-effective amendment (the "N-1A Post-Effective Amendment") to its registration statement on Form N-1A (File Nos. 33-33144; 811-6030), as promptly as practicable so that all Acquiring Funds and their shares are registered under the Securities Act of 1933, as amended (the "1933 Act"), the Investment Company Act of 1940, as amended (the "1940 Act"), as necessary to consummate the transaction contemplated hereby. Nations Funds will prepare and file with the appropriate state securities commission any notices or other filings required to consummate the transactions contemplated hereby. In addition, Nations Funds, on behalf of each Acquiring Fund, has prepared and filed, or will prepare and file with the SEC a registration statement on Form N-14 under the 1933 Act, relating to the Acquiring Fund Shares, which, without limitation, shall include a proxy statement of Pacific Horizon Funds and the prospectuses of the Acquiring Funds of Nations Funds relating to the transactions contemplated by this Agreement (the "Registration Statement"). Pacific Horizon Funds, on behalf of each Acquired Fund, has provided or will provide each corresponding Acquiring Fund with the materials and information necessary to prepare the N-1A Post-Effective Amendment and the Proxy Materials for inclusion in the Registration Statement, prepared in accordance with paragraph 4.1, and with such other information and documents relating to each Acquired Fund as are requested by the corresponding Acquiring Fund and as are reasonably necessary for the preparation of the N-1A Post-Effective Amendment and the Registration Statement. I(A)-6 4.7. As soon after the Closing Date as is reasonably practicable, Pacific Horizon Funds, on behalf of each Acquired Fund shall prepare and file all federal and other tax returns and reports of each Acquired Fund required by law to be filed with respect to all periods ending on or before the Closing Date but not theretofore filed. 4.8. With respect to each Acquiring Fund, Nations Funds agrees to use all reasonable efforts to operate in accordance with its then current prospectus and statement of additional information prepared in accordance with Form N-1A, as may be modified from time to time, including qualifying as a "regulated investment company" under the Code, for at least one (1) year following the Closing Date. 4.9. With respect to each Acquired Fund, Pacific Horizon Funds agrees to use all reasonable efforts to operate in accordance with its then current prospectus and statement of additional information prepared in accordance with Form N-1A, as may be modified from time to time, including qualifying as a "regulated investment company" under the Code, up to the Closing Date. 4.10. Following the transfer of assets by each Acquired Fund to the corresponding Acquiring Fund in exchange for Acquiring Fund Shares and the assumption of all Liabilities of the Acquired Fund as contemplated herein, Pacific Horizon Funds will file any final regulatory reports, including but not limited to any Form N-SAR and Rule 24f-2 filings with respect to such Acquired Fund(s), promptly after the Closing Date. As soon as practicable after the Closing Date and further subject to Section 1.8 hereof and comparable provisions of similar Agreements and Plans of Reorganization between Pacific Horizon Funds and Nations Fund Trust and Nations Funds, Inc., Pacific Horizon Funds shall file an application pursuant to Section 8(f) of the 1940 Act for an order declaring that it has ceased to be an investment company; shall file Articles of Dissolution for recordation with the Department of Assessments, and shall take, in accordance with Maryland General Corporation Law, all other steps necessary and proper to effect its complete dissolution. 4.11. Nations Fund, on behalf of each Acquiring Fund, shall use its best efforts to satisfy the conditions of the statutory exemption set forth in Section 15(f) of the 1940 Act, as an assumption of the stated expectation of the Pacific Horizon Funds as set forth in the proxy statement of the Pacific Horizon Funds dated May 15, 1998. 5. REPRESENTATIONS AND WARRANTIES 5.1. Nations Funds, on behalf of itself and each Acquiring Fund, represents and warrants to the Pacific Horizon Funds as follows: 5.1.a. Nations Funds was duly created pursuant to its Agreement and Declaration of Trust by the Trustees for the purpose of acting as a management investment company under the 1940 Act and is validly existing under the laws of the Commonwealth of Massachusetts, and the Agreement and Declaration of Trust directs the Trustees to manage the affairs of Nations Funds and grants them all powers necessary or desirable to carry out such responsibility, including administering Nations Funds business as currently conducted by Nations Funds and as described in the current prospectuses of Nations Funds; Nations Funds is registered as an investment company classified as an open-end management company under the 1940 Act, and its registration with the SEC as an investment company is in full force and effect; I(A)-7 5.1.b. The Registration Statement, including the current prospectuses and statement of additional information of each Acquiring Fund, conform or will conform, at all times up to and including the Closing Date, in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the regulations thereunder and do not include or will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; 5.1.c. Each Acquiring Fund is not in violation of, and the execution, delivery and performance of this Agreement by Nations Funds for itself and on behalf of each Acquiring Fund does not and will not (i) violate Nations Funds' Agreement and Declaration of Trust or By-Laws, or (ii) result in a breach or violation of, or constitute a default under any material agreement or material instrument, to which Nations Funds is a party or by which its properties or assets are bound; 5.1.d. Except as previously disclosed in writing to the Pacific Horizon Funds, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to Nations Funds' knowledge, threatened against Nations Funds or its business, the Acquiring Funds or any of their properties or assets, which, if adversely determined, would materially and adversely affect Nations Funds or an Acquiring Fund's financial condition or the conduct of their business, and Nations Funds knows of no facts that might form the basis for the institution of any such proceeding or investigation, and no Acquiring Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects, or is reasonably likely to materially and adversely affect, its business or its ability to consummate the transactions contemplated herein; 5.1.e. All issued and outstanding shares, including shares to be issued in connection with the Reorganization, of each Acquiring Fund class will, as of the Closing Date, be duly authorized and validly issued and outstanding, fully paid and non-assessable by Nations Funds and the Acquiring Fund does not have outstanding any option, warrants or other rights to subscribe for or purchase any of its shares nor is there outstanding any security convertible into any of its shares; 5.1.f. The execution, delivery and performance of this Agreement on behalf of each Acquiring Fund will have been duly authorized prior to the Closing Date by all necessary action on the part of Nations Funds and the Trustees, and this Agreement constitutes a valid and binding obligation of Nations Funds and each Acquiring Fund enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; 5.1.g. The Acquiring Fund Shares to be issued and delivered to the corresponding Acquired Fund for the account of the Acquired Fund Investors, pursuant to the terms hereof, will have been duly authorized as of the Closing Date and, when so issued and delivered, will be duly and validly issued, fully paid and non-assessable, and the shares of the class of the Acquiring Fund issued and outstanding prior to the Closing Date were offered and sold in compliance with the applicable registration requirements, or exemptions therefrom, of the 1933 Act, and the applicable notice or filing requirements, or exemptions therefrom, of all applicable state securities laws, and the regulations thereunder, and no shareholder of an Acquiring Fund shall have any preemptive right of subscription or purchase in respect thereto; I(A)-8 5.1.h. From the effective date of the Registration Statement, through the time of the meeting of the Acquired Fund shareholders and on the Closing Date, any written information furnished by Nations Funds with respect to an Acquiring Fund for use in the Proxy Materials, the Registration Statement or any other materials provided in connection with the Reorganization does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information provided not misleading; 5.1.i. No governmental consents, approvals, authorizations or filings are required under the 1933 Act, the Securities Exchange Act of 1934 (the "1934 Act"), the 1940 Act or Massachusetts law for the execution of this Agreement by Nations Funds, for itself and on behalf of each Acquiring Fund, or the performance of the Agreement by Nations Funds, for itself and on behalf of each Acquiring Fund, except for the effectiveness of the Registration Statement, any necessary exemptive relief or no-action assurances requested from the SEC or its staff with respect to Sections 17(a) and 17(d) of the 1940 Act and Rule 17d-1 thereunder, and the filing of Articles of Transfer pursuant to Maryland law and such other consents, approvals, authorizations and filings as have been made or received, and except for such consents, approvals, authorizations and filings as may be required subsequent to the Closing Date; 5.1.j. The Statement of Assets and Liabilities, Statement of Operations and Statement of Changes in Net Assets of Nations Cash Reserves, Nations Government Reserves, Nations Treasury Reserves and Nations Municipal Reserves as of and for the period ended March 31, 1998, audited by PricewaterhouseCoopers LLP (copies of which have been or will be furnished to the corresponding Acquired Fund), and the unaudited Statement of Net Assets and Liabilities, Statement of Operations and Statement of Changes in Net Assets of Nations Cash Reserves, Nations Government Reserves, Nations Treasury Reserves and Nations Municipal Reserves as of and for the six-month period ended October 31, 1998 (copies of which have been or will be furnished to the corresponding Acquired Fund), present fairly, in all material respects, the financial position of Nations Cash Reserves, Nations Government Reserves, Nations Treasury Reserves and Nations Municipal Reserves as of such date and the results of its operations and the changes in its Net Assets for the period then ended in accordance with generally accepted accounting principles consistently applied and as of such date there were no Liabilities of Nations Cash Reserves, Nations Government Reserves, Nations Treasury Reserves and Nations Municipal Reserves known to Nations Funds that were not disclosed therein but that would be required to be disclosed therein in accordance with generally accepted accounting principles; 5.1.k. Since the date of the most recent audited financial statements, there has not been any material adverse change in any Acquiring Fund's financial position, assets, liabilities or business, other than changes occurring in the ordinary course of business, or any incurrence by an Acquiring Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed in writing to and accepted by the corresponding Acquired Fund, prior to the Closing Date (for the purposes of this subparagraph (k), neither a decline in an Acquiring Fund's net asset value per share nor a decrease in an Acquiring Fund's size due to redemptions shall be deemed to constitute a material adverse change); 5.1.l. All federal and other tax returns and reports of Nations Funds and each Acquiring Fund required by law to be filed on or before the Closing Date have been or will be filed, and all federal and other taxes owed by Nations Funds on behalf of the Acquiring Funds have been or will be paid so far as due, and to the best of Nations Funds' knowledge, no such return is currently under audit and no assessment has been asserted with respect to any such return; and I(A)-9 5.1.m. Each Acquiring Fund intends to qualify as a "regulated investment company" under the Code, and each Acquiring Fund that has conducted material investment operations prior to the Closing Date has elected to qualify and has qualified as a "regulated investment company" under the Code, as of and since its first taxable year; has been a "regulated investment company" under the Code at all times since the end of its first taxable year when it so qualified; and qualifies and shall continue to qualify as a "regulated investment company" under the Code for its current taxable year. 5.2. Pacific Horizon Funds, on behalf of itself and each Acquired Fund, represents and warrants to Nations Funds as follows: 5.2.a. Pacific Horizon Funds was duly incorporated under the laws of the State of Maryland for the purpose of acting as a management investment company under the 1940 Act and is validly existing under the laws of the State of Maryland, and its Charter and the laws of the State of Maryland provide that the affairs of Pacific Horizon Funds shall be managed under the direction of the Directors and grant them all powers necessary or desirable to carry out such responsibility, including administering Pacific Horizon Funds business as currently conducted by Pacific Horizon Funds and as described in the current prospectuses of Pacific Horizon Funds; Pacific Horizon Funds is registered as an investment company classified as an open-end management company under the 1940 Act, and its registration with the SEC as an investment company is in full force and effect; 5.2.b. All of the issued and outstanding shares of common stock of each Acquired Fund have been offered and sold in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities laws; 5.2.c. Each Acquired Fund is not in violation of, and the execution, delivery and performance of this Agreement by Pacific Horizon Funds for itself and on behalf of each Acquired Fund does not and will not (i) violate Pacific Horizon Funds' Charter or By-Laws, or (ii) result in a breach or violation of, or constitute a default under any material agreement or material instrument, to which Pacific Horizon Funds is a party or by which its properties or assets are bound, except as otherwise previously disclosed in writing to the Acquiring Funds; 5.2.d. Except as previously disclosed in writing to Nations Funds, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to Pacific Horizon Funds' knowledge, threatened against Pacific Horizon Funds or its business, the Acquired Funds or any of their properties or assets which, if adversely determined, would materially and adversely affect Pacific Horizon or an Acquired Fund's financial condition or the conduct of their business, and Pacific Horizon Funds knows of no facts that might form the basis for the institution of any such proceeding or investigation, and no Acquired Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects, or is reasonably likely to materially and adversely affect, its business or its ability to consummate the transactions contemplated herein; I(A)-10 5.2.e. The Statement of Assets and Liabilities, Statement of Operations and Statement of Changes in Net Assets of each Acquired Fund as of and for the year ended February 28, 1998, audited by PricewaterhouseCoopers LLP (copies of which have been or will be furnished to the corresponding Acquiring Fund) and the unaudited Statement of Assets and Liabilities, Statement of Operations and Statement of Changes in Net Assets of each Acquired Funds as of and for the six-month period ended August 31, 1998 (copies of which have been or will be furnished to the corresponding Acquiring Fund) present fairly, in all material respects, the financial position of each Acquired Fund as of such date and the results of its operations and the changes in its Net Assets for such period in accordance with generally accepted accounting principles consistently applied, and as of such date there were no Liabilities of any Acquired Fund known to Pacific Horizon Funds that were not disclosed therein but that would be required to be disclosed therein in accordance with generally accepted accounting principles; 5.2.f. Since the date of the most recent audited financial statements, there has not been any material adverse change in any Acquired Fund's financial condition, Assets, Liabilities or business, other than changes occurring in the ordinary course of business, or any incurrence by an Acquired Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed in writing to and accepted by the corresponding Acquiring Fund, prior to the Closing Date (for the purposes of this subparagraph (f), neither a decline in an Acquired Fund's net asset value per share nor a decrease in an Acquired Fund's size due to redemptions shall be deemed to constitute a material adverse change); 5.2.g. All federal and other tax returns and reports of Pacific Horizon Funds and each Acquired Fund required by law to be filed on or before the Closing Date, have been or will be filed, and all federal and other taxes owed by Pacific Horizon Funds on behalf of the Acquired Funds, have been or will be paid so far as due, and to the best of Pacific Horizon Funds' knowledge, no such return is currently under audit and no assessment has been asserted with respect to any such return; 5.2.h. Each Acquired Fund has elected to qualify and has qualified as a "regulated investment company" under the Code, as of and since its first taxable year; has been a "regulated investment company" under the Code at all times since the end of its first taxable year when it so qualified; and qualifies and shall continue to qualify as a "regulated investment company" under the Code for its taxable year ending upon its liquidation; 5.2.i. All issued and outstanding shares of each Acquired Fund are, and on the Closing Date will be, duly authorized and validly issued and outstanding, and fully paid and non-assessable by Pacific Horizon Funds, and all such shares will, at the time of the Closing(s), be held by the persons and in the amounts set forth in the list of Acquired Fund Investors provided to each corresponding Acquiring Fund, pursuant to paragraph 3.4, and no Acquired Fund has outstanding any options, warrants or other rights to subscribe for or purchase any of its shares, nor is there outstanding any security convertible into any of its shares; 5.2.j. At the Closing Date, each Acquired Fund will have good and marketable title to its Fund Assets and full right, power and authority to assign, deliver and otherwise transfer such Fund Assets hereunder, and upon delivery and payment for such Fund Assets as contemplated herein and the filing of Articles of Transfer pursuant to the laws of the State of Maryland, the corresponding Acquiring Fund will acquire good and marketable title thereto, subject to no restrictions on the ownership or transfer thereof other than such restrictions as might arise under the 1933 Act or state securities laws, and except for any liens or transfer tax liens arising in connection with the transfer of Fund Assets pursuant to this Agreement; I(A)-11 5.2.k. The execution, delivery and performance of this Agreement on behalf of the Acquired Funds will have been duly authorized prior to the Closing Date by all necessary action on the part of Pacific Horizon Funds and the Directors, and this Agreement constitutes a valid and binding obligation of Pacific Horizon Funds and each Acquired Fund enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; 5.2.l. From the effective date of the Registration Statement, through the time of the meeting of the Pacific Horizon Funds shareholders, and on the Closing Date, the Registration Statement insofar as it relates to materials provided by Pacific Horizon Funds or the Acquired Funds, used in connection with the preparation of the Registration Statement: (i) will comply in all material respects with the applicable provisions of the 1933 Act, the 1934 Act and the 1940 Act and the regulations thereunder and (ii) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and as of such dates and times, any written information furnished by Pacific Horizon Funds, on behalf of the Acquired Funds, for use in the Registration Statement or in any other manner that may be necessary in connection with the transactions contemplated hereby does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information provided not misleading; and 5.2.m. No governmental consents, approvals, authorizations or filings are required under the 1933 Act, the 1934 Act, the 1940 Act or Maryland law for the execution of this Agreement by Pacific Horizon Funds, for itself and on behalf of each Acquired Fund, or the performance of the Agreement by Pacific Horizon Funds for itself and on behalf of each Acquired Fund, except for the effectiveness of the Registration Statement, any necessary exemptive relief or no-action assurances requested from the SEC or its staff with respect to Section 17(a) and 17(d) of the 1940 Act and Rule 17d-1 thereunder and the filing of Articles of Transfer pursuant to Maryland law, and except for such other consents, approvals, authorizations and filings as have been made or received, and such consents, approvals, authorizations and filings as may be required subsequent to the Closing Date, it being understood, however, that this Agreement and the transactions contemplated herein must be approved by the shareholders of the Acquired Funds as described in paragraph 8.1; and 5.2.n. At the Closing Date, the Acquired Funds will have good and marketable title to their assets and full right, power and authority to assign, deliver and otherwise transfer such assets. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED FUNDS The obligations of Pacific Horizon Funds to consummate the Reorganization with respect to each Acquired Fund shall be subject to the performance by Nations Funds, for itself and on behalf of each Acquiring Fund, of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions with respect to each corresponding Acquiring Fund: 6.1. All representations and warranties of Nations Funds with respect to each Acquiring Fund contained herein shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated herein, as of the Closing Date with the same force and effect as if made on and as of the Closing Date. I(A)-12 6.2. Nations Funds, on behalf of each Acquiring Fund, shall have delivered to Pacific Horizon Funds at the Closing(s) a certificate executed on behalf of each corresponding Acquiring Fund by Nations Funds' President, Secretary, Assistant Secretary, or other authorized officer, in a form and substance reasonably satisfactory to Pacific Horizon Funds and dated as of the Closing Date, to the effect that the representations and warranties of Nations Funds with respect to each Acquiring Fund made herein are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated herein, and as to such other matters as such Acquired Fund shall reasonably request. 6.3. Each Acquired Fund shall have received at the Closing(s) a favorable opinion of Morrison & Foerster LLP, counsel to Nations Funds (based upon or subject to such representations, assumptions, limitations or opinions of local counsel as such counsel may deem appropriate or necessary), dated as of the Closing Date, in a form (including the representations, assumptions, limitations or opinions of local counsel upon which it is based or to which it is subject) reasonably satisfactory to each Acquired Fund, substantially to the effect that: 6.3.a. Nations Funds is a duly registered, open-end, management investment company, and its registration with the SEC as an investment company under the 1940 Act is in full force and effect; 6.3.b. each Acquiring Fund is a portfolio of Nations Funds, which is a company duly created pursuant to its Agreement and Declaration of Trust, is validly existing and in good standing under the laws of the Commonwealth of Massachusetts and the Agreement and Declaration of Trust directs the Trustees to manage the affairs of Nations Funds and grants them all powers necessary or desirable to carry out such responsibility, including administering Nations Funds' business as described in the current prospectuses of Nations Funds; 6.3.c. this Agreement has been duly authorized, executed and delivered on behalf of Nations Funds and each Acquiring Fund and, assuming due authorization, execution and delivery of this Agreement on behalf of the Acquired Funds, is a valid and binding obligation of Nations Funds enforceable against Nations Funds in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; 6.3.d. the Acquiring Fund Shares to be issued to the Acquired Funds Investors pursuant to this Agreement are duly registered under the 1933 Act on the appropriate form, and are duly authorized and upon such issuance will be validly issued and outstanding and fully paid and non-assessable, and no shareholder of an Acquiring Fund has any preemptive rights to subscription or purchase in respect thereof; 6.3.e. the N-1A Post-Effective Amendment and the Registration Statement have become effective with the SEC and, to the best of such counsel's knowledge, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or threatened; 6.3.f. no consent, approval, authorization, filing or order of any court or governmental authority of the United States or any state is required for the consummation by Nations Funds of the Reorganization with respect to each Acquiring Fund, except for such consents, approvals, authorizations and filings (including filing of Articles of Transfer pursuant to Maryland law) as have been made or received, except for such consents, approvals, authorizations and filings as may be required subsequent to the Closing Date; and except for such consents, approvals, authorizations and filings as may be required under state securities or blue sky law; I(A)-13 6.3.g. to such counsel's knowledge, the execution and delivery of the Agreement and the performance of its terms by Nations Funds, and each Acquiring Fund, do not violate or result in a violation of the Nations Funds Agreement and Declaration of Trust or By-Laws, or any judgment, order or decree known to such counsel, of any court or arbiter, to which Nations Funds is a party, and, to such counsel's knowledge, will not constitute a material breach of the terms, conditions or provisions of, or constitute a default under, any contract, undertaking, indenture or other agreement by which Nations Funds is now bound or to which it is now a party; 6.3.h. to such counsel's knowledge, (a) no legal or governmental proceedings existing on or before the date of mailing the combined proxy statement/prospectus ("Combined Proxy/Prospectus"), involving Nations Funds or the Acquiring Funds, are required to be described in the Combined Proxy/Prospectus which are not described as required and (b) there are no contracts or documents relating to Nations Funds or the Acquiring Funds, known to such counsel, of a character required to be described in the Combined Proxy/Prospectus or to be filed as an exhibit to the Registration Statement that are not described or filed as required; and 6.3.i. to such counsel's knowledge, except as otherwise disclosed in the Registration Statement, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened against Nations Funds or an Acquiring Fund or any of their properties or assets and neither Nations Funds nor any Acquiring Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects, or would materially and adversely affect, its business. 6.4. As of the Closing Date with respect to the Reorganization of each Acquired Fund, there shall have been no material change in the investment objective, policies and restrictions nor any material change in the investment management fees, fee levels payable pursuant to the 12b-1 plan of distribution, other fees payable for services provided to the Acquiring Funds, fee waiver or expense reimbursement undertakings, or sales loads of the Acquiring Funds from those fee amounts, undertakings and sales load amounts described in the prospectus of each Acquiring Fund delivered to the corresponding Acquired Fund pursuant to paragraph 4.1 and in the notice of meeting, form of proxy and Combined Proxy/Prospectus (collectively, "Proxy Materials"). 6.5. With respect to each Acquiring Fund, the Board of Trustees of Nations Funds, including a majority of the "non-interested" Trustees, has determined that the Reorganization is in the best interests of each Acquiring Fund and that the interests of the existing shareholders of each Acquiring Fund would not be diluted as a result of the Reorganization. 6.6. For the period beginning at the Closing Date of the last Reorganization to occur and ending not less than six years thereafter, Nations Funds, its successor or assigns shall provide, or cause to be provided, liability coverage at least as comparable to the liability coverage currently applicable to both former and current Directors and officers of Pacific Horizon Funds, covering the actions of such Directors and officers of Pacific Horizon Funds for the period they served as such. 6.7. NBAI shall have delivered to Pacific Horizon Funds, no later than April 15, 1999, a certificate, in form and substance reasonably satisfactory to Pacific Horizon Funds, to the effect that NBAI believes that, as of such date, The Bank of New York ("BONY") is capable of satisfactorily providing accounting services for the Acquired Funds and Acquiring Funds, on a combined basis, following the Reorganization ("Accounting Services"). Such certificate shall also set forth the basis for NBAI's determination that BONY is capable of satisfactorily providing the Accounting Services. 6.8. Stephens Inc., the principal underwriter for the Nations Funds, no later than the Closing Date, shall have received an exemptive order under Section 9(c) of the 1940 Act, authorizing such company to serve as the principal underwriter for the Nations Funds, or otherwise shall be authorized to serve in such capacity. I(A)-14 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUNDS The obligations of Nations Funds to consummate the Reorganization with respect to each Acquiring Fund shall be subject to the performance by Pacific Horizon Funds of all the obligations to be performed by it hereunder, with respect to each corresponding Acquired Fund, on or before the Closing Date and, in addition thereto, the following conditions: 7.1. All representations and warranties of Pacific Horizon Funds with respect to the Acquired Funds contained herein shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date, with the same force and effect as if made on and as of the Closing Date. 7.2. Pacific Horizon Funds, on behalf of each Acquired Fund, shall have delivered to each corresponding Acquiring Fund at the Closing(s) a certificate executed on behalf of each Acquired Fund, by Pacific Horizon Funds' President, Secretary or Assistant Secretary, or other authorized officer, in form and substance reasonably satisfactory to the Acquiring Funds and dated as of the Closing Date, to the effect that the representations and warranties of Pacific Horizon Funds with respect to each Acquired Fund made herein are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated herein and as to such other matters as each Acquiring Fund shall reasonably request. 7.3. Each Acquiring Fund shall have received at the Closing(s) a favorable opinion of Drinker Biddle & Reath LLP, counsel to Pacific Horizon Funds (based upon or subject to such representations, assumptions, limitations or opinions of local counsel as such counsel may deem appropriate or necessary), dated as of the Closing Date, in a form (including the representations, assumptions, limitations or opinions of local counsel upon which it is based or to which it is subject) reasonably satisfactory to such Acquiring Fund, substantially to the effect that: 7.3.a. Pacific Horizon Funds is a duly registered, open-end management investment company, and its registration with the SEC as an investment company under the 1940 Act is in full force and effect; 7.3.b. each Acquired Fund is a portfolio of Pacific Horizon Funds which is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland, and the Charter and the laws of the State of Maryland provide that the affairs of Pacific Horizon Funds shall be managed under the direction of the Directors and grants them all powers necessary or desirable to carry out such responsibility, including administering Pacific Horizon Funds' business as described in the current prospectuses of Pacific Horizon Funds; 7.3.c. this Agreement has been duly authorized, executed and delivered by Pacific Horizon Funds, for itself and on behalf of each Acquired Fund and, assuming due authorization, execution and delivery of this Agreement on behalf of each Acquiring Fund, is a valid and binding obligation of Pacific Horizon Funds, enforceable against Pacific Horizon Funds in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and court decisions with respect thereto, and such counsel will express no opinion with respect to the application of equitable principles in any proceeding, whether at law or in equity; I(A)-15 7.3.d. no consent, approval, authorization, filing or order of any governmental authority or to such counsel's knowledge, order of any court of the United States or any state is required for the consummation of the Reorganization by Pacific Horizon Funds with respect to each Acquired Fund, except for such consents, approvals, authorizations and filings (including filing of Articles of Transfer pursuant to Maryland law) as have been made or received, except for such consents, approvals, authorizations and filings as may be required subsequent to the Closing Date; and except for such consents, approvals, authorizations and filings as may be required under state securities or blue sky law; 7.3.e. to such counsel's knowledge, the execution and delivery of the Agreement and the performance of its terms by Pacific Horizon Funds, and each Acquired Fund, do not violate or result in a violation of the Pacific Horizon Funds' Charter or By-Laws, or any judgment, order or decree known to such counsel, of any court or arbiter, to which Pacific Horizon Funds is a party, and, to such counsel's knowledge, will not constitute a material breach of the terms, conditions or provisions of, or constitute a default under, any contract, undertaking, indenture or other agreement by which Pacific Horizon Funds is now bound or to which it is now a party; 7.3.f. to such counsel's knowledge, (a) no legal or governmental proceedings existing on or before the date of mailing the Combined Proxy/Prospectus involving Pacific Horizon Funds or the Acquired Funds, are required to be described in the Combined Proxy/Prospectus which are not described as required and (b) there are no contracts or documents relating to Pacific Horizon Funds or the Acquired Funds, known to such counsel, of a character required to be described in the Combined Proxy/Prospectus or to be filed as an exhibit to the Registration Statement that are not described or filed as required; and 7.3.g. to such counsel's knowledge, except as otherwise disclosed in the Registration Statement, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened against Pacific Horizon Funds or an Acquired Fund or any of their properties or assets and neither Pacific Horizon Funds nor an Acquired Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects, or would materially and adversely affect, its business. 7.4. Nations Funds, on behalf of each Acquiring Fund, shall have received from PricewaterhouseCoopers LLP a letter addressed to Nations Funds, on behalf of each Acquiring Fund, and dated as of the Closing Date with respect to the Acquired Funds, in form and substance satisfactory to Nations Funds, to the effect that: 7.4.a. they are independent accountants with respect to Pacific Horizon Funds and each Acquired Fund within the meaning of the 1933 Act and the applicable regulations thereunder; 7.4.b. in their opinion, the audited financial statements and the per share data provided in accordance with Item 3 in Form N-1A (the "Per Share Data") of the Acquired Fund included or incorporated by reference in the Registration Statement previously reported on by them comply as to form in all material aspects with the applicable accounting requirements of the 1933 Act and the published rules and regulations thereunder; I(A)-16 7.4.c. on the basis of limited procedures agreed upon by Nations Funds, on behalf of the Acquiring Funds and Pacific Horizon Funds, on behalf of the Acquired Funds, and described in such letter (but not an examination in accordance with generally accepted auditing standards), the data with respect to the Acquired Funds used in the calculation of any figure expressed numerically or in dollars or percentages that appear in the Registration Statement under: (a) "Table II -- Total Expense Information" in the Combined Proxy Statement/Prospectus; (b) "Table III -- Capitalization (as of September 30, 1998 or October 31, 1998) in the Combined Proxy Statement/Prospectus; (c) "Comparison of Pacific Horizon and Nations--Investment Advisory Services" in the Combined Proxy Statement/ Prospectus; (d) "Appendix II -- Expense Summaries of Pacific Horizon Funds and the Corresponding Nations Funds" in the Combined Proxy Statement/Prospectus; and (e) the PRO FORMA financial statements in the Statement of Additional Information, agree with the underlying accounting records of the Acquired Funds or with written estimates provided by officers of Pacific Horizon Funds having responsibility for financial and reporting matters, and were found to be mathematically correct. 7.5. Pacific Horizon Funds shall have delivered to the Acquiring Funds, pursuant to paragraph 5.2(e), copies of financial statements of each Acquired Fund as of and for the year ended February 28, 1999, audited by PricewaterhouseCoopers LLP. 7.6. The Board of Directors of Pacific Horizon Funds, including a majority of "non-interested" Directors, has determined that the Reorganization is in the best interests of Pacific Horizon Funds and that the interests of the existing shareholders of Pacific Horizon Funds would not be diluted as a result of the Reorganization. 8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS The obligations of each Acquiring Fund and of each corresponding Acquired Fund herein are subject to the further conditions that on or before the Closing Date with respect to each Acquiring Fund and each corresponding Acquired Fund: 8.1. This Agreement and the transactions contemplated herein shall have been approved by a majority of the votes of the shares of common stock outstanding and entitled to vote of Pacific Horizon Funds and of each Acquired Fund, consistent with the provisions of the laws of the State of Maryland, Pacific Horizon Funds' Charter and the 1940 Act, and certified copies of the resolutions evidencing such approval shall have been delivered to each corresponding Acquiring Fund. Approval of this Agreement by a majority of the votes of the shares of common stock outstanding and entitled to vote in an Acquired Fund shall constitute approval of all of the transactions contemplated herein, including the reorganization of all investment portfolios of Pacific Horizon Funds with the Nations Family of Funds and the dissolution of Pacific Horizon Funds, subject to the approval under Maryland law and the Charter of Pacific Horizon Funds by a majority of the votes of the shares of common stock outstanding and entitled to vote of Pacific Horizon Funds. 8.2. On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or any of the transactions contemplated herein. 8.3. All consents of other parties and all other consents, orders, approvals and permits of federal, state and local regulatory authorities (including, without limitation, those of the SEC and of state securities authorities) deemed necessary by Nations Funds, on behalf of the Acquiring Funds or by Pacific Horizon Funds, on behalf of the Acquired Funds, to permit consummation, in all material respects, of the transactions contemplated herein shall have been obtained, except where failure to obtain any such consent, order or permit would not, in the opinion of the party asserting that the condition to closing has not been satisfied, involve a risk of a material adverse effect on the assets or properties of any of an Acquiring Fund or its corresponding Acquired Fund. I(A)-17 8.4. The N-1A Post-Effective Amendment and the Registration Statement shall have become effective under the 1933 Act, no stop orders suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act. 8.5. Except to the extent prohibited by Rule 19b-1 promulgated under the 1940 Act, each Acquired Fund shall have declared a dividend or dividends, with a record date and ex-dividend date prior to the Applicable Valuation Date, which, together with all previous dividends, shall have the effect of distributing to each Acquired Fund's shareholders substantially all of its net investment company taxable income, if any, for all taxable periods or years ending on or prior to the Closing Date (computed without regard to any deduction for dividends paid) and substantially all of its net capital gain, if any, realized for all taxable periods or years ending on or prior to the Closing Date (after reduction for any capital loss carry forward.) 8.6. Nations Funds, on behalf of each Acquiring Fund, and Pacific Horizon Funds, on behalf of each Acquired Fund, shall have received from PricewaterhouseCoopers LLP a letter dated as of the Closing Date, in form and substance satisfactory to Nations Funds and to Pacific Horizon Funds, to the effect that on the basis of limited procedures agreed upon by Nations Funds, on behalf of the Acquiring Funds and Pacific Horizon Funds, on behalf of the Acquired Funds (but not an examination in accordance with generally accepted auditing standards), the data with respect to the acquiring funds used in the calculation of any figure expressed numerically or in dollars or percentages that appear in the Registration Statement under: (a) "Table II -- Total Expense Information" in the Combined Proxy Statement/Prospectus; (b) "Table III -- Capitalization (as of September 30, 1998 or October 31, 1998) in the Combined Proxy Statement/Prospectus; and (c) "Appendix II -- Expense Summaries of Pacific Horizon Funds and the Corresponding Nations Funds" in Combined Proxy Statement/Prospectus; and (d) the pro forma financial statements in the Statement of Additional Information, agree with the underlying accounting records of the Acquiring Funds or with written estimates provided by officers of Nations Funds having responsibility for financial and reporting matters, and were found to be mathematically correct. 8.7. Nations Funds and Pacific Horizon Funds shall have received an opinion of Morrison & Foerster LLP addressed to both Nations Funds and Pacific Horizon Funds in a form reasonably satisfactory to them, and dated as of the Closing Date, substantially to the effect that on the basis of facts, representations, and assumptions set forth in such opinion: 8.7.a. each Reorganization will constitute a "reorganization" within the meaning of Section 368(a) of the Code, and each Acquiring Fund and the corresponding Acquired Fund will each be a "party to a reorganization" within the meaning of Section 368(b) of the Code with respect to such Reorganization. 8.7.b. no gain or loss will be recognized by an Acquired Fund upon the transfer of its assets and Liabilities to the corresponding Acquiring Fund solely in exchange for the Acquiring Fund Shares; 8.7.c. no gain or loss will be recognized by an Acquiring Fund upon the receipt of the assets and assumption of Liabilities of the corresponding Acquired Fund solely in exchange for the Acquiring Fund Shares; 8.7.d. the basis of an Acquired Fund's assets received by the corresponding Acquiring Fund pursuant to the Reorganization will be the same as the basis of those assets in the hands of the Acquired Fund immediately prior to the Reorganization; 8.7.e. the holding period of an Acquired Fund's assets in the hands of the corresponding Acquiring Fund will include the period for which such assets have been held by the Acquired Fund; I(A)-18 8.7.f. no gain or loss will be recognized by an Acquired Fund on the distribution to its shareholders of the Acquiring Fund Shares to be received by the Acquired Fund in the Reorganization; 8.7.g. no gain or loss will be recognized by the shareholders of an Acquired Fund upon their receipt of the corresponding Acquiring Fund Shares in exchange for such shareholders' shares of the Acquired Fund; 8.7.h. the basis of the Acquiring Fund Shares received by the shareholders of the corresponding Acquired Fund will be the same as the basis of the Acquired Fund shares surrendered by such shareholders pursuant to the Reorganization; 8.7.i. the holding period for the Acquiring Fund Shares received by the Acquired Fund shareholders will include the period during which such shareholders held the Acquired Fund shares surrendered therefor, provided that such Acquired Fund shares are held as a capital asset in the hands of the Acquired Fund shareholders on the date of the exchange; and 8.7.j. each Acquiring Fund will succeed to and take into account the tax attributes described in Section 381(c) of the Code of the corresponding Acquired Fund as of the Closing Date, subject to the conditions and limitations specified in the Code. In rendering such opinion described in this paragraph 8.7, Morrison & Foerster LLP may require and, to the extent they deem necessary and appropriate, may rely upon representations made in certificates of Nations Funds and Pacific Horizon Funds, their affiliates, and principal shareholders. Notwithstanding anything herein to the contrary, neither an Acquiring Fund nor its corresponding Acquired Fund may waive the condition set forth in this paragraph 8.7. 8.8. Nations Funds and Pacific Horizon Funds shall have received a memorandum addressed to Nations Funds and the Pacific Horizon Funds, in form reasonably satisfactory to them, prepared by Morrison & Foerster LLP concerning the filing of notices and/or other documents, and the payment of fees, in connection with the shares to be issued by Nations Funds pursuant to this Agreement under applicable state securities laws or the exemption from such filing and payment requirements under such laws. 8.9. The SEC shall not have issued any unfavorable advisory report under Section 25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act. 8.10. Pacific Horizon Funds' agreements with each of its service contractors shall have terminated before or at the Closing, and each party has received reasonable assurance that no claim for damages (liquidated or otherwise) will arise as a result of such termination. 9. FINDER'S FEES AND EXPENSES 9.1. Nations Funds, for itself and on behalf of the Acquiring Funds and Pacific Horizon Funds, on behalf of itself and on behalf of the Acquired Funds, represent and warrant that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein. 9.2. NationsBanc Advisors, Inc. shall bear, or shall cause one of its affiliates to bear, the customary expenses associated with the transactions contemplated by this Agreement. I(A)-19 10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES 10.1. Except for certain side letter agreements, between NationsBanc Advisors, Inc. and Pacific Horizon Funds, this Agreement constitutes the entire agreement between the parties and supersedes any prior or contemporaneous understanding or arrangement with respect to the subject matter hereof. 10.2. The representations, warranties and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall survive the consummation of the transactions contemplated herein. 11. TERMINATION 11.1. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing: 11.1.a. by the mutual written consent of Nations Funds and Pacific Horizon Funds; 11.1.b. by either Nations Funds or Pacific Horizon Funds by notice to the other, without liability to the terminating party on account of such termination (provided any such termination shall not excuse the terminating party from any liability arising out of a default or breach of this Agreement by such terminating party) if such Closing(s) shall not have occurred on or before December 31, 1999, or such other date as may be agreed to by the parties; or 11.1.c. by either of Nations Funds or the Pacific Horizon Funds, in writing without liability to the terminating party on account of such termination (provided any such termination shall not excuse the terminating party from any liability arising out of a material default or breach of this Agreement by such terminating party), if (i) the other party shall fail to perform in any material respect its agreements contained herein required to be performed prior to the Closing Date, (ii) the other party materially breaches or shall have materially breached any of its representations, warranties or covenants contained herein, or (iii) any other express condition precedent to the obligations of the terminating party has not been met and it reasonably appears that it will not or cannot be met. 11.2. Termination of this Agreement pursuant to paragraphs 11.1(a) or (b) shall terminate all obligations of the parties hereunder with respect to the Acquired Fund and Acquiring Fund affected by such termination, or with respect to Nations Funds and Pacific Horizon Funds, as the case may be, and there shall be no liability for damages on the part of Nations Funds or Pacific Horizon Funds or the Trustees or officers of Nations Funds or Directors or officers of Pacific Horizon Funds, on account of termination pursuant to paragraphs 11.1(a) or (b), except for possible liability on the part of Nations Funds or Pacific Horizon Funds as provided in paragraphs 11.1(a) or (b); provided, however, that notwithstanding any termination of this Agreement pursuant to paragraph 11.1, such termination shall not relieve NationsBanc Advisors, Inc. of its obligations pursuant to Section 9.2 hereof. I(A)-20 12. AMENDMENTS This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of Nations Funds, acting on behalf of each Acquiring Fund and the authorized officers of Pacific Horizon Funds, acting on behalf of each Acquired Fund; provided, however, that following the meeting of the shareholders of the Acquired Funds, no such amendment may have the effect of changing the provisions for determining the number of shares of the corresponding Acquiring Funds to be issued to the Acquired Fund Investors under this Agreement to the detriment of such Acquired Fund Investors, or otherwise materially and adversely affecting such Acquired Fund Investors, without the Acquired Fund obtaining the Pacific Horizon Fund(s)' shareholders further approval except that nothing in this paragraph 12 shall be construed to prohibit any Acquiring Fund and the corresponding Acquired Fund from amending this Agreement to change the Closing Date or Applicable Valuation Date by mutual agreement. At any time prior to or (to the fullest extent permitted by law) after approval of this Agreement by the shareholders of Pacific Horizon Funds either party may waive any breach by the other party or the failure to satisfy any of the conditions to its obligations (such waiver to be in writing and authorized by the Board of Trustees or Directors of the waiving party, or any appropriate officer of either party, with or without the approval of such party's shareholders). 13. NOTICES Any notice, report, statement or demand required or permitted by any provision of this Agreement shall be in writing and shall be given by prepaid telegraph, telecopy, certified mail or overnight express courier addressed to: For Nations Funds, on behalf of itself and each Acquiring Fund: Richard H. Blank, Jr. Secretary c/o Stephens Inc. 111 Center Street Little Rock, Arkansas 72201 With copies to: Robert M. Kurucza and Marco E. Adelfio Morrison & Foerster LLP 2000 Pennsylvania Avenue, N.W., Suite 5500 Washington, D.C. 20006 For Pacific Horizon Funds, on behalf of itself and each Acquired Fund: c/o W. Bruce McConnel, III Secretary Drinker Biddle & Reath LLP 1345 Chestnut Street Philadelphia, PA 19107-3496 14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY 14.1. The article and paragraph headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All references herein to articles, paragraphs, subparagraphs or Schedules shall be construed as referring to articles, paragraphs or subparagraphs hereof or Schedules hereto, respectively. Whenever the terms hereto, hereunder, herein or hereof are used in this Agreement, they shall be construed as referring to this entire Agreement, rather than to any individual article, paragraph, subparagraph or sentence. I(A)-21 14.2. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 14.3. This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland, without giving effect to the conflicts of laws principles otherwise applicable therein. 14.4. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement. 14.5. It is expressly agreed that the obligations of Nations Funds hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents, or employees of Nations Funds personally, but shall bind only the assets and the property of the respective Acquiring Fund of Nations Funds, as provided in its Agreement and Declaration of Trust. The execution and delivery by such officers shall not be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and the property of the respective Acquiring Fund of Nations Funds as provided in its Agreement and Declaration of Trust. 14.6. No Acquired Fund shall have any liability for the obligations of any other Acquired Fund hereunder and no Acquiring Fund shall have any liability for the obligation of any other Acquiring Fund hereunder. 14.7. The names "Pacific Horizon Funds" and "Directors of Pacific Horizon Funds" refer respectively to the corporation created and the Directors, as directors but not individually or personally, acting from time to time under Pacific Horizon Funds' Charter, which is hereby referred to and a copy of which is on file at the Department of Assessments and at the principal office of the corporation. The obligations of "Pacific Horizon Funds" entered into in the name or on behalf thereof by any of the Directors, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Directors, shareholders, or representatives of the corporation personally, but bind only the corporate property, and all persons dealing with any class of shares of the corporation must look solely to the corporate property belonging to such class for the enforcement of any claims against the corporation. 14.8. Any announcement or similar publicity with respect to this Agreement or the transactions contemplated herein shall be made only at such time and in such manner as the parties shall agree; provided that nothing herein shall prevent either party upon notice to the other party from making such public announcements as such party's counsel may consider advisable in order to satisfy the party's legal and contractual obligations in such regard. I(A)-22 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their authorized officers, and attested by their Secretaries as of the day and year first written above.
NATIONS INSTITUTIONAL RESERVES, for itself and on ATTEST: behalf of each Acquiring Fund /s/ Richard H. Blank, Jr. By: /s/ A. Max Walker - - ----------------------------- ------------------------------- Richard H. Blank, Jr. A. Max Walker Secretary President and Chairman of the Board of Trustees PACIFIC HORIZON FUNDS, INC., for itself and on behalf ATTEST: of each Acquired Fund /s/ W. Bruce McConnel, III By: /s/ Dr. Cornelius J. Pings - - ----------------------------- ------------------------------- W. Bruce McConnel, III Dr. Cornelius J. Pings Secretary President and Chairman of the Board of Directors NATIONSBANC ADVISORS, INC., hereby joins in this Agreement with respect to, and agrees to be bound by Section 9.2 and 11.2 hereof By: /s/ Robert H. Gordon ------------------------------- Robert H. Gordon President
I(A)-23
SCHEDULE A ---------- ACQUIRED FUND ACQUIRING FUND Pacific Horizon Prime Fund Nations Cash Reserves Class S Shares (Class B-Special Series 3) Daily Class Shares Class X Shares (Class B-Special Series 4) Daily Class Shares Class Y Shares (Class B-Special Series 5) Service Class Shares Horizon Service Class Shares (Class B-Special Series 1) Advisor Class Shares Horizon Class Shares (Class B-Special Series 2) Capital Class Shares Pacific Horizon Class Shares (Class B) Investor Class Shares Pacific Horizon Government Fund Nations Government Reserves Horizon Service Class Shares (Class L-Special Series 1) Advisor Class Shares Horizon Class Shares (Class L-Special Series 2) Capital Class Shares Pacific Horizon Class Shares (Class L) Investor Class Shares Pacific Horizon Treasury Fund Nations Treasury Reserves Class X Shares (Class A-Special Series 4) Daily Class Shares Class Y Shares (Class A-Special Series 5) Service Class Shares Horizon Service Class Shares (Class A-Special Series 1) Advisor Class Shares Horizon Class Shares (Class A-Special Series 2) Capital Class Shares Pacific Horizon Class Shares (Class A) Investor Class Shares Pacific Horizon Treasury Only Fund Nations Government Reserves Horizon Service Class Shares (Class K-Special Series 1) Advisor Class Shares Horizon Class Shares (Class K-Special Series 2) Capital Class Shares Pacific Horizon Class Shares (Class K) Investor Class Shares Pacific Horizon California Tax-Exempt Money Market Fund Nations California Tax-Exempt Reserves (Shell) Class S Shares (Class J-Special Series 3) Daily Class Shares Class X Shares (Class J-Special Series 4) Daily Class Shares Horizon Service Class Shares (Class J-Special Series 1) Advisor Class Shares Pacific Horizon Class Shares (Class J) Investor Class Shares Pacific Horizon Tax Exempt Money Fund Nations Municipal Reserves Class S Shares (Class I-Special Series 3) Daily Class Shares Horizon Service Class Shares (Class I-Special Series 1) Advisor Class Shares Horizon Class Shares (Class I-Special Series 2) Capital Class Shares Pacific Horizon Class Shares (Class I) Investor Class Shares Pacific Horizon Asset Allocation Fund Nations Asset Allocation Fund (Shell) Share Class A (Class O) Investor A Share Class B (Class O-Special Series 3) Investor B Share Class K (Class O-Special Series 5) Investor C Share Class SRF (Class O-Special Series 7) Seafirst Class Pacific Horizon Capital Income Fund Nations Capital Income Fund (Shell) Share Class A (Class F) Investor A Share Class B (Class F-Special Series 3) Investor B Share Class K (Class F-Special Series 5) Investor C A-1 Pacific Horizon California Municipal Bond Fund Nations California Municipal Bond Fund (Shell) Share Class A (Class G) Investor A Share Class B (Class G-Special Series 3) Investor B Pacific Horizon Intermediate Bond Fund (feeder) Nations Intermediate Bond Fund (Feeder Shell) Share Class A (Class M) Investor A Share Class K (Class M-Special Series 5) Investor C Share Class SRF (Class M-Special Series 7) Seafirst Class Pacific Horizon Blue Chip Fund (feeder) Nations Blue Chip Fund (Feeder Shell) Share Class A (Class N) Investor A Share Class B (Class N-Special Series 3) Investor B Share Class K (Class N-Special Series 5) Investor C Share Class SRF (Class N-Special Series 7) Seafirst Class
A-2 APPENDIX I(B) AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of this 8th day of February, 1999, by and between Nations Master Investment Trust ("NMIT"), a Delaware business trust, for itself and on behalf of Nations Blue Chip Master Portfolio and Nations Intermediate Bond Master Portfolio (each an "Acquiring Fund" and collectively the "Acquiring Funds"), each a master portfolio of NMIT, and Master Investment Trust, Series I ("MIT"), a Delaware business trust, for itself and on behalf of the Blue Chip Master Portfolio and Investment Grade Bond Master Portfolio (each an "Acquired Fund" and collectively the "Acquired Funds"), each a portfolio of MIT. In accordance with the terms and conditions set forth in this Agreement, the parties desire that all of the Fund Assets (as defined in paragraph 1.2) of each Acquired Fund be transferred to each Acquiring Fund corresponding thereto, as set forth in the table attached hereto as Schedule A, in exchange for shares of beneficial interest of the corresponding Acquiring Fund ("Acquiring Fund Shares") and the assumption by each Acquiring Fund of the Liabilities (as defined in paragraph 1.3) of each corresponding Acquired Fund, and that such Acquiring Fund Shares be distributed immediately after the Closing(s), as defined in this Agreement, by each Acquired Fund to its interestholders in liquidation of each Acquired Fund. In consideration of the promises and of the covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound hereby, covenant and agree as follows: 1. REORGANIZATION OF ACQUIRED FUNDS 1.1. Subject to the terms and conditions herein set forth, and on the basis of the representations and warranties contained herein, each Acquired Fund shall assign, deliver and otherwise transfer the Fund Assets to its corresponding Acquiring Fund identified in Schedule A, and such corresponding Acquiring Fund shall, as consideration therefor, on the Closing Date (as defined in paragraph 3.1), (i) deliver to each corresponding Acquired Fund the full and fractional number of shares of beneficial interest calculated by dividing the value of the Fund Assets less the Liabilities of the corresponding Acquired Fund that are so conveyed and are attributable to the Acquiring Fund's shares of beneficial interests set forth in Schedule A, computed in the manner and as of the time and date set forth in this Agreement, by the net asset value of one Acquiring Fund share that is to be delivered with respect thereto, computed in the manner and as of the time and date set forth in this Agreement; and (ii) assume all of such Acquired Fund's Liabilities. Such transfer, delivery and assumption shall take place at the closing(s) provided for in paragraph 3.1 (hereinafter sometimes referred to as the "Closing(s)"). Promptly after the Closing(s), each Acquired Fund shall distribute the Acquiring Fund Shares to the interestholders of the Acquired Fund in liquidation of the Acquired Fund as provided in paragraph 1.4 hereof. Such transaction(s) are hereinafter sometimes collectively referred to as the "Reorganization(s)." 1.2. With respect to each Acquired Fund, the "Fund Assets" shall consist of all property and assets of any nature whatsoever, including, without limitation, all cash, cash equivalents, securities, claims (whether absolute or contingent, known or unknown, accrued or unaccrued) and receivables (including dividend and interest receivables) owned by each Acquired Fund, and any prepaid expenses shown as an asset on each Acquired Fund's books, on the Closing Date. I(B)-1 1.3. Each Acquired Fund will endeavor to discharge all of its known liabilities and obligations prior to the Closing Date. Each Acquiring Fund will assume all liabilities and obligations of the corresponding Acquired Fund, accrued, absolute, contingent or otherwise existing, as of the Closing Date, which liabilities and obligations shall include any obligation of MIT to indemnify MIT's current and former Trustees and officers, acting in their capacities as such, to the fullest extent permitted by law and MIT's Amended and Restated Declaration of Trust, as in effect as of the date of this Agreement ("Liabilities"). Without limiting the foregoing, each Acquiring Fund agrees that all rights to indemnification and all limitations of liability existing in favor of MIT's current and former Trustees and officers, acting in their capacities as such, under MIT's Amended and Restated Declaration of Trust as in effect as of the date of this Agreement shall survive the Reorganization as obligations of the Acquiring Funds and shall continue in full force and effect, without any amendment thereto, and shall constitute rights which may be asserted against NMIT. The Liabilities assumed by NMIT on behalf of an Acquiring Fund shall be separate Liabilities of such Acquiring Fund, and not joint or joint and several liabilities of any other Acquiring Fund. 1.4. Promptly after the Closing(s) with respect to each Acquired Fund, the Acquired Fund will distribute the Acquiring Fund Shares received by the Acquired Fund pursuant to paragraph 1.1 to its interestholders of record determined as of the close of business on the Closing Date ("Acquired Fund Investors") in complete liquidation of the Acquired Fund. Acquired Fund Investors will be credited with full and fractional Acquiring Fund Shares under this Agreement with respect to the interests in the Acquired Fund that are held by the Acquired Fund Investors. Such distribution will be accomplished by an instruction, signed by an appropriate officer of MIT, to transfer the Acquiring Fund Shares then credited to the Acquired Fund's account on the books of the Acquiring Fund and to open accounts on the books of the Acquiring Fund established and maintained by the Acquiring Fund's transfer agent in the names of record of the Acquired Fund Investors and representing the respective number of shares of the Acquiring Fund due such Acquired Fund Investors. In exchange for Acquiring Fund Shares distributed, all issued and outstanding shares of beneficial interest of the Acquired Fund will be redeemed and canceled simultaneously therewith on the Acquired Fund's books. 1.5. If a request shall be made for a change of the registration of interests in an Acquiring Fund to another person from the account of the interestholder in which name the shares are registered in the records of the corresponding Acquired Fund, it shall be a condition of such registration of interests that there be furnished to the Acquiring Fund an instrument of transfer properly endorsed, accompanied by appropriate signature guarantees and otherwise in proper form for transfer and, if any of such interests are outstanding in certificated form, the certificates representing such interests, and that the person requesting such registration shall pay to such Acquiring Fund any transfer or other taxes required by reason of such registration or establish to the reasonable satisfaction of the Acquiring Fund that such tax has been paid or is not applicable. 1.6. Following the transfer of assets by each Acquired Fund to the corresponding Acquiring Fund, the assumption of the Acquired Fund's Liabilities by the Acquiring Fund, and the distribution by the Acquired Fund of the Acquiring Fund Shares received by it pursuant to paragraph 1.4, MIT shall terminate the qualification, classification and registration of such Acquired Fund at all appropriate federal and state agencies. All reporting and other obligations of MIT shall remain the exclusive responsibility of MIT up to and including the date on which the particular Acquired Fund is terminated and deregistered, subject to any reporting or other obligations described in paragraph 4.10. Subject to the provisions of Section 1.7 at an appropriate time as determined by MIT, upon the advice of counsel, MIT will be dissolved under the laws of the State of Delaware. 1.7. Subject to the conditions set forth in this Agreement, the failure of one Acquired Fund to consummate the transactions contemplated hereby shall not affect the consummation or validity of a Reorganization with respect to any other Acquired Fund, and the provisions of this Agreement shall be construed to effect this intent, including, without limitation, as the context requires, construing the terms "Acquiring Fund" and "Acquired Fund" as meaning only those series of NMIT and MIT, respectively, which are involved in a Reorganization as of a Closing Date. I(B)-2 2. VALUATION 2.1. With respect to each Acquired Fund, the value of the Fund Assets shall be the value of such assets computed as of the time at which its net asset value is calculated on the Closing Date (such time and date being herein called the "Applicable Valuation Date"). The net asset value of the Fund Assets to be transferred by the Acquired Funds shall be computed by MIT and shall be subject to adjustment by the amount, if any, agreed to by NMIT and the respective Acquired Funds. In determining the value of the securities transferred by the Acquired Funds to the Acquiring Funds, each security shall be priced in accordance with the pricing policies and procedures of the Acquiring Funds as described in its then current registration statement. For such purposes, price quotations and the security characteristics relating to establishing such quotations shall be determined by MIT, provided that such determination shall be subject to the approval of NMIT. MIT and NMIT agree to use all commercially reasonable efforts to resolve any material pricing differences between the prices of portfolio securities determined in accordance with the pricing policies and procedures of MIT and those determined in accordance with the pricing policies and procedures of the Acquiring Funds prior to the Applicable Valuation Date. 2.2. The net asset value of a share of an Acquiring Fund shall be the net asset value per share computed on the Applicable Valuation Date, using the valuation procedures set forth in the Acquiring Fund's then current registration statement. 3. CLOSING(S) AND CLOSING DATE 3.1. The Closing for the Acquiring Funds and their corresponding Acquired Funds, shall occur on May 21, 1999, and/or on such other date(s) as may be mutually agreed upon in writing by the officers of the parties hereto (a "Closing Date"), but in any case, no earlier than the closing of the reorganization of the Pacific Horizon Intermediate Bond Fund and the Nations Intermediate Bond Fund and the closing of the reorganization of the Pacific Horizon Blue Chip Fund and the Nations Blue Chip Fund. The Closing(s) shall be held at the offices of Stephens Inc., 111 Center Street, Suite 300, Little Rock, Arkansas 72201 or at such other location as is mutually agreeable to the parties. All acts taking place at the Closing(s) shall be deemed to take place simultaneously as of 4:01 p.m. Eastern time on the Closing Date unless otherwise provided. 3.2. Each Acquiring Fund's custodian shall deliver at the Closing(s) a certificate of an authorized officer stating that: (a) each Acquired Fund's portfolio securities, cash and any other assets have been delivered in proper form to the corresponding Acquiring Fund on the Closing Date and (b) all necessary taxes including all applicable federal and state stock transfer stamps, if any, have been paid, or provision for payment shall have been made, by such Acquired Fund in conjunction with the delivery of portfolio securities. Proper delivery of cash shall be by wire to The Bank of New York, the Acquiring Funds' Custodian, pursuant to instructions to be delivered prior to the Closing(s). 3.3. Notwithstanding anything herein to the contrary, in the event that on the Applicable Valuation Date (a) the New York Stock Exchange shall be closed to trading or trading thereon shall be restricted or (b) trading or the reporting of trading on such exchange or elsewhere shall be disrupted so that, in the judgment of NMIT and MIT, accurate appraisal of the value of the net assets of an Acquiring Fund or an Acquired Fund is impracticable, the Applicable Valuation Date and Closing Date shall be postponed until the first business day after the day when trading shall have been fully resumed without restriction or disruption and reporting shall have been restored. I(B)-3 3.4. With respect to each Acquired Fund, MIT shall provide NMIT and its transfer agents with immediate access from and after the Closing Date to (a) the computer, electronic or such other forms of records containing the names, addresses and taxpayer identification numbers of all of the Acquired Fund interestholders and the number and percentage ownership of outstanding Acquired Fund interests owned by such Acquired Fund interestholder, all as of the Applicable Valuation Date, and (b) all original documentation (including all applicable Internal Revenue Service forms, certificates, certifications and correspondence) relating to the Acquired Fund interestholders' taxpayer identification numbers and their liability for or exemption from back-up withholding. Each corresponding Acquiring Fund shall issue and deliver to the Secretary or Assistant Secretary of MIT, acting on behalf of the Acquired Fund, a confirmation evidencing the Acquiring Fund Shares credited on the Closing Date or shall provide evidence satisfactory to each Acquired Fund that such Acquiring Fund Shares have been credited to each Acquired Fund's account on the books of each Acquiring Fund. At the Closing(s), each party shall deliver to the other such bills of sale, checks, assignments, assumptions of liability share certificates, if any, receipts or other documents of transfer, assignment or conveyance as such other party or its counsel may reasonably request. 3.5. Within twenty (20) days after the Closing Date, each Acquired Fund shall deliver, in accordance with Article 1 hereof, to the corresponding Acquiring Fund a statement of the Fund Assets and Liabilities, together with a list of such Acquired Fund's portfolio securities and other assets showing the respective adjusted bases and holding periods thereof for income tax purposes, as of the Closing Date, certified by an appropriate officer of MIT. 4. COVENANTS WITH RESPECT TO THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS 4.1. MIT will take such actions reasonably necessary to obtain the approval of the transactions contemplated herein, including approval for each Acquired Fund's liquidating distribution of the Acquiring Fund Shares contemplated hereby, and for MIT to terminate each Acquired Fund's qualification, classification and registration, if requisite approvals are obtained with respect to each Acquired Fund. 4.2. MIT, on behalf of each Acquired Fund, covenants that each Acquired Fund shall not sell or otherwise dispose of any Acquiring Fund Shares to be received in the transactions contemplated herein, except in distribution to its interestholders in accordance with the terms of this Agreement. 4.3. MIT, on behalf of each Acquired Fund, will assist the corresponding Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the record and beneficial ownership of shares of each class of each Acquired Fund. 4.4. Subject to the provisions hereof, NMIT, on its own behalf and on behalf of each Acquiring Fund, and MIT, on its own behalf and on behalf of each Acquired Fund, will take, or cause to be taken, all actions, and do, or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated herein. 4.5. MIT, on behalf of each Acquired Fund, shall furnish to its corresponding Acquiring Fund on the Closing Date, a statement of the total amount of each Acquired Fund's Assets and Liabilities as of the Closing Date, which statement shall be certified by an appropriate officer of MIT as being determined in accordance with generally accepted accounting principles consistently applied and as being valued in accordance with paragraph 2.1 hereof. 4.6. NMIT will prepare and file with the Securities and Exchange Commission ("SEC") a registration statement on Form N-1A so that all Acquiring Funds are registered under the Investment Company Act of 1940, as amended (the "1940 Act") as necessary to consummate the transactions contemplated hereby. NMIT will prepare and file with appropriate state securities commissions any notices or other filings required to consummate the transactions contemplated hereby. MIT, on behalf of each Acquired Fund, has provided or will provide each corresponding Acquiring Fund with the materials and information necessary to prepare the N-1A registration statement and with such other information and documents relating to each Acquired Fund as are requested by the corresponding Acquiring Fund and as are reasonably necessary for the preparation of the N-1A registration statement. I(B)-4 4.7. As soon after the Closing Date as is reasonably practicable, MIT, on behalf of each Acquired Fund shall prepare and file all federal and other tax returns and reports of each Acquired Fund required by law to be filed with respect to all periods ending on or before the Closing Date but not theretofore filed. 4.8. With respect to each Acquiring Fund, NMIT agrees to use all reasonable efforts to operate in accordance with its then current registration statement prepared in accordance with Form N-1A, as may be modified from time to time, including qualifying as a partnership under the Internal Revenue Code of 1986, as amended (the "Code"), for at least one (1) year following the Closing Date. 4.9. With respect to each Acquired Fund, MIT agrees to use all reasonable efforts to operate in accordance with its then current registration statement prepared in accordance with Form N-1A, as may be modified from time to time, including qualifying as a partnership under the Code, up to the Closing Date. 4.10. Following the transfer of Fund Assets by each Acquired Fund to the corresponding Acquiring Fund in exchange for Acquiring Fund Shares and the assumption of all Liabilities of the Acquired Fund as contemplated herein, MIT will file any final regulatory reports, including but not limited to any Form N-SAR with respect to such Acquired Fund(s), promptly after the Closing Date. As soon as practicable after the Closing Date and further subject to Section 1.7 hereof. MIT shall file an application pursuant to Section 8(f) of the 1940 Act for an order declaring that it has ceased to be an investment company; shall file a Certificate of Cancellation with the Secretary of State of Delaware in accordance with the Delaware Business Trust Act, and shall take, in accordance with Delaware Business Trust Act, all other steps necessary and proper to effect its complete dissolution. 5. REPRESENTATIONS AND WARRANTIES 5.1. NMIT, on behalf of itself and each Acquiring Fund, represents and warrants to MIT as follows: 5.1.a. NMIT was duly created pursuant to its Agreement and Declaration of Trust for the purpose of acting as a management investment company under the 1940 Act and is validly existing under the laws of the State of Delaware, and the Agreement and Declaration of Trust directs the Trustees to manage the affairs of NMIT and grants them all powers necessary or desirable to carry out such responsibility, including administering NMIT business as currently conducted by NMIT and as described in the current registration statement of NMIT; NMIT is registered as an investment company classified as an open-end management company under the 1940 Act, and its registration with the SEC as an investment company is in full force and effect; 5.1.b. The N-1A registration statement of each Acquiring Fund, will conform, at the Closing Date, in all material respects to the applicable requirements of the 1940 Act and the regulations thereunder and will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; I(B)-5 5.1.c. Each Acquiring Fund is not in violation of, and the execution, delivery and performance of this Agreement by NMIT for itself and on behalf of each Acquiring Fund does not and will not (i) violate NMIT's Agreement and Declaration of Trust or By-Laws, or (ii) result in a breach or violation of, or constitute a default under any material agreement or material instrument, to which NMIT is a party or by which its properties or assets are bound; 5.1.d. Except as previously disclosed in writing to MIT, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to NMIT's knowledge, threatened against NMIT or its business, the Acquiring Funds or any of their properties or assets, which, if adversely determined, would materially and adversely affect NMIT or an Acquiring Fund's financial condition or the conduct of their business, and NMIT knows of no facts that might form the basis for the institution of any such proceeding or investigation, and no Acquiring Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects, or is reasonably likely to materially and adversely affect, its business or its ability to consummate the transactions contemplated herein; 5.1.e. All issued and outstanding interests, including interests to be issued in connection with the Reorganization, of each Acquiring Fund class will, as of the Closing Date, be duly authorized and validly issued and outstanding, fully paid and non-assessable by NMIT and the Acquiring Fund does not have outstanding any option, warrants or other rights to subscribe for or purchase any of its interests nor is there outstanding any security convertible into any of its interests; 5.1.f. The execution, delivery and performance of this Agreement on behalf of each Acquiring Fund will have been duly authorized prior to the Closing Date by all necessary action on the part of NMIT and the Trustees, and this Agreement constitutes a valid and binding obligation of NMIT and each Acquiring Fund enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; 5.1.g. The Acquiring Fund Shares to be issued and delivered to the corresponding Acquired Fund for the account of the Acquired Fund interestholders, pursuant to the terms hereof, will have been duly authorized as of the Closing Date, if any, and, when so issued and delivered, will be duly and validly issued, fully paid and non-assessable, and the shares of beneficial interest of the Acquiring Fund issued and outstanding prior to the Closing Date, if any, were offered and sold in compliance with the applicable registration requirements, or exemptions therefrom, of the 1933 Act, and the applicable notice or filing requirements, or exemptions therefrom, of all applicable state securities laws, and the regulations thereunder, and no interestholder of an Acquiring Fund shall have any preemptive right of subscription or purchase in respect thereto; 5.1.h. From the date hereof to the Closing Date, any written information furnished by NMIT with respect to an Acquiring Fund for use in any materials provided in connection with the Reorganization does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information provided not misleading; I(B)-6 5.1.i. No governmental consents, approvals, authorizations or filings are required under the 1933 Act, the Securities Exchange Act of 1934 (the "1934 Act"), the 1940 Act or Delaware law for the execution of this Agreement by NMIT, for itself and on behalf of each Acquiring Fund, or the performance of the Agreement by NMIT, for itself and on behalf of each Acquiring Fund, except for the effectiveness of the N-1A registration statement, any necessary exemptive relief or no-action assurances requested from the SEC or its staff with respect to Sections 17(a) and 17(d) of the 1940 Act and Rule 17d-1 thereunder, and such other consents, approvals, authorizations and filings as have been made or received, and except for such consents, approvals, authorizations and filings as may be required subsequent to the Closing Date; and 5.1.j. Each Acquiring Fund intends to qualify as a partnership for federal income tax purposes. 5.2. MIT, on behalf of itself and each Acquired Fund, represents and warrants to NMIT as follows: 5.2.a. MIT was formed as a statutory business trust under the laws of the State of Delaware for the purpose of acting as a management investment company under the 1940 Act and is validly existing under the laws of the State of Delaware, and its Amended and Restated Declaration of Trust and the laws of the State of Delaware provide that the affairs of MIT shall be managed under the direction of the Trustees and grants them all powers necessary or desirable to carry out such responsibility, including administering MIT business as currently conducted by MIT and as described in the current prospectus of MIT; MIT is registered as an investment company classified as an open-end management company under the 1940 Act, and its registration with the SEC as an investment company is in full force and effect; 5.2.b. All of the issued and outstanding shares of beneficial interest of each Acquired Fund have been offered and sold in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities laws or exempt thereto; 5.2.c. Each Acquired Fund is not in violation of, and the execution, delivery and performance of this Agreement by MIT for itself and on behalf of each Acquired Fund does not and will not (i) violate MIT's Amended and Restated Declaration of Trust or By-Laws, or (ii) result in a breach or violation of, or constitute a default under any material agreement or material instrument, to which MIT is a party or by which its properties or assets are bound, except as otherwise previously disclosed in writing to the Acquiring Funds; 5.2.d. Except as previously disclosed in writing to NMIT, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to MIT's knowledge, threatened against MIT or its business, the Acquired Funds or any of their properties or assets which, if adversely determined, would materially and adversely affect MIT or an Acquired Fund's financial condition or the conduct of its business, and MIT knows of no facts that might form the basis for the institution of any such proceeding or investigation, and no Acquired Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects, or is reasonably likely to materially and adversely affect, its business or its ability to consummate the transactions contemplated herein; 5.2.e. The Statement of Assets and Liabilities, Statement of Operations and Statement of Changes in Net Assets of each Acquired Fund as of and for the year ended February 28, 1998, audited by PricewaterhouseCoopers LLP (copies of which have been or will be furnished to the corresponding Acquiring Fund) and the unaudited Statement of Assets and Liabilities, Statement of Operations and Statement of Changes in Net Assets of each Acquired Funds as of and for the six-month period ended August 31, 1998 (copies of which have been or will be furnished to the corresponding Acquiring Fund) present fairly, in all material respects, the financial position of each Acquired Fund as of such date and the results of its operations and the changes in its Net Assets for such period in accordance with generally accepted accounting principles consistently applied, and as of such date there were no Liabilities of any Acquired Fund known to MIT that were not disclosed therein but that would be required to be disclosed therein in accordance with generally accepted accounting principles; 5.2.f. Since the date of the most recent audited financial statements, there has not been any material adverse change in any Acquired Fund's financial condition, Assets, Liabilities or business, other than changes occurring in the ordinary course of business, or any incurrence by an Acquired Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed in writing to and accepted by the corresponding Acquiring Fund, prior to the Closing Date (for the purposes of this subparagraph (f), neither a decline in an Acquired Fund's net asset value per share nor a decrease in an Acquired Fund's size due to redemptions shall be deemed to constitute a material adverse change); 5.2.g. All federal and other tax returns and reports of MIT and each Acquired Fund required by law to be filed on or before the Closing Date, have been or will be filed, and all federal and other taxes owed by MIT on behalf of the Acquired Funds, if any, have been or will be paid so far as due, and to the best of MIT's knowledge, no such return is currently under audit and no assessment has been asserted with respect to any such return; 5.2.h. Each Acquired Fund has elected to qualify and has qualified as a partnership for federal income tax purposes under the Code, as of and since its first taxable year and, since its formation, has operated in a manner so that a regulated investment company, as defined in the Code, investing therein can continue to so qualify; 5.2.i. All issued and outstanding interests of each Acquired Fund are, and on the Closing Date will be, duly authorized and validly issued and outstanding, and fully paid and non-assessable by MIT, and all such interests will, at the time of the Closing(s), be held by the persons and in the amounts set forth in the list of Acquired Fund Investors provided to each corresponding Acquiring Fund, pursuant to paragraph 3.4, and no Acquired Fund has outstanding any options, warrants or other rights to subscribe for or purchase any of its shares, nor is there outstanding any security convertible into any of its interests; 5.2.j. At the Closing Date, each Acquired Fund will have good and marketable title to its Fund Assets and full right, power and authority to assign, deliver and otherwise transfer such Fund Assets hereunder, and upon delivery and payment for such Fund Assets as contemplated herein, the corresponding Acquiring Fund will acquire good and marketable title thereto, subject to no restrictions on the ownership or transfer thereof other than such restrictions as might arise under the 1933 Act or state securities laws, and except for any liens or transfer tax liens arising in connection with the transfer of Fund Assets pursuant to this Agreement; 5.2.k. The execution, delivery and performance of this Agreement on behalf of the Acquired Funds will have been duly authorized prior to the Closing Date by all necessary action on the part of MIT and the Trustees, and this Agreement constitutes a valid and binding obligation of MIT and each Acquired Fund enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; 5.2.l. From the date hereof to the Closing Date, any written information furnished by MIT, on behalf of the Acquired Funds, for use in any manner that may be necessary in connection with the transactions contemplated hereby does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information provided not misleading; I(B)-7 5.2.m. No governmental consents, approvals, authorizations or filings are required under the 1933 Act, the 1934 Act, the 1940 Act or Delaware law for the execution of this Agreement by MIT, for itself and on behalf of each Acquired Fund, or the performance of the Agreement by MIT for itself and on behalf of each Acquired Fund, except for any necessary exemptive relief or no-action assurances requested from the SEC or its staff with respect to Section 17(a) and 17(d) of the 1940 Act and Rule 17d-1 thereunder and except for such other consents, approvals, authorizations and filings as have been made or received, and such consents, approvals, authorizations and filings as may be required subsequent to the Closing Date, it being understood, however, that this Agreement and the transactions contemplated herein must be approved by the interestholders of the Acquired Funds as described in paragraph 8.1; and 5.2.n. At the Closing Date, the Acquired Funds will have good and marketable title to their assets and full right, power and authority to assign, deliver and otherwise transfer such assets. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED FUNDS The obligations of MIT to consummate the Reorganization with respect to each Acquired Fund shall be subject to the performance by NMIT, for itself and on behalf of each Acquiring Fund, of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions with respect to each corresponding Acquiring Fund: 6.1. All representations and warranties of NMIT with respect to each Acquiring Fund contained herein shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated herein, as of the Closing Date with the same force and effect as if made on and as of the Closing Date. 6.2. NMIT, on behalf of each Acquiring Fund, shall have delivered to MIT at the Closing(s) a certificate executed on behalf of each corresponding Acquiring Fund by NMIT's President, Secretary, Assistant Secretary, or other authorized officer, in a form and substance reasonably satisfactory to MIT and dated as of the Closing Date, to the effect that the representations and warranties of NMIT with respect to each Acquiring Fund made herein are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated herein, and as to such other matters as such Acquired Fund shall reasonably request. 6.3. Each Acquired Fund shall have received at the Closing(s) a favorable opinion of Morrison & Foerster LLP, counsel to NMIT (based upon or subject to such representations, assumptions, limitations or opinions of local counsel as such counsel may deem appropriate or necessary), dated as of the Closing Date, in a form (including the representations, assumptions, limitations or opinions of local counsel upon which it is based or to which it is subject) reasonably satisfactory to each Acquired Fund, substantially to the effect that: 6.3.a. NMIT is a duly registered, open-end, management investment company, and its registration with the SEC as an investment company under the 1940 Act is in full force and effect; 6.3.b. each Acquiring Fund is a portfolio of NMIT, which is a company duly created pursuant to its Agreement and Declaration of Trust, is validly existing and in good standing under the laws of the State of Delaware and the Agreement and Declaration of Trust directs the Trustees to manage the affairs of NMIT and grants them all powers necessary or desirable to carry out such responsibility, including administering NMIT's business as described in the current prospectuses of NMIT; I(B)-8 6.3.c. this Agreement has been duly authorized, executed and delivered on behalf of NMIT and each Acquiring Fund and, assuming due authorization, execution and delivery of this Agreement on behalf of the Acquired Funds, is a valid and binding obligation of NMIT enforceable against NMIT in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; 6.3.d. the Acquiring Fund Shares to be issued to the Acquired Funds Investors pursuant to this Agreement are duly authorized and upon such issuance will be validly issued and outstanding and fully paid and non-assessable, and no interestholder of an Acquiring Fund has any preemptive rights to subscription or purchase in respect thereof; 6.3.e. the N-1A registration statement has become effective with the SEC and, to the best of such counsel's knowledge, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or threatened; 6.3.f. no consent, approval, authorization, filing or order of any court or governmental authority of the United States or any state is required for the consummation of the Reorganization by NMIT with respect to each Acquiring Fund, except for such consents, approvals, authorizations and filings as have been made or received, except for such consents, approvals, authorizations and filings as may be required subsequent to the Closing Date; and except for such consents, approvals, authorizations and filings as may be required under state securities or blue sky laws; 6.3.g. to such counsel's knowledge, the execution and delivery of the Agreement and the performance of its terms by NMIT, and each Acquiring Fund, do not violate or result in a violation of the NMIT Agreement and Declaration of Trust or By-Laws, or any judgment, order or decree known to such counsel, of any court or arbiter, to which NMIT is a party, and, to such counsel's knowledge, will not constitute a material breach of the terms, conditions or provisions of, or constitute a default under, any contract, undertaking, indenture or other agreement by which NMIT is now bound or to which it is now a party; 6.3.h. to such counsel's knowledge, except as otherwise disclosed to MIT, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened against NMIT or an Acquiring Fund or any of their properties or assets and neither NMIT nor any Acquiring Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects, or would materially and adversely affect, its business. 6.4. As of the Closing Date with respect to the Reorganization of each Acquired Fund, there shall have been no material change in the investment objective, policies and restrictions nor any material change in the investment management fees, other fees payable for services provided to the Acquiring Funds, fee waiver or expense reimbursement undertakings as described in the N-1A registration statement. 6.5. With respect to each Acquiring Fund, the Board of Trustees of NMIT, including a majority of the "non-interested" Trustees, has determined that the Reorganization is in the best interests of each Acquiring Fund and that the interests of the existing interestholders of each Acquiring Fund would not be diluted as a result of the Reorganization. I(B)-9 6.6. For the period beginning at the Closing Date of the last Reorganization to occur and ending not less than six years thereafter, NMIT, its successor or assigns shall provide, or cause to be provided, liability coverage at least comparable to the liability coverage currently applicable to both former and current Trustees and officers of MIT, covering the actions of such Trustees and officers of MIT for the period they served as such. 6.7. NBAI shall have delivered to MIT, no later than April 15, 1999, a certificate, in form and substance reasonably satisfactory to MIT, to the effect that NBAI believes that, as of such date, The Bank of New York ("BONY") is capable of satisfactorily providing accounting services for the Acquired Funds and Acquiring Funds, on a combined basis, following the Reorganization ("Accounting Services"). Such certificate shall also set forth the basis for NBAI's determination that BONY is capable of satisfactorily providing the Accounting Services. 6.8. Stephens Inc., the principal underwriter for the NMIT, no later than the Closing Date, shall have received an exemptive order under Section 9(c) of the 1940 Act, authorizing such company to serve as the principal underwriter for the NMIT, or otherwise shall be authorized to serve in such capacity. 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUNDS The obligations of NMIT to consummate the Reorganization with respect to each Acquiring Fund shall be subject to the performance by MIT of all the obligations to be performed by it hereunder, with respect to each corresponding Acquired Fund, on or before the Closing Date and, in addition thereto, the following conditions: 7.1. All representations and warranties of MIT with respect to the Acquired Funds contained herein shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date, with the same force and effect as if made on and as of the Closing Date. 7.2. MIT, on behalf of each Acquired Fund, shall have delivered to each corresponding Acquiring Fund at the Closing(s) a certificate executed on behalf of each Acquired Fund, by MIT's President, SECRETARY or Assistant Secretary, or other authorized officer, in form and substance reasonably satisfactory to the Acquiring Funds and dated as of the Closing Date, to the effect that the representations and warranties of MIT with respect to each Acquired Fund made herein are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated herein and as to such other matters as each Acquiring Fund shall reasonably request. 7.3. Each Acquiring Fund shall have received at the Closing(s) a favorable opinion of Drinker Biddle & Reath LLP, counsel to MIT (based upon or subject to such representations, assumptions, limitations or opinions of local counsel as such counsel may deem appropriate or necessary), dated as of the Closing Date, in a form (including the representations, assumptions, limitations or opinions of local counsel upon which it is based or to which it is subject) reasonably satisfactory to such Acquiring Fund, substantially to the effect that: 7.3.a. MIT is a duly registered, open-end management investment company, and its registration with the SEC as an investment company under the 1940 Act is in full force and effect; 7.3.b. each Acquired Fund is a portfolio of MIT which is a duly formed statutory business trust, validly existing and in good standing under the laws of the State of Delaware, and the Amended and Restated Declaration of Trust and the laws of the State of Delaware provide that the affairs of MIT shall be managed under the direction of the Trustees and grants them all powers necessary or desirable to carry out such responsibility, including administering MIT's business as described in the current prospectuses of MIT; I(B)-10 7.3.c. this Agreement has been duly authorized, executed and delivered by MIT, for itself and on behalf of each Acquired Fund and, assuming due authorization, execution and delivery of this Agreement on behalf of each Acquiring Fund, is a valid and binding obligation of MIT, enforceable against MIT in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and court decisions with respect thereto, and such counsel will express no opinion with respect to the application of equitable principles in any proceeding, whether at law or in equity; 7.3.d. no consent, approval, authorization, filing or order of any governmental authority or to such counsel's knowledge, order of any court of the United States or any state is required for the consummation of the Reorganization by MIT with respect to each Acquired Fund, except for such consents, approvals, authorizations and filings as have been made or received, except for such consents, approvals, authorizations and filings as may be required subsequent to the Closing Date; and except for such consents, approvals, authorizations and filings as may be required under state securities or blue sky laws; 7.3.e. to such counsel's knowledge, the execution and delivery of the Agreement and the performance of its terms by MIT, and each Acquired Fund, do not violate or result in a violation of the MIT's Amended and Restated Declaration of Trust or By-Laws, or any judgment, order or decree known to such counsel, of any court or arbiter, to which MIT is a party, and, to such counsel's knowledge, will not constitute a material breach of the terms, conditions or provisions of, or constitute a default under, any contract, undertaking, indenture or other agreement by which MIT is now bound or to which it is now a party; and 7.3.f. to such counsel's knowledge, except as otherwise disclosed to NMIT, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened against MIT or an Acquired Fund or any of their properties or assets and neither MIT nor any Acquired Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects, or would materially and adversely affect, its business. 7.4. MIT shall have delivered to the Acquiring Funds, pursuant to paragraph 5.2(e), copies of financial statements of each Acquired Fund as of and for the year ended February 28, 1999, audited by PricewaterhouseCoopers LLP. 7.5. The Board of Trustees of MIT, including a majority of "non-interested" Trustees, has determined that the Reorganization is in the best interests of MIT and that the interests of the existing interestholders of MIT would not be diluted as a result of the Reorganization. 8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS The obligations of each Acquiring Fund and of each corresponding Acquired Fund herein are subject to the further conditions that on or before the Closing Date with respect to each Acquiring Fund and each corresponding Acquired Fund: I(B)-11 8.1. This Agreement and the transactions contemplated herein shall have been approved by a majority of the holders of the interests of each Acquired Fund, consistent with the provisions of the laws of the State of Delaware, MIT's Amended and Restated Declaration of Trust and the 1940 Act, and certified copies of the resolutions evidencing such approval shall have been delivered to each corresponding Acquiring Fund. Approval of this Agreement by a majority of the holders of the shares of beneficial interests outstanding and entitled to vote in an Acquired Fund shall constitute approval of all of the transactions contemplated herein, including the reorganization of all investment portfolios of MIT with NMIT and the termination of MIT. 8.2. On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or any of the transactions contemplated herein. 8.3. All consents of other parties and all other consents, orders, approvals and permits of federal, state and local regulatory authorities (including, without limitation, those of the SEC and of state securities authorities) deemed necessary by NMIT, on behalf of the Acquiring Funds or by MIT, on behalf of the Acquired Funds, to permit consummation, in all material respects, of the transactions contemplated herein shall have been obtained, except where failure to obtain any such consent, order or permit would not, in the opinion of the party asserting that the condition to closing has not been satisfied, involve a risk of a material adverse effect on the assets or properties of any Acquiring Fund or its corresponding Acquired Fund. 8.4. Except to the extent prohibited by Rule 19b-1 promulgated under the 1940 Act, each Acquired Fund shall have declared a dividend or dividends, with a record date and ex-dividend date prior to the Applicable Valuation Date, which, together with all previous dividends, shall have the effect of distributing to each Acquired Fund's interestholders substantially all of its net investment company taxable income, if any, for all taxable periods or years ending on or prior to the Closing Date (computed without regard to any deduction for dividends paid) and substantially all of its net capital gain, if any, realized for all taxable periods or years ending on or prior to the Closing Date (after reduction for any capital loss carry forward) determined as if the Acquired Fund is a "regulated investment company" under the Code. 8.5. The N-1A registration statement shall have become effective under the 1940 Act, no stop order suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1940 Act. 8.6. NMIT and MIT shall have received an opinion of Morrison & Foerster LLP addressed to both NMIT and MIT in a form reasonably satisfactory to them, and dated as of the Closing Date, substantially to the effect that on the basis of facts, representations, and assumptions set forth in such opinion that for federal income tax purposes: 8.6.a. each Reorganization will not be taxable for federal income tax purposes to each Acquiring Fund, or their respective interestholders; 8.6.b. the basis of an Acquired Fund's assets received by the corresponding Acquiring Fund pursuant to the Reorganization will be the same as the basis of those assets in the hands of the Acquired Fund immediately prior to the Reorganization; 8.6.c. the holding period of an Acquired Fund's assets in the hands of the corresponding Acquiring Fund will include the period for which such assets have been held by the Acquired Fund; 8.6.d. the basis of the Acquiring Fund Shares received by the interestholders of the corresponding Acquired Fund will be the same as the basis of the Acquired Fund shares surrendered by such interestholders pursuant to the Reorganization; I(B)-12 8.6.e. the holding period for the Acquiring Fund Shares received by the Acquired Fund interestholders will include the period during which such interestholders held the Acquired Fund shares surrendered therefor, provided that such Acquired Fund shares are held as a capital asset in the hands of the Acquired Fund interestholders on the date of the exchange; and 8.6.f. each Acquiring Fund will be treated as a partnership that is a continuation of the corresponding Acquired Fund. In rendering such opinion described in this paragraph 8.6, Morrison & Foerster LLP may require and, to the extent they deem necessary and appropriate, may rely upon representations made in certificates of NMIT and MIT, their affiliates, and principal interestholders. Notwithstanding anything herein to the contrary, neither an Acquiring Fund nor its corresponding Acquired Fund may waive the condition set forth in this paragraph 8.6. 8.7. NMIT and MIT shall have received a memorandum addressed to NMIT and the MIT, in form reasonably satisfactory to them, prepared by Morrison & Foerster LLP concerning the filing of notices and/or other documents, and the payment of fees, in connection with the shares to be issued by NMIT pursuant to this Agreement under applicable state securities laws or the exemption from such filing and payment requirements under such laws. 8.8. The SEC shall not have issued any unfavorable advisory report under Section 25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act. 8.9. MIT's agreements with each of its service contractors shall have terminated before or at the Closing, and each party has received reasonable assurance that no claim for damages (liquidated or otherwise) will arise as a result of such termination. 9. FINDER'S FEES AND EXPENSES 9.1. NMIT, for itself and on behalf of the Acquiring Funds and MIT, on behalf of itself and on behalf of the Acquired Funds, represent and warrant that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein. 9.2. NationsBanc Advisors, Inc. shall bear, or shall cause one of its affiliates to bear, the customary expenses associated with the transactions contemplated by this Agreement. 10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES 10.1. This Agreement constitutes the entire agreement between the parties and supersedes any prior or contemporaneous understanding or arrangement with respect to the subject matter hereof. 10.2. The representations, warranties and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall survive the consummation of the transactions contemplated herein. 11. TERMINATION 11.1. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing: 11.1.a. by the mutual written consent of NMIT and MIT; I(B)-13 11.1.b. by either NMIT or MIT by notice to the other, without liability to the terminating party on account of such termination (provided any such termination shall not excuse the terminating party from any liability arising out of a default or breach of this Agreement by such terminating party) if such Closing(s) shall not have occurred on or before December 31, 1999, or such other date as may be agreed to by the parties; or 11.1.c. by either NMIT or the MIT, in writing without liability to the terminating party on account of such termination (provided any such termination shall not excuse the terminating party from any liability arising out of a material default or breach of this Agreement by such terminating party), if (i) the other party shall fail to perform in any material respect its agreements contained herein required to be performed prior to the Closing Date, (ii) the other party materially breaches or shall have materially breached any of its representations, warranties or covenants contained herein, or (iii) any other express condition precedent to the obligations of the terminating party has not been met and it reasonably appears that it will not or cannot be met. 11.2. Termination of this Agreement pursuant to paragraphs 11.1(a) or (b) shall terminate all obligations of the parties hereunder with respect to the Acquired Fund and Acquiring Fund affected by such termination, or with respect to NMIT and MIT, as the case may be, and there shall be no liability for damages on the part of NMIT or MIT or the Trustees or officers of NMIT or Trustees or officers of MIT, on account of termination pursuant to paragraphs 11.1(a) or (b), except for possible liability on the part of Nations Funds or MIT as provided in paragraphs 11.1(a) or (b); provided, however, that notwithstanding any termination of this Agreement pursuant to paragraph 11.1, such termination shall not relieve NationsBanc Advisors, Inc. of its obligations pursuant to Section 9.2 hereof. 12. AMENDMENTS This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of NMIT, acting on behalf of each Acquiring Fund and the authorized officers of MIT, acting on behalf of each Acquired Fund; provided, however, that following the meeting of the interestholders of the Acquired Funds, no such amendment may have the effect of changing the provisions for determining the number of interests of the corresponding Acquiring Funds to be issued to the Acquired Fund intrestholders under this Agreement to the detriment of such Acquired Fund interestholders, or otherwise materially and adversely affecting such Acquired Fund interestholders, without the Acquired Fund obtaining the MIT interestholders further approval except that nothing in this paragraph 12 shall be construed to prohibit any Acquiring Fund and the corresponding Acquired Fund from amending this Agreement to change the Closing Date or Applicable Valuation Date by mutual agreement. At any time prior to or (to the fullest extent permitted by law) after approval of this Agreement by the interestholders of MIT either party may waive any breach by the other party or the failure to satisfy any of the conditions to its obligations (such waiver to be in writing and authorized by the Board of Trustees or Trustees of the waiving party, or any appropriate officer of either party, with or without the approval of such party's interestholders). 13. NOTICES Any notice, report, statement or demand required or permitted by any provision of this Agreement shall be in writing and shall be given by prepaid telegraph, telecopy, certified mail or overnight express courier addressed to: I(B)-14 For NMIT, on behalf of itself and each Acquiring Fund: Richard H. Blank, Jr. Secretary c/o Stephens Inc. 111 Center Street Little Rock, Arkansas 72201 With copies to: Robert M. Kurucza and Marco E. Adelfio Morrison & Foerster LLP 2000 Pennsylvania Avenue, N.W., Suite 5500 Washington, D.C. 20006 For MIT, on behalf of itself and each Acquired Fund: c/o W. Bruce McConnel, III Secretary Drinker Biddle & Reath LLP 1345 Chestnut Street Philadelphia, PA 19107-3496 14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY 14.1. The article and paragraph headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All references herein to articles, paragraphs, subparagraphs or Schedules shall be construed as referring to articles, paragraphs or subparagraphs hereof or Schedules hereto, respectively. Whenever the terms hereto, hereunder, herein or hereof are used in this Agreement, they shall be construed as referring to this entire Agreement, rather than to any individual article, paragraph, subparagraph or sentence. 14.2. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 14.3. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws principles otherwise applicable therein. 14.4. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement. 14.5. It is expressly agreed that the obligations of NMIT hereunder shall not be binding upon any of the Trustees, interestholders, nominees, officers, agents, or employees of NMIT personally, but shall bind only the assets and the property of the respective Acquiring Fund of NMIT, as provided in its Agreement and Declaration of Trust. The execution and delivery by such officers shall not be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and the property of the respective Acquiring Fund of NMIT as provided in its Agreement and Declaration of Trust. I(B)-15 14.6. No Acquired Fund shall have any liability for the obligations of any other Acquired Fund hereunder and no Acquiring Fund shall have any liability for the obligation of any other Acquiring Fund hereunder. 14.7. The obligations of "MIT" entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, interestholders, or representatives of MIT personally, but bind only the business trust property, and all persons dealing with any shares of beneficial interest of MIT must look solely to the business trust property belonging to such class for the enforcement of any claims against MIT. 14.8. Any announcement or similar publicity with respect to this Agreement or the transactions contemplated herein shall be made only at such time and in such manner as the parties shall agree; provided that nothing herein shall prevent either party upon notice to the other party from making such public announcements as such party's counsel may consider advisable in order to satisfy the party's legal and contractual obligations in such regard. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their authorized officers, and attested by their Secretaries as of the day and year first written above.
NATIONS MASTER INVESTMENT TRUST, for itself and on ATTEST: behalf of each Acquiring Fund /s/ Richard H. Blank, Jr. By: /s/ A. Max Walker - - ---------------------------- ----------------------------- Richard H. Blank, Jr. A. Max Walker Secretary President and Chairman of the Board of Trustees MASTER INVESTMENT TRUST, SERIES I., for itself and on ATTEST: behalf of each Acquired Fund /s/ W. Bruce McConnel, III By: /s/ Monroe Haegele - - ---------------------------- ----------------------------- W. Bruce McConnel, III Monroe Haegele Secretary President NATIONSBANC ADVISORS, INC., hereby joins in this Agreement with respect to, and agrees to be bound by Section 9.2 and 11.2 hereof By: /s/ Robert H. Gordon ----------------------------- Robert H. Gordon President
I(B)-16 SCHEDULE A ---------- ACQUIRED FUND ACQUIRING FUND INVESTMENT GRADE BOND PORTFOLIO NATIONS INTERMEDIATE BOND PORTFOLIO BLUE CHIP MASTER PORTFOLIO NATIONS BLUE CHIP MASTER PORTFOLIO A-1 APPENDIX II EXPENSE SUMMARIES OF THE PACIFIC HORIZON FUNDS AND CORRESPONDING NATIONS FUNDS ----------------------------------------------- The following tables (a) compare the fees and expenses as of September 30, 1998, for the Shell Nations Funds and their corresponding Pacific Horizon Funds and as of October 31, 1998 for the Operating Nations Funds and their corresponding Pacific Horizon Funds and (b) show the estimated fees and expenses for the corresponding Nations Funds on a PRO FORMA basis after giving effect to the reorganization. The Nations Funds' management fees as of September 30, 1998 or October 31, 1998, as applicable, have been adjusted to reflect a Board-approved reduction in the contractual fee rates under the management contracts. The contractual management fees shown are expected to become effective in May 1999, at or prior to the consummation of the Reorganization. The purpose of these tables is to assist shareholders in understanding the various costs and expenses that investors in these portfolios will bear as shareholders. The tables do not reflect any charges that may be imposed by institutions directly on their customer accounts in connection with investments in the portfolios. The fund operating expense levels shown in this Proxy/Prospectus assume current net asset levels; PRO FORMA expense levels shown should not be considered an actual representation of future expenses or performance. Such PRO FORMA expense levels project anticipated levels but may be greater or less than those shown. NBAI has agreed that it will commit to waive fees and/or reimburse expenses as needed to ensure that, for one year from the Reorganization, the Nations Funds total expense ratios will not exceed the PRO FORMA after waiver expense ratios shown here, absent a determination by the Nations Board that extraordinary circumstances or a material reduction in Fund assets has occurred that has made it appropriate to permit an increase in expense ratios. There can be no assurance that such expense ratios will continue after this commitment expires. Nations Asset Allocation Fund, Nations Blue Chip Fund, Nations California Municipal Bond Fund, Nations California Tax-Exempt Reserves, Nations Capital Income Fund and Nations Intermediate Bond Fund are new investment portfolios with nominal assets and liabilities that will commence investment operations upon the completion of the Reorganization. II-1 PACIFIC HORIZON ASSET ALLOCATION FUND-A SHARES NATIONS ASSET ALLOCATION FUND-INVESTOR A SHARES
PACIFIC HORIZON NATIONS ASSET ASSET ALLOCATION FUND ALLOCATION FUND PRO FORMA --------------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ 5.75% 5.75% Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)1 ....................... 1.00% 1.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees.................................... 0.40% 0.65% 12b-1/Shareholder Servicing Fees.................... 0.25% 0.25% Other Expenses (after waivers)2..................... 0.32% 0.30% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3 ......... 0.97% 1.20% ==== ====
- - -------------------- 1 Certain A Shares and Investor A Shares that are purchased at net asset value are subject to a Deferred Sales Charge if redeemed within two years of purchase. 2 Other Expenses (absent waivers) would be 0.32% for the Nations Asset Allocation Fund. 3 Total Fund Operating Expenses (absent waivers) would be 1.22% for the Nations Asset Allocation Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period:
PACIFIC HORIZON NATIONS ASSET ASSET ALLOCATION ALLOCATION FUND FUND PRO FORMA 1 year ............................................ $67 $69 3 years ........................................... 87 93 5 years ........................................... 108 120 10 years .......................................... 170 195
- - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-2 PACIFIC HORIZON ASSET ALLOCATION FUND-B SHARES NATIONS ASSET ALLOCATION FUND-INVESTOR B SHARES
PACIFIC HORIZON NATIONS ASSET ASSET ALLOCATION FUND ALLOCATION FUND PRO FORMA --------------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load(as a percentage of redemption proceeds)1 ...................... 5.00% 5.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees..................................... 0.40% 0.65% 12b-1/Shareholder Servicing Fees.................... 1.00% 1.00% Other Expenses (after waivers)2..................... 0.32% 0.30% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3......... 1.72% 1.95% ==== ====
- - -------------------- 1 Investor B Shares purchased prior to January 1, 1996 or after July 31, 1997 are subject to the Deferred Sales Charge as set forth in the applicable schedule in the prospectus. The Maximum Deferred Sales Charge is 5.00% in the first year after purchase, declining to 1.00% in the sixth year after purchase and eliminated thereafter. 2 Other Expenses (absent waivers) would be 0.32% for the Nations Asset Allocation Fund. 3 Total Fund Operating Expenses (absent waivers) would be 1.97% for the Nations Asset Allocation Fund. II-3 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON ASSET NATIONS ASSET ALLOCATION ALLOCATION FUND FUND PRO FORMA ---- --------- 1 year ..................... $67 $70 3 years .................... 84 91 5 years .................... 113 125 10 years ................... 203 208 You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) no redemption at the end of each time period: PACIFIC HORIZON NATIONS ASSET ASSET ALLOCATION ALLOCATION FUND FUND PRO FORMA ---- --------- 1 year ..................... $17 $20 3 years .................... 54 61 5 years .................... 93 105 10 years ................... 203 208 - - -------------------- * THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THESE EXAMPLES ASSUME THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-4 PACIFIC HORIZON ASSET ALLOCATION FUND-K SHARES NATIONS ASSET ALLOCATION FUND-INVESTOR C SHARES
PACIFIC HORIZON NATIONS ASSET ASSET ALLOCATION FUND ALLOCATION FUND PRO FORMA --------------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds) ....................... None 1.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees .................................... 0.40% 0.65% 12b-1/Shareholder Servicing Fees (after waivers)1... 0.75% 1.00% Other Expenses (after waivers)2..................... 0.32% 0.30% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3.......... 1.47% 1.95% ==== ====
- - -------------------- 1 Distribution and Shareholder Servicing Fees (absent waivers) would be 1.00% for the Pacific Horizon Asset Allocation Fund. 2 Other Expenses (absent waivers) would be 0.32% for the Nations Asset Allocation Fund. 3 Total Fund Operating Expenses (absent waivers) would be 1.72% for the Pacific Horizon Asset Allocation Fund an 1.97% for the Nations Asset Allocation Fund. II-5 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS ASSET ASSET ALLOCATION ALLOCATION FUND FUND PRO FORMA ---- --------- 1 year ......................... $ 15 $ 30 3 years ........................ 46 61 5 years ........................ 80 105 10 years ....................... 176 228 You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) no redemption at the end of each time period: PACIFIC HORIZON NATIONS ASSET ASSET ALLOCATION ALLOCATION FUND FUND PRO FORMA ---- --------- 1 year ......................... $ 15 $ 20 3 years ........................ 46 61 5 years ........................ 80 105 10 years ....................... 176 228 - - -------------------- * THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THESE EXAMPLES ASSUME THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-6 PACIFIC HORIZON ASSET ALLOCATION FUND-SRF SHARES NATIONS ASSET ALLOCATION FUND-SEAFIRST SHARES
PACIFIC HORIZON NATIONS ASSET ASSET ALLOCATION FUND ALLOCATION FUND PRO FORMA --------------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds) ........................ None None Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees .................................... 0.40% 0.65% 12b-1/Shareholder Servicing Fees (after waivers)1... 0.23% 0.00% Other Expenses (after waivers)2..................... 0.32% 0.30% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3.......... 0.95% 0.95% ==== ====
- - -------------------- 1 Distribution and Shareholder Servicing Fees (absent waivers) would be 0.25% for the Pacific Horizon Asset Allocation Fund and the Nations Asset Allocation Fund. 2 Other Expenses (absent waivers) would be 0.32% for the Nations Asset Allocation Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.97% for the Pacific Horizon Asset Allocation Fund and 1.22% for the Nations Asset Allocation Fund. II-7 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS ASSET ASSET ALLOCATION ALLOCATION FUND FUND PRO FORMA ---- --------- 1 year ............................ $ 10 $ 10 3 years ........................... 30 30 5 years ........................... 53 53 10 years .......................... 117 117 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON BLUE CHIP FUND-A SHARES NATIONS BLUE CHIP FUND-INVESTOR A SHARES
PACIFIC HORIZON NATIONS BLUE BLUE CHIP CHIP FUND FUND PRO FORMA ---- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ............ 5.75% 5.75% Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)1........................... 1.00% 1.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees .................................... 0.50% 0.65% 12b-1/Shareholder Servicing Fees.................... 0.25% 0.25% Other Expenses (after waivers)2..................... 0.45% 0.30% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:.......... 1.20% 1.20% ==== ====
II-8 - - -------------------- 1 Certain A Shares and Investor A Shares that are purchased at net asset value are subject to a Deferred Sales Charge if redeemed within two years of purchase. 2 Other Expenses (absent waivers) would be 0.48% for the Pacific Horizon Blue Chip Fund and 0.38% for the Nations Blue Chip Fund. 3 Total Fund Operating Expenses (absent waivers) would be 1.23% for the Blue Chip Fund and 1.28% for the Nations Blue Chip Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS BLUE BLUE CHIP CHIP FUND FUND PRO FORMA ---- --------- 1 year ................................ $ 69 $ 69 3 years ............................... 93 93 5 years ............................... 120 120 10 years .............................. 195 195 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-9 PACIFIC HORIZON BLUE CHIP FUND-B SHARES NATIONS BLUE CHIP FUND-INVESTOR B SHARES
NATIONS BLUE PACIFIC HORIZON CHIP FUND BLUE CHIP FUND PRO FORMA SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)1 .......................... 5.00% 5.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees .................................... 0.50% 0.65% 12b-1/Shareholder Servicing Fees.................... 1.00% 1.00% Other Expenses (after waivers)2..................... 0.45% 0.30% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:.......... 1.95% 1.95% ==== ====
- - -------------------- 1 Investor B Shares purchased prior to January 1, 1996 or after July 31, 1997 are subject to the Deferred Sales Charge as set forth in the applicable schedule in the prospectus. The Maximum Deferred Sales Charge is 5.00% in the first year after purchase, declining to 1.00% in the sixth year after purchase and eliminated thereafter. 2 Other Expenses (absent waivers) would be 0.48% for the Pacific Horizon Blue Chip Fund and 0.38% for Nations Blue Chip Fund. 3 Total Fund Operating Expenses (absent waivers) would be 1.98% for the Pacific Horizon Blue Chip Fund and 2.03% for Nations Blue Chip Fund. II-10 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS BLUE BLUE CHIP CHIP FUND FUND PRO FORMA ---- --------- 1 year ............................... $ 70 $ 70 3 years .............................. 91 91 5 years .............................. 125 125 10 years ............................. 227 208 You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) no redemption at the end of each time period: PACIFIC HORIZON NATIONS BLUE BLUE CHIP CHIP FUND FUND PRO FORMA ---- --------- 1 year ............................... $ 20 $ 20 3 years .............................. 61 61 5 years .............................. 105 105 10 years ............................. 227 208 - - -------------------- * THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THESE EXAMPLES ASSUME THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-11 PACIFIC HORIZON BLUE CHIP FUND-K SHARES NATIONS BLUE CHIP FUND-INVESTOR C SHARES
PACIFIC HORIZON NATIONS BLUE BLUE CHIP CHIP FUND FUND PRO FORMA SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)............................ None 1.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees .................................... 0.50% 0.65% 12b-1/Shareholder Servicing Fees (after waivers)1... 0.75% 1.00% Other Expenses (after waivers)2..................... 0.45% 0.30% ---- ---- TOTAL FUND OPERATING EXPENSES (after waivers)3:.......... 1.70% 1.95% ==== ====
- - -------------------- 1 Distribution and Servicing Fees (absent waivers) would be 1.00% for the Pacific Horizon Blue Chip Fund. 2 Other Expenses (absent waivers) would be 0.48% for the Pacific Horizon Blue Chip Fund and 0.38% for Nations Blue Chip Fund. 3 Total Fund Operating Expenses (absent waivers) would be 1.98% for the Pacific Horizon Blue Chip Fund and 2.03% for Nations Blue Chip Fund. II-12 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS BLUE BLUE CHIP CHIP FUND FUND PRO FORMA ---- --------- 1 year ............................ $ 17 $ 30 3 years ........................... 54 61 5 years ........................... 92 105 10 years .......................... 202 228 You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) no redemption at the end of each time period: PACIFIC HORIZON NATIONS BLUE CHIP BLUE CHIP FUND FUND PRO FORMA ---- --------- 1 year ............................ $ 17 $ 20 3 years ........................... 54 61 5 years ........................... 92 105 10 years .......................... 202 228 - - ------------------- * THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THESE EXAMPLES ASSUME THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-13 PACIFIC HORIZON BLUE CHIP FUND-SRF SHARES NATIONS BLUE CHIP FUND-SEAFIRST SHARES
PACIFIC HORIZON NATIONS BLUE BLUE CHIP CHIP FUND FUND PRO FORMA ---- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)............................ None None Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees .................................... 0.50% 0.65% 12b-1/Shareholder Servicing Fees (after waivers)1... 0.00% 0.00% Other Expenses (after waivers)2..................... 0.45% 0.30% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:.......... 0.95% 0.95% ==== ====
- - -------------------- 1 Distribution and Servicing Fees (absent waivers) would be 0.25% for the Pacific Horizon Blue Chip Fund and Nations Blue Chip Fund. 2 Other Expenses (absent waivers) would be 0.48% for the Pacific Horizon Blue Chip Fund and 0.38% for Nations Blue Chip Fund. 3 Total Fund Operating Expenses (absent waivers) would be 1.23% for the Pacific Horizon Blue Chip Fund and 1.28% for Nations Blue Chip Fund. II-14 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS BLUE BLUE CHIP CHIP FUND FUND PRO FORMA 1 year ............................. $ 10 $ 10 3 years ............................ 30 30 5 years ............................ 53 53 10 years ........................... 117 117 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-15 PACIFIC HORIZON CALIFORNIA MUNICIPAL BOND FUND-A SHARES NATIONS CALIFORNIA MUNICIPAL BOND FUND-INVESTOR A SHARES
NATIONS PACIFIC HORIZON CALIFORNIA CALIFORNIA MUNICIPAL BOND MUNICIPAL BOND FUND FUND PRO FORMA ---- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ............ 4.75% 4.75% Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)1 .......................... 1.00% 1.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)2.................... 0.30% 0.28% 12b-1/Shareholder Servicing Fees3................... 0.25% 0.20% Other Expenses...................................... 0.39% 0.32% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)4:.......... 0.94% 0.80% ==== =====
- - -------------------- 1 Certain A Shares and Investor A Shares that are purchased at net asset value are subject to a Deferred Sales Charge if redeemed within two years of purchase. 2 Management Fees (absent waivers) would be 0.50% for the Nations California Municipal Bond Fund. 3 Distribution and Servicing Fees (absent waivers) would be 0.25% for the Nations California Municipal Bond Fund. 4 Total Fund Operating Expenses (absent waivers) would be 1.07% for the Nations California Municipal Bond Fund. II-16 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: NATIONS PACIFIC HORIZON CALIFORNIA CALIFORNIA MUNICIPAL BOND MUNICIPAL BOND FUND FUND PRO FORMA 1 year ............................. $ 57 $ 55 3 years ............................ 76 72 5 years ............................ 97 90 10 years ........................... 158 142 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-17 PACIFIC HORIZON CALIFORNIA MUNICIPAL BOND FUND-B SHARES NATIONS CALIFORNIA MUNICIPAL BOND FUND-INVESTOR B SHARES
NATIONS PACIFIC HORIZON CALIFORNIA CALIFORNIA MUNICIPAL BOND MUNICIPAL BOND FUND FUND PRO FORMA ---- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)1........................... 5.00% 5.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)2.................... 0.30% 0.28% 12b-1/Shareholder Servicing Fees (after waivers)3... 1.00% 0.85% Other Expenses (after waivers)...................... 0.39% 0.32% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)4........... 1.69% 1.45% ==== =====
- - --------------- 1 Investor B Shares purchased prior to January 1, 1996 or after July 31, 1997 are subject to the Deferred Sales Charge as set forth in the applicable schedule. The Maximum Deferred Sales Charge is 5.00% in the first year after purchase, declining to 1.00% in the sixth year after purchase and eliminated thereafter. 2 Management Fees (absent waivers) would be 0.50% for the Nations California Municipal Bond Fund. 3 Distribution and Servicing Fees (absent waivers) would be 1.00% for the Nations California Municipal Bond Fund. 4 Total Fund Operating Expenses (absent waivers) would be 1.82% for the Nations California Municipal Bond Fund. II-18 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: NATIONS PACIFIC HORIZON CALIFORNIA CALIFORNIA MUNICIPAL BOND MUNICIPAL BOND FUND FUND PRO FORMA ---- --------- 1 year ............................. $ 67 $ 65 3 years ............................ 83 76 5 years ............................ 112 99 10 years ........................... 200 157 You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) no redemption at the end of each time period: NATIONS PACIFIC HORIZON CALIFORNIA CALIFORNIA MUNICIPAL BOND MUNICIPAL BOND FUND FUND PRO FORMA ---- --------- 1 year ............................. $ 17 $ 15 3 years ............................ 53 46 5 years ............................ 92 79 10 years ........................... 200 157 - - -------------------- * THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THESE EXAMPLES ASSUME THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-19 PACIFIC HORIZON CALIFORNIA TAX-EXEMPT MONEY MARKET FUND- HORIZON SERVICE SHARES NATIONS CALIFORNIA TAX-EXEMPT RESERVES-ADVISER SHARES
PACIFIC HORIZON NATIONS CALIFORNIA CALIFORNIA TAX-EXEMPT TAX-EXEMPT MONEY MARKET RESERVES FUND PRO FORMA ---- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds) ........................ None None Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.10% 0.10% 12b-1/Shareholder Servicing Fees.................... 0.25% 0.25% Other Expenses (after waivers)2..................... 0.14% 0.10% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3.......... 0.49% 0.45% ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.15% for the Nations California Tax-Exempt Reserves. 2 Other Expenses (absent waivers) would be 0.14% for the Nations California Tax-Exempt Reserves. 3 Total Fund Operating Expenses (absent waivers) would be 0.54% for the Nations California Tax-Exempt Reserves. II-20 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS CALIFORNIA TAX CALIFORNIA EXEMPT MONEY TAX-EXEMPT MARKET FUND RESERVES PRO FORMA 1 year ............................. $ 5 $ 5 3 years ............................ 16 14 5 years ............................ 27 25 10 years ........................... 62 57 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-21 PACIFIC HORIZON CALIFORNIA TAX-EXEMPT MONEY MARKET FUND- PACIFIC HORIZON SHARES NATIONS CALIFORNIA TAX-EXEMPT RESERVES-INVESTOR SHARES
PACIFIC HORIZON NATIONS CALIFORNIA CALIFORNIA TAX-EXEMPT TAX-EXEMPT MONEY MARKET RESERVES FUND PRO FORMA ---- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds) ........................ None None Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.10% 0.10% 12b-1/Shareholder Servicing Fees.................... 0.35% 0.35% Other Expenses (after waivers)2..................... 0.11% 0.10% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3 0.56% 0.55% ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.15% for the Nations California Tax-Exempt Reserves. 2 Other Expenses (absent waivers) would be 0.14% for the Pacific Horizon California Tax-Exempt Money Market Fund and the Nations California Tax-Exempt Reserves. 3 Total Fund Operating Expenses (absent waivers) would be 0.59% for the Pacific Horizon California Tax-Exempt Money Market Fund and 0.64% for the Nations California Tax-Exempt Reserves. II-22 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: NATIONS PACIFIC HORIZON CALIFORNIA CALIFORNIA TAX TAX-EXEMPT EXEMPT MONEY RESERVES MARKET FUND PRO FORMA ----------- --------- 1 year ............................... $ 6 $ 6 3 years .............................. 18 18 5 years .............................. 31 31 10 years ............................. 70 69 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-23 PACIFIC HORIZON CALIFORNIA TAX-EXEMPT MONEY MARKET FUND- S AND X SHARES NATIONS CALIFORNIA TAX-EXEMPT RESERVES-DAILY SHARES
PACIFIC HORIZON PACIFIC HORIZON CALIFORNIA CALIFORNIA NATIONS TAX-EXEMPT TAX-EXEMPT CALIFORNIA MONEY MARKET MONEY MARKET TAX-EXEMPT FUND FUND RESERVES S SHARES X SHARES PRO FORMA SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load(as a percentage of redemption proceeds) ........................... None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.10% 0.10% 0.10% 12b-1/Shareholder Servicing Fees(after waivers)2.... 0.55% 0.55% 0.60% Other Expenses (after waivers)3..................... 0.14% 0.14% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):4 0.79% 0.79% 0.80% ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.15% for the Nations California Tax-Exempt Reserves. 2 Distribution and Shareholder Servicing Fees (absent waivers) would be 1.00% for S Shares of the Pacific Horizon California Tax-Exempt Money Market Fund and 0.57% for X Shares of the Pacific Horizon California Tax-Exempt Money Market Fund. 3 Other Expenses (absent waivers) would be 0.14% for Nations California Tax-Exempt Reserves. 4 Total Fund Operating Expenses (absent waivers) would be 1.24% for S Shares of the Pacific Horizon California Tax-Exempt Money Market Fund, 0.81% for the X Shares of the Pacific Horizon California Tax-Exempt Money Market Fund and 0.89% for Nations California Tax-Exempt Reserves. II-24 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON PACIFIC HORIZON CALIFORNIA CALIFORNIA NATIONS TAX-EXEMPT MONEY TAX-EXEMPT CALIFORNIA MARKET FUND MONEY MARKET TAX-EXEMPT S SHARES FUND RESERVES X SHARES PRO FORMA 1 year .............. $ 8 $ 8 $ 8 3 years ............. 25 25 26 5 years ............. 44 44 44 10 years ............ 98 98 99 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly II-25 PACIFIC HORIZON CAPITAL INCOME FUND-A SHARES NATIONS CAPITAL INCOME FUND-INVESTOR A SHARES
PACIFIC HORIZON NATIONS CAPITAL CAPITAL INCOME INCOME FUND FUND PRO FORMA SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ 5.75% 5.75% Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load(as a percentage of redemption proceeds)1........................... 1.00% 1.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees .................................... 0.45% 0.65% 12b-1/Shareholder Servicing Fees.................... 0.25% 0.25% Other Expenses...................................... 0.51% 0.33% ---- ---- TOTAL FUND OPERATING EXPENSES: 1.21% 1.23% ==== ====
- - -------------------- 1 Certain A Shares and Investor A Shares that are purchased at net asset value are subject to a Deferred Sales Charge if redeemed within two years of purchase. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS CAPITAL CAPITAL INCOME INCOME FUND FUND PRO FORMA 1 year .......................... $ 69 $ 69 3 years ......................... 94 94 5 years ......................... 120 121 10 years ........................ 196 198 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-26 PACIFIC HORIZON CAPITAL INCOME FUND-B SHARES NATIONS CAPITAL INCOME FUND-INVESTOR B SHARES
PACIFIC HORIZON NATIONS CAPITAL CAPITAL INCOME INCOME FUND FUND PRO FORMA ---- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)1 .......................... 5.00% 5.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees .................................... 0.45% 0.65% 12b-1/Shareholder Servicing Fees.................... 1.00% 1.00% Other Expenses ..................................... 0.51% 0.33% ---- ---- TOTAL FUND OPERATING EXPENSES:........................... 1.96% 1.98% ==== ====
- - -------------------- 1 Investor B Shares purchased prior to January 1, 1996 or after July 31, 1997 are subject to the Deferred Sales Charge as set forth in the applicable schedule. The Maximum Deferred Sales Charge is 5.00% in the first year after purchase, declining to 1.00% in the sixth year after purchase and eliminated thereafter. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS CAPITAL CAPITAL INCOME INCOME FUND FUND PRO FORMA ---- --------- 1 year ................................ $ 70 $ 70 3 years ............................... 92 92 5 years ............................... 126 127 10 years .............................. 229 211 II-27 You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) no redemption at the end of each time period: PACIFIC HORIZON NATIONS CAPITAL CAPITAL INCOME INCOME FUND FUND PRO FORMA ---- --------- 1 year ................................ $ 20 $ 20 3 years ............................... 62 62 5 years ............................... 106 107 10 years .............................. 229 211 - - ------------------- * These examples should not be considered a representation of future expenses which may be more or less than those shown. The assumed 5% annual return is hypothetical and should not be considered a representation of past or future annual return; actual return may be greater or less than the assumed amount. These examples assume that all dividends and other distributions are reinvested and that the percentage amounts listed under Total Fund Operating Expenses above remain the same in the years shown. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON CAPITAL INCOME FUND-K SHARES NATIONS CAPITAL INCOME FUND-INVESTOR C SHARES
PACIFIC HORIZON NATIONS CAPITAL CAPITAL INCOME INCOME FUND FUND PRO FORMA SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load(as a percentage of redemption proceeds) ........................... None 1.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees .................................... 0.45% 0.65% 12b-1/Shareholder Servicing Fees(after waivers)1.... 0.75% 1.00% Other Expenses...................................... 0.51% 0.33% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):2 1.71% 1.98% ==== ====
II-28 - - -------------------- 1 Distribution and Shareholder Servicing Fees (absent waivers) would be 1.00% for Pacific Horizon Capital Income Fund. 2 Total Fund Operating Expenses (absent waivers) would be 1.96% for the Pacific Horizon Capital Income Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS CAPITAL CAPITAL INCOME INCOME FUND FUND PRO FORMA ---- --------- 1 year ................................ $ 17 $ 30 3 years ............................... 54 62 5 years ............................... 93 107 10 years .............................. 203 232 You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) no redemption at the end of each time period: PACIFIC HORIZON NATIONS CAPITAL CAPITAL INCOME INCOME FUND FUND PRO FORMA ---- --------- 1 year ................................ $ 17 $ 20 3 years ............................... 54 62 5 years ............................... 93 107 10 years .............................. 203 232 - - -------------------- * These examples should not be considered a representation of future expenses which may be more or less than those shown. The assumed 5% annual return is hypothetical and should not be considered a representation of past or future annual return; actual return may be greater or less than the assumed amount. These examples assume that all dividends and other distributions are reinvested and that the percentage amounts listed under Total Fund Operating Expenses above remain the same in the years shown. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-29 PACIFIC HORIZON GOVERNMENT FUND-HORIZON SHARES NATIONS GOVERNMENT RESERVES-CAPITAL SHARES
PACIFIC HORIZON NATIONS GOVERNMENT FUND GOVERNMENT COMBINED FUND RESERVES PRO FORMA SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ......... None None None Maximum Sales Load Imposed on Reinvested Dividends......................... None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)......................... None None None Redemption Fees ................................. None None None Exchange Fee .................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1................. 0.05% 0.10% 0.10% 12b-1/Shareholder Servicing Fees................. 0.00% 0.00% 0.00% Other Expenses (after waivers)2.................. 0.18% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:....... 0.23% 0.20% 0.20% ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.10% for the Government Fund and 0.15% for Nations Government Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Government Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.28% for the Government Fund and 0.29% for Nations Government Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: II-30 PACIFIC HORIZON NATIONS GOVERNMENT FUND GOVERNMENT COMBINED FUND RESERVES PRO FORMA 1 year ............... $ 2 $ 2 $ 2 3 years .............. 7 6 6 5 years .............. 13 11 11 10 years ............. 29 26 26 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON GOVERNMENT FUND-HORIZON SERVICE SHARES NATIONS GOVERNMENT RESERVES-ADVISER SHARES
PACIFIC HORIZON NATIONS GOVERNMENT FUND GOVERNMENT COMBINED FUND RESERVES PRO FORMA SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ......... None None None Maximum Sales Load Imposed on Reinvested Dividends......................... None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)......................... None None None Redemption Fees ................................. None None None Exchange Fee .................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................ 0.05% 0.10% 0.10% 12b-1/Shareholder Servicing Fees................. 0.25% 0.25% 0.25% Other Expenses (after waivers)2.................. 0.18% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:....... 0.48% 0.45% 0.45% ==== ==== ====
II-31 - - -------------------- 1 Management Fees (absent waivers) would be 0.10% for the Pacific Horizon Government Fund and 0.15% for Nations Government Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Government Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.53% for the Pacific Horizon Government Fund and 0.54% for Nations Government Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS GOVERNMENT FUND GOVERNMENT COMBINED FUND RESERVES PRO FORMA 1 year ................ $ 5 $ 5 $ 5 3 years ............... 15 14 14 5 years ............... 27 25 25 10 years .............. 60 57 57 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-32 PACIFIC HORIZON GOVERNMENT FUND-PACIFIC HORIZON SHARES NATIONS GOVERNMENT RESERVES-INVESTOR SHARES
NATIONS PACIFIC HORIZON GOVERNMENT COMBINED FUND GOVERNMENT FUND RESERVES PRO FORMA --------------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ......... None None None Maximum Sales Load Imposed on Reinvested Dividends......................... None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)......................... None None None Redemption Fees ................................. None None None Exchange Fee .................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................ 0.05% 0.10% 0.10% 12b-1/Shareholder Servicing Fees................. 0.32% 0.35% 0.35% Other Expenses (after waivers)2.................. 0.18% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:....... 0.55% 0.55% 0.55% ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.10% for the Government Fund and 0.15% for Nations Government Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Government Reserves and Nations Government Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.60% for the Government Fund and 0.64% for Nations Government Reserves and the Combined Fund. II-33 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS GOVERNMENT FUND GOVERNMENT COMBINED FUND RESERVES PRO FORMA 1 year .............. $ 6 $ 6 $ 6 3 years ............. 18 18 18 5 years ............. 31 31 31 10 years ............ 69 69 69 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-34 PACIFIC HORIZON INTERMEDIATE BOND FUND-A SHARES NATIONS INTERMEDIATE BOND FUND-INVESTOR A SHARES
NATIONS PACIFIC HORIZON INTERMEDIATE INTERMEDIATE BOND FUND BOND FUND PRO FORMA --------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ............ 3.25% 3.25% Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)1 .......................... 1.00% 1.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)2.................... 0.26% 0.40% 12b-1/Shareholder Servicing Fees.................... 0.25% 0.25% Other Expenses...................................... 0.45% 0.41% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:.......... 0.96% 1.06% ==== ----
- - -------------------- 1 Certain A Shares and Investor A Shares that are purchased at net asset value are subject to a Deferred Sales Charge if redeemed within two years of purchase. 2 Management Fees (absent waivers) would be 0.30% for the Pacific Horizon Intermediate Bond Fund. 3 Total Fund Operating Expenses (absent waivers) would be 1.00% for the Pacific Horizon Intermediate Bond Fund. II-35 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: NATIONS PACIFIC HORIZON INTERMEDIATE INTERMEDIATE BOND FUND BOND FUND PRO FORMA --------- --------- 1 year .............................. $ 42 $ 43 3 years ............................. 62 65 5 years ............................. 84 89 10 years ............................ 147 158 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON INTERMEDIATE BOND FUND-K SHARES NATIONS INTERMEDIATE BOND FUND-INVESTOR C SHARES
NATIONS PACIFIC HORIZON INTERMEDIATE INTERMEDIATE BOND FUND BOND FUND PRO FORMA SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)............................ None 1.00% Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1.................... 0.26% 0.40% 12b-1/Shareholder Servicing Fees (after waivers)2... 0.75% 1.00% Other Expenses ..................................... 0.45% 0.41% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:.......... 1.46% 1.81% ==== ----
II-36 - - -------------------- 1 Management Fees (absent waivers) would be 0.30% for the Pacific Horizon Intermediate Bond Fund. 2 Distribution and Servicing Fees (absent waivers) would be 1.00% for the Pacific Horizon Intermediate Bond Fund. 3 Total Fund Operating Expenses (absent waivers) would be 1.75% for the Pacific Horizon Intermediate Bond Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: NATIONS PACIFIC HORIZON INTERMEDIATE INTERMEDIATE BOND FUND BOND FUND PRO FORMA --------- --------- 1 year ............................ $ 15 $ 28 3 years ........................... 46 57 5 years ........................... 80 98 10 years .......................... 175 214 You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) no redemption at the end of each time period: NATIONS PACIFIC HORIZON INTERMEDIATE INTERMEDIATE BOND FUND BOND FUND PRO FORMA --------- --------- 1 year ............................ $ 15 $ 18 3 years ........................... 46 57 5 years ........................... 80 98 10 years .......................... 175 214 - - -------------------- * THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THESE EXAMPLES ASSUME THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-37 PACIFIC HORIZON INTERMEDIATE BOND FUND-SRF SHARES NATIONS INTERMEDIATE BOND FUND-SEAFIRST SHARES
NATIONS PACIFIC HORIZON INTERMEDIATE INTERMEDIATE BOND FUND BOND FUND PRO FORMA --------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ............ None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)............................ None None Redemption Fees .................................... None None Exchange Fee ....................................... None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1.................... 0.26% 0.40% 12b-1/Shareholder Servicing Fees (after waivers)2... 0.24% 0.14% Other Expenses...................................... 0.45% 0.41% ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:.......... 0.95% 0.95% ==== ----
- - -------------------- 1 Management Fees (absent waivers) would be 0.30% for the Pacific Horizon Intermediate Bond Fund. 2 Distribution and Servicing Fees (absent waivers) would be 0.25% for the Pacific Horizon Intermediate Bond Fund and Nations Intermediate Bond Fund. 3 Total Fund Operating Expenses (absent waivers) would be 1.00% for the Pacific Horizon Intermediate Bond Fund and 1.06% for Nations Intermediate Bond Fund. II-38 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: NATIONS PACIFIC HORIZON INTERMEDIATE INTERMEDIATE BOND FUND BOND FUND PRO FORMA 1 year ................................ $ 10 $ 10 3 years ............................... 30 30 5 years ............................... 53 53 10 years .............................. 117 117 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON PRIME FUND-HORIZON SHARES NATIONS CASH RESERVES-CAPITAL SHARES
PACIFIC HORIZON NATIONS CASH COMBINED FUND PRIME FUND RESERVES PRO FORMA ---------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)............................ None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1.................... 0.09% 0.10% 0.10% Other Expenses (after waivers)2..................... 0.15% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:.......... 0.24% 0.20% 0.20% ==== ==== ====
II-39 - - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Cash Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.13% for Nations Cash Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.28% for Nations Cash Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS CASH COMBINED FUND PRIME FUND RESERVES PRO FORMA 1 year .............. $ 2 $2 $ 2 3 years ............. 8 6 6 5 years ............. 14 11 11 10 years ............ 31 26 26 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-40 PACIFIC HORIZON PRIME FUND-HORIZON SERVICE SHARES NATIONS CASH RESERVES-ADVISER SHARES
PACIFIC HORIZON NATIONS CASH COMBINED FUND PRIME FUND RESERVES PRO FORMA SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)............................ None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.09% 0.10% 0.10% 12b-1/Shareholder Servicing Fees.................... 0.25% 0.25% 0.25% Other Expenses (after waivers)2..................... 0.15% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3.......... 0.49% 0.45% 0.45% ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Cash Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.13% for Nations Cash Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.53% for Nations Cash Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS CASH COMBINED FUND PRIME FUND RESERVES PRO FORMA 1 year .............. $ 5 $ 5 $ 5 3 years ............. 16 14 14 5 years ............. 27 25 25 10 years ............ 62 57 57 II-41 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON PRIME FUND-PACIFIC HORIZON SHARES NATIONS CASH RESERVES-INVESTOR SHARES
PACIFIC HORIZON NATIONS CASH COMBINED FUND PRIME FUND RESERVES PRO FORMA ---------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)............................ None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1.................... 0.09% 0.10% 0.10% 12b-1/Shareholder Servicing Fees.................... 0.32% 0.35% 0.35% Other Expenses (after waivers)2..................... 0.15% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:.......... 0.56% 0.55% 0.55% ==== ==== ====
II-42 - - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Cash Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.13% for Nations Cash Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.63% for Nations Cash Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON PRIME NATIONS CASH COMBINED FUND FUND RESERVES PRO FORMA 1 year .............. $ 6 $ 6 $ 6 3 years ............. 18 18 18 5 years ............. 31 31 31 10 years ............ 70 69 69 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-43 PACIFIC HORIZON PRIME FUND-S AND X SHARES NATIONS CASH RESERVES-DAILY SHARES
PACIFIC HORIZON PACIFIC HORIZON PRIME FUND- PRIME FUND- NATIONS CASH COMBINED FUND S SHARES X SHARES RESERVES PRO FORMA -------- -------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None None Maximum Deferred Sales Load(as a percentage of redemption proceeds) ........................... None None None None Redemption Fees .................................... None None None None Exchange Fee ....................................... None None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees1 ................................... 0.09% 0.09% 0.10% 0.10% 12b-1/Shareholder Servicing Fees2................... 0.55% 0.55% 0.60% 0.60% Other Expenses (after waivers)3..................... 0.15% 0.15% 0.10% 0.10% ---- ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):4.......... 0.79% 0.79% 0.80% 0.80% ==== ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Cash Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.13% for Nations Cash Reserves and the Combined Fund. 3 Distribution and Shareholder Servicing Fees (absent waivers) would be 1.00% for S Shares of the Pacific Horizon Prime Fund. 4 Total Fund Operating Expenses (absent waivers) would be 1.24% for S Shares of the Pacific Horizon Prime Fund, and 0.88% for Nations Cash Reserves and the Combined Fund. II-44 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period:
PACIFIC HORIZON PACIFIC HORIZON PRIME FUND- PRIME FUND- NATIONS CASH COMBINED FUND S SHARES X SHARES RESERVES PRO FORMA -------- -------- -------- --------- 1 year ............................................ $ 8 $ 8 $ 8 $ 8 3 years ........................................... 25 25 26 26 5 years ........................................... 44 44 44 44 10 years .......................................... 98 98 99 99
- - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-45 PACIFIC HORIZON PRIME FUND-Y SHARES NATIONS CASH RESERVES-SERVICE SHARES
PACIFIC HORIZON NATIONS CASH COMBINED FUND PRIME FUND RESERVES PRO FORMA ---------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load(as a percentage of redemption proceeds) ........................... None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1.................... 0.09% 0.10% 0.10% 12b-1/Shareholder Servicing Fees.................... 1.00% 1.00% 1.00% Other Expenses (after waivers)2..................... 0.15% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3.......... 1.24% 1.20% 1.20% ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Cash Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.13% for Nations Cash Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 1.28% for Nations Cash Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON PRIME NATIONS CASH COMBINED FUND FUND RESERVES PRO FORMA ---- -------- --------- 1 year .......... $ 13 $ 12 $ 12 3 years ......... 39 38 38 5 years ......... 68 66 66 10 years ........ 150 145 145 II-46 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON TAX-EXEMPT MONEY FUND-HORIZON SHARES NATIONS MUNICIPAL RESERVES-CAPITAL SHARES
PACIFIC HORIZON NATIONS TAX-EXEMPT MUNICIPAL COMBINED FUND MONEY FUND RESERVES PRO FORMA ---------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load(as a percentage of redemption proceeds) ........................... None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.10% 0.10% 0.10% Other Expenses (after waivers)2..................... 0.17% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3.......... 0.27% 0.20% 0.20% ==== ==== ====
II-47 - - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Municipal Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.15% for Nations Municipal Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.30% for Nations Municipal Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS TAX-EXEMPT MONEY MUNICIPAL COMBINED FUND FUND RESERVES PRO FORMA 1 year ............. $ 3 $ 2 $ 2 3 years ............ 9 6 6 5 years ............ 15 11 11 10 years ........... 34 26 26 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-48 PACIFIC HORIZON TAX-EXEMPT MONEY FUND-HORIZON SERVICE SHARES NATIONS MUNICIPAL RESERVES-ADVISER SHARES
PACIFIC HORIZON NATIONS TAX-EXEMPT MUNICIPAL COMBINED FUND MONEY FUND RESERVES PRO FORMA ---------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load(as a percentage of redemption proceeds) ........................... None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.10% 0.10% 0.10% 12b-1/Shareholder Servicing Fees.................... 0.25% 0.25% 0.25% Other Expenses (after waivers)2..................... 0.17% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3.......... 0.52% 0.45% 0.45% ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Municipal Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.15% for Nations Municipal Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.55% for Nations Municipal Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS TAX-EXEMPT MONEY MUNICIPAL COMBINED FUND FUND RESERVES PRO FORMA 1 year .............. $ 5 $ 5 $ 5 3 years ............. 17 14 14 5 years ............. 29 25 25 10 years ............ 65 57 57 II-49 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON TAX-EXEMPT MONEY FUND-PACIFIC HORIZON SHARES NATIONS MUNICIPAL RESERVES-INVESTOR SHARES
PACIFIC HORIZON NATIONS TAX-EXEMPT MUNICIPAL COMBINED FUND MONEY FUND RESERVES PRO FORMA ---------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load(as a percentage of redemption proceeds) ........................... None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.10% 0.10% 0.10% 12b-1/Shareholder Servicing Fees.................... 0.32% 0.35% 0.35% Other Expenses (after waivers)2..................... 0.17% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3.......... 0.59% 0.55% 0.55% ==== ==== ====
II-50 - - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Municipal Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.15% for Nations Municipal Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.65% for Nations Municipal Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS TAX-EXEMPT MONEY MUNICIPAL COMBINED FUND FUND RESERVES PRO FORMA 1 year ............... $ 6 $ 6 $6 3 years .............. 19 18 18 5 years .............. 33 31 31 10 years ............. 74 69 69 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-51 PACIFIC HORIZON TAX-EXEMPT MONEY FUND-S SHARES NATIONS MUNICIPAL RESERVES-DAILY SHARES
PACIFIC HORIZON NATIONS TAX-EXEMPT MUNICIPAL COMBINED FUND MONEY FUND RESERVES PRO FORMA ---------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load(as a percentage of redemption proceeds) ........................... None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.10% 0.10% 0.10% 12b-1/Shareholder Servicing Fees (after waivers)2... 0.55% 0.60% 0.60% Other Expenses (after waivers)3..................... 0.17% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):4.......... 0.82% 0.80% 0.80% ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Municipal Reserves and the Combined Fund. 2 Distribution and Shareholder Servicing Fees (absent waivers) would be 1.00% for Pacific Horizon Tax-Exempt Money Fund. 3 Other Expenses (absent waivers) would be 0.15% for Nations Municipal Reserves and the Combined Fund. 4 Total Fund Operating Expenses (absent waivers) would be 1.27% for the Pacific Horizon Tax-Exempt Money Fund and 0.90% for Nations Municipal Reserves and the Combined Fund. II-52 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS TAX-EXEMPT MONEY MUNICIPAL COMBINED FUND FUND RESERVES PRO FORMA 1 year ............ $ 8 $ 8 $ 8 3 years ........... 26 26 26 5 years ........... 46 44 44 10 years .......... 101 99 99 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-53 PACIFIC HORIZON TREASURY FUND-HORIZON SHARES NATIONS TREASURY RESERVES-CAPITAL SHARES
NATIONS PACIFIC HORIZON TREASURY COMBINED FUND TREASURY FUND RESERVES PRO FORMA ------------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load(as a percentage of redemption proceeds) ........................... None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.10% 0.10% 0.10% Other Expenses (after waivers)2..................... 0.14% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3.......... 0.24% 0.20% 0.20% ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Treasury Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Treasury Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.29% for Nations Treasury Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: NATIONS PACIFIC HORIZON TREASURY COMBINED FUND TREASURY FUND RESERVES PRO FORMA ------------- -------- --------- 1 year ............... $ 2 $ 2 $ 2 3 years .............. 8 6 6 5 years .............. 14 11 11 10 years ............. 31 26 26 II-54 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON TREASURY FUND-HORIZON SERVICE SHARES NATIONS TREASURY RESERVES-ADVISER SHARES
NATIONS PACIFIC HORIZON TREASURY COMBINED FUND TREASURY FUND RESERVES PRO FORMA ------------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)............................ None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.10% 0.10% 0.10% 12b-1 Shareholder Servicing Fees.................... 0.25% 0.25% 0.25% Other Expenses (after waivers)2..................... 0.14% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3 0.49% 0.45% 0.45% ==== ==== ====
II-55 - - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Treasury Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Treasury Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.54% for Nations Treasury Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS COMBINED FUND TREASURY FUND TREASURY PRO FORMA RESERVES 1 year ........... $ 5 $ 5 $ 5 3 years .......... 16 14 14 5 years .......... 27 25 25 10 years ......... 62 57 57 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-56 PACIFIC HORIZON TREASURY FUND-PACIFIC HORIZON SHARES NATIONS TREASURY RESERVES-INVESTOR SHARES
NATIONS PACIFIC HORIZON TREASURY COMBINED FUND TREASURY FUND RESERVES PRO FORMA ------------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load(as a percentage of redemption proceeds) ........................... None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.10% 0.10% 0.10% 12b-1/Shareholder Servicing Fees.................... 0.32% 0.35% 0.35% Other Expenses (after waivers)2..................... 0.14% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3.......... 0.56% 0.55% 0.55% ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Treasury Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Treasury Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.64% for Nations Treasury Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: NATIONS PACIFIC HORIZON TREASURY COMBINED FUND TREASURY FUND RESERVES PRO FORMA ------------- -------- --------- 1 year .............. $ 6 $6 $ 6 3 years ............. 18 18 18 5 years ............. 31 31 31 10 years ............ 70 69 69 II-57 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON TREASURY FUND-X SHARES NATIONS TREASURY RESERVES-DAILY SHARES
PACIFIC HORIZON NATIONS TREASURY FUND TREASURY COMBINED FUND X SHARES RESERVES PRO FORMA -------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load(as a percentage of redemption proceeds) ........................... None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.10% 0.10% 0.10% 12b-1/Shareholder Servicing Fees.................... 0.55% 0.60% 0.60% Other Expenses (after waivers)2..................... 0.14% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3 0.79% 0.80% 0.80% ==== ==== ====
II-58 - - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Treasury Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Treasury Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.89% for Nations Treasury Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON TREASURY FUND NATIONS COMBINED FUND X SHARES TREASURY PRO FORMA RESERVES 1 year .............. $ 8 $ 8 $ 8 3 years ............. 25 26 26 5 years ............. 44 44 44 10 years ............ 98 99 99 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-59 PACIFIC HORIZON TREASURY FUND-Y SHARES NATIONS TREASURY RESERVES-SERVICE SHARES
PACIFIC HORIZON NATIONS TREASURY COMBINED FUND TREASURY FUND RESERVES PRO FORMA ------------- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases ............ None None None Maximum Sales Load Imposed on Reinvested Dividends............................ None None None Maximum Deferred Sales Load(as a percentage of redemption proceeds) ........................... None None None Redemption Fees .................................... None None None Exchange Fee ....................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................... 0.10% 0.10% 0.10% 12b-1/Shareholder Servicing Fees.................... 1.00% 1.00% 1.00% Other Expenses (after waivers)2..................... 0.14% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3 1.24% 1.20% 1.20% ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Treasury Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Treasury Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 1.29% for Nations Treasury Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS COMBINED FUND TREASURY FUND TREASURY PRO FORMA RESERVES 1 year ............... $ 13 $ 12 $ 12 3 years .............. 39 38 38 5 years .............. 68 66 66 10 years ............. 150 145 145 II-60 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON TREASURY ONLY FUND-HORIZON SHARES NATIONS GOVERNMENT RESERVES-CAPITAL SHARES
PACIFIC HORIZON NATIONS TREASURY ONLY GOVERNMENT COMBINED FUND FUND RESERVES PRO FORMA ---- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ......... None None None Maximum Sales Load Imposed on Reinvested Dividends......................... None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)......................... None None None Redemption Fees ................................. None None None Exchange Fee .................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................ 0.10% 0.10% 0.10% Other Expenses (after waivers)2.................. 0.17% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:....... 0.27% 0.20% 0.20% ==== ==== ====
II-61 - - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Government Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Government Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.29% for Nations Government Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS TREASURY ONLY GOVERNMENT COMBINED FUND FUND RESERVES PRO FORMA 1 year ................ $ 3 $ 2 $ 2 3 years ............... 9 6 6 5 years ............... 15 11 11 10 years .............. 34 26 26 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-62 PACIFIC HORIZON TREASURY ONLY FUND-HORIZON SERVICE SHARES NATIONS GOVERNMENT RESERVES-ADVISER SHARES
PACIFIC HORIZON NATIONS TREASURY ONLY GOVERNMENT COMBINED FUND FUND RESERVES PRO FORMA ---- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ......... None None None Maximum Sales Load Imposed on Reinvested Dividends......................... None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)......................... None None None Redemption Fees ................................. None None None Exchange Fee .................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................ 0.10% 0.10% 0.10% 12b-1/Shareholder Servicing Fees................. 0.25% 0.25% 0.25% Other Expenses (after waivers)2.................. 0.17% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS):3....... 0.52% 0.45% 0.45% ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Government Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Government Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.54% for Nations Government Reserves and the Combined Fund. II-63 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS TREASURY ONLY GOVERNMENT COMBINED FUND FUND RESERVES PRO FORMA 1 year .......... $ 5 $ 5 $ 5 3 years ......... 17 14 14 5 years ......... 29 25 25 10 years ........ 65 57 57 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON TREASURY ONLY FUND-PACIFIC HORIZON SHARES NATIONS GOVERNMENT RESERVES-INVESTOR SHARES
PACIFIC HORIZON NATIONS TREASURY ONLY GOVERNMENT COMBINED FUND FUND RESERVES PRO FORMA ---- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ......... None None None Maximum Sales Load Imposed on Reinvested Dividends......................... None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)......................... None None None Redemption Fees ................................. None None None Exchange Fee .................................... None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................ 0.10% 0.10% 0.10% 12b-1/Shareholder Servicing Fees................. 0.32% 0.35% 0.35% Other Expenses (after waivers)2.................. 0.17% 0.10% 0.10% ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3........ 0.59% 0.55% 0.55% ==== ==== ====
II-64 - - -------------------- 1 Management Fees (absent waivers) would be 0.15% for Nations Government Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Government Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.64% for Nations Government Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period: PACIFIC HORIZON NATIONS TREASURY ONLY GOVERNMENT COMBINED FUND FUND RESERVES PRO FORMA ---- -------- --------- 1 year .............. $ 6 $ 6 $ 6 3 years ............. 19 18 18 5 years ............. 33 31 31 10 years ............ 74 69 69 - - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-65 PACIFIC HORIZON GOVERNMENT & TREASURY ONLY-HORIZON SHARES NATIONS GOVERNMENT RESERVES-CAPITAL SHARES
PACIFIC HORIZON PACIFIC HORIZON NATIONS GOVERNMENT TREASURY ONLY GOVERNMENT COMBINED FUND FUND FUND RESERVES PRO FORMA SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ......... None None None None Maximum Sales Load Imposed on Reinvested Dividends......................... None None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)......................... None None None None Redemption Fees ................................. None None None None Exchange Fee .................................... None None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................ 0.05% 0.10% 0.10% 0.10% 12b-1/Shareholder Servicing Fees................. 0.00% 0.00% 0.00% 0.00% Other Expenses (after waivers)2.................. 0.18% 0.17% 0.10% 0.10% ---- ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:....... 0.23% 0.27% 0.20% 0.20% ==== ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.10% for Pacific Horizon Government Fund and 0.15% for Nations Government Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Government Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.28% for Pacific Horizon Government Fund and 0.29% for Nations Government Reserves and the Combined Fund. II-66 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period:
PACIFIC HORIZON PACIFIC HORIZON NATIONS GOVERNMENT TREASURY ONLY GOVERNMENT COMBINED FUND FUND FUND RESERVES PRO FORMA 1 year ............................................ $ 2 $ 3 $ 2 $ 2 3 years ........................................... 7 9 6 6 5 years ........................................... 13 15 11 11 10 years .......................................... 29 34 26 26
- - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. PACIFIC HORIZON GOVERNMENT & TREASURY ONLY-HORIZON SERVICE SHARES NATIONS GOVERNMENT RESERVES-ADVISER SHARES
PACIFIC HORIZON PACIFIC HORIZON NATIONS GOVERNMENT TREASURY ONLY GOVERNMENT COMBINED FUND FUND FUND RESERVES PRO FORMA ---- ---- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ......... None None None None Maximum Sales Load Imposed on Reinvested Dividends......................... None None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)......................... None None None None Redemption Fees ................................. None None None None Exchange Fee .................................... None None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................ 0.05% 0.10% 0.10% 0.10% 12b-1/Shareholder Servicing Fees................. 0.25% 0.25% 0.25% 0.25% Other Expenses (after waivers)2.................. 0.18% 0.17% 0.10% 0.10% ---- ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:....... 0.48% 0.52% 0.45% 0.45% ==== ==== ==== ====
II-67 - - -------------------- 1 Management Fees (absent waivers) would be 0.10% for Pacific Horizon Government Fund and 0.15% for Nations Government Reserves and the Combined Fund. 2 Other Expenses (absent waivers) would be 0.14% for Nations Government Reserves and the Combined Fund. 3 Total Fund Operating Expenses (absent waivers) would be 0.53% for Pacific Horizon Government Fund and 0.54% for Nations Government Reserves and the Combined Fund. EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period:
PACIFIC HORIZON PACIFIC HORIZON NATIONS GOVERNMENT TREASURY ONLY GOVERNMENT COMBINED FUND FUND FUND RESERVES PRO FORMA ---- ---- -------- --------- 1 year ............................................ $ 5 $ 5 $ 5 $ 5 3 years ........................................... 15 17 14 14 5 years ........................................... 27 29 25 25 10 years .......................................... 60 65 57 57
- - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-68 PACIFIC HORIZON GOVERNMENT & TREASURY ONLY-PACIFIC HORIZON SHARES NATIONS GOVERNMENT RESERVES-INVESTOR SHARES
PACIFIC HORIZON PACIFIC HORIZON NATIONS GOVERNMENT TREASURY ONLY GOVERNMENT COMBINED FUND FUND FUND RESERVES PRO FORMA ---- ---- -------- --------- SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Load Imposed on Purchases (as a percentage of offering price) ......... None None None None Maximum Sales Load Imposed on Reinvested Dividends......................... None None None None Maximum Deferred Sales Load (as a percentage of redemption proceeds)......................... None None None None Redemption Fees ................................. None None None None Exchange Fee .................................... None None None None ANNUAL FUND OPERATING EXPENSES: (as a percentage of average net assets) Management Fees (after waivers)1 ................ 0.05% 0.10% 0.10% 0.10% 12b-1/Shareholder Servicing Fees................. 0.32% 0.32% 0.35% 0.35% Other Expenses (after waivers)2.................. 0.18% 0.17% 0.10% 0.10% ---- ---- ---- ---- TOTAL FUND OPERATING EXPENSES (AFTER WAIVERS)3:....... 0.55% 0.59% 0.55% 0.55% ==== ==== ==== ====
- - -------------------- 1 Management Fees (absent waivers) would be 0.10% for Pacific Horizon Government Fund and 0.15% for Nations Government Reserves. 2 Other Expenses (absent waivers) would be 0.14% for Nations Government Reserves. 3 Total Fund Operating Expenses (absent waivers) would be 0.60% for Pacific Horizon Government Fund and 0.64% for Nations Government Reserves. II-69 EXAMPLE:* You would pay the following expenses on a $1,000 investment, assuming (1) 5% gross annual return and (2) redemption at the end of each time period:
PACIFIC HORIZON PACIFIC HORIZON NATIONS GOVERNMENT TREASURY ONLY GOVERNMENT COMBINED FUND FUND FUND RESERVES PRO FORMA ---- ---- -------- --------- 1 year ............................................ $ 6 $ 6 $ 6 $ 6 3 years ........................................... 18 19 18 18 5 years ........................................... 31 33 31 31 10 years .......................................... 69 74 69 69
- - -------------------- * THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME IN THE YEARS SHOWN. The purpose of the foregoing tables is to assist an investor in understanding the various costs and expenses that an investor in the Funds will bear directly or indirectly. II-70 APPENDIX III INVESTMENT OBJECTIVES, LIMITATIONS AND CERTAIN SIGNIFICANT INVESTMENT POLICIES OF THE PACIFIC HORIZON FUNDS AND CORRESPONDING NATIONS FUNDS This Appendix highlights the investment objectives and certain significant similarities and differences among the investment limitations and policies of five Pacific Horizon Funds and the four corresponding Operating Nations Funds into which they would be reorganized. Because the Pacific Horizon Asset Allocation, Blue Chip, California Municipal Bond Fund, California Tax-Exempt Money Market Fund, Capital Income Fund and Intermediate Bond Fund would be reorganized into Shell Nations Funds that have substantially the same investment objectives, restrictions and policies as their corresponding Pacific Horizon Funds, they are not discussed in this Appendix. The following is qualified in its entirety by the more detailed information included in the prospectuses and statements of additional information for the Pacific Horizon Funds and the corresponding Nations Funds which are incorporated by reference in this Proxy/Prospectus. I. PACIFIC HORIZON GOVERNMENT FUND/ NATIONS GOVERNMENT RESERVES Investment Objectives: 1. PACIFIC HORIZON GOVERNMENT FUND: to seek current income, a stable share price and daily liquidity. 2. NATIONS GOVERNMENT RESERVES: to preserve principal value and maintain a high degree of liquidity while providing current income. Comment: The Pacific Horizon Fund pursues its investment objective by investing in short-term debt obligations issued or guaranteed (as to principal and interest) by the U.S. Government, its agencies, instrumentalities, or sponsored entities (and in repurchase agreements relating to such obligations) including those issues backed by the full faith and credit of the United States; right of the issuer to borrow from the U.S. Treasury; discretionary authority of the U.S. Government to purchase the agency's obligations; and credit of the agency or instrumentality issuing the obligations). All of the Fund's investment will be in the highest short term rating category or will be issued by issuers with such rating (or, if, unrated, will be of comparable quality). Like the Pacific Horizon Fund, the Nations Fund also typically invests in direct obligations issued by the U.S. Treasury, STRIPS and repurchase agreements and reverse repurchase agreements involving such obligations. The Nations Funds also may invest in obligations the principal and interest of which are backed by the full faith and credit of the United States Government, provided that the Fund shall under normal market conditions invest at least 65% of its total assets in U.S. Treasury bills, notes and bonds and other instruments issued directly by the U.S. Government and repurchase agreements relating thereto. However, it is expected that after the Reorganization, the Nations Government Reserves Fund will not invest in repurchase agreements. Each Fund is a money market fund and in accordance with Rule 2a-7 under the 1940 Act, will invest in instruments with remaining maturity not exceeding 397 days and each Fund's dollar-weighted average portfolio maturity may not exceed 90 days. Both Funds limit their investment to "First Tier Securities" as defined by Rule 2a-7. II. PACIFIC HORIZON PRIME FUND/NATIONS CASH RESERVES Investment Objectives: 1. PACIFIC HORIZON PRIME FUND: to seek current income, a stable share price and daily liquidity. 2. NATIONS CASH RESERVES: to preserve principal value and maintain a high degree of liquidity while providing current income. III-1 Comment: The Pacific Horizon Fund pursues its invest objective by investing in U.S. dollar denominated money market securities (such as bank certificates of deposit, bankers' acceptances and commercial paper), including those issued by U.S. and foreign banks, U.S. and foreign corporate issuers, the U.S. government, its agencies and instrumentalities and municipalities. At least 95% of the Fund's investments will be in highest short-term rating category or will issued by issuers with such ratings (or, if unrated, will be of comparable quality). The Pacific Horizon Fund will concentrate its investments in the securities of the banking and financing sector. Under normal market conditions, the Pacific Horizon Fund will invest at least 25% of its net assets in such investments. The Pacific Horizon Fund invests in both First Tier and Second Tier Securities as defined by Rule 2a-7 under the 1940 Act. The Nations Fund invests in obligations denominated in U.S. dollars and consisting of: (i) commercial paper; (ii) obligations (including certificates of deposit, time deposits and banker's' acceptances) of thrift institutions, U.S. commercial banks (including foreign branches of such banks) and U.S. and London branches of foreign banks, provided that such institutions have total assets of $1 billion or more (iii) short-term corporate obligations of issuers of commercial paper whose commercial paper is eligible for purchase by the Fund; (iv) high quality short-term taxable obligations issued by state and local governments; (v) instruments eligible for purchase by Nations Government Reserves; and (vi) repurchase agreements and reverse repurchase agreements involving any of the foregoing obligations. Similar, although not identical to, the Pacific Horizon Fund, the Nations Fund reserves the right to concentrate (I.E., invest more than 25% of its assets) investments in U.S. dollar denominated obligations of U.S. banks, foreign branches of U.S. banks and U.S. branches of foreign banks. The Nations Fund may also invest in guaranteed investment contracts and in securities issued by other investment companies. The short term obligations that may be purchased include instruments issued by trusts, partnerships or other special purpose issuers, including pass-through certificates representing participations in or debt instruments backed by the securities and other assets owned by such issuers. For temporary defensive purposes, the investment advisers may invest up to 100% of its assets in securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, repurchase agreements and cash. Each Fund is a money market fund and in accordance with Rule 2a-7 under the 1940 Act, will invest in instruments with remaining maturities not exceeding 397 days. Additionally, each Fund's dollar-weighted average portfolio maturity may not exceed 90 days. The Fund is listed on the National Association of Insurance Commissioners' Approved List of Class 1 Money Market Mutual Funds. The Nations Fund, unlike the Pacific Horizon Fund, limits its investment to "First-Tier Securities" as defined by Rule 2a-7 under the 1940 Act. III. PACIFIC HORIZON TAX-EXEMPT MONEY FUND/ NATIONS MUNICIPAL RESERVES Investment Objectives: 1. PACIFIC HORIZON TAX EXEMPT MONEY FUND: to seek current income exempt from Federal taxes, a stable share price and daily liquidity. 2. NATIONS MUNICIPAL RESERVES: to preserve principal value and maintain a high degree of liquidity while providing current income exempt from Federal income taxes. Comment: The Pacific Horizon Fund pursues its objective by investing at least 80% of its assets in a diversified portfolio of federally tax-exempt short term debt oblations issued by, or on behalf of, states, territories and possessions of the United States, including those issued by the U.S. government, its agencies, and instrumentalities, municipalities, local governments, other political subdivisions and their agencies ("Municipal Securities"). Under normal circumstances, all investments of the Pacific Horizon Fund will be in the highest short-term rating category or will be issued by issuers with such ratings (or, if unrated will be of comparable quality). For temporary defensive purposes, or if the investment adviser does not feel that suitable securities in the highest short-term rating category are available, the Fund may invest in investments in the second-highest short-term rating category. The Fund also may invest up to 20% of its assets in taxable obligations. Similar to the Pacific Horizon Fund, under normal market conditions, the Nations Fund will also invest at least 80% of its total assets in Municipal Securities. Unlike the Pacific Horizon Fund, the Nations Fund may also invest in instruments issued by certain trusts, partnerships or other special purpose issuers, including pass through certificates. Like the Pacific Horizon Fund, the Nations Fund also may invest up to 20% of the total value of its assets in taxable instruments. The Nations Fund, however, intends to limit any such investment in money market instruments (consisting of U.S. Government Obligations and repurchase agreements) and private activity bonds, the interest on which may be treated as a specific tax preference item under the Federal alternative minimum tax. Like the Pacific Horizon Fund, the Nations Fund may hold cash reserves pending investment during temporary defensive periods or if the investment adviser believes that desirable tax-exempt obligations are unavailable. III-2 Each Fund is a money market fund and in accordance with Rule 2a-7 under the 1940 Act, will invest in instruments with remaining maturity not exceeding 397 days and each Fund's dollar-weighted average portfolio maturity may not exceed 90 days. The Pacific Horizon Fund and the Nations Fund are permitted to invest their assets in both First Tier Securities and Second Tier Securities, as those terms are defined by the SEC, in accordance with Rule 2a-7 under the 1940 Act. The Pacific Horizon Fund will invest in both First Tier and Second Tier Securities but the Nations Fund will invest only in First Tier Securities. IV. PACIFIC HORIZON TREASURY FUND/NATIONS TREASURY RESERVES Investment Objectives: 1. PACIFIC HORIZON TREASURY FUND: to seek current income, a stable share price and daily liquidity. 2. NATIONS TREASURY RESERVES: to preserve principal value and maintain a high degree of liquidity while providing current income. Comment: Each Fund is a money market fund and in accordance with Rule 2a-7 under the 1940 Act, will invest in instruments with remaining maturity not exceeding 397 days and each Fund's dollar-weighted average portfolio maturity may not exceed 90 days. The Pacific Horizon Fund pursues its investment objective by investing solely in direct obligations of the U.S. Treasury, including U.S. Treasury bills, notes and bonds, repurchase agreements backed by U.S. Treasury bills, notes and bonds. All of the Fund's investments will be in the highest short-term rating category or will issued by issuers with such ratings. The Pacific Horizon Fund will invest only in First Tier Securities as defined by Rule 2a-7 under the 1940 Act. Like the Pacific Horizon Fund, the Nations Fund also typically invests in direct obligations issued by the U.S. Treasury, STRIPS and repurchase agreements and reverse repurchase agreements involving such obligations. Under normal market conditions, the Nations Fund will invest 65% of its total assets in U.S. Treasury bills, notes and bonds and other instruments issued directly by the U.S. Government and repurchase agreements secured by such obligations. The Nations Fund may also invest in obligations the principal and interest of which are backed by the full faith and credit of the United States Government. The Fund is listed on the National Association of Insurance Commissioners' Approved List of Class 1 Money Market Mutual Funds. Like the Pacific Horizon Fund, the Nations Fund will invest only in First Tier Securities. V. PACIFIC HORIZON TREASURY ONLY FUND/NATIONS GOVERNMENT RESERVES Investment Objectives: 1. PACIFIC HORIZON TREASURY ONLY FUND: to seek current income, a stable share price and daily liquidity. 2. NATIONS GOVERNMENT RESERVES: to preserve principal value and maintain a high degree of liquidity while providing current income. Comment: Each Fund is a money market fund and in accordance with Rule 2a-7 under the 1940 Act, will invest in instruments with remaining maturity not exceeding 397 days and each Fund's dollar-weighted average portfolio maturity may not exceed 90 days. The Pacific Horizon Fund will pursue its investment objective by investing solely in the obligations of the U.S. Treasury. U.S. Treasury securities are backed by the full faith and credit of the U.S. Government and include U.S. Treasury bills, notes and bonds. All of the Fund's investments will be in the highest short-term rating category or will be issued by issuers with such ratings. The Pacific Horizon Fund will invest in "First Tier Securities" as defined by Rule 2a-7 under the 1940 Act. Like the Pacific Horizon Fund, the Nations Fund also typically invests in direct obligations issued by the U.S. Treasury and STRIPS. Unlike the Pacific Horizon Fund, the Nations Fund may also purchase obligations, the principal and interest of which are backed by the full faith and credit of the U.S. Government. The Nations Fund, unlike the Pacific Horizon Fund, may enter into repurchase agreements involving such obligations. Like the Pacific Horizon Fund, the Nations Fund will invest only in First Tier Securities. III-3 APPENDIX IV SHAREHOLDER TRANSACTIONS AND SERVICES OF THE NATIONS FUNDS AND THE CORRESPONDING PACIFIC HORIZON FUNDS ----------------------------------------------- This Appendix compares the shareholder transactions and services of the Pacific Horizon Funds and the corresponding Nations Funds. The following is qualified in its entirety by the more detailed information included in the prospectuses for the Pacific Horizon Funds and Nations Funds which are incorporated by reference in this Proxy/Prospectus. Unless otherwise indicated, terms used herein and not otherwise defined have the same meanings as are given to them in such prospectuses. Please note that after the Reorganization, Nations will generally continue to honor any standing instructions regarding the corresponding Pacific Horizon Fund classes, under arrangements such as automatic withdrawal plans, systematic investment plans or dividend reinvestment plans. In such cases, standing instructions will be subject to the same or similar terms (e.g., minimum investments, account balances and minimum transaction amounts) currently in effect, except that there may be exceptions with respect to the timing of transactions which may need to be altered to comport with Nations procedures. Shareholders will be notified of any such exceptions. After the Reorganization, any instructions given with respect to any new account will be subject to the terms of the applicable Nations Fund class. IV-1 I. PACIFIC HORIZON FUNDS - A SHARES CORRESPONDING NATIONS FUNDS - INVESTOR A SHARES A. Sales Charges and Exemptions There is a maximum sales charge of 5.75% on A Shares of the Pacific Horizon Asset Allocation, Blue Chip and Capital Income Funds, 3.25% on the Intermediate Bond Fund and 4.75% on the California Municipal Bond Fund. The sales charge on the A Shares of the Pacific Horizon Funds may decrease as the amount a shareholder invests increases. Also there is no sales charge on purchases of A shares of $1 million or more. However, unless a Pacific Horizon Fund shareholder participates in the Bank of America Daily Advantage(R) or Advantage Plus(R) programs, a contingent deferred sales charge will be imposed as follows: 1% redemptions made within 1 year of purchases made on or after November 16, 1998, declining to 0.50% in the second year, and eliminated thereafter, or 1% on redemptions made within 18 months of purchases made before November 16, 1998. An investor also may be entitled to reduced sales charges on A Shares through rights of accumulation, letter of intent, quantity discounts or through certain affiliations with BankAmerica Corporation. There is a maximum sales charge of 5.75% on Investor A Shares of the Nations Capital Income, Asset Allocation and Blue Chip Funds, 3.25% on the Intermediate Bond Fund and 4.25% on the California Municipal Bond Fund. Sales charges are reduced as the amount invested increases. An investor also may be entitled to reduced sales charges on Investor A Shares through Rights of Accumulation, a Letter of Intent, Quantity Discounts or through certain affiliations with BankAmerica Corporation. Investor A Shares of each of the Nations Funds have in addition a 1.00% and 0.50% maximum deferred sales charge which is imposed only if shares are redeemed within the first and second years of purchase, respectively. B. Purchase Policies
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Minimum initial investment $500 for a regular account; $100 for $1,000 for a regular account; $500 investors purchasing through BofA or for IRA investors; $250 for its affiliates*; $500 for IRA, Roth non-working spousal IRAs; $250 for IRA, or SEP IRA investors; $250 for wrap fee and other investment non-working spousal IRAs; $2500 for adviser accounts; $100 for investors SEP-IRAs with more than one participating in the Systematic participant. Investment Plan; no minimum investment for 401(k) plans, simplified employee pension plans ("SEPs"), Savings Incentives Method Plans for Employees ("SIMPLE IRAs") and salary reduction-IRAs ("SAR-IRAs").** Minimum subsequent investments $50 for regular accounts and $0 for $100; $50 for subsequent investments investors purchasing through BofA or made through the Systematic its affiliates; for IRA, Roth IRA or Investment Plan. SEP IRA investors; for non-working spousal IRAs; or for SEP-IRAs.
- - ---------- * The minimum investment is $100 for purchases made through BofA or its affiliates' trust and agency accounts or a Service Organization whose clients have made aggregate minimum purchases of $1 million. The minimum investment is $200 for BankAmerica cardholders with an appropriate award certificate. ** The assets of such plans must reach an asset value of $1,000 ($500 for SEPs, SAR-SEPs and SAR-IRAs) within one year of the account open date. If the assets of such plans do not reach the minimum asset size within one year, Nations reserves the right to redeem the Shares held by such plans on 60 days' written notice. IV-2
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Purchase methods Through Bank of America; Service Through Selling Agents, Servicing Organizations; by mail; by wire; by Agents, a Nations Fund Personal telephone; or Teletrade. Investment Planner account; by mail; by wire; by telephone# and a Systematic Investment Plan. C. Redemption Procedures PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Through an authorized selling or Yes Yes servicing agent By mail Yes Yes By telephone Yes Yes By wire Yes Yes Check writing feature Yes ($500 transaction minimum) None (fixed income funds only) By automatic withdrawal plan Yes (net asset value of account must Yes (net asset value of account must be $5,000) be $10,000)@
Due to the high cost of maintaining fund accounts with small balances, Nations Funds may redeem Investor A Shares and Pacific Horizon may redeem A Shares, if the balance in a shareholder's account with the Fund drops below $500 as a result of redemptions, and the shareholder does not increase the balance to at least $500 on 60 days' written notice. Share balances also may be redeemed at the direction of an agent pursuant to arrangements between the agent and its customer. Nations and Pacific Horizon also may redeem shares of the Nations Funds and Pacific Horizon Funds involuntarily or make payment for redemption in readily marketable securities or other property under certain circumstances in accordance with the 1940 Act. D. Additional Shareholder Services
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Systematic/automatic investment plan Yes ($50 minimum initial and Yes (in any amount from $50 to subsequent investment) $100,000). E. Share Exchanges PACIFIC HORIZON FUNDS NATIONS FUNDS By mail Yes Yes By telephone Yes Yes Minimum The A Shares exchanged must have a The Investor A Shares exchanged must current value of at least $500. have a current value of at least $1,000 Automatic exchange feature No Yes. A shareholder may automatically exchange at least $25 on a monthly or quarterly basis.
- - ---------- # Telephone transactions for the Nations Funds, consisting of purchases, exchanges and redemptions, are limited to $50,000. @ Shares of Nations Funds redeemed under the automatic withdrawal plan will not be subject to a contingent deferred sales charge, provided that the shares so redeemed do not exceed, on an annual basis, 12% of the net asset value of the respective shares in the account. IV-3 Investor A Shares of a Nations Fund may be exchanged for Investor A Shares of most other Nations Funds. Exchanges are subject to the minimum investment and other requirements imposed. A Shares of a Pacific Horizon Fund may be exchanged for A Shares of any other Pacific Horizon Fund or Time Horizon Fund, a separate investment company advised by Bank of America, or for Pacific Horizon Shares of Pacific Horizon money market funds. Exchanges are subject to the minimum investment requirements imposed. II. PACIFIC HORIZON FUNDS - B SHARES CORRESPONDING NATIONS FUNDS - INVESTOR B SHARES A. Sales Charges and Exemptions There is a maximum deferred sales charge of 5.00% on B Shares and Investor B Shares of each of the Pacific Horizon Funds and the Nations Funds, respectively if such shares are redeemed within a specified number of years of the initial purchase. The deferred sales charge is reduced as the number of years the shares are held increases, and there is no deferred sales charge on shares held for six years or longer. B. Purchase Policies
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Minimum initial investment $500 for a regular account; $100 for $1,000 for a regular account; $500 investors purchasing through BofA or for IRA investors; $250 for its affiliate*; $500 for IRA, Roth non-working spousal IRAs; $100 for IRA or SEP IRA investors; $250 for investors participating in the non-working spousal IRAs; $2500 for Systematic Investment Plan; no SEP-IRAs with more than one minimum investment for 401(k) plans, participant. simplified employee pension plans ("SEPs"), Savings Incentives Method Plans for Employees ("SIMPLE IRAs") and salary reduction-IRAs ("SAR-IRAs").** Minimum subsequent investments $50 for regular accounts and $0 for $100; $50 for subsequent investments investors purchasing through BofA or made through the Systematic its affiliate; for IRA or SEP IRA Investment Plan. investors; for non-working spousal IRAs; or for SEP-IRAs. Purchase methods Through Bank of America; Service Through Selling Agents, Servicing Organizations; by mail; by wire; by Agents, a Nations Fund Personal telephone; or Teletrade. Investment Planner account; by mail; by wire; by telephone# and a Systematic Investment Plan.
- - ---------- * The minimum investment is $100 for purchases made through BofA or its affiliates' trust and agency accounts or a Service Organization whose clients have made aggregate minimum purchases of $1 million. The minimum investment is $200 for BankAmerica cardholders with an appropriate award certificate. ** The assets of such plans must reach an asset value of $1,000 ($500 for SEPs, SAR-SEPs and SAR-IRAs) within one year of the account open date. If the assets of such plans do not reach the minimum asset size within one year, Nations reserves the right to redeem the Shares held by such plans on 60 days' written notice. IV-4 C. Redemption Procedures
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Through an authorized selling or Yes Yes servicing agent By mail Yes Yes By telephone Yes Yes# By wire Yes Yes Check writing feature (fixed income Yes ($500 transaction minimum) None funds only) By automatic withdrawal plan Yes (net asset value of account must Yes (net asset value of account must be $5,000) be $10,000)@
Due to the high cost of maintaining fund accounts with small balances, Nations Funds may redeem Investor B Shares and Pacific Horizon may redeem B Shares, if the balance in a shareholder's account with the Fund drops below $500 as a result of redemptions, and the shareholder does not increase the balance to at least $500 on 60 days' written notice. Share balances also may be redeemed at the direction of an agent pursuant to arrangements between the agent and its customer. Nations and Pacific Horizon also may redeem shares of the Nations Funds and Pacific Horizon Funds involuntarily or make payment for redemption in readily marketable securities or other property under certain circumstances in accordance with the 1940 Act. D. Additional Shareholder Services
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Systematic/automatic investment plan Yes ($50 minimum initial and Yes (in any amount from $50 to subsequent investment) $100,000). Conversion feature Yes (to A Shares in 8 years) Yes (to Investor A shares in 8 years) E. Share Exchanges PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- By mail Yes Yes By telephone Yes Yes Minimum The B Shares exchanged must have a The Investor B Shares exchanged must current value of at least $500. have a current value of at least $1,000 Automatic exchange feature None None
Investor B Shares of a Nations Fund may be exchanged for Investor B Shares of most other Nations Funds or Investor C Shares of Nations Fund money market funds. Exchanges are subject to the minimum investment requirements imposed. B Shares of a Pacific Horizon Fund may be exchanged for B Shares of any other Pacific Horizon Fund or Time Horizon Fund or the Y Shares of Pacific Horizon's Prime Fund. Exchanges are subject to the minimum investment requirements imposed. - - ---------- # Telephone transactions for the Nations Funds, consisting of purchases, exchanges and redemptions, are limited to $50,000. @ Shares of Nations Funds redeemed under the automatic withdrawal plan will not be subject to a contingent deferred sales charge, provided that the shares so redeemed do not exceed, on an annual basis, 12% of the net asset value of the respective shares in the account. IV-5 III. PACIFIC HORIZON FUND - K SHARES CORRESPONDING NATIONS FUND - INVESTOR C SHARES A. Sales Charges and Exemptions Pacific Horizon's K Shares and Nations Funds' Investor C Shares are offered at net asset value with no front-end sales charge, although a 1.00% deferred sales charge will apply to all redemptions made within one year of purchase. Nations Funds Investor C Shares are subject to a maximum deferred sales charge of 1.00% of the lower of the original purchase price or redemption proceeds. B. Purchase Policies
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Minimum initial investment $500 for a regular account; $100 for $1,000 for a regular account; $500 investors purchasing through BofA or for IRA investors; $250 for its affiliate*; $500 for IRA, Roth non-working spousal IRAs; $100 for IRA or SEP IRA investors; $250 for investors participating in the non-working spousal IRAs; $2500 for Systematic Investment Plan; no SEP-IRAs with more than one minimum investment for 401(k) plans, participant. simplified employee pension plans ("SEPs"), Savings Incentives Method Plans for Employees ("SIMPLE IRAs") and salary reduction-IRAs ("SAR-IRAs").** Minimum subsequent investments $50 for regular accounts and $0 for $100; $50 for subsequent investments investors purchasing through BofA or made through the Systematic its affiliate; for IRA or SEP IRA Investment Plan. investors; for non-working spousal IRAs; or for SEP-IRAs. Purchase methods Through eligible interest accounts. Through Selling Agents, Servicing Agents, a Nations Fund Personal Investment Planner account; by mail; by wire; by telephone# and a Systematic Investment Plan.
- - ---------- * The minimum investment is $100 for purchases made through BofA or its affiliates' trust and agency accounts or a Service Organization whose clients have made aggregate minimum purchases of $1 million. The minimum investment is $200 for BankAmerica cardholders with an appropriate award certificate. ** The assets of such plans must reach an asset value of $1,000 ($500 for SEPs, SAR-SEPs and SAR-IRAs) within one year of the account open date. If the assets of such plans do not reach the minimum asset size within one year, Nations reserves the right to redeem the Shares held by such plans on 60 days' written notice. # Telephone transactions for the Nations Funds, consisting of purchases, exchanges and redemptions, are limited to $50,000. IV-6 C. Redemption Procedures
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Through an authorized selling or Yes Yes servicing agent By mail Yes Yes By telephone Yes Yes By wire Yes Yes Check writing feature (fixed income Yes ($500 transaction minimum) None funds only) By automatic withdrawal plan Yes (net asset value of account must Yes (net asset value of account must (fixed income funds only) be $5,000) be $10,000)@
Due to the high cost of maintaining fund accounts with small balances, Nations Funds may redeem Investor C Shares and Pacific Horizon may redeem K Shares, if the balance in a shareholder's account with the Fund drops below $500 as a result of redemptions, and the shareholder does not increase the balance to at least $500 on 60 days' written notice. Share balances also may be redeemed at the direction of an agent pursuant to arrangements between the agent and its customer. Nations and Pacific Horizon also may redeem shares of the Nations Funds and Pacific Horizon Funds involuntarily or make payment for redemption in readily marketable securities or other property under certain circumstances in accordance with the 1940 Act. D. Additional Shareholder Services
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Systematic/automatic investment plan Yes ($50 minimum initial and Yes (in any amount from $50 to subsequent investment) $100,000). E. Share Exchanges PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- By mail Yes Yes By telephone Yes Yes Minimum The K Shares exchanged must have a The Investor C Shares exchanged must current value of at least $500. have a current value of at least $1,000 Automatic exchange feature No Yes. A shareholder may automatically exchange at least $25 on a monthly or quarterly basis.
Investor C Shares of a Nations Fund may be exchanged for Investor C Shares of any other Nations Funds non-money market fund or Daily Shares of certain money market funds. Exchanges are subject to the minimum investment and other requirements imposed. K Shares of a Pacific Horizon Fund may be exchanged for K Shares of any other Pacific Horizon Fund or Time Horizon Fund. Exchanges are subject to the minimum investment requirements imposed. - - ---------- @ Shares of Nations Funds redeemed under the automatic withdrawal plan will not be subject to a contingent deferred sales charge, provided that the shares so redeemed do not exceed, on an annual basis, 12% of the net asset value of the respective shares in the account. IV-7 IV. PACIFIC HORIZON FUNDS - SRF SHARES CORRESPONDING NATIONS FUNDS - SEAFIRST SHARES A. Sales Charges and Exemptions Pacific Horizon's SRF Shares and Nations Funds Seafirst Shares are offered at net asset value with no front-end or contingent deferred sales charges. B. Purchase Policies
PACIFIC HORIZON FUNDS NATIONS FUNDS* --------------------- -------------- Minimum initial investment None None Minimum subsequent investments None None Purchase methods Through eligible interest accounts. None C. Redemption Procedures PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Through an authorized selling or Yes Yes servicing agent By mail Yes Yes By telephone No Yes By wire No Yes Check writing feature None None
Due to the high cost of maintaining fund accounts with small balances, Nations Funds may redeem Seafirst Shares and Pacific Horizon may redeem SRF Shares, if the balance in a shareholder's account with the Fund drops below $500 as a result of redemptions, and the shareholder does not increase the balance to at least $500 on 60 days' written notice. Share balances also may be redeemed at the direction of an agent pursuant to arrangements between the agent and its customer. Nations and Pacific Horizon also may redeem shares of the Nations Funds and Pacific Horizon Funds involuntarily or make payment for redemption in readily marketable securities or other property under certain circumstances in accordance with the 1940 Act. D. Additional Shareholder Services
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Systematic/automatic investment plan None None
- - ---------- * Seafirst Shares of Nations Funds will not be offered to new investors. IV-8 E. Share Exchanges
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- By mail Yes Yes By telephone Yes Yes Minimum None The Seafirst Shares exchanged must have a current value of at least $1,000. Automatic Conversion Plan On June 23, 2000 to A Shares Yes
SRF Shares of a Pacific Horizon Fund may be exchanged for SRF Shares or A Shares of any other Pacific Horizon Fund or Time Horizon Fund or Pacific Horizon Shares of the Pacific Horizon Prime Fund. Exchanges are subject to the minimum investment requirements imposed. Seafirst Shares of Nations Funds may be exchanged for Seafirst Shares of any other Nations Fund and for Investor A Shares of most Nations Funds. Seafirst Shares of Nations Funds will automatically convert to Investor A shares of equal value on June 23, 2000. V. PACIFIC HORIZON FUNDS - S SHARES CORRESPONDING NATIONS FUNDS - DAILY SHARES A. Sales Charges and Exemptions Pacific Horizon's S Shares and Nations Funds' Daily Shares are both offered at net asset value with no front-end or contingent deferred sales charges.
B. Purchase Policies PACIFIC HORIZON FUNDS*** NATIONS FUNDS ------------------------ ------------- Minimum initial investment None $1,000 for a regular account; $500 for IRA investors; $250 for non-working spousal IRAs; $100 for investors participating in the Systematic Investment Plan; no minimum investment for 401(k) plans, simplified employee pension plans ("SEPs"), Savings Incentives Method Plans for Employees ("SIMPLE IRAs") and salary reduction-IRAs ("SAR-IRAs").** Minimum subsequent investments None $100; $50 for subsequent investments made through the Systematic Investment Plan.
*** Service Organizations set their own terms and conditions regarding purchases, exchanges, redemptions, investment limits and balance requirements. ** The assets of such plans must reach an asset value of $1,000 ($500 for SEPs, SAR-SEPs and SAR-IRAs) within one year of the account open date. If the assets of such plans do not reach the minimum asset size within one year, Nations reserves the right to redeem the Shares held by such plans on 60 days' written notice. IV-9
PACIFIC HORIZON FUNDS*** NATIONS FUNDS ------------------------ ------------- Purchase methods Through departments of Bank of Through Selling Agents, Servicing America or Service Organizations Agents, a Nations Fund Personal Investment Planner account; by mail; by wire; by telephone# and a Systematic Investment Plan. C. Redemption Procedures PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Through an authorized selling or Yes Yes servicing agent By mail Terms set by Service Organization Yes By telephone Terms set by Service Organization Yes# By wire Terms set by Service Organization Yes Check writing feature None Yes ($250 transaction minimum) By automatic withdrawal plan Terms set by Service Organization Yes (net asset value of account must be $10,000)@
Due to the high cost of maintaining fund accounts with small balances, Nations Funds may redeem Daily Shares and Pacific Horizon may redeem S Shares, if the balance in a shareholder's account with the Fund drops below $500 as a result of redemptions, and the shareholder does not increase the balance to at least $500 on 60 days' written notice. Share balances also may be redeemed at the direction of an agent pursuant to arrangements between the agent and its customer. Nations and Pacific Horizon also may redeem shares of the Nations Funds and Pacific Horizon Funds involuntarily or make payment for redemption in readily marketable securities or other property under certain circumstances in accordance with the 1940 Act. D. Additional Shareholder Services
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Systematic/automatic investment plan Terms set by Service Organization Yes (in any amount from $50 to $100,000).
- - ---------- # Telephone transactions for the Nations Funds, consisting of purchases, exchanges and redemptions, are limited to $50,000. @ Shares of Nations Funds redeemed under the automatic withdrawal plan will not be subject to a contingent deferred sales charge, provided that the shares so redeemed do not exceed, on an annual basis, 12% of the net asset value of the respective shares in the account. IV-10 E. Share Exchanges
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- By mail Terms set by Service Organization Yes By telephone Terms set by Service Organization Yes Minimum Terms set by Service Organization The Daily Shares exchanged must have a current value of at least $1,000 Automatic exchange feature Terms set by Service Organization Yes. A shareholder may automatically exchange at least $25 on a monthly or quarterly basis.#
Daily Shares of a Nations Institutional Reserves money market fund may be exchanged for Daily Shares of any other Nations Institutional Reserves money market fund. Exchanges are subject to the minimum investment requirements imposed. The exchange features of Pacific Horizon's S Shares are determined by the investor's Service Organization. VI. PACIFIC HORIZON FUNDS - X SHARES CORRESPONDING NATIONS FUNDS - DAILY SHARES A. Sales Charges and Exemptions Pacific Horizon's X Shares and Nations Funds' Daily Shares are both offered at net asset value with no front-end or contingent deferred sales charges. - - ---------- # Shares of Nations Fund redeemed under the automatic withdrawal plan will not be subject to a contingent deferred sales charge, provided that the shares so redeemed do not exceed, on an annual basis, 12% of the net asset value of the respective shares in the account. IV-11 B. Purchase Policies
PACIFIC HORIZON FUNDS*** NATIONS FUNDS ------------------------ ------------- Minimum initial investment None $1,000 for a regular account; $500 for IRA investors; $250 for non-working spousal IRAs; $100 for investors participating in the Systematic Investment Plan; no minimum investment for 401(k) plans, simplified employee pension plans ("SEPs"), Savings Incentives Method Plans for Employees ("SIMPLE IRAs") and salary reduction-IRAs ("SAR-IRAs").** Minimum subsequent investments None $100; $50 for subsequent investments made through the Systematic Investment Plan. Purchase methods Through departments of Bank of Through Selling Agents, Servicing America or Service Organizations Agents, a Nations Fund Personal Investment Planner account; by mail; by wire; by telephone# and a Systematic Investment Plan. C. Redemption Procedures PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Through an authorized selling or Yes Yes servicing agent By mail Terms set by Service Organization Yes By telephone Terms set by Service Organization Yes By wire Terms set by Service Organization Yes Check writing feature None Yes ($250 transaction minimum) By automatic withdrawal plan Terms set by Service Organization Yes (net asset value of account must be $10,000)@
Due to the high cost of maintaining fund accounts with small balances, Nations Funds may redeem Daily Shares and Pacific Horizon may redeem X Shares, if the balance in a shareholder's account with the Fund drops below $500 as a result of redemptions, and the shareholder does not increase the balance to at least $500 on 60 days' written notice. Share balances also may be redeemed at the direction of an agent pursuant to arrangements between the agent and its customer. Nations and Pacific Horizon also may redeem shares of the Nations Funds and Pacific Horizon Funds involuntarily or make payment for redemption in readily marketable securities or other property under certain circumstances in accordance with the 1940 Act. - - ---------- *** Service Organizations set their own terms and conditions regarding purchases, exchanges, redemptions, investment limits and balance requirements. ** The assets of such plans must reach an asset value of $1,000 ($500 for SEPs, SAR-SEPs and SAR-IRAs) within one year of the account open date. If the assets of such plans do not reach the minimum asset size within one year, Nations reserves the right to redeem the Shares held by such plans on 60 days' written notice. # Telephone transactions for the Nations Funds, consisting of purchases, exchanges and redemptions, are limited to $50,000. @ Shares of Nations Funds redeemed under the automatic withdrawal plan will not be subject to a contingent deferred sales charge, provided that the shares so redeemed do not exceed, on an annual basis, 12% of the net asset value of the respective shares in the account. IV-12
D. Additional Shareholder Services PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Systematic/automatic investment plan Terms set by Service Organization Yes (in any amount from $50 to $100,000). E. Share Exchanges PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- By mail Terms set by Service Organization Yes By telephone Terms set by Service Organization Yes Minimum Terms set by Service Organization The Daily Shares exchanged must have a current value of at least $1,000 Automatic exchange feature Terms set by Service Organization Yes. A shareholder may automatically exchange at least $25 on a monthly or quarterly basis.
Daily Shares of a Nations Institutional Reserves money market fund may be exchanged for Daily Shares of any other Nations Institutional Reserves money market fund. Exchanges are subject to the minimum investment requirements imposed. The exchange features of Pacific Horizon's X Shares are determined by the investor's Service Organization. VII. PACIFIC HORIZON FUNDS - Y SHARES CORRESPONDING NATIONS FUNDS - SERVICE SHARES A. Sales Charges and Exemptions Pacific Horizon's Y Shares and Nations Funds' Service Shares are both offered at net asset value with no front-end or contingent deferred sales charges.
B. Purchase Policies PACIFIC HORIZON FUNDS*** NATIONS FUNDS ------------------------ ------------- Minimum initial investment None None Minimum subsequent investments None None Purchase methods Through departments of Bank of Through Selling Agents, Servicing America or Service Organizations Agents, a Nations Fund Personal Investment Planner account; by mail; by wire; by telephone# and a Systematic Investment Plan.
- - ---------- *** Service Organizations set their own terms and conditions regarding purchases, exchanges, redemptions, investment limits and balance requirements. IV-13
C. Redemption Procedures PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Through an authorized selling or Yes Yes servicing agent By mail Terms set by Service Organization Yes By telephone Terms set by Service Organization Yes# By wire Terms set by Service Organization Yes Check writing feature None Yes ($250 transaction minimum) By automatic withdrawal plan Terms set by Service Organization Yes (net asset value of account must be $10,000)@ Reinstatement Privileges Within 120 days only for exchanges None of B Shares into Y Shares of Pacific Horizon's Prime Fund.
Due to the high cost of maintaining fund accounts with small balances, Nations Funds may redeem Service Shares and Pacific Horizon may redeem Y Shares, if the balance in a shareholder's account with the Fund drops below $500 as a result of redemptions, and the shareholder does not increase the balance to at least $500 on 60 days' written notice. Share balances also may be redeemed at the direction of an agent pursuant to arrangements between the agent and its customer. Nations and Pacific Horizon also may redeem shares of the Nations Funds and Pacific Horizon Funds involuntarily or make payment for redemption in readily marketable securities or other property under certain circumstances in accordance with the 1940 Act.
D. Additional Shareholder Services PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Systematic/automatic investment plan Terms set by Service Organization Yes (in any amount from $50 to $100,000).+ E. Share Exchanges PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- By mail Terms set by Service Organization Yes By telephone Terms set by Service Organization Yes Minimum Terms set by Service Organization None Automatic exchange feature Terms set by Service Organization Yes. A shareholder may automatically exchange at least $25 on a monthly or quarterly basis.
Service Shares of a Nations Institutional Reserves money market fund may be exchanged for Service Shares of any other Nations Institutional Reserves money market fund. Exchanges are subject to the minimum investment requirements imposed. - - ---------- # Telephone transactions for the Nations Funds, consisting of purchases, exchanges and redemptions, are limited to $50,000. @ Shares of Nations Funds redeemed under the automatic withdrawal plan will not be subject to a contingent deferred sales charge, provided that the shares so redeemed do not exceed, on an annual basis, 12% of the net asset value of the respective shares in the account. + Minimum initial investment: $1,000. IV-14 Pacific Horizon's Y Shares of the Prime Fund may be exchanged for B Shares of any other Pacific Horizon Fund or Y Shares of the Treasury Fund. Shares of the Treasury Fund may be exchanged only for Y Shares of the Prime Fund. Exchanges are subject to the minimum investment requirements imposed. VIII. PACIFIC HORIZON FUNDS - HORIZON SERVICE SHARES CORRESPONDING NATIONS FUNDS - ADVISER SHARES A. Sales Charges and Exemptions Pacific Horizon's Horizon Service Shares and Nations Funds' Adviser Shares are both offered at net asset value with no front-end or contingent deferred sales charges.
B. Purchase Policies PACIFIC HORIZON FUNDS*** NATIONS FUNDS ------------------------ ------------- Minimum initial investment $500,000 $100,000 Minimum subsequent investments None None Purchase methods Directly by institutional clients or Through Stephens, the Transfer through selected Service Agent, or their respective agents Organizations upon execution of the appropriate account documentation C. Redemption Procedures PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Through an authorized selling or Yes Yes servicing agent By telephone Yes Yes By wire Yes Yes Check writing feature None None By automatic withdrawal plan None None
Due to the high cost of maintaining fund accounts with small balances, Nations Funds may redeem Adviser Shares and Pacific Horizon may redeem Horizon Service Shares, if the balance in a shareholder's account with the Fund drops below $500 as a result of redemptions, and the shareholder does not increase the balance to at least $500 on 60 days' written notice. Share balances also may be redeemed at the direction of an agent pursuant to arrangements between the agent and its customer. Nations and Pacific Horizon also may redeem shares of the Nations Funds and Pacific Horizon Funds involuntarily or make payment for redemption in readily marketable securities or other property under certain circumstances in accordance with the 1940 Act.
D. Additional Shareholder Services PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Systematic/automatic investment plan Terms set by Service Organization None
- - ---------- *** Service Organizations set their own terms and conditions regarding purchases, exchanges, redemptions, investment limits and balance requirements. IV-15 E. Share Exchanges
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- By mail Terms set by Service Organization None By telephone Terms set by Service Organization Yes Minimum Terms set by Service Organization None Automatic exchange feature Terms set by Service Organization None
Adviser Shares of a Nations Institutional Reserves money market fund may be exchanged for Adviser Shares of any other Nations Institutional Reserves money market fund. Exchanges are subject to the minimum investment requirements imposed. Horizon Service Shares of a Pacific Horizon Fund may be exchanged for Horizon Service Shares of any other Pacific Horizon Fund. Exchanges are subject to the minimum investment requirements imposed. IX. PACIFIC HORIZON FUNDS - HORIZON SHARES CORRESPONDING NATIONS FUNDS - CAPITAL SHARES A. Sales Charges and Exemptions Pacific Horizon's Horizon Shares and Nations Funds' Capital Shares are both offered at net asset value with no front-end or contingent deferred sales charges. B. Purchase Policies
PACIFIC HORIZON FUNDS*** NATIONS FUNDS ------------------------ ------------- Minimum initial investment $500,000* $1,000,000 Minimum subsequent investments None None Purchase methods Directly by institutional clients or Through Stephens, the Transfer through selected Service Agent, or their respective agents Organizations upon execution of the appropriate account documentation C. Redemption Procedures PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Through an authorized selling or Yes Yes servicing agent By telephone Yes Yes By wire Yes Yes Check writing feature None None By automatic withdrawal plan None None
Due to the high cost of maintaining fund accounts with small balances, Nations Funds may redeem Capital Shares and Pacific Horizon may redeem Horizon Shares, if the balance in a shareholder's account with the Fund drops below $500 as a result of redemptions, and the shareholder does not increase the balance to at least $500 on 60 days' written notice. Share balances also may be redeemed at the direction of an agent pursuant to arrangements between the agent and its customer. Nations and Pacific Horizon also may redeem shares of the Nations Funds and Pacific Horizon Funds involuntarily or make payment for redemption in readily marketable securities or other property under certain circumstances in accordance with the 1940 Act. - - ---------- *** Service Organizations set their own terms and conditions regarding purchases, exchanges, redemptions, investment limits and balance requirements. * Purchases by checks are not permitted. IV-16 D. Additional Shareholder Services
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Systematic/automatic investment plan Terms set by Service Organization None E. Share Exchanges PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- By mail Terms set by Service Organization Yes By telephone Terms set by Service Organization Yes Minimum Terms set by Service Organization None Automatic exchange feature Terms set by Service Organization None
Capital Shares of a Nations Institutional Reserves money market fund may be exchanged for Capital Shares of any other Nations Institutional Reserves money market fund. Exchanges are subject to the minimum investment requirements imposed. Horizon Shares of a Pacific Horizon Fund may be exchanged for Horizon Shares of any other Pacific Horizon Fund. Exchanges are subject to the minimum investment requirements imposed. X. PACIFIC HORIZON FUNDS - PACIFIC HORIZON SHARES CORRESPONDING NATIONS FUNDS - INVESTOR SHARES A. Sales Charges and Exemptions Pacific Horizon's Pacific Horizon Shares and Nations Funds' Investor Shares are both offered at net asset value with no front-end or contingent deferred sales charges. B. Purchase Policies
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Minimum initial investment $500 for a regular account; $500 for $25,000 IRA or Roth IRA and SEP IRAs; $250 for non-working spousal IRAs; $2500 for SEP-IRAs with more than one participant; $50 through Direct Deposit Program. Minimum subsequent investments $50, $500 for Teletrade, $0 for None investors purchasing through BofA or its affiliations; for IRA or Roth IRA investors; for non-working spousal IRAs; or for SEP-IRAs with more than one participant. Purchase methods Through Bank of America or Service Through Stephens, the Transfer Organizations. Agent, or their respective agents.
IV-17
C. Redemption Procedures PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Through an authorized selling or Yes Yes servicing agent By mail Yes Yes By telephone Yes Yes By wire Yes Yes Check writing feature Yes (transaction minimum: $500) Yes (transaction minimum: $500) By automatic withdrawal plan Yes (net asset value of account must None be $5,000) Reinstatement privileges Yes (within 90 days) Yes (within 90 days)
Due to the high cost of maintaining fund accounts with small balances, Nations Funds may redeem Investor Shares and Pacific Horizon may redeem Pacific Horizon Shares, if the balance in a shareholder's account with the Fund drops below $500 as a result of redemptions, and the shareholder does not increase the balance to at least $500 on 60 days' written notice. Share balances also may be redeemed at the direction of an agent pursuant to arrangements between the agent and its customer. Nations and Pacific Horizon also may redeem shares of the Nations Funds and Pacific Horizon Funds involuntarily or make payment for redemption in readily marketable securities or other property under certain circumstances in accordance with the 1940 Act.
D. Additional Shareholder Services PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Systematic/automatic Yes ($50 minimum None investment plan initial and subsequent investment). E. Share Exchanges PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- By mail Yes Yes By telephone Yes Yes Minimum The Pacific Horizon Shares exchanged None must have a current value of a least $500. Automatic exchange feature None None
Investor Shares of a Nations Institutional Reserves money market fund may be exchanged for Investor Shares of any other Nations Institutional Reserves money market fund. Exchanges are subject to the minimum investment requirements imposed. Pacific Horizon Shares of a Pacific Horizon Fund may be exchanged for Pacific Horizon Shares of any other Pacific Horizon Fund or Time Horizon Fund, except Pacific Horizon Shares of the Pacific Horizon's Prime Fund acquired through an exchange of B Shares of a Time Horizon Fund may only be exchanged back to B shares of a Time Horizon Fund. Exchanges are subject to the minimum investment requirements imposed. IV-18 XI. DIVIDENDS. Dividends for each of the Pacific Horizon Funds and Nations Funds are declared and paid as follows:
PACIFIC HORIZON FUNDS NATIONS FUNDS --------------------- ------------- Declared daily and paid monthly Tax-Exempt Money Fund Municipal Reserves Prime Fund Cash Reserves Treasury Fund Treasury Reserves Treasury Only Fund Government Reserves California Tax-Exempt Money Market California Tax-Exempt Money Market Fund Reserves Intermediate Bond Fund Intermediate Bond Fund California Municipal Bond Fund Declared and paid quarterly Asset Allocation Fund Asset Allocation Fund Blue Chip Fund Blue Chip Fund Capital Income Fund Capital Income Fund Declared and paid at least California Municipal Bond Fund annually
IV-19 STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 1, 1999 PACIFIC HORIZON FUNDS, INC. 400 BELLEVUE PARKWAY WILMINGTON, DELAWARE 19809 1-800-346-2087 NATIONS INSTITUTIONAL RESERVES ONE NATIONSBANK PLAZA, 33RD FLOOR CHARLOTTE, NORTH CAROLINA 28255 1-800-321-7854 (APRIL 12, 1999 SPECIAL MEETING OF SHAREHOLDERS OF PACIFIC HORIZON FUNDS) This Statement of Additional Information is not a prospectus but should be read in conjunction with the Proxy/Prospectus dated the date hereof, for the Special Meeting of Shareholders of Pacific Horizon to be held on April 12, 1999. Copies of the Proxy/Prospectus may be obtained at no charge by writing or calling Pacific Horizon or Nations at the addresses or telephone numbers set forth above. Unless otherwise indicated, capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Proxy/Prospectus. INCORPORATION OF DOCUMENTS BY REFERENCE IN STATEMENT OF ADDITIONAL INFORMATION Further information about Nations Municipal Reserves, Nations Government Reserves, Nations Cash Reserves and Nations Treasury Reserves, is contained in and incorporated by reference to their statements of additional information dated September 1, 1998 and as supplemented. Further information about the Pacific Horizon Asset Allocation Fund, Blue Chip Fund, California Municipal Bond Fund, California Tax-Exempt Money Market Fund, Capital Income Fund, Government Fund, Intermediate Bond Fund, Prime Fund, Tax-Exempt Fund, Treasury Fund and Treasury Only Fund, is contained in and incorporated herein by reference to their statements of additional information, dated July 1, 1998, as supplemented. The audited financial statements and related Report of Independent Accountants for the year ended March 31, 1998 and the unaudited financial statements for the semi-annual period ended September 30, 1998 for Nations Government Reserves, Nations Cash Reserves, Nations Municipal Reserves and Nations Treasury Reserves, are incorporated herein by reference. No other part of the annual or semi-annual reports are incorporated herein by reference. 1 The audited financial statements and related Report of Independent Accountants for the year ended February 28, 1998 and the unaudited financial statements for the semi-annual period ended August 31, 1998 for the Pacific Horizon Asset Allocation, Blue Chip, California Municipal Bond, California Municipal Tax-Free Money Market, Capital Income, Government Intermediate Bond, Prime, Tax-Exempt Money, Treasury and Treasury Only Funds and the Blue Chip Portfolio and Investment Grade Bond Portfolio of Master Investment Trust, Series I are incorporated herein by reference. No other part of the annual or semi-annual reports are incorporated herein by reference. 2 TABLE OF CONTENTS General Information....................................................................4 Introductory Note to PRO FORMA Financial Information...........................5 3 GENERAL INFORMATION The Reorganization contemplates the transfer of all of the assets and liabilities of each Pacific Horizon Fund to a corresponding Nations Fund in exchange for Shares of designated classes of the corresponding Nations Fund of equal value. The Shares issued by Nations will have an aggregate value equal to the aggregate value of the shares of the respective Pacific Horizon Funds that were outstanding immediately before the Closing. After the transfer of their assets and liabilities in exchange for Shares of the Nations Funds, the Pacific Horizon Funds will distribute the Shares of the Nations Funds to their shareholders in liquidation of the Pacific Horizon Funds. Each shareholder owning shares of a particular Pacific Horizon Fund at the Closing will receive Shares of the corresponding Nations Fund of equal value, and will receive any unpaid dividends or distributions that were declared before the Closing on shares of the Pacific Horizon Funds. Nations will establish an account for each former shareholder of the Pacific Horizon Funds reflecting the appropriate number of Nations Fund Shares distributed to the shareholder. These accounts will be substantially identical to the accounts maintained by Pacific Horizon for each shareholder. Upon completion of the reorganization with respect to all funds of Pacific Horizon, all outstanding shares of the Pacific Horizon Funds will have been redeemed and cancelled in exchange for Shares of the Nations Funds distributed, and Pacific Horizon will wind up its affairs and be deregistered as an investment company under the 1940 Act and dissolved under Maryland law. For further information about the transaction, see the Proxy/Prospectus. 4 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 Pacific Horizon Funds to the Nations Funds, accounted for as if each transfer had occurred as of September 30, 1998 (for the Shell Nations Funds and corresponding Pacific Horizon Funds) and October 31, 1998 (for the Operating Nations Funds and corresponding Pacific Horizon Funds). In addition, each PRO FORMA combining statement has been prepared based upon the structure of the proposed fee and expense structure of the applicable surviving Nations Fund. The PRO FORMA financial information should be read in conjunction with the historical financial statements and notes thereto of the Pacific Horizon Funds and Nations Funds included or incorporated herein by reference in this Statement of Additional Information. Each combination of the above Pacific Horizon Funds and Nations Funds will be accounted for as a tax-free reorganization. 5 [ PRO FORMA FINANCIALS TO BE DISTRIBUTED SEPARATELY BY NBAI ] 6
- - --------------------------------------------------------------------------------------------------------- NATIONS BLUE CHIP FUND / PACIFIC HORIZONS BLUE CHIP FUND - - --------------------------------------------------------------------------------------------------------- Pro Forma Combining Statement of Net Assets (unaudited) - - --------------------------------------------------------------------------------------------------------- September 30,1998 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- Nations Blue Pacific Horizons Adjustments to Pro Pro Forma Chip Fund Blue Chip Fund Forma Combined - - --------------------------------------------------------------------------------------------------------- (in 000's) (in 000's) (in 000's) (in 000's) - - --------------------------------------------------------------------------------------------------------- INVESTMENT IN MASTER INVESTMENT TRUST, SERIES I- BLUE CHIP $ - $ 699,807 $ - $ 699,807 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES: Other assets and liabilities, net - (1,272) - (1,272) - - --------------------------------------------------------------------------------------------------------- Total Other Assets and Liabilities - (1,272) - (1,272) - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- NET ASSETS - 698,535 - 698,535 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- NET ASSETS BY CLASS: - - --------------------------------------------------------------------------------------------------------- Investor A / Class A $ - $ 340,351 $ - $ 340,351 - - --------------------------------------------------------------------------------------------------------- Investor B / Class B $ - $ 4,284 $ - $ 4,284 - - --------------------------------------------------------------------------------------------------------- Investor C / Class K $ - $ 8,501 $ - $ 8,501 - - --------------------------------------------------------------------------------------------------------- Seafirst Class $ - $ 345,399 $ - $ 345,399 - - --------------------------------------------------------------------------------------------------------- $ - $ 698,535 $ - $ 698,535 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- SHARES OUTSTANDING BY CLASS: - - --------------------------------------------------------------------------------------------------------- Investor A / Class A - 12,180 - 12,180 - - --------------------------------------------------------------------------------------------------------- Investor B / Class B - 153 - 153 - - --------------------------------------------------------------------------------------------------------- Investor C / Class K - 305 - 305 - - --------------------------------------------------------------------------------------------------------- Seafirst Class - - 13,970 - - ---------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------- 13,970 - - --------------------------------------------------------------------------------------------------------- - 26,608 - 26,608 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE BY CLASS: - - --------------------------------------------------------------------------------------------------------- Investor A / Class A $ - $ 27.94 $ - 27.94 - - --------------------------------------------------------------------------------------------------------- Investor B / Class B $ - $ 27.96 $ - 27.96 - - --------------------------------------------------------------------------------------------------------- Investor C / Class K $ - $ 27.83 $ - 27.83 - - --------------------------------------------------------------------------------------------------------- Seafirst Class $ - $ 24.72 $ - 24.72 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- NATIONS BLUE CHIP FUND / PACIFIC HORIZONS BLUE CHIP FUND - - --------------------------------------------------------------------------------------------------------- Pro Forma Combining Statement of Operations (unaudited) - - --------------------------------------------------------------------------------------------------------- September 30,1998 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- Nations Blue Pacific Horizons Adjustments to Pro Pro Forma Chip Fund Blue Chip Fund Forma Combined - - --------------------------------------------------------------------------------------------------------- (in 000's) (in 000's) (in 000's) (in 000's) - - --------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: - - --------------------------------------------------------------------------------------------------------- Investment Income from Master Investment Trust, Series 1 - Blue Chip Portfolio - - --------------------------------------------------------------------------------------------------------- Interest $0 $1,282 $0 $1,282 - - --------------------------------------------------------------------------------------------------------- Dividends - 9,883 - 9,883 - - --------------------------------------------------------------------------------------------------------- - 11,165 - 11,165 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- Expenses - 4,272 882 5,154 - - --------------------------------------------------------------------------------------------------------- Less: Fee waivers and expense reimbursements - (33) 33 - - - --------------------------------------------------------------------------------------------------------- - 4,239 915 5,154 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- Net Investment Income from - 6,926 6,011 Master Investment Trust (915) Series I - Blue Chip Portfolio - - ---------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------- EXPENSES: - - --------------------------------------------------------------------------------------------------------- Investment Advisory - - - - - --------------------------------------------------------------------------------------------------------- Administration - 1,032 206 1,238 - - --------------------------------------------------------------------------------------------------------- Transfer Agent - 474 474 - - --------------------------------------------------------------------------------------------------------- Custodian - 1 1 - - --------------------------------------------------------------------------------------------------------- Legal and Audit Fees - 20 20 - - --------------------------------------------------------------------------------------------------------- Registration & Filing - 59 59 - - --------------------------------------------------------------------------------------------------------- Trustees' Fees - 5 5 - - --------------------------------------------------------------------------------------------------------- Interest Expense - - - - - --------------------------------------------------------------------------------------------------------- Other expenses - 150 150 - - --------------------------------------------------------------------------------------------------------- Subtotal - 1,741 206 1,947 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- SHAREHOLDER SERVICING AND DISTRIBUTION FEES - - --------------------------------------------------------------------------------------------------------- Investor A / Class A - 768 - 768 - - --------------------------------------------------------------------------------------------------------- Investor B / Class B - 1 - 1 - - --------------------------------------------------------------------------------------------------------- Investor C / Class K - 64 - 64 - - --------------------------------------------------------------------------------------------------------- Seafirst Class - 939 - 939 - - --------------------------------------------------------------------------------------------------------- Subtotal - 1,772 - 1,772 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- Fees waived and/or reimbursed by investment - - --------------------------------------------------------------------------------------------------------- advisor, administrator and/or distributor - (636) (839) (1,475) - - --------------------------------------------------------------------------------------------------------- TOTAL EXPENSES - 2,877 (633) 2,244 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME - 4,049 (282) 3,767 - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: - - --------------------------------------------------------------------------------------------------------- Net realized gain/(loss) on investments - - 46,637 46,637 - - --------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation/depreciation of investments - (133,152) - (133,152) - - --------------------------------------------------------------------------------------------------------- Net realized and unrealized gain/(loss) on investments - (86,515) - (86,515) - - --------------------------------------------------------------------------------------------------------- NET INCREASE/(DECREASE) IN NET ASSETS - - --------------------------------------------------------------------------------------------------------- RESULTING FROM OPERATIONS $0 ($82,466) ($282) ($82,748) - - --------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------- LEGEND: - - --------------------------------------------------------------------------------------------------------- (A) REFLECTS ADJUSTMENT TO THE ACQUIRING FUND - - ---------------------------------------------------------------------------------------------------------
(B) CONTRACTUAL FEE OBLIGATION. ADJUSTMENT REFLECTS EXPECTED SAVINGS WHEN THE TWO FUNDS BECOME ONE. - - -------------------------------------------------------------------------------- (C) REFLECTS ADJUSTMENT TO THE LEVEL OF THE ACQUIRING FUND'S VOLUNTARY EXPENSE REIMBURSEMENT. - - -------------------------------------------------------------------------------- (D) NET OF EXPENSE OFFSET ARRANGEMENTS AMOUNTS TO LESS THAN .01% OF AVERAGE NET ASSETS. - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS - - -------------------------------------------------------------------------------- Nations Blue Chip Fund Pacific Horizon Blue Chip Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of September 30, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of September 30, 1998 and the unaudited Pro Forma Combining Statement of Operations assumes the exchange occurred as of October 1,1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at September 30, 1998 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizon Blue Chip Fund in exchange for shares of Nations Blue Chip Fund. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward under the new name of Nations Blue Chip Fund. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 2. Portfolio 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. The investment advisory and administration fees and Investor C shareholders servicing and distribution fees have been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations Blue Chip Fund at the time of the Reorganization at the combined level of average net assets for the twelve month period ended September 30, 1998.
- - ------------------------------------------------------------------------------------------------------------------------------------ NATIONS MASTER INVESTMENT TRUST, SERIES I - BLUE CHIP PORTFOLIO / MASTER INVESTMENT TRUST, SERIES I - BLUE CHIP PORTFOLIO - - ------------------------------------------------------------------------------------------------------------------------------------ Pro Forma Combining Schedule of Investments (unaudited) - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ September 30,1998 - - ------------------------------------------------------------------------------------------------------------------------------------ Pacific Pacific Horizon Blue Nations Horizon Pro Forma Nations Blue Chip Pro Forma Blue Chip Blue Chip Blue Chip Chip Portfolio Portfolio Blue Chip Portfolio Portfolio Portfolio Shares Shares Shares Asset Description Value Value Value (in 000's) (in 000's) (in 000's) COMMON STOCK - 96.78% 253,700 253,700 Abbott Laboratories 11,020 11,020 59,600 59,600 Albertson's, Inc. 3,226 3,226 103,900 103,900 AlliedSignal, Inc. 3,676 3,676 208,594 208,594 Allstate Corp. 8,695 8,695 27,600 27,600 Aluminum Company of America 1,959 1,959 96,800 96,800 American Express Co. 7,514 7,514 103,700 103,700 American General Corp. 6,624 6,624 183,700 183,700 Ameritech Corp. 8,703 8,703 53,700 53,700 AMR Corp. 2,977 2,977 120,500 120,500 Anheuser-Busch Cos., Inc. 6,507 6,507 226,300 226,300 AT&T Corp. 13,225 13,225 178,000 178,000 Avon Products, Inc. 4,995 4,995 130,000 130,000 Banc One Corp. 5,541 5,541 109,600 109,600 BankBoston Corp. 3,617 3,617 167,442 167,442 Bell Atlantic Corp. 8,110 8,110 188,800 188,800 BellSouth Corp. 14,207 14,207 69,000 69,000 Biogen, Inc. 4,541 4,541 138,200 138,200 Biomet, Inc. 4,794 4,794 146,700 146,700 Bristol-Meyers Squibb Co. 15,238 15,238 82,400 82,400 Brunswick Corp. 1,066 1,066 91,500 91,500 Burlington Northern Santa Fe Corp. 2,928 2,928 103,900 103,900 Centex Corp. 3,585 3,585 123,100 123,100 Chase Manhattan Corp. 5,324 5,324 119,300 119,300 Chevron Corp. 10,029 10,029 57,600 57,600 Chrysler Corp. 2,758 2,758 165,975 165,975 Cisco Systems, Inc. 10,259 10,259 50,900 50,900 Citicorp 4,730 4,730 46,300 46,300 Clorox Co. 3,820 3,820 142,400 142,400 Coastal Corp. 4,806 4,806 193,100 193,100 Coca-Cola Co. 11,128 11,128 61,900 61,900 Compaq Computer Corp. 1,957 1,957 100,100 100,100 Conagra, Inc. 2,696 2,696 177,800 177,800 Conseco, Inc. 5,434 5,434 Pacific Pacific Horizon Blue Nations Horizon Pro Forma Nations Blue Chip Pro Forma Blue Chip Blue Chip Blue Chip Chip Portfolio Portfolio Blue Chip Portfolio Portfolio Portfolio Shares Shares Shares Asset Description Value Value Value (in 000's) (in 000's) (in 000's) 62,700 62,700 Dana Corp. 2,339 2,339 73,800 73,800 Deere & Co. 2,232 2,232 270,000 270,000 Dell Computer Corp. 17,752 17,752 70,000 70,000 Dow Chemical Co. 5,981 5,981 59,000 59,000 Du Pont, (E.I.) de Nemours & Co. 3,312 3,312 45,000 45,000 Eastman Kodak Co. 3,479 3,479 308,900 308,900 Edison International 7,935 7,935 187,400 187,400 EMC Corp. 10,717 10,717 4,200 4,200 Equitable Cos., Inc. 174 174 287,600 287,600 Exxon Corp. 20,186 20,186 224,900 224,900 First Union Corp. 11,512 11,512 144,500 144,500 Fleet Financial Group, Inc. 10,612 10,612 104,100 104,100 Fluor Corp. 4,275 4,275 209,500 209,500 Ford Motor Co. 9,834 9,834 162,800 162,800 FPL Group, Inc. 11,345 11,345 121,700 121,700 Gap, Inc. 6,420 6,420 278,500 278,500 General Electric Co. 22,158 22,158 50,100 50,100 Goodrich (B.F.) Co. 1,638 1,638 63,500 63,500 Guidant Corp. 4,715 4,715 107,500 107,500 Harris Corp. 3,440 3,440 229,800 229,800 HBO & Co. 6,635 6,635 51,800 51,800 Heinz (H.J.) Co. 2,648 2,648 208,200 208,200 Home Depot, Inc. 8,224 8,224 86,000 86,000 Honeywell, Inc. 5,509 5,509 46,200 46,200 Ingersoll-Rand Co. 1,753 1,753 114,100 114,100 Intel, Inc. 9,784 9,784 62,500 62,500 Johnson & Johnson Co. 4,890 4,890 84,500 84,500 Kimberly-Clark Corp. 3,422 3,422 60,900 60,900 King World Productions, Inc. 1,591 1,591 124,400 124,400 Kroger Co. 6,220 6,220 101,300 101,300 Lehman Brothers Holdings, Inc. 2,862 2,862 226,800 226,800 Lowe's Cos., Inc. 7,215 7,215 135,700 135,700 Lucent Technologies, Inc. 9,372 9,372 118,500 118,500 Marriott International Inc., Class A 2,829 2,829 122,600 122,600 Maxim Integrated Products, Inc. 3,418 3,418 44,100 44,100 McDonald's Corp. 2,632 2,632 47,300 47,300 McGraw-Hill Cos., Inc. 3,749 3,749 158,400 158,400 MCI Worldcom, Inc. 7,742 7,742 132,100 132,100 Mellon Bank Corp. 7,274 7,274 45,600 45,600 Merck & Co., Inc. 5,908 5,908 244,100 244,100 Microsoft Corp. 26,867 26,867 144,900 144,900 Mobil Corp. 11,003 11,003 109,700 109,700 Morgan Stanley Dean Witter Discover & Co. 4,724 4,724 88,800 88,800 National City Corp. 5,855 5,855 138,406 138,406 NationsBank Corp. 7,405 7,405 114,800 114,800 New York Times Co., Class A 3,157 3,157 Pacific Pacific Horizon Blue Nations Horizon Pro Forma Nations Blue Chip Pro Forma Blue Chip Blue Chip Blue Chip Chip Portfolio Portfolio Blue Chip Portfolio Portfolio Portfolio Shares Shares Shares Asset Description Value Value Value (in 000's) (in 000's) (in 000's) 56,000 56,000 Newell Co. 2,579 2,579 106,000 106,000 Oracle Corp. 3,087 3,087 125,400 125,400 Owens-Illinois, Inc. 3,135 3,135 48,300 48,300 P.P.G. Industries, Inc. 2,635 2,635 102,900 102,900 PepsiCo, Inc. 3,029 3,029 153,300 153,300 Pfizer, Inc. 16,240 16,240 265,200 265,200 Philip Morris Cos., Inc. 12,216 12,216 88,100 88,100 Phillips Petroleum Co. 3,975 3,975 89,200 89,200 Pioneer Hi-Bred International, Inc. 2,341 2,341 83,400 83,400 Praxair, Inc. 2,726 2,726 88,600 88,600 Procter & Gamble Co. 6,285 6,285 114,500 114,500 Quaker Oats Co. 6,756 6,756 181,500 181,500 Schering-Plough Corp. 18,797 18,797 67,400 67,400 Solutia, Inc. 2,177 2,177 62,000 62,000 Sun Co., Inc. 1,984 1,984 114,500 114,500 Sun Microsystems, Inc. 5,704 5,704 120,800 120,800 SunAmerica, Inc. 7,369 7,369 68,200 68,200 SYSCO Corp. 1,607 1,607 88,600 88,600 Tellabs, Inc. 3,527 3,527 46,500 46,500 Temple Inland, Inc. 2,226 2,226 114,500 114,500 Time Warner, Inc. 10,026 10,026 419,800 419,800 TJX Cos., Inc. 7,478 7,478 42,200 42,200 Tommy Hilfiger 1,730 1,730 138,500 138,500 Transocean Offshore, Inc. 4,804 4,804 112,300 112,300 Travelers Group, Inc. 4,211 4,211 158,500 158,500 Tyco International Ltd. 8,757 8,757 131,200 131,200 U.S. West, Inc. 6,880 6,880 21,100 21,100 UAL Corp. 1,368 1,368 55,900 55,900 Unilever NV 3,424 3,424 113,500 113,500 United Healthcare Corp. 3,973 3,973 117,600 117,600 United Technologies Corp. 8,989 8,989 143,200 143,200 USX - Marathon Group 5,075 5,075 119,900 119,900 USX-U.S. Steel Group, Inc. 2,863 2,863 117,000 117,000 Viacom, Inc., Class B 6,786 6,786 50,200 50,200 Wal-Mart Stores, Inc. 2,742 2,742 0 0 Walt Disney Co. 0 0 98,200 98,200 Warner-Lambert Co. 7,414 7,414 62,000 62,000 Xerox Corp. 5,255 5,255 --------------------------------------- 0 728,603 728,603 --------------------------------------- INVESTMENT COMPANIES - 2.68% 20,219,278 20,219,278Temporary Investment Fund 20,219 20,219 --------------------------------------- 0 20,219 20,219 --------------------------------------- U.S. TREASURY OBLIGATIONS - .4% 3,040,000 3,040,000U.S. Treasury Bill 3,034 3,034 Pacific Pacific Horizon Blue Nations Horizon Pro Forma Nations Blue Chip Pro Forma Blue Chip Blue Chip Blue Chip Chip Portfolio Portfolio Blue Chip Portfolio Portfolio Portfolio Shares Shares Shares Asset Description Value Value Value (in 000's) (in 000's) (in 000's) --------------------------------------- 0 3,034 3,034 --------------------------------------- --------------------------------------- Total Investment--99.86% (Cost $0, $653,495, $653,495, respectively) 0 751,856 751,856 ---------------------------------------
- - ----------------------------------------------------------------------------------------------------------------------------------- NATIONS MASTER INVESTMENT TRUST, SERIES I - BLUE CHIP PORTFOLIO / MASTER INVESTMENT TRUST, SERIES I - BLUE CHIP PORTFOLIO - - ---------------------------------------------------------------------------------------------------------------------------------- Pro Forma Combining Statement of Net Assets (unaudited) - - ---------------------------------------------------------------------------------------------------------------------------------- September 30,1998 - - ------------------------------------------------------------------------------------------------------------------------------------ Nations Blue Pacific Horizons Adjustments to Pro Pro Forma Chip Portfolio Blue Chip Portfolio Forma Combined - - ------------------------------------------------------------------------------------------------------------------------------------ (in 000's) (in 000's) (in 000's) (in 000's) - - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS $ - $ 751,856 $ - $751,856 - - ------------------------------------------------------------------------------------------------------------------------------------ OTHER ASSETS AND LIABILITIES: - - ------------------------------------------------------------------------------------------------------------------------------------ Other assets and liabilities, net - 1,031 - 1,031 - - ------------------------------------------------------------------------------------------------------------------------------------ Total Other Assets and Liabilities - 1,031 - 1,031 - - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS - 752,887 - 752,887 - - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS BY CLASS: - - ------------------------------------------------------------------------------------------------------------------------------------ World Horizon Class $ - $ 53,095 $ - $ 53,095 - - ------------------------------------------------------------------------------------------------------------------------------------ Pacific Horizon Class $ - $ 699,792 $ - $ 699,792 - - ------------------------------------------------------------------------------------------------------------------------------------ $ - $ 752,887 $ - $ 752,887 - - ------------------------------------------------------------------------------------------------------------------------------------ SHARES OUTSTANDING BY CLASS: - - ------------------------------------------------------------------------------------------------------------------------------------ World Horizon Class - 2,207 - 2,207 - - ------------------------------------------------------------------------------------------------------------------------------------ Pacific Horizon Class - 28,736 - 28,736 - - ------------------------------------------------------------------------------------------------------------------------------------ - 30,943 - 30,943 - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE BY CLASS: - - ------------------------------------------------------------------------------------------------------------------------------------ World Horizon Class $ - $ 24.06 $ - $ 24.06 - - ------------------------------------------------------------------------------------------------------------------------------------ Pacific Horizon Class $ - $ 24.35 $ - $ 24.35 - - ------------------------------------------------------------------------------------------------------------------------------------ SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ NATIONS MASTER INVESTMENT TRUST, SERIES I - BLUE CHIP PORTFOLIO / MASTER INVESTMENT TRUST, SERIES I - BLUE CHIP PORTFOLIO - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ Pro Forma Combining Statement of Operations (unaudited) - - ------------------------------------------------------------------------------------------------------------------------------------ September 30,1998 - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ Nations Blue Pacific Horizons Adjustments to Pro Pro Forma Chip Portfolio Blue Chip Portfolio Forma Combined - - ------------------------------------------------------------------------------------------------------------------------------------ (in 000's) (in 000's) (in 000's) (in 000's) - - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME: - - ------------------------------------------------------------------------------------------------------------------------------------ Interest $0 $1,396 $0 $1,396 - - ------------------------------------------------------------------------------------------------------------------------------------ Dividends - 10,560 - 10,560 - - ------------------------------------------------------------------------------------------------------------------------------------ - 11,956 - 11,956 - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES: - - ------------------------------------------------------------------------------------------------------------------------------------ Investment Advisory - 3,726 1,118 4,844 - - ------------------------------------------------------------------------------------------------------------------------------------ Administration - 373 373 - - ------------------------------------------------------------------------------------------------------------------------------------ Transfer Agent - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Custodian - 114 (40) 74 - - ------------------------------------------------------------------------------------------------------------------------------------ Legal and Audit Fees - 71 71 - - ------------------------------------------------------------------------------------------------------------------------------------ Registration & Filing - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Trustees' Fees - 46 46 - - ------------------------------------------------------------------------------------------------------------------------------------ Interest Expense - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Other expenses - 293 (100) 193 - - ------------------------------------------------------------------------------------------------------------------------------------ Subtotal - 4,623 978 5,601 - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ Fees waived and/or reimbursed by investment advisor, administrator and/or distributor - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES - 4,623 978 5,601 - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME - 7,333 (978) 6,355 - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: - - ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain/(loss) on investments - 62,453 - 62,453 - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation/ (depreciation) of investments - (112,610) - (112,610) - - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain/(loss) on investments - (50,157) - (50,157) - - ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE/(DECREASE) IN NET ASSETS - - ------------------------------------------------------------------------------------------------------------------------------------ RESULTING FROM OPERATIONS $0 ($42,824) ($978) ($43,802) - - ------------------------------------------------------------------------------------------------------------------------------------ LEGEND: - - --------------------------------------------------------------------------------------------------------------------------------- (A) REFLECTS ADJUSTMENT TO THE ACQUIRING FUND CONTRACTUAL FEE OBLIGATION. - - --------------------------------------------------------------------------------------------------------------------------------- (B) ADJUSTMENT REFLECTS EXPECTED SAVINGS WHEN THE TWO FUNDS BECOME ONE. - - --------------------------------------------------------------------------------------------------------------------------------- (C) REFLECTS ADJUSTMENT TO THE LEVEL OF THE ACQUIRING FUND'S VOLUNTARY EXPENSE REIMBURSEMENT. - - --------------------------------------------------------------------------------------------------------------------------------- (D) NET OF EXPENSE OFFSET ARRANGEMENTS AMOUNTS TO LESS THAN .01% OF AVERAGE NET ASSETS. - - --------------------------------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------------------------------- SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS - - ---------------------------------------------------------------------------------------------------------------------------------
Nations Blue Chip Master Portfolio Pacific Horizon Blue Chip Master Portfolio Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of September 30, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of September 30, 1998 and the unaudited Pro Forma Combining Statement of Operations assumes the exchange occurred as of October 1,1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at September 30, 1998 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizon Blue Chip Master Portfolio in exchange for shares of Nations Blue Chip Master Portfolio. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward under the new name of Nations Blue Chip Master Portfolio. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 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. The investment advisory and administration fees have been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations Blue Chip Master Portfolio at the time of the Reorganization at the combined level of average net assets for the twelve month period ended September 30, 1998.
NATIONS CALIFORNIA MUNICIPAL BOND FUND / PACIFIC HORIZON CALIFORNIA MUNICIPAL BOND FUND Pro Forma Combining Schedule of Investments (unaudited) Twelve Month Period Ending September 30,1998 Pacific Nations Horizon California California Pacific Municipal Municipal Nations Horizon Bond Bond Pro Forma California California Principal Principal Principal Municipal Municipal Pro Forma Amount Amount Amount Description Bond Value Bond Value Value (in 000's) (in 000's) (in 000's) MUNICIPAL BONDS - PUERTO RICO - 2.39% 5,000,000 5,000,000 PUERTO RICO ELECTRIC POWER AUTH REV 6% 5,431 5,431 07/01/2014 --------------------------------------- 0 5,431 5,431 --------------------------------------- MUNICIPAL BONDS - CALIFORNIA - 98.12% 2,500,000 2,500,000 ORANGE CNTY CALIF ARPT REV 5.50% 07/01/10 2,781 2,781 4,000,000 4,000,000 ORANGE COUNTY CALIFORNIA ARPT REV 5.5% 4,420 4,420 7/01/2011 5,000,000 5,000,000 PORT OAKLAND CLAIF PORT REV 5.50% 11/1/15 5,363 5,363 1,730,000 1,730,000 SAN FRANCISCO CALIFORNIA CITY & CNTY AIRPORTS 1,968 1,968 1,465,000 1,465,000 ABAG FIN AUTH FOR NONVIOLENT CORPS 4.625% 1,502 1,502 7/1/04 4,780,000 4,780,000 ALAMEDA CNTY CALIF CTFS PARTN 4,798 4,798 3,000,000 3,000,000 CALIFORNIA STATEWIDE CMNTYS DEV 5.125% 3,067 3,067 08/15/17 1,280,000 1,280,000 CHINO CALIFORNIA UNIFIED SCHOOL DISTRICT 1,310 1,310 2,000,000 2,000,000 MANHATTAN BEACH CALIFORNIA UNIFIED SCHOOL 1,957 1,957 DISTRICT 1,000,000 1,000,000 SOUTHERN CALIFORNIA RAPID TRAN DISTRICT 1,071 1,071 1,000,000 1,000,000 NATOMAS UNIFIED SCHOOL DISTRICT, SERIES A 1,080 1,080 3,500,000 3,500,000 UNIVERSITY CALIF REVS 6.00% 7/1/26 3,885 3,885 2,000,000 2,000,000 LOS ANGELES CALIFORNIA SERIES A 6.00% 9/1/11 2,240 2,240 1,295,000 1,295,000 SCOTTS VALLEY CALIF UN SCH DIST 1,353 1,353 1,025,000 1,025,000 WESTWOOD CALIF UNI SCH DIST 6.50% 8/1/21 1,158 1,158 1,000,000 1,000,000 CALIFORNIA HEALTH FACILITY FINANCING AUTH REV 1,085 1,085 1,000,000 1,000,000 CALIFORNIA HEALTH FACS FING AUTH REVENUE 1,091 1,091 5,000,000 5,000,000 DUARTE CALIFORNIA CTFS PARTN CITY OF HOPE 5,319 5,319 3,000,000 3,000,000 CALIFORNIA HLTH FACS FIN AUTH REV 5.125% 3,041 3,041 08/15/22 5,000,000 5,000,000 UNIVERSITY OF CALIF REVS 5.75% 07/01/24 5,419 5,419 2,750,000 2,750,000 CALIFORNIA HFA 5.65% 08/01/17 2,874 2,874 2,000,000 2,000,000 CALIFORNIA HSG FIN AGY REV 6.10% 08/01/15 2,145 2,145 2,050,000 2,050,000 CALIFORNIA HSG FIN AGY SINGLE 5.40% 08/01/28 2,091 2,091 3,000,000 3,000,000 CALIFORNIA HSG FIN REV 5.75% 02/01/29 3,154 3,154 2,500,000 2,500,000 PASADENA CALIFORNIA COMMUNITY DEVLP 2,667 2,667 1,000,000 1,000,000 INDUSTRY CAL URBAN DEV TAX 6.90% 11/01/2016 1,101 1,101 1,500,000 1,500,000 SAN DIEGO CALIF INDL DEV REV 6.40% 9/1/18 1,618 1,618 1,370,000 1,370,000 THOUSAND OAKS CALIF REDEV AGENCY 1,493 1,493 1,000,000 1,000,000 DEL MAR CALIF RACE TRACK AUTH REV 6.00% 1,101 1,101 8/15/06 1,200,000 1,200,000 DEL MAR CALIF RACE TRACK AUTH REV 6.00% 1,332 1,332 8/15/08 1,000,000 1,000,000 OAKLAND CALIF ST BLDG AUTH LEASE 5.00% 1,017 1,017 04/01/17 2,000,000 2,000,000 SAN MATEO CNTY CALIF JT PWRS 5.125% 07/15/32 2,030 2,030 1,130,000 1,130,000 SANTA ANA FINANCING AUTHORITY LEASING REVENUE 1,242 1,242 1,185,000 1,185,000 BODEGA BAY FIRE PROTECTION DIST COP 6.45% 1,355 1,355 10/1/31 2,500,000 2,500,000 POWAY CERTIFICATES OF PARTICIPATION, 2,725 2,725 2,500,000 2,500,000 CALIFORNIA HLTH FACS FIN AUTH 5% 6/01/2007 2,687 2,687 1,000,000 1,000,000 CALIFORNIA PCR FINANCIAL AUTH 1,047 1,047 1,000,000 1,000,000 CALIFORNIA POLLUTION CONTROL FINANCING AUTH 1,095 1,095 5,000,000 5,000,000 FRESNO CALIFORNIA SEWER REV 5,981 5,981 3,670,000 3,670,000 SAN JOSE CALIFORNIA REDEVELOPMENT AGENCY TAX 4,280 4,280 2,900,000 2,900,000 SACRAMENTO CALIFORNIA POWER AUTH COGENRATION 3,121 3,121 1,000,000 1,000,000 SOUTHERN CALIFORNIA PUBLIC POWER AUTH 1,239 1,239 3,000,000 3,000,000 WEST COVINA CAL REDEV AGY CMNTY 6.00% 9/1/17 3,424 3,424 3,000,000 3,000,000 ALAMEDA CNTY CALIF CTFS PARTN 5.7% 12/01/2014 3,236 3,236 7,970,000 7,970,000 CALIFORNIA ST PUB WKS BRD LEASE REV 5.50% 8,319 8,319 6/1/19 1,250,000 1,250,000 UNION CITY COMMUNITY REDEVELOPMENT AGENCY 1,344 1,344 CALIF. 1,000,000 1,000,000 ABAG FIN CORPORATION CAL SER A 6.25% 6/1/11 1,046 1,046 1,000,000 1,000,000 CADA SAC LEASE REV 6.50% 04/01/12 1,107 1,107 2,600,000 2,600,000 CALIFORNIA GO GFIC 5.25% 10/01/2017 2,701 2,701 1,000,000 1,000,000 CALIFORNIA HEALTH FAC FIN AUTH 6.50% 12/1/20 1,065 1,065 1,600,000 1,600,000 CALIFORNIA HLTH FACS FIN VRN 7/1/12 1,600 1,600 1,000,000 1,000,000 CALIFORNIA POLLUTION CONTROL 6.40% 12/01/2024 1,084 1,084 2,000,000 2,000,000 CALIFORNIA ST PUB WKS BRD 5.50% 1/1/10 2,205 2,205 210,000 210,000 CALIFORNIA ST UNREFUNDED BAL-AMBAC TCRS 6% 235 235 5/1/12 4,500,000 4,500,000 CALIFORNIA STATE DEPT. OF WATER 5.70% 4,776 4,776 12/01/16 3,000,000 3,000,000 CENTRAL VALLEY FING AUTHORITY CALIFORNIA 3,232 3,232 4,000,000 4,000,000 CONTRA COSTA CALIF WTR DIST WTR REV 5.00% 4,010 4,010 10/01/22 1,000,000 1,000,000 DEL MAR CALIF RACE TRACK AUTH REV 6.20% 1,116 1,116 8/15/11 575,000 575,000 EMERYVILLE CALIF PUB FING AUTH REV 6.50% 639 639 05/01/21 925,000 925,000 EMERYVILLE CALIF PUB FING AUTH REV 6.50% 1,005 1,005 05/01/21 1,965,000 1,965,000 FREMONT CALIF PUB FING AUTH 6.00% 09/01/11 2,013 2,013 4,000,000 4,000,000 LONG BEACH CALIFORNIA 5.375% 5/15/20 4,115 4,115 3,000,000 3,000,000 LOS ANGELES CALIF CONVETNION 6.00% 8/15/10 3,502 3,502 2,000,000 2,000,000 LOS ANGELES HARBOR REVENUE AMT 2,200 2,200 4,500,000 4,500,000 METROLPOLITAN WATER DISTRICT, SOUTHERN 5,158 5,158 CALIFORNIA 2,000,000 2,000,000 NORTHERN CALIFORNIA TRANSMISSION REVENUE 2,195 2,195 2,500,000 2,500,000 NORTHRIDGE WTR DIST CALIF REV 5.25% 2/1/18 2,584 2,584 1,500,000 1,500,000 ORANGE CO RANCHO SANTA MARG CORP 7.125% 1,575 1,575 8/15/17 2,000,000 2,000,000 RANCHO CALIFORNIA WTR DIST FING AUTH 5.9% 2,230 2,230 11/1/15 2,000,000 2,000,000 SAN DIEGO CFD 7.00% 9/1/15 2,412 2,412 3,000,000 3,000,000 SAN FRANCISCO CALIF CITY 5.70% 5/1/26 3,202 3,202 1,000,000 1,000,000 SAN FRANCISCO CALIF ST BLDG 5.00% 10/1/08 1,079 1,079 1,750,000 1,750,000 SAN JOAQUIN COUNTY CAL PUBLIC FAC 5.50% 1,958 1,958 11/15/13 3,000,000 3,000,000 SAN JOAQUIN HILLS CALIF TRANSN STEP UP 2,021 2,021 01/15/16 3,000,000 3,000,000 SAN JOSE CAL FIN AUTH REV 6.40% 9/1/17 3,240 3,240 2,000,000 2,000,000 LOS ANGELES COUNTY CALIF TRANS COMMUNITY 2,101 2,101 SALES 2,500,000 2,500,000 LOS ANGELES COUNTY CALIF TRANSPORTATION COMMN 2,716 2,716 5,000,000 5,000,000 SAN JOSE CALIF REDEVL AGCY 5.25% 08/01/29 5,131 5,131 1,290,000 1,290,000 THOUSAND OAKS REDEVELOPMENT AGENCY 5.40% 1,409 1,409 12/1/09 3,000,000 3,000,000 FOOTHILL EASTERN CORRIDOR AGCY CALIF 6.00% 3,341 3,341 1/1/16 485,000 485,000 SAN FRANCISCO CALIF BAY AREA 5.50% 07/01/20 538 538 610,000 610,000 SAN FRANCISCO CALIF BAY AREA 5.50% 07/01/2020 641 641 3,000,000 3,000,000 SAN FRANCISCO CALIF BAY AREA RAPID 4.75% 2,957 2,957 7/1/23 1,500,000 1,500,000 ESCONDIDO POWER 6.00% 09/01/18 1,669 1,669 1,500,000 1,500,000 LOS ANGELES COUNTY CALIFORNIA SANTN DIST FING 1,579 1,579 2,000,000 2,000,000 TURLOCK CALIFORNIA IRR DIST REVENUE- REF-1996 2,307 2,307 2,515,000 2,515,000 ALAMEDA COUNTY CALIFORNIA WATER DIST REV 2,767 2,767 CTFS PART 2,000,000 2,000,000 CALIFORNIA ST DEP WTR RES CENT VY PROJ REV 2,033 2,033 3,000,000 3,000,000 EAST BAY CALIF MUN UTIL DIST 5% 6/1/2016 3,056 3,056 1,000,000 1,000,000 EASTERN MUNI WATER DISTRICT CALIFORNIA 1,249 1,249 1,500,000 1,500,000 ELSINORE VALLEY CALIFORNIA 1,757 1,757 2,000,000 2,000,000 LOS ANGELES DEPT WTR & PWR WATER REV 5.75% 2,163 2,163 4/15/12 1,000,000 1,000,000 RANCH CALIFORNIA WATER DIST FINANCIAL AUTH 1,098 1,098 REV 1,500,000 1,500,000 RIVERSIDE CALIF WTR REV 5.375% 10/01/11 1,620 1,628 --------------------------------------- 0 223,079 223,079 --------------------------------------- TOTAL INVESTMENTS--100.51% (COST $0, $209, 600, $209,600, RESPECTIVELY) 0 228,502 228,502 NATIONS CALIFORNIA MUNICIPAL BOND FUND / PACIFIC HORIZON CALIFORNIA MUNICIPAL BOND FUND Pro Forma Combining Statement of Net Assets (unaudited) September 30,1998 Pacific Nations CA Horizon CA Municipal Municipal Bond Adjustments to Pro Pro Forma Bond Fund Fund Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) ----------------------------------------------- ---------------- TOTAL INVESTMENTS $ - $228,502 $ - $ 228,502 OTHER ASSETS AND LIABILITIES: Other assets and liabilities, net - (1,156) - (1,156) ----------------------------------------------- ---------------- Total Other Assets and Liabilities - (1,156) - (1,156) ----------------------------------------------- ---------------- NET ASSETS $ - $227,346 $ - $227,346 =============================================== ================ NET ASSETS BY CLASS: Investor A / Class A $ - $226,190 $- $226,190 Investor B / Class B - 1,156 - 1,156 ----------------------------------------------- ---------------- $- $227,346 %- $227,346 ----------------------------------------------- ---------------- SHARES OUTSTANDING BY CLASS: Investor A / Class A - 29,258 - 29,258 Investor B / Class B - 149 - 149 ----------------------------------------------- ---------------- - 29,407 - 29,407 ----------------------------------------------- ---------------- NET ASSET VALUE PER SHARE BY CLASS: Investor A / Class A $ - $ 7.73 $ - $7.73 Investor B / Class B $ - $ 7.74 $ - $7.74 SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS NATIONS CALIFORNIA MUNICIPAL BOND FUND / PACIFIC HORIZON CALIFORNIA MUNICIPAL BOND FUND Pro Forma Combining Statement of Operations (unaudited) Twelve Month Period Ending September 30,1998 Pacific Nations CA Horizon CA Municipal Municipal Bond Adjustments to Pro Pro Forma Bond Fund Fund Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) ----------------------------------------------- ---------------- INVESTMENT INCOME: Interest $0 $12,368 $0 $12,368 Dividends - - - - ----------------------------------------------- ---------------- Total Investment Income - 12,368 - 12,368 ----------------------------------------------- ---------------- EXPENSES: Investment Advisory - 529 353(a) 882 Administration - 349 39 (a) 388 Transfer Agent - 137 (57) (b) 80 Custodian - 18 22 (b) 40 Legal and Audit Fees - 42 (35) (b) 7 Registration & Filing - 29 - 29 Trustees' Fees - 4 (b) 4 Interest Expense - - - - Other expenses - 130 (110) (b) 20 ----------------------------------------------- ---------------- Subtotal - 1,238 212 1,450 ----------------------------------------------- ---------------- SHAREHOLDER SERVICING AND DISTRIBUTION FEES Investor A - 567 - 567 Investor B - 2 - 2 ----------------------------------------------- ---------------- - 569 - 569 ----------------------------------------------- ---------------- Fees waived and/or reimbursed by investment advisor, administrator and/or distributor - 257 (645) (c) (388) ----------------------------------------------- ---------------- TOTAL EXPENSES - 2,064 (433) 1,631 ----------------------------------------------- ---------------- ----------------------------------------------- ---------------- NET INVESTMENT INCOME - 10,304 433 10,737 ----------------------------------------------- ---------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) on investments - 4,192 - 4,192 Net change in unrealized appreciation/ (depreciation) of investments - 20,809 - 20,809 Net realized and unrealized gain/(loss) ----------------------------------------------- ---------------- on investments - 25,001 - 25,001 ----------------------------------------------- ---------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $0 $35,305 $433 $35,738 =============================================== ================
LEGEND: (A) REFLECTS ADJUSTMENT TO THE ACQUIRING FUND CONTRACTUAL FEE OBLIGATION. (B) ADJUSTMENT REFLECTS EXPECTED SAVINGS WHEN THE TWO FUNDS BECOME ONE. (C) REFLECTS ADJUSTMENT TO THE LEVEL OF THE ACQUIRING FUND'S VOLUNTARY EXPENSE REIMBURSEMENT. (D) NET OF EXPENSE OFFSET ARRANGEMENTS AMOUNTS TO LESS THAN .01% OF AVERAGE NET ASSETS. Nations California Municipal Bond Fund Pacific Horizon California Municipal Bond Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of September 30, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of September 30, 1998 and the unaudited Pro Forma Combining Statement of Operations assumes the exchange occurred as of October 1,1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at September 30, 1998 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizon California Municipal Bond Fund in exchange for shares of Nations California Municipal Bond Fund. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward under the new name of Nations California Municipal Bond Fund. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 1. 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. The investment advisory and administration fees have been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations California Municipal Bond Fund at the time of the Reorganization at the combined level of average net assets for the twelve month period ended September 30, 1998.
Nations Capital Income Fund / Pacific Horizon Capital Income Fund Pro Forma Combining Schedule of Investments (unaudited) September 30,1998 Pacific Nations Horizon Capital Capital Pacific Income Income Pro Forma Nations Horizon Principal Principal Principal Capital Capital Pro Forma Amount Amount Amount Description Income Value Income Value (in 000's) (in 000's) (in 000's) Common Stock - 16.81% 90,000 90,000 AMERICAN HOME PRODUCTS CORP. 4,714 4,714 80,000 80,000 AMOCO CORP 4,310 4,310 50,000 50,000 BANKBOSTON CORPORATION 1,650 1,650 73,500 73,500 CISCO SYSTEMS, INCORPORATED 4,543 4,543 54,000 54,000 ELI LILLY & COMPANY 4,229 4,229 40,000 40,000 FLEET FINANCIAL GROUP INC. 2,938 2,938 85,342 85,342 GOLDEN STATE BANCORP INC. 1,702 1,702 66,800 66,800 INTEL CORPORATION 5,728 5,728 85,104 85,104 MCDERMOTT INTL INC 2,292 2,292 85,000 85,000 MCDONALD'S CORPORATION 5,072 5,072 120,000 120,000 MICRON TECHNOLOGY INC 3,653 3,653 166,600 166,600 NORDSTROM INCORPORATED 4,123 4,123 31,000 31,000 PFIZER INC 3,284 3,284 45,000 45,000 PNC BANK CORP 2,025 2,025 40,000 40,000 PROCTER & GAMBLE COMPANY 2,838 2,838 200,000 200,000 SOVREIGN BANCORP, INC. 2,663 2,663 100,000 100,000 XILINX INCORPORATED 3,500 3,500 --------------------------------------- 0 59,264 59,264 --------------------------------------- Convertible Bond - 42.27% 7,350,000 7,350,000 AGNICO EAGLE MINES 3.50% 1/27/04 4,309 4,309 4,400,000 4,400,000 ALZA CORPORATION 5.0% 5/1/06 5,544 5,544 4,200,000 4,200,000 AMERICAN RETIREMENT CORPORATION 5.75% 3,675 3,675 10/01/02 4,765,000 4,765,000 ARV ASSISTED LIVING 6.75% 04/01/06 2,793 2,793 5,660,000 5,660,000 ATMEL SA 3.25% 6/1/02 *STEP UP* SERIES 144A 4,026 4,026 4,300,000 4,300,000 BANKATLANTIC BNC 5.625% 12/01/07 3,913 3,913 5,000,000 5,000,000 BELL ATLANTIC FINL SERV 144A 4.25% 9/15/05 4,863 4,863 4,500,000 4,500,000 BELL ATLANTIC FINL SERV 5.75% 04/01/03 144A 4,601 4,601 1,125,000 1,125,000 BERKSHIRE HATHAWAY 1.00% 12/2/01 1,367 1,367 4,840,000 4,840,000 CLEAR CHANNEL 2.625% 04/01/03 4,882 4,882 0 0 CUSTODY SWEEP INTEREST - - 0 0 EMCOR GROUP INC 5.75% 04/01/05 - - 4,900,000 4,900,000 HEALTHSOUTH CORP 3.25% 04/01/03 SERIES: 144A 3,700 3,700 4,580,000 4,580,000 HILTON HOTELS CORPORATION 5.00% 5/15/06 4,053 4,053 2,800,000 2,800,000 HOME DEPOT INC 3.25% 10/1/01 4,886 4,886 2,250,000 2,250,000 ITRON INC 144A 6.75% 03/31/04 1,496 1,496 900,000 900,000 ITRON INC. 6.75% 03/31/04 599 599 2,850,000 2,850,000 KELLSTROM INDUSTRIES INC 5.5% 6/15/03 2,212 2,212 3,000,000 3,000,000 LOEWS CORP 3.125% 9/15/07 2,385 2,385 4,100,000 4,100,000 MAGNA INTERNATIONAL INC 4.875% 02/15/05 4,121 4,121 3,000,000 3,000,000 MARK IV INDUSTRIES 4.75% 11/01/04 2,505 2,505 2,135,000 2,135,000 MARK IV INDUSTRIES 4.75% 11/01/04 1,783 1,783 3,350,000 3,350,000 MOTOROLA INC. ZERO CPN. 9/27/13 2,291 2,291 1,310,000 1,310,000 NCS HEALTHCARE INC 5.75% 08/15/04 1,118 1,118 4,300,000 4,300,000 OMNICARE 5% 12/01/07 144A 4,504 4,504 4,400,000 4,400,000 OMNICOM 2.25% 1/6/13 144A 5,038 5,038 1,065,000 1,065,000 PARKER DRILLING CORP 5.50% 8/1/04 799 799 3,780,000 3,780,000 PENN TREATY AMERICA CORP 6.25% 12/01/03 4,002 4,002 890,000 890,000 PENN TREATY AMERICA CORP EURO 12/01/03 6.25% 942 942 8,800,000 8,800,000 PEP BOYS 0% 9/20/11 4,862 4,862 4,550,000 4,550,000 PHOTRONICS INC. 6.0% 6/1/2004 3,788 3,788 4,215,000 4,215,000 PROTECTION ONE ALRM 6.75% 9/15/03 4,742 4,742 4,350,000 4,350,000 RITE AID CORP 5.25% 09/15/02 5,160 5,160 9,000,000 9,000,000 ROCHE HOLDINGS INC ZERO CPN 05/06/12 4,669 4,669 5,000,000 5,000,000 ROCHE HOLDINGS ZERO COUPON BOND 144A 4/20/10 3,025 3,025 1,700,000 1,700,000 SEACOR 5.375 11/15/06 144 1,552 1,552 1,300,000 1,300,000 SEACOR HOLDINGS INC 5.375 11/15/2006 CNV 1,188 1,188 2,000,000 2,000,000 SOLECTRON CORP. 6% 3/1/06 144A 3,073 3,073 4,920,000 4,920,000 THERMO ELECTRON CORP. 144A 4,225 4,225 10,525,000 10,525,000 TIMES MIRROR CO 0.00% 04/15/17 4,684 4,684 2,680,000 2,680,000 TOWER AUTOMOTIVE INC. 5.0% 8/1/04 2,582 2,582 12,000,000 12,000,000 US CELLULAR CORP 0.00% 6/15/15 CONV 4,545 4,545 3,500,000 3,500,000 US FILTER 4.50% 12/15/01 3,176 3,176 2,500,000 2,500,000 WASTE MANAGEMENT INC 4.00% 02/01/02 3,041 3,041 4,500,000 4,500,000 WMX TECHNOLOGIES 2.00% 01/24/05 4,500 4,500 4,000,000 4,000,000 XILINX INC 5.25% 11/01/02 3,820 3,820 --------------------------------------- 0 149,039 149,039 --------------------------------------- Preferred Stock-Convertible - 36.90% 120,000 120,000 AMERUS LIFE HOLDINGS INC 2,910 2,910 70,000 70,000 CALENERGY CAPITAL TRUST II PFD 144A 2,923 2,923 85,000 85,000 CITIZENS UTILITIES CO. 5.0000% 1/31/36 SERIES 3,655 3,655 168,300 168,300 CNB CAPITAL TRUST I PFD 4,502 4,502 71,600 71,600 CONSECO FINANCE TRUST IV PFD 2,824 2,824 94,000 94,000 EL PASO ENERGY CPTL TRUST I PFD 4,312 4,312 108,000 108,000 ELSAG BAILEY PFD 5.50% 12/31/35 SERIES 4,266 4,266 89,600 89,600 FLEETWOOD CAPITAL TRUST SERIES: 144A 3,965 3,965 112,400 112,400 FREEPORT MCMORAN COV GOLD PFD 5.000% SERIES 1,812 1,812 19,000 19,000 FRONTIER FINANCING TRUST PFD 829 829 50,000 50,000 FRONTIER INSURANCE GROUP INC 144A PFD STK 2,181 2,181 0 0 GOLDEN STATE BANCORP 8.75% SERIES A - - 66,100 66,100 HOUSTON INDUSTRIES INC PFD 5,044 5,044 93,000 93,000 INTERNATIONAL PAPER 144A CONV PFRD 4,569 4,569 45,600 45,600 LIFE RE CAPITAL TRUST II 6.00% PFD 3,386 3,386 142,500 142,500 MCN CORP. 2,654 2,654 86,500 86,500 MEDIAONE GROUP "ATI" PIES 4,833 4,833 60,000 60,000 MEDIAONE GROUP INC SERIES "D" PREFERRED STOCK 5,633 5,633 50,000 50,000 MICROSOFT CORP 2.196% PFD 4,819 4,819 81,300 81,300 NEWELL FINANCIAL TRUST 5.25% PREFERRED 4,583 4,583 CONVERTIBLE 40,000 40,000 OCCIDENTAL PETE CONV PFD $3.00 2,445 2,445 85,000 85,000 OWENS CORNING LLC 144A 4,154 4,154 95,350 95,350 OWENS-ILL INC 3,409 3,409 391,000 391,000 PHILADELPHIA CONS HLDG CORP 3,812 3,812 73,300 73,300 PLC CAP TRUST II (PL) 6.5% 2/16/01 SERIES 4,462 4,462 81,000 81,000 RALSTON PURINA CO. 7% 8/1/00 4,941 4,941 200,000 200,000 READERS DIGEST (RDA) $1.9300 2/15/01 4,163 4,163 77,200 77,200 SEALED AIR CORP (NEW) WI 2,788 2,788 91,000 91,000 SPRINT CORP CONV PFD 8.25% 6,143 6,143 50,000 50,000 ST. PAUL CAPITAL LLC 6.00% 12/31/49 3,088 3,088 75,000 75,000 TCI COMMUNICATIONS PRFD 6,318 6,318 96,500 96,500 TEXAS UTILITIES CO 5,428 5,428 18,000 18,000 UNION PACIFIC CAP TRUST 801 801 90,000 90,000 UNION PACIFIC CAP TRUST 144A 4,005 4,005 85,000 85,000 UNOCAL CORP. 4,452 4,452 --------------------------------------- 0 130,109 130,009 --------------------------------------- Warrants - 0.10% 85,342 85,342 GOLDEN STATE BANCRP-LITIG ST 360 360 --------------------------------------- 0 360 360 --------------------------------------- Total Investments- 96.08% (Cost $0, $346,163 respectively) 0 338,772 338,772 Nations Capital Income Fund / Pacific Horizon Capital Income Fund Pro Forma Combining Statement of Net Assets (unaudited) September 30,1998 Pacific Horizon Nations Capital Capital Income Adjustments to Pro Forma Income Fund Fund Pro Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) -------------------------------------------------- ---------------- Total Investments $ - $338,772 $ - $338,772 Other Assets and Liabilities: Other assets and liabilities, net - 13,807 - 13,807 -------------------------------------------------- ---------------- Total Other Assets and Liabilities - 13,807 - 13,807 -------------------------------------------------- ---------------- Net Assets $ - $ 352,579 $ - $352,579 ================================================== ================ Net Assets by Class: Investor A / Class A $ - $347,714 $- $347,714 Investor B / Class B $ - $ 1,755 $- $ 1,755 Investor C / Class K $ - $ 3,110 $- $ 3,110 -------------------------------------------------- ---------------- $ - $352,579 $- $352,579 -------------------------------------------------- ---------------- Shares Outstanding by Class: Investor A / Class A - 22,612 - 22,612 Investor B / Class B - 114 - 114 Investor C / Class K - 202 - 202 -------------------------------------------------- ---------------- - 22,928 - 22,928 -------------------------------------------------- ---------------- Net Asset Value per Share by Class: Investor A / Class A $ - $ 15.38 $ - $ 15.38 Investor B / Class B $ - $ 15.37 $ - $ 15.37 Investor C / Class K $ - $ 15.39 $ - $ 15.39 See Notes to Pro Forma Financial Statements Nations Capital Income Fund / Pacific Horizon Capital Income Fund Pro Forma Combining Statement of Operations (unaudited) Twelve Month Period Ending September 30,1998 Pacific Horizon Nations Capital Capital Income Adjustments to Pro Pro Forma Income Fund Fund Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) -------------------------------------------------- ---------------- INVESTMENT INCOME: Interest $0 $10,299 $0 $10,299 Dividends - 6,720 - 6,720 -------------------------------------------------- ---------------- Total Investment Income - 17,019 - 17,019 -------------------------------------------------- ---------------- EXPENSES: Investment Advisory - 1,785 796(a) 2,581 Administration - 794 119(a) 913 Transfer Agent - 568 (388) (b) 180 Custodian - 3 42 (b) 45 Legal and Audit Fees - 32 (23) (b) 9 Registration & Filing - 37 - 37 Trustees' Fees - 6 2 (b) 8 Other expenses - 151 (50) (b) 101 -------------------------------------------------- ---------------- Subtotal - 3,376 498 3,874 -------------------------------------------------- ---------------- Shareholder Servicing and Distribution Fees Investor A - 984 - 984 Investor B - 2 - 2 Investor C - 27 - 27 -------------------------------------------------- ---------------- - 1,013 - 1,013 -------------------------------------------------- ---------------- Fees waived and/or reimbursed by investment advisor, administrator and/or distributor - (7) 7 - -------------------------------------------------- ---------------- Total Expenses - 4,382 505 4,887 -------------------------------------------------- ---------------- -------------------------------------------------- ---------------- NET INVESTMENT INCOME - 12,637 (505) 12,132 -------------------------------------------------- ---------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) on investments - 18,900 - 18,900 Net change in unrealized appreciation/ (depreciation) of investments - (30,917) - (30,917) Net realized and unrealized gain/(loss) -------------------------------------------------- ---------------- on investments - (12,017) - (12,017) -------------------------------------------------- ---------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $0 $620 ($505) $115 ================================================== ================
Legend: (a) Reflects adjustment to the acquiring fund contractual fee obligation. (b) Adjustment reflects expected savings when the two funds become one. (c) Reflects adjustment to the level of the acquiring fund's voluntary expense reimbursement. (d) Net of expense offset arrangements amounts to less than .01% of average net assets. Nations Capital Income Fund Pacific Horizon Capital Income Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of September 30, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of September 30, 1998 and the unaudited Pro Forma Combining Statement of Operations assumes the exchange occurred as of October 1,1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at September 30, 1998 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizon Capital Income Fund in exchange for shares of Nations Capital Income Fund. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward under the new name of Nations Capital Income Fund. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the 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. The investment advisory and administration fees and Investor C shareholders servicing and distribution fees have been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations Capital Income at the time of the Reorganization at the combined level of average net assets for the twelve month period ended September 30, 1998.
NATIONS CASH RESERVES / PACIFIC HORIZON PRIME FUND Pro Forma Combining Schedule of Investments (unaudited) October 31,1998 Pacific Horizon Pacific Nations Cash Prime Fund Nations Cash Horizon Pro Forma Reserves Principal Pro Forma Reserves Prime Fund Combined Principal Amount Amount Combined Principal Description Value Value Value Amount (in 000's) (in 000's) (in 000's) BANK NOTES - 2.08% 0 25,000,000 25,000,000 BANK ONE WISCONSIN N.A. 5.55% 2/26/99 0 24,989 24,989 0 50,000,000 50,000,000 KEY BANK N.A. VR 10/29/99 0 50,000 50,000 0 100,000,000 100,000,000 KEY BANK N.A. VR 9/16/99 0 99,966 99,966 0 50,000,000 50,000,000 MORGAN GUARANTY TRUST COMP OF N.Y. VR 0 49,986 49,986 10/15/99 0 100,000,000 100,000,000 MORGAN GUARANTY TRUST COMP. OF N.Y. VR 0 99,956 99,956 9/27/99 0 50,000,000 50,000,000 PNC BANK N.A. VR 10/13/99 0 49,991 49,991 0 50,000,000 50,000,000 US BANK N.A. VR 9/15/99 0 49,996 49,996 ------------------------------------ 0 424,884 424,884 ------------------------------------ CERTIFICATES OF DEPOSIT - EURO - 0.85% 0 50,000,000 50,000,000 COMMERZBANK AG LONDON BRANCH 5.19% 1/7/99 0 49,987 49,987 0 100,000,000 100,000,000 ING BANK NV LDN BRNCH 5.53% 1/08/99 0 100,002 100,002 0 25,000,000 25,000,000 SVENSKA HANDELSBANKEN LDN BRNCH 5.655% 0 25,000 25,000 12/7/98 ------------------------------------ 0 174,989 174,989 ------------------------------------ CERTIFICATES OF DEPOSIT- DOMESTIC - 1.22% 40,000,000 0 40,000,000 BANKERS TRUST NEW YORK 5.33% 11/2/98 39,988 0 39,988 45,000,000 0 45,000,000 BANKERS TRUST NEW YORK 5.78% 4/28/99 44,989 0 44,989 23,500,000 0 23,500,000 BANKERS TRUST NEW YORK 5.77% 4/28/99 23,486 0 23,486 35,000,000 0 35,000,000 BANKERS TRUST NEW YORK 5.67% 2/26/99 34,995 0 34,995 50,000,000 0 50,000,000 CHASE MANHATTAN BANK 5% 2/16/99 50,000 0 50,000 20,000,000 0 20,000,000 CHASE MANHATTAN BANK U.S.A. 5.685% 8/03/99 19,991 0 19,991 36,000,000 0 36,000,000 MORGAN GUARANTY TRUST, 5.55% 2/02/99 35,976 0 35,976
------------------------------------- 249,425 0 249,425 ------------------------------------- CERTIFICATES OF DEPOSIT- YANKEE - 9.6% 25,000,000 0 25,000,000 ABN-AMRO BANK 5.75% 3/31/99 24,994 0 24,994 30,000,000 0 30,000,000 BANK NATIONALE DE PARIS 5.71% 2/25/99 30,000 0 30,000 0 50,000,000 50,000,000 BANQUE NATL DE PARIS,NY BRANCH 5.73% 3/31/99 0 49,990 49,990 0 90,000,000 90,000,000 BANQUE PARIBAS NY BRANCH 5.66% 3/1/99 0 89,986 89,986 0 50,000,000 50,000,000 BANQUE PARIBAS NY BRANCH 5.73% 3/29/99 0 49,990 49,990 0 75,000,000 75,000,000 BAYERISCHE LANDESBANK GIROZENTRALE, NY BRANCH 0 74,975 74,975 0 50,000,000 50,000,000 CANADIAN IMPERIAL BANK OF COMMERCE, NY BRANCH 0 49,985 49,985 0 22,000,000 22,000,000 COMMERZBANK AG NY BRANCH 5.08% 9/28/99 0 22,061 22,061 0 27,000,000 27,000,000 COMMERZBANK AG NY BRANCH 5.14% 9/15/99 0 27,084 27,084 0 200,000,000 200,000,000 COMMERZBANK AG NY BRANCH 5.19% 9/21/99 0 200,590 200,590 27,500,000 0 27,500,000 COMMERZBANK 5.64% 3/02/99 27,485 0 27,485 40,000,000 0 40,000,000 CREDIT AGRICOLE 5.75% 4/01/99 39,992 0 39,992 0 100,000,000 100,000,000 CREDIT SUISSE FIRST BOSTON VR 8/11/99 0 100,000 100,000 0 80,000,000 80,000,000 DRESDNER BANK A.G. NY BRANCH 5.73% 4/19/99 0 80,178 80,178 0 50,000,000 50,000,000 ISTITUTO BANCAIRIO SAN PAOLO D.T. NY VR 0 49,993 49,993 3/19/99 0 50,000,000 50,000,000 ISTITUTO BANCARIO SAN PAOLO DI TORINO, NY 0 49,988 49,988 BRANCH 0 50,000,000 50,000,000 ISTITUTO BANCARIO SAN PAOLO DI TORINO, NY 0 49,979 49,979 BRANCH 20,000,000 0 20,000,000 NATIONAL BANK OF CANADA 5.94% 12/03/98 20,000 0 20,000 30,000,000 0 30,000,000 NATIONAL BANK OF CANADA 5.64% 1/04/99 30,000 0 30,000 0 25,000,000 25,000,000 NATIONAL WESTMINSTER BANK PLC NY BRANCH 0 24,986 24,986 0 50,000,000 50,000,000 ROYAL BANK OF CANADA NY BRANCH 5.63% 2/26/99 0 49,989 49,989 0 25,000,000 25,000,000 SOCIETE GENERALE BANK NY BRANCH VR 1/22/99 0 24,997 24,997 0 25,000,000 25,000,000 SOCIETE GENERALE BANK NY BRANCH VR 5/7/99 0 24,992 24,992 0 50,000,000 50,000,000 SOCIETE GENERALE BANK NY BRANCH VR 6/1/99 0 49,977 49,977 0 50,000,000 50,000,000 SOCIETE GENERALE BANK NY BRANCH 5.66% 2/26/99 0 49,995 49,995
0 50,000,000 50,000,000 SOCIETE GENERALE BANK NY BRANCH 5.69% 3/2/99 0 49,992 49,992 0 25,000,000 25,000,000 SOCIETE GENERALE BANK NY BRANCH 5.75% 4/15/99 0 24,995 24,995 0 25,000,000 25,000,000 SOCIETE GENERALE BANK NY BRANCH 5.76% 4/16/99 0 24,995 24,995 125,000,000 0 125,000,000 SOCIETE GENERALE NY 5.323% 11/2/98 124,903 0 124,903 16,250,000 0 16,250,000 SOCIETE GENERALE NY 5.7% 3/23/99 16,247 0 16,247 29,000,000 0 29,000,000 SOCIETE GENERALE NY 5.8% 3/31/99 28,995 0 28,995 30,000,000 0 30,000,000 SOCIETE GENERALE NY 5.75% 4/16/99 29,986 0 29,986 30,000,000 0 30,000,000 SOCIETE GENERALE NY 5.8% 4/28/99 29,986 0 29,986 25,000,000 50,000,000 75,000,000 SOCIETE GENERALE 5.7% 2/26/99 24,997 49,994 74,991 0 50,000,000 50,000,000 SVENSKA HANDELSBANKEN NY BRANCH 0 50,315 50,315 0 100,000,000 100,000,000 SVENSKA HANDELSBANKEN NY BRANCH 5.75% 4/26/99 0 99,977 99,977 0 100,000,000 100,000,000 WESTDEUTSCHE LANDES BANK GIROZENTRALE, NY 0 100,000 100,000 BRANCH ----------------------------------------- 427,585 1,520,003 1,947,588 ----------------------------------------- COMMERCIAL PAPER - 42.72% 0 50,000,000 50,000,000 ABBEY NATIONAL NORTH AMERICA CORP. 0 49,529 49,529 0 95,000,000 95,000,000 AETNA SERVICES INC 5.40% 11/20/98 0 94,729 94,729 0 40,000,000 40,000,000 AETNA SERVICES INC 5.45% 1/22/99 0 39,503 39,503 0 20,000,000 20,000,000 AKZO NOBEL INC 5.30% 2/19/99 0 19,676 19,676 0 43,500,000 43,500,000 ALCATEL ALSTHOM INC 5.30% 12/18/98 0 43,199 43,199 25,066,000 0 25,066,000 AON CORP 12/01/98 24,955 0 24,955 34,296,000 0 34,296,000 AON CORP 12/07/98 34,118 0 34,118 50,000,000 0 50,000,000 AON CORP 12/08/98 49,724 0 49,724 21,000,000 0 21,000,000 AON CORP 12/22/98 20,844 0 20,844 15,581,000 0 15,581,000 AON CORP 11/12/98 15,555 0 15,555 0 100,000,000 100,000,000 ASSET SECURITIZATION COOPERATIVE CORP 0 99,941 99,941 0 35,000,000 35,000,000 ASSET SECURITIZATION COOPERATIVE CORP 0 34,906 34,906 0 100,000,000 100,000,000 ASSET SECURITIZATION COOPERATIVE CORP 0 99,426 99,426 0 100,000,000 100,000,000 ASSET SECURITIZATION COOPERATIVE CORP 0 99,411 99,411 0 50,000,000 50,000,000 BANC ONE FUNDING CORP 5.30% 01/13/99 0 49,463 49,463 53,564,000 0 53,564,000 BANKERS TRUST CORPORATION 1/15/99 52,922 0 52,922 12,500,000 0 12,500,000 BANKERS TRUST CORPORATION 2/19/99 12,288 0 12,288 20,000,000 0 20,000,000 BANKERS TRUST NY CORP 11/24/98 19,930 0 19,930 0 50,000,000 50,000,000 BAT CAPITAL CORP 5.27% 12/11/98 0 49,707 49,707 0 150,000,000 150,000,000 BAT CAPITAL CORP 5.46% 12/30/98 0 148,658 148,658
0 100,000,000 100,000,000 BAT CAPITAL CORP 5.54% 11/18/98 0 99,738 99,738 0 50,000,000 50,000,000 BETA FINANCE INCORPORATED 4.97% 4/6/99 0 48,923 48,923 0 50,000,000 50,000,000 BHF FINANCE DELAWARE INC. 5.53% 11/25/98 0 49,816 49,816 30,000,000 0 30,000,000 BT ALEX BROWN 1/21/99 29,624 0 29,624 16,000,000 0 16,000,000 BURMAH CASTROL FINANCE 11/16/98 15,963 0 15,963 0 85,000,000 85,000,000 CC USA INC 5.26% 1/25/99 0 83,944 83,944 0 30,000,000 30,000,000 CC USA INC 5.53% 11/19/98 0 29,917 29,917 0 30,000,000 30,000,000 CC USA INC 5.53% 11/20/98 0 29,912 29,912 125,000,000 0 125,000,000 CHASE MANHATTAN CORP 1/29/99 123,399 0 123,399 0 75,000,000 75,000,000 CITIBANK CAP MKTS ASSETS LLC 5.40% 11/10/98 0 74,899 74,899 0 25,000,000 25,000,000 CITIBANK CAP MKTS ASSETS LLC 5.485% 12/21/98 0 24,810 24,810 0 50,000,000 50,000,000 CITIBANK CAP MKTS ASSETS LLC 5.53% 11/4/98 0 49,977 49,977 0 50,000,000 50,000,000 CITIBANK CAP MKTS ASSETS LLC 5.54% 11/02/98 0 49,992 49,992 0 100,000,000 100,000,000 CORPORATE ASSET FUNDING CORP. INC 0 98,569 98,569 0 50,000,000 50,000,000 CORPORATE ASSET FUNDING CORP. INC 0 49,279 49,279 58,000,000 0 58,000,000 COUNTRYWIDE HOME LOANS INC 11/02/98 57,991 0 57,991 50,000,000 0 50,000,000 COUNTRYWIDE HOME LOANS, INC 11/18/98 49,872 0 49,872 35,500,000 0 35,500,000 COUNTRYWIDE HOME LOANS, INC 11/24/98 35,380 0 35,380 50,000,000 50,000,000 100,000,000 COUNTRYWIDE HOME LOANS, INC 11/25/98 49,824 49,816 99,641 20,000,000 0 20,000,000 COUNTRYWIDE HOME LOANS, INC 11/30/98 19,912 0 19,912 0 25,000,000 25,000,000 CREGEM NORTH AMERICA INC 5.05% 1/14/99 0 24,740 24,740 0 50,000,000 50,000,000 CREGEM NORTH AMERICA INC 5.19% 1/14/99 0 49,467 49,467 0 100,000,000 100,000,000 DAIMLER-BENZ NORTH AMERICA CORP 0 99,522 99,522 0 25,000,000 25,000,000 DUKE CAPITAL CORP 5.53% 11/24/98 0 24,912 24,912 0 30,000,000 30,000,000 DUKE CAPITAL CORP 5.54% 11/13/98 0 29,945 29,945 45,000,000 0 45,000,000 EDISON SECURITIZATION 4/23/99 43,919 0 43,919 0 40,435,000 40,435,000 FALCON ASSET SECURITIZATION CORP 0 40,380 40,380 0 73,800,000 73,800,000 FALCON ASSET SECURITIZATION CORP 0 73,598 73,598 0 26,545,000 26,545,000 FALCON ASSET SECURITIZATION CORP 0 26,468 26,468 0 38,895,000 38,895,000 FALCON ASSET SECURITIZATION CORP 0 38,436 38,436 6,034,000 0 6,034,000 FINOVA CAPITAL CORP 11/20/98 6,016 0 6,016 27,500,000 0 27,500,000 FINOVA CAPITAL CORP 1/05/99 27,232 0 27,232 28,000,000 0 28,000,000 FINOVA CAPITAL CORP 1/29/99 27,624 0 27,624 300,000,000 0 300,000,000 GEN MOTORS ACCEP CORP 11/02/98 299,952 0 299,952
200,000,000 300,000,000 500,000,000 GENERAL ELECTRIC CAPITAL CORP 11/02/98 199,968 299,952 499,920 0 50,000,000 50,000,000 GENERAL ELECTRIC CAPITAL CORP 5.48% 12/29/98 0 49,559 49,559 0 50,000,000 50,000,000 GENERAL ELECTRIC CAPITAL SERV 5.48% 12/29/98 0 49,559 49,559 92,000,000 0 92,000,000 GENERAL ELECTRIC COMPANY 12/31/98 91,213 0 91,213 200,000,000 0 200,000,000 GOLMAN SACHS GROUP 5.646% 11/09/98 200,000 0 200,000 0 43,164,000 43,164,000 GOVERNMENT DEVELOPMENT BANK OF PUERTO RICO 0 43,104 43,104 0 50,000,000 50,000,000 GREYHAWK FUNDING LLC 5.35% 1/28/99 0 49,346 49,346 0 75,000,000 75,000,000 GREYHAWK FUNDING LLC 5.40% 1/29/99 0 74,010 74,010 0 50,000,000 50,000,000 HERTZ CORPORATION 5.20% 11/20/98 0 49,863 49,863 0 50,000,000 50,000,000 HERTZ CORPORATION 5.52% 12/11/98 0 49,693 49,693 30,000,000 0 30,000,000 HITACHI AMERICA 12/02/98 29,868 0 29,868 15,000,000 20,000,000 35,000,000 HITACHI AMERICA 12/16/98 14,897 19,863 34,760 16,000,000 0 16,000,000 HITACHI AMERICA LTD 5/14/99 15,533 0 15,533 0 23,985,000 23,985,000 HITACHI AMERICA LTD 5.315% 5/6/99 0 23,326 23,326 0 17,000,000 17,000,000 HITACHI AMERICA LTD 5.51% 11/10/98 0 16,977 16,977 0 20,000,000 20,000,000 HITACHI AMERICA LTD 5.52% 11/30/98 0 19,911 19,911 21,000,000 0 21,000,000 HITACHI AMERICA, LTD. 2/24/99 20,661 0 20,661 9,000,000 0 9,000,000 HITACHI AMERICA, LTD. 4/13/99 8,776 0 8,776 12,000,000 0 12,000,000 HITACHI AMERICA,LTD 5/11/99 11,653 0 11,653 60,500,000 0 60,500,000 INTERNATIONAL SECURITIZATION 11/12/98 60,399 0 60,399 76,146,000 0 76,146,000 INTERNATIONAL SECURITIZATION 12/10/98 75,715 0 75,715 35,250,000 0 35,250,000 INTERNATIONAL SECURITIZATION 4/22/99 34,408 0 34,408 55,050,000 0 55,050,000 INTERNATIONAL SECURITIZATION 4/29/99 53,704 0 53,704 0 97,000,000 97,000,000 JOHNSON CONTROLS INC 5.45% 12/4/98 0 96,515 96,515 0 50,000,000 50,000,000 JOHNSON CONTROLS INC 5.48% 2/26/99 0 49,277 49,277 0 50,000,000 50,000,000 JOHNSON CONTROLS INC 5.60% 11/18/98 0 49,868 49,868 0 45,000,000 45,000,000 JP MORGAN & CO INC 4.82% 4/13/99 0 44,018 44,018 50,000,000 0 50,000,000 LEHMAN BROS 11/16/98 49,884 0 49,884 60,000,000 0 60,000,000 LEHMAN BROS 12/21/98 59,538 0 59,538 0 100,000,000 100,000,000 LEHMAN BROTHERS HOLDINGS INC VR 05/07/99 0 100,000 100,000 0 50,000,000 50,000,000 LEHMAN BROTHERS HOLDINGS INC VR 1/19/99 0 50,000 50,000 0 50,000,000 50,000,000 LEHMAN BROTHERS HOLDINGS INC. 5.55% 11/18/98 0 49,869 49,869 75,000,000 0 75,000,000 LEXINGTON PARKER CAPITAL CP IL 4/27/99 75,000 0 75,000 60,000,000 0 60,000,000 MITSUBISHI INTERNATIONAL 11/03/98 59,981 0 59,981 17,000,000 0 17,000,000 MITSUBISHI INTERNATIONAL 11/23/98 16,941 0 16,941 65,000,000 0 65,000,000 MITSUBISHI INTERNATIONAL 1/26/99 64,107 0 64,107 45,000,000 0 45,000,000 MITSUBISHI INTERNATIONAL CORP 11/12/98 44,920 0 44,920 10,000,000 0 10,000,000 MITSUBISHI INTERNATIONAL CORP 11/16/98 9,976 0 9,976
50,000,000 0 50,000,000 MITSUBISHI MOTORS, 1/27/99 49,305 0 49,305 0 38,000,000 38,000,000 MOAT FUNDING LLC 5.33% 1/8/99 0 37,617 37,617 0 50,000,000 50,000,000 MOAT FUNDING LLC AB 5.38% 1/28/99 0 49,342 49,342 0 22,695,000 22,695,000 MOAT FUNDING LLC 5.40% 1/22/99 0 22,416 22,416 0 58,273,000 58,273,000 MOAT FUNDING LLC 5.53% 12/11/98 0 57,915 57,915 0 22,941,000 22,941,000 MOAT FUNDING LLC 5.54% 11/23/98 0 22,863 22,863 0 142,480,000 142,480,000 MOAT FUNDING LLC 5.54% 11/24/98 0 141,976 141,976 0 71,004,000 71,004,000 MOAT FUNDING LLC 5.54% 11/25/98 0 70,742 70,742 0 50,000,000 50,000,000 NATIONAL AUST FUND (DELAWARE) 5.475% 12/29/98 0 49,559 49,559 0 50,000,000 50,000,000 NATIONAL BANK OF CANADA 5.485% 12/28/98 0 49,566 49,566 20,000,000 0 20,000,000 NATIONAL BANK OF CANADA. 12/31/98 19,820 0 19,820 72,000,000 0 72,000,000 NATIONAL BANK OF CANADA DCP. 2/24/99 70,818 0 70,818 90,000,000 0 90,000,000 PHH CORP 1/20/99 88,888 0 88,888 40,208,000 0 40,208,000 PHH CORP 1/21/99 39,703 0 39,703 50,000,000 0 50,000,000 PHH CORP 11/18/98 49,866 0 49,866 33,500,000 0 33,500,000 PHH CORP 12/09/98 33,302 0 33,302 0 75,000,000 75,000,000 PHH CORPORATION 5.50% 11/13/98 0 74,863 74,863 0 50,000,000 50,000,000 PHH CORPORATION 5.63% 12/16/98 0 49,648 49,648 0 181,342,000 181,342,000 REPUBLIC INDUSTRIES FUNDING 5.25% 11/30/98 0 180,575 180,575 0 25,000,000 25,000,000 RIVERWOODS FUNDING CORP 5.20% 1/21/99 0 24,708 24,708 0 250,000,000 250,000,000 RIVERWOODS FUNDING CORP 5.2675% 1/22/99 0 246,997 246,997 20,000,000 0 20,000,000 SAFECO CORP 11/12/98 19,966 0 19,966 20,000,000 0 20,000,000 SAFECO CORP 11/17/98 19,951 0 19,951 12,000,000 0 12,000,000 SAFECO CORP 12/02/98 11,943 0 11,943 90,000,000 0 90,000,000 SAFECO CORP 12/08/98 89,514 0 89,514 30,000,000 0 30,000,000 SAFECO CORP 12/10/98 29,830 0 29,830 58,000,000 0 58,000,000 SAFECO CORP 12/14/98 57,631 0 57,631 30,000,000 0 30,000,000 SAFECO CREDIT 11/19/98 29,917 0 29,917 10,000,000 0 10,000,000 SAFECO CREDIT 12/09/98 9,944 0 9,944 10,000,000 0 10,000,000 SAFECO CREDIT 12/10/98 9,944 0 9,944 7,500,000 0 7,500,000 SAFECO CREDIT 12/18/98 7,448 0 7,448 25,000,000 0 25,000,000 SAFECO CREDIT CO 11/12/98 24,958 0 24,958 38,100,000 0 38,100,000 SAFECO CREDIT CO 12/04/98 37,908 0 37,908 0 50,000,000 50,000,000 SAFECO CREDIT COMPANY 5.41% 1/22/99 0 49,384 49,384 0 50,000,000 50,000,000 SAFECO CREDIT COMPANY 5.52% 12/03/98 0 49,755 49,755 0 35,000,000 35,000,000 SAFECO CREDIT COMPANY 5.535% 11/25/98 0 34,871 34,871 0 49,320,000 49,320,000 SAFECO CREDIT COMPANY 5.54% 11/17/98 0 49,199 49,199 0 100,000,000 100,000,000 SALOMON SMITH BARNEY HOLDINGS INC 0 99,954 99,954
0 50,000,000 50,000,000 SALOMON SMITH BARNEY HOLDINGS INC. 0 49,870 49,870 0 50,000,000 50,000,000 SALOMON SMITH BARNEY HOLDINGS INC. 0 49,748 49,748 0 100,000,000 100,000,000 SALOMON SMITH BARNEY HOLDINGS INC. 0 98,824 98,824 0 50,000,000 50,000,000 SALOMON SMITH BARNEY HOLDINGS INC. 0 49,410 49,410 0 50,000,000 50,000,000 SIGMA FINANCE INC 5.31% 2/5/99 0 49,292 49,292 0 50,000,000 50,000,000 SIGMA FINANCE INC 5.32% 1/19/99 0 49,416 49,416 0 50,000,000 50,000,000 SIGMA FINANCE INC 5.53% 11/30/98 0 49,777 49,777 0 50,000,000 50,000,000 SIGMA FINANCE INC 5.56% 11/9/98 0 49,938 49,938 5,000,000 0 5,000,000 SUMITOMO CORP 12/11/98 4,969 0 4,969 10,000,000 0 10,000,000 SUMITOMO CORP OF AMERICA 11/19/98 9,972 0 9,972 0 19,541,000 19,541,000 THAMES ASSET GLOBAL SECURITIZATION NO.1 INC 0 19,303 19,303 0 17,767,000 17,767,000 THAMES ASSET GLOBAL SECURITIZATION NO.1 INC 0 17,545 17,545 0 50,000,000 50,000,000 THAMES ASSET GLOBAL SECURITIZATION NO.1 INC 0 49,355 49,355 0 50,000,000 50,000,000 THAMES ASSET GLOBAL SECURITIZATION NO.1 INC 0 49,353 49,353 0 100,000,000 100,000,000 THE BEAR STEARNS COMPANIES INC. 5.49% 0 99,283 99,283 12/18/98 18,000,000 0 18,000,000 TULIP FUNDING 11/10/98 17,976 0 17,976 32,263,000 0 32,263,000 TULIP FUNDING 11/16/98 32,189 0 32,189 25,000,000 0 25,000,000 TULIP FUNDING 1/04/99 24,760 0 24,760 18,627,000 0 18,627,000 TULIP FUNDING CORP 11/17/98 18,581 0 18,581 45,000,000 0 45,000,000 TULIP FUNDING CORP 1/26/99 44,425 0 44,425 100,000,000 0 100,000,000 TULIP FUNDING CORP 1/28/99 98,680 0 98,680 187,000,000 0 187,000,000 VARIABLE FUNDING CAPITAL CORP 11/02/98 186,970 0 186,970 0 38,460,000 38,460,000 WORLD 0MNI VEHICLE LEASING INC 5.42% 12/8/98 0 38,246 38,246 0 42,180,000 42,180,000 WORLD OMNI VEHICLE LEASING INC 0 41,935 41,935 0 37,000,000 37,000,000 WORLD OMNI VEHICLE LEASING INC 5.42% 11/4/98 0 36,983 36,983 0 25,000,000 25,000,000 WORLD OMNI VEHICLE LEASING INC 5.45% 0 24,985 24,985 ----------------------------------------- 3,353,364 5,345,131 8,698,495 ----------------------------------------- COMMERCIAL PAPER - FOREIGN - 3.5% 0 41,627,000 41,627,000 BAA PLC 5.12% 3/19/99 0 40,810 40,810 0 75,000,000 75,000,000 BRADFORD & BINGLEY BUILDING SOCIETY 0 74,315 74,315 0 150,000,000 150,000,000 BRITISH GAS CAPITAL INC. 5.00% 04/16/99 0 146,542 146,542 0 100,000,000 100,000,000 BRITISH GAS CAPITAL INC. 5.01% 04/15/99 0 97,704 97,704
0 48,000,000 48,000,000 DIAGEO CAPITAL PLC 5.13% 2/18/99 0 47,254 47,254 0 50,000,000 50,000,000 DIAGEO CAPITAL PLC 5.49% 12/1/98 0 49,771 49,771 0 50,000,000 50,000,000 FCE BANK PLC 5.31% 1/15/99 0 49,447 49,447 0 200,000,000 200,000,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE 0 199,968 199,968 ----------------------------------------- 0 705,811 705,811 ----------------------------------------- CORPORATE NOTE - 13.78% 0 50,000,000 50,000,000 AMERICAN HONDA FINANCE CORP VRMTN 06/16/99 0 50,000 50,000 0 25,000,000 25,000,000 AMERICAN HONDA FINANCE CORP VRMTN 06/25/99 0 25,000 25,000 0 25,000,000 25,000,000 AMERICAN HONDA FINANCE CORP VRMTN 1/20/99 0 25,000 25,000 0 50,000,000 50,000,000 AMERICAN HONDA FINANCE CORP VRMTN 1/21/99 0 49,999 49,999 0 65,000,000 65,000,000 AMERICAN HONDA FINANCE CORP VRMTN 4/20/99 0 65,000 65,000 0 25,000,000 25,000,000 AMERICAN HONDA FINANCE CORP VRMTN 4/26/99 0 24,999 24,999 0 25,000,000 25,000,000 BANCO POPULAR DE PUERTO RICO VRMTN 1/15/99 0 25,008 25,008 0 105,000,000 105,000,000 BANKERS TRUST CORPORATION VRMTN 2/10/99 0 104,989 104,989 0 100,000,000 100,000,000 BANKERS TRUST CORPORATION VRMTN 8/9/99 0 99,958 99,958 0 100,000,000 100,000,000 BEAR STEARNS COMPANIES INC VRMTN 3/17/99 0 100,000 100,000 0 50,000,000 50,000,000 BETA FINANCE INC VRMTN AB 10/26/99 0 50,000 50,000 0 50,000,000 50,000,000 BETA FINANCE INC VRMTN AB 10/27/99 0 50,000 50,000 0 50,000,000 50,000,000 CC USA INC VRMTN AB 11/02/99 0 49,958 49,958 0 50,000,000 50,000,000 CHRYSLER FINANCIAL CORP VRMTN 6/23/99 0 50,000 50,000 0 50,000,000 50,000,000 COMPAGNIE BANCAIRE USA FUNDING VRMTN 11/25/98 0 50,000 50,000 0 100,000,000 100,000,000 COUNTRYWIDE HOME LOANS INC SERIES G VRMTN 0 100,000 100,000 08/30/99 0 100,000,000 100,000,000 COUNTRYWIDE HOME LOANS INC SERIES G VRMTN 0 100,000 100,000 7/26/99 0 50,000,000 50,000,000 COUNTRYWIDE HOME LOANS INC VRMTN 7/26/99 0 50,000 50,000 0 100,000,000 100,000,000 CREDIT SUISSE FIRST BOSTON INC VRMTN 7/30/99 0 100,000 100,000 0 150,000,000 150,000,000 CREDIT SUISSE FIRST BOSTON INC VRMTN 9/13/99 0 149,937 149,937 110,000,000 0 110,000,000 FIRST UNION NATL BANK 5.48% 10/27/99 110,000 0 110,000 0 35,000,000 35,000,000 GENERAL MOTOR ACCEPTANCE CORP VRMTN 10/08/99 0 34,959 34,959
0 25,000,000 25,000,000 HOUSEHOLD FINANCE CORPORATION VRMTN 1/19/99 0 25,000 25,000 0 25,000,000 25,000,000 HOUSEHOLD FINANCE CORPORATION VRMTN 1/21/99 0 25,000 25,000 0 75,000,000 75,000,000 HOUSEHOLD FINANCE CORPORATION VRMTN 10/14/99 0 75,000 75,000 0 25,000,000 25,000,000 HOUSEHOLD FINANCE CORPORATION VRMTN 3/29/99 0 24,993 24,993 0 50,000,000 50,000,000 HOUSEHOLD FINANCE CORPORATION VRMTN 3/9/99 0 50,000 50,000 0 20,000,000 20,000,000 HOUSEHOLD FINANCE CORPORATION VRMTN 4/08/99 0 20,015 20,015 0 100,000,000 100,000,000 JP MORGAN & CO INC VRMTN 10/4/99 0 100,000 100,000 50,000,000 0 50,000,000 LEHMAN BROTHERS HOLDINGS INC 5.46% 11/3/98 50,000 0 50,000 0 25,000,000 25,000,000 LEHMAN BROTHERS HOLDINGS INC. VRMTN 2/12/99 0 25,000 25,000 13,500,000 0 13,500,000 LEHMAN BROTHERS, INC. 10% 5/15/99 13,780 0 13,780 0 100,000,000 100,000,000 MERRILL LYNCH & CO., INC. VRMTN 10/01/99 0 100,000 100,000 0 100,000,000 100,000,000 MERRILL LYNCH & CO., INC. VRMTN 10/04/99 0 100,000 100,000 0 25,000,000 25,000,000 MERRILL LYNCH & CO., INC. VRMTN 11/23/98 0 25,000 25,000 0 25,000,000 25,000,000 MERRILL LYNCH & CO., INC. VRMTN 12/9/98 0 25,000 25,000 0 100,000,000 100,000,000 MERRILL LYNCH & CO., INC. VRMTN 9/23/99 0 100,000 100,000 0 100,000,000 100,000,000 PHH CORPORATION VRMTN 2/24/99 0 100,000 100,000 0 90,000,000 90,000,000 PHH CORPORATION VRMTN 3/16/99 0 90,000 90,000 0 43,280,000 43,280,000 RACERS SERIES 1998-MM-3-5 VRMTN AB 3/31/99 0 43,278 43,278 0 50,000,000 50,000,000 SIGMA FINANCE INC VRMTN 07/19/99 0 50,000 50,000 0 50,000,000 50,000,000 SIGMA FINANCE INC VRMTN 08/26/99 0 50,000 50,000 0 50,000,000 50,000,000 SIGMA FINANCE INC VRMTN 9/15/99 0 50,000 50,000 0 100,000,000 100,000,000 THE CIT GROUP INC VRMTN 10/20/99 0 100,000 100,000 0 100,000,000 100,000,000 TOYOTA MOTOR CREDIT VRMTN 10/18/99 0 100,000 100,000 ----------------------------------------- 173,780 2,633,093 2,806,873 ----------------------------------------- GUARANTEED INVESTMENT CONTRACTS - 2.45% 75,000,000 0 75,000,000 COMMONWEALTH LIFE INS CO 5.53% 11/2/98 75,000 0 75,000 50,000,000 0 50,000,000 FIRST ALLMERICA FIN LIFE INSUR 5.78% 5/15/03 50,000 0 50,000 50,000,000 0 50,000,000 FIRST ALLMERICA FIN LIFE INSUR 5.62% 9/22/03 50,000 0 50,000 50,000,000 0 50,000,000 GIC JACKSON NATL LIFE INS 5.65% 1/01/50 50,000 0 50,000
50,000,000 0 50,000,000 JACKSON NATL LIFE INS 5.41% 1/01/99 50,000 0 50,000 100,000,000 0 100,000,000 NY LIFE 5.292% 11/17/98 100,000 0 100,000 25,000,000 0 25,000,000 PEOPLES LIFE INS COMP FRN 5.45% 1/01/50 25,000 0 25,000 50,000,000 0 50,000,000 TRAVELERS INSURANCE CO FRN 5.368% 11/12/98 50,000 0 50,000 50,000,000 0 50,000,000 TRAVELERS INSURANCE GROUP 5.645% 1/4/99 50,000 0 50,000 ----------------------------------------- 500,000 0 500,000 ----------------------------------------- INVESTMENT COMPANIES - 0.51% 56,347,559 0 56,347,559 AIM LIQUID ASSET PORTFOLIO 56,348 0 56,348 18,474,000 0 18,474,000 AIM PRIME 18,474 0 18,474 30,376,000 0 30,376,000 DREYFUS CASH MANAGEMENT PLUS 30,376 0 30,376 ----------------------------------------- 105,198 0 105,198 ----------------------------------------- MASTER NOTES - 4.42% 0 400,000,000 400,000,000 GOLDMAN SACHS GROUP L.P. MASTER NOTE 07/09/99 0 400,000 400,000 0 500,000,000 500,000,000 MORGAN STANLEY, DEAN WITTER, DISCOVER MDN 0 500,000 500,000 12/18/98 ----------------------------------------- 0 900,000 900,000 ----------------------------------------- MEDIUM TERM NOTES - 6.73% 40,000,000 100,000,000 140,000,000 BANKERS TRUST CORP 5.39% 8/06/99 39,997 99,992 139,989 45,000,000 0 45,000,000 BANKERS TRUST CORP FRN 5.386% 9/14/99 45,000 0 45,000 10,000,000 0 10,000,000 BEAR STEARNS CO INC 5.69% 2/25/99 9,998 0 9,998 48,000,000 0 48,000,000 BEAR STEARNS CO INC 5.8% 6/14/99 48,069 0 48,069 50,000,000 0 50,000,000 BEAR STEARNS CO INC 5.19% 7/28/99 50,000 0 50,000 0 50,000,000 50,000,000 CC USA INC ABMTN 5.80% 4/9/99 0 50,000 50,000 70,000,000 0 70,000,000 CREDIT SUISSE FIRST BOSTON 5.409% 11/09/99 69,930 0 69,930 50,000,000 0 50,000,000 GOLDMAN SACHS GROUP FRN 5.438% 3/26/99 50,000 0 50,000 20,000,000 0 20,000,000 JP MORGAN AND CO INC ICP 5.75% 3/10/99 20,000 0 20,000 70,000,000 0 70,000,000 LEHMAN BROS HOLDINGS DCP 5.466% 2/12/99 70,000 0 70,000 40,000,000 0 40,000,000 LEHMAN BROTHERS 5.53% 3/23/99 40,000 0 40,000 20,000,000 0 20,000,000 LEHMAN BROTHERS HOLDINGS INC 4.87% 1/13/99 20,000 0 20,000 25,000,000 0 25,000,000 LIBERTY LIGHT US 5.76% 7/23/99 24,998 0 24,998 125,000,000 0 25,000,000 LIBERTY LIGHT US CAPITAL FRN 5.389% 9/15/99 124,984 0 124,984 25,000,000 0 25,000,000 LIBERTY LIGHT US CAPITAL FRN 5.43% 11/05/99 25,000 0 25,000 50,000,000 0 50,000,000 LIBERTY LIGHT US FRN 5.39% 8/06/99 50,000 0 50,000
50,000,000 0 50,000,000 LIBERTY LIGHT US FRN 5.39% 8/27/99 50,000 0 50,000 50,000,000 0 50,000,000 MERRILL LYNCH & CO 4.754% 5/11/99 50,000 0 50,000 30,000,000 0 30,000,000 MERRILL LYNCH & CO 4.77% 11/25/99 30,000 0 30,000 70,000,000 0 70,000,000 MERRILL LYNCH & CO MTNB 5.37% 6/11/99 70,000 0 70,000 67,000,000 0 67,000,000 MERRILL LYNCH CO FRN 5.44% 10/08/99 67,000 0 67,000 25,000,000 0 25,000,000 MORGAN STANLEY DEAN WITT FRN 5.298% 1/15/99 24,999 0 24,999 25,000,000 0 25,000,000 PHH CORP FRN 5.346% 2/10/99 24,990 0 24,990 50,000,000 0 50,000,000 PHH CORP FRN 5.476% 6/14/99 50,000 0 50,000 40,000,000 0 40,000,000 PHH CORP FRN 5.465% 7/06/99 39,997 0 39,997 35,176,000 0 35,176,000 PHILIP MORRIS 8.625% 3/01/99 35,489 0 35,489 20,000,000 0 20,000,000 PHILIP MORRIS 7.375% 2/15/99 20,084 0 20,084 0 25,000,000 25,000,000 SIGMA FINANCE INC MTN 5.76% 3/31/99 0 25,000 25,000 0 25,000,000 25,000,000 SIGMA FINANCE INC MTN 5.775% 3/31/99 0 25,000 25,000 0 20,000,000 20,000,000 THE CIT GROUP INC MTN 6.625% 9/13/99 0 20,309 20,309 ----------------------------------------- 1,150,535 220,301 1,370,836 ----------------------------------------- MUNICIPAL BOND - 0.19% 40,000,000 0 40,000,000 VIRGINIA HSG DEV AUTH FRN 5.1% 1/01/46 40,000 0 40,000 ----------------------------------------- 40,000 0 40,000 ----------------------------------------- REPURCHASE AGREEMENTS - 7.74% 0 150,000,000 150,000,000 HSBC SECURITIES INC 5.58% 11/02/98 0 150,000 150,000 0 129,570,000 129,570,000 JP MORGAN 5.00% 11/02/98 0 129,570 129,570 0 600,000,000 600,000,000 LEHMAN 5.60% 11/02/98 0 600,000 600,000 100,000,000 0 100,000,000 MERRILL LYNCH 5.72% 11/02/98 100,000 0 100,000 0 555,000,000 555,000,000 PRUDENTIAL 5.60% 11/02/98 0 555,000 555,000 0 17,429,000 17,429,000 THE BANK OF NEW YORK 5.20% 11/02/98 0 17,429 17,429 0 25,000,000 25,000,000 THE BANK OF NEW YORK 5.55% 11/02/98 0 25,000 25,000 ----------------------------------------- 100,000 1,476,999 1,576,999 ----------------------------------------- TIME DEPOSITS- EURO - 4.82% 150,000,000 0 150,000,000 CHASE MANHATTAN 5.563% 11/02/98 150,000 0 150,000 350,000,000 0 350,000,000 DEUTSCHE BANK 5.688% 11/02/98 350,000 0 350,000 82,000,000 0 82,000,000 FIRST UNION 5.25% 11/02/98 82,000 0 82,000 50,000,000 0 50,000,000 SOCIETE GENERALE 5.563% 11/02/98 50,000 0 50,000 350,000,000 0 350,000,000 WESTDEUTSCHE 5.688% 11/02/98 350,000 0 350,000 ----------------------------------------- 982,000 0 982,000 ----------------------------------------- Total Investments--100.61% (Cost $7,081,887, $13,401,211, $20,483,098, respectively) 7,081,887 13,401,211 20,483,098
NATIONS CASH RESERVES / PACIFIC HORIZON PRIME FUND Pro Forma Combining Statement of Net Assets (unaudited) October 31,1998 Pacific Nations Cash Horizon Adjustments to Pro Forma Reserves Prime Fund Pro Forma Combined ( in 000's) ( in 000's) ( in 000's) ( in 000's) -------------------------------------------- -------------- TOTAL INVESTMENTS $ 7,081,887 $ 13,401,211 $-- $ 20,483,098 OTHER ASSETS AND LIABILITIES: Receivable for investment securities sold -- 2,008,830 -- 2,008,830 Payable for investment securities purchased -- (2,100,728) -- (2,100,728) Other assets and liabilities, net 908 (34,322) -- (33,414) ------------- ------------ ------------ ------------ Total Other Assets and Liabilities 908 (126,220) -- (125,312) ------------- ------------ ------------ ------------ NET ASSETS $ 7,082,795 $ 13,274,991 $ -- $ 20,357,786 ============= ============ ============ ============ NET ASSETS BY CLASS: Capital Class / Horizon (Primary) $ 3,808,855 $ 3,437,950 $- $ 7,246,805 Liquidity Class 1,300,321 -- -- 1,300,321 Adviser Class / Horizon Service 810,617 4,078,140 -- 4,888,757 Market Class 1,163,002 -- -- 1,163,002 Investor Class / Pacific Horizon -- 2,883,219 -- 2,883,219 Service Class / Class Y -- 184,077 -- 184,077 Daily / Class S & Class X -- 2,691,605 -- 2,691,605 ------------ ------------ ------------ ------------ $ 7,082,795 $ 13,274,991 $- $ 20,357,786 ------------ ------------ ------------ ------------ SHARES OUTSTANDING BY CLASS: Capital Class / Horizon (Primary) 3,808,850 3,438,902 -- 7,247,752 Liquidity Class 1,300,319 -- -- 1,300,319 Adviser Class / Horizon Service 810,616 4,078,815 -- 4,889,431 Market Class 1,163,000 -- -- 1,163,000 Investor Class / Pacific Horizon -- 2,883,995 -- 2,883,995 Service Class / Class Y -- 184,111 -- 184,111 Daily / Class S & Class X -- 2,692,046 -- 2,692,046 ------------ ------------ ------------ ------------ 7,082,785 13,277,869 -- 20,360,654 ------------ ------------ ------------ ------------ NET ASSET VALUE PER SHARE BY CLASS: Capital Class / Horizon (Primary) $ 1.00 $ 1.00 $ -- $ 1.00 Liquidity Class $ 1.00 $ -- $ -- $ 1.00 Adviser Class / Horizon Service $ 1.00 $ 1.00 -- $ 1.00 Market Class $ 1.00 $ -- -- $ 1.00 Investor Class / Pacific Horizon $ -- $ 1.00 -- $ 1.00 Service Class / Class Y -- $ 1.00 -- $ 1.00 Daily / Class S & Class X -- $ 1.00 -- $ 1.00 SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS NATIONS CASH RESERVES / PACIFIC HORIZON PRIME FUND Pro Forma Combining Statement of Operations (unaudited) For the Twelve Month Period Ending October 31,1998 Pacific Nations Cash Horizon Adjustments to Pro Forma Reserves Prime Fund Pro Forma Combined ( in 000's) ( in 000's) ( in 000's) ( in 000's) ----------------------------------------- -------------- INVESTMENT INCOME: Interest $299,325 $610,079 $0 $909,404 Dividends 7,169 - - 7,169 ----------------------------------------- -------------- Total Investment Income 306,494 610,079 - 916,573 ----------------------------------------- -------------- EXPENSES: Investment Advisory 16,144 9,387 (2,072) (a) 23,459 Administration 5,381 10,258 - (a) 15,639 Transfer Agent 93 390 (97) (b) 386 Custodian 295 698 (131) (b) 862 Legal and Audit Fees 71 332 (44) (b) 359 Registration & Filing 1,014 1,211 - 2,225 Trustees' Fees 110 175 (50) (b) 235 Interest Expense 11 - - 11 Other expenses 271 1,168 (700) (b) 739 ----------------------------------------- -------------- Subtotal 23,390 23,619 (3,094) 43,915 ----------------------------------------- -------------- SHAREHOLDER SERVICING AND DISTRIBUTION FEES Liquidity Class 9,755 - - 9,755 Adviser Class / Horizon Service 1,699 9,268 - 10,967 Market Class 3,687 - - 3,687 Investor Class / Pacific Horizon - 8,150 764(a) 8,914 Service Class / Class Y - 1,316 - 1,316 Daily / Class S & Class X - 12,858 (2,376) (a) 10,482 ----------------------------------------- -------------- Subtotal 15,141 31,592 (1,612) 45,121 ----------------------------------------- -------------- Fees waived and/or reimbursed by investment advisor, administrator and/or distributor (21,732) (3,251) 12,350(c) (12,633) ----------------------------------------- -------------- TOTAL EXPENSES 16,799 51,960 7,644 76,403 ----------------------------------------- -------------- NET INVESTMENT INCOME 289,695 558,119 (7,644) 840,170 ----------------------------------------- -------------- NET REALIZED GAIN/(LOSS) ON INVESTMENTS 2 (1,032) - (1,030) ----------------------------------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $289,697 $557,087 ($7,644) $839,140 ========================================= ==============
LEGEND: (A) REFLECTS ADJUSTMENT TO THE ACQUIRING FUND CONTRACTUAL FEE OBLIGATION. (B) ADJUSTMENT REFLECTS EXPECTED SAVINGS WHEN THE TWO FUNDS BECOME ONE. (C) REFLECTS ADJUSTMENT TO THE LEVEL OF THE ACQUIRING FUND'S VOLUNTARY EXPENSE REIMBURSEMENT. SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS Nations Cash Reserves Pacific Horizon Prime Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of October 31, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of October 31, 1998 and the unaudited Pro Forma Combining Statement of Operations for the year ended October 31, 1998 assumes the exchange occurred as of November 1, 1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at October 31, 1997 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizon Prime Fund in exchange for shares of Nations Cash Reserves. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward to the surviving entity and the results of operations of the Nations Cash Reserves for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 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. The investment advisory and shareholder servicing and distribution fees have been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations Cash Reserves at the time of the Reorganization at the combined level of average net assets for the twelve month period ended October 31, 1998.
NATIONS CALIFORNIA TAX EXEMPT FUND / PACIFIC HORIZON CALIFORNIA TAX EXEMPT FUND Pro Forma Combining Schedule of Investments (unaudited) September 30,1998 Nations Pacific Horizon Pacific California California Nations Horizon Tax-Exempt Tax-Exempt California California Principal Principal Pro Forma Principal Tax-Exempt Tax-Exempt Pro Forma Amount Amount Amount Description Value Value Value (in 000's) (in 000's) (in 000's) SHORT-TERM TAX-EXEMPT INVESTMENTS - PUERTO RICO - 2.76% 2,000,000 2,000,000 PUERTO RICO COMWLTH HWY & TRANSN REV 07/01/28 2,000 2,000 10,995,000 10,995,000 PUERTO RICO COMMONWEALTH INFRA VRN 7/01/12 10,995 10,995 *144A* 27,900,000 27,900,000 PUERTO RICO ELEC POWER AUTH VRN 07/01/22 27,900 27,900 *144A* 4,900,000 4,900,000 PUERTO RICO ELEC PWR AUTH PWR REV 07/01/23 4,900 4,900 --------------------------------------- 0 45,795 45,795 --------------------------------------- SHORT-TERM TAX-EXEMPT INVESTMENTS - CALIFORNIA - 97.80% ABAG FIN AUTH FOR NONPROFIT CORPS CALIF 3,000,000 3,000,000 10/01/27 3,000 3,000 5,000,000 5,000,000 ALAMEDA CONTRA COSTA CALIF VRN 08/01/23 5,000 5,000 1,800,000 1,800,000 ANAHEIM CALIF HSG AUTH MULTIFAMILY 08/01/20 1,800 1,800 CALIFORNIA HSG FIN AGY MULTI UNIT RENT HSG 2,000,000 2,000,000 REV 2,000 2,000 CALIFORNIA HSG FIN AGY MULTI UNIT RENT HSG 2,775,000 2,775,000 REV 2,775 2,775 2,000,000 2,000,000 CA HSG FIN AGY MULTI-UNIT 3.7% 08/01/23 2,000 2,000 10,995,000 10,995,000 CALIFORNIA HLTH FACS FINC AUTH REV 06/01/12 10,995 10,995 14,100,000 14,100,000 CALIFORNIA HLTH FACS FIN AUTH REV 09/01/28 14,100 14,100 1,660,000 1,660,000 CALIFORNIA HLTH FACS FIN AUTH REV 10/01/24 1,660 1,660 1,800,000 1,800,000 CALIF HEALTH FACS FIN AUTH REV VRN 7/1/22 1,800 1,800 15,700,000 15,700,000 CALIFORNIA HLTH FACS FIN AUTH VRN 10/01/22 15,700 15,700 5,615,000 5,615,000 CALIFORNIA HSG FIN AGY REV P-FLTS SER PA 58 5,615 5,615 2/1/24 1,000,000 1,000,000 CALIFORNIA HSG FIN AGY REV 07/15/13 1,000 1,000 1,200,000 1,200,000 CALIFORNIA HSG FIN AGY REV VRN 07/15/13 1,200 1,200 14,360,000 14,360,000 CALIFORNIA HSG FIN AGY REV 3.55% 02/01/33 14,360 14,360 4,700,000 4,700,000 CALIFORNIA HEALTH FACS VRN 07/01/13 4,700 4,700 2,500,000 2,500,000 CALIFORNIA HEALTH FACS FING AUTH REV 10/01/21 2,500 2,500 2,405,000 2,405,000 CA PCR FIN AUTH (CHEVRON) 4.00% 11/15/01 2,408 2,408 14,000,000 14,000,000 CA PCR FIN AUTH ( SO CAL ) SER 1985B 14,000 14,000 700,000 700,000 CALIFORNIA PCR FIN AUTH VRN 10/01/06 700 700 16,000,000 16,000,000 CALIFORNIA POLLUTN CTL VRN 12/1/16 AMT PCR 16,000 16,000 1,000,000 1,000,000 CALIF POLLUN CTL FING VRN 12/1/16 AMT 1,000 1,000 2,500,000 2,500,000 CALIFORNIA POLLUTN CTL FING VRN 11/1/26 2,500 2,500 7,800,000 7,800,000 CALIF POLLUTN CTL FING VRN 2/1/16 7,800 7,800 2,000,000 2,000,000 CALIFORNIA PCR AUTH VRN 12/01/18 2,000 2,000 7,500,000 7,500,000 CALIFORNIA PCR FIN AUTH VRN 11/01/26 7,500 7,500 45,000,000 45,000,000 CALIFORNIA PCR FINCL AUTH VRN 11/01/26 45,000 45,000 4,900,000 4,900,000 CA PCR DELANO PWR PROJ "AMT" 8/1/19 (PCR) 4,900 4,900 10,700,000 10,700,000 CA POLLTN CNTRL REVENUE FIN AUTH "AMT" 10,700 10,700 5,125,000 5,125,000 CA POLLUTION CNTRL TAORIMINA SOLID WSTE DISP 5,125 5,125 PCR 10,000,000 10,000,000 CA PCR FIN AUTH (SHELL) SER A "AMT" VRN 10,000 10,000 10/01/24 2,240,000 2,240,000 CA PCR FIN AUTH (TAORMINA IND) SER B "AMT" 2,240 2,240 PCR 17,900,000 17,900,000 CALIFORNIA PCR FIN AUTH VRN 10/01/31 AMT 17,900 17,900 2,500,000 2,500,000 CALIFORNIA PCR FIN AUTH VRN 10/01/31 2,500 2,500 1,700,000 1,700,000 CALIFORNIA PCR FINCL AUTH VRN 12/01/11 "AMT" 1,700 1,700 2,000,000 2,000,000 CALIFORNIA POLLUTN CTL FING AUTH SOLID WASTE 2,000 2,000 DISP 42,050,000 42,050,000 CALIFORNIA SCH CASH RESERVE PROG 4.50% 42,324 42,324 07/02/99 3,975,000 3,975,000 CALIFORNIA ST MUNI TR RCPTS 4.20% 09/01/21 3,975 3,975 *144A* 8,385,000 8,385,000 CALIFORNIA ST FLTG RATE RCPTS-SG 95 9/01/2016 8,385 8,385 8,340,000 8,340,000 CALIFORNIA ST SGA 40 VRN 06/01/13 8,340 8,340 15,950,000 15,950,000 CALIFORNIA ST G.O. VRN 06/01/21 *144A* 15,950 15,950 2,000,000 2,000,000 CALIFORNIA STATE GO SOC GEN $ VRN 06/01/17 2,000 2,000 *144A* 35,000,000 35,000,000 CALIFORNIA ST P-FLOATS-PT 1072 02/01/21 35,000 35,000 20,000,000 20,000,000 CALIFORNIA ST REV ANTIC NTS 4.00% 06/30/99 20,123 20,123 1,400,000 1,400,000 CALIF STATEWIDE CMNTYS DEV VRN 12/15/24 "AMT" 1,400 1,400 100,000 100,000 CALIFORNIA STATEWIDE CMNTY DEV AUTH VRN 100 100 6/1/26 3,000,000 3,000,000 CALIFONIA STATEWIDE CMNTY VRN 02/01/28 3,000 3,000 0 0 CALIFORNIA STWD COMM DEVL VRN 07/01/27 "AMT" 0 0 13,100,000 13,100,000 CALIFORNIA TRAN FIN AUTH 10/01/27 13,100 13,100 CALIFORNIA STATEWIDE CMNTYS DEV CORP REV 1,605,000 1,605,000 12/01/18 1,605 1,605 1,000,000 1,000,000 CALIFORNIA STATEWIDE DEV AUTH REV VRN 12/1/18 1,000 1,000 39,200,000 39,200,000 CA ST-WIDE COM DEV AUTH REV SUTTER HEALTH 39,200 39,200 7/1/15 1,300,000 1,300,000 CA STATEWIDE COMM DEV AUTH REV 08/15/27 1,300 1,300 5,000,000 5,000,000 CAMARILLO CALIF MULTIFAMILY HSG REV 07/15/19 5,000 5,000 2,000,000 2,000,000 CAMPBELL CALIF UN ELEM SCH 4.00% 08/02/99 2,007 2,007 2,250,000 2,250,000 CENTRAL COAST WTR AUTH CALIF REV 10/01/16 2,250 2,250 *144A* 2,365,000 2,365,000 CHAFFEY CALIIF UN HIGH SCH 4.00% 08/01/99 2,373 2,373 2,000,000 2,000,000 CHULA VISTA CA (TERRA NOVA PROJ) 92A 3/1/05 2,000 2,000 11,000,000 11,000,000 CHULA VISTA CA IDR (SAN DIEGO) "AMT" 12/1/27 11,000 11,000 7,400,000 7,400,000 CHULA VISTA CALIF IDR VRN 03/01/23 "AMT" 7,400 7,400 2,900,000 2,900,000 CONTRA COSTA CNTY CALIF VAR-REF-B-RMK 9/28/94 2,900 2,900 11,950,000 11,950,000 CA HFA FIN AGCY 3.50% 08/01/16 *144A* 11,950 11,950 10,000,000 10,000,000 CALIFORNIA GEN OBLIG CLASS A EAGEL 2/1/06 10,000 10,000 17,270,000 17,270,000 CALIF ST DEPT OF WATER RES VRN 12/01/29 17,270 17,270 15,100,000 15,100,000 CALIFORNIA G.O. VRN 04/01/04 15,100 15,100 13,000,000 13,000,000 CITY OF LONG BEACH 05/15/15 VRN 13,000 13,000 17,600,000 17,600,000 FOOTHILL EASTERN TRANSPORTATION VRN 1/2/35 17,600 17,600 15,000,000 15,000,000 FOOTHILL EASTERN TRANS CORRIDOR REVENUE 15,000 15,000 1/2/35 2,000,000 2,000,000 FREMONT CALIF CTFS PARTN 08/01/28 2,000 2,000 9,790,000 9,790,000 FREMONT CALIF MULTIFMLY HSG VRN 09/01/14 9,790 9,790 17,800,000 17,800,000 HAYWARD CALIF MULTIFAMILY HSG REV 08/01/14 17,800 17,800 3,800,000 3,800,000 HAYWARD CALIF MULTIFAM HSG REV VRN 03/01/33 3,800 3,800 11,600,000 11,600,000 HUNTINGTON BEACH CALIF MUTIFAMILY VRN 7/1/14 11,600 11,600 5,060,000 5,060,000 INDIO CA MULTIFAMILY REV (WESTERN FEDERAL 5,060 5,060 SAVINGS) 15,500,000 15,500,000 IRVNE CALIF IMPT BD VRN 09/02/22 15,500 15,500 9,000,000 9,000,000 IRVINE CALIF IMPT BD ACT 1915 VRN 09/02/23 9,000 9,000 1,100,000 1,100,000 IRVINE RANCH CALIF WTR DIST 10/1/00 1,100 1,100 1,200,000 1,200,000 KERN CNTY CALIF CTFS VRN 8/1/06 1,200 1,200 8,500,000 8,500,000 KERN CNTY CALIF CTFS PARTN VRN8/1/06 8,500 8,500 4,500,000 4,500,000 LIVERMORE CALIF MULTIFAMILY REV 07/15/18 4,500 4,500 9,995,000 9,995,000 LONG BEACH CA AMT 05/15/07 9,995 9,995 *144A* 8,950,000 8,950,000 LONG BEACH CALIFORNIA HEALTH SRVCS VRN 8,950 8,950 10/01/16 20,000,000 20,000,000 LOS ANGELES CALIF CMNTY REDEV VRN 10/01/19 20,000 20,000 AMT 7,880,000 7,880,000 LOS ANGELES CALIF CONVENTION 7.375% 08/15/18 8,277 8,277 2,000,000 2,000,000 LOS ANGELES CALIF INDL DEV AUTH INDL 08/01/23 2,000 2,000 7,000,000 7,000,000 LOS ANGELES CNTY CALIF 4.50% 10/01/98 7,000 7,000 43,780,000 43,780,000 LOS ANGELES CA USD 44,055 44,055 1,000,000 1,000,000 LOS ANGELES CALIF(BELMONT LEARNING) VRN 1,000 1,000 12/01/17 2,100,000 2,100,000 LOS ANGELES CNTY CALIF MTA VRN 07/01/17 2,100 2,100 *144A* 13,355,000 13,355,000 LOS ANGELES CNTY CAL.MET TRANSN AUTH 13,355 13,355 7/1/11*144A* 5,000,000 5,000,000 LOS ANGELES METROPOLITAN TRANS AUTH CP 3.45% 5,000 5,000 6,000,000 6,000,000 LOS ANGELES CO TRANSP COMM SALES TAX REV 6,000 6,000 2,600,000 2,600,000 LOS ANGELES CO CA PENSION OBLIGATION VRN 2,600 2,600 6/30/07 5,200,000 5,200,000 LOS ANGELES CO, CALIF PENSION OBLIG VRN 5,200 5,200 6/30/07 5,200,000 5,200,000 MSR PUB PWR AGY CALIF VRN 07/01/22 5,200 5,200 9,000,000 9,000,000 M-S-R PUBLIC POWER AGCY CALIF SER D VRN 9,000 9,000 07/01/18 2,545,000 2,545,000 MODESTO CALIF HIGH SCH DIST & MODESTO CITY 2,545 2,545 08/1/11 4,975,000 4,975,000 MODESTO CALIF MLTIFMLY HSG VRN 09/01/24 4,975 4,975 9,000,000 9,000,000 MONTERAY COUNTY CA RECLAMATION AND DIST PROJ 9,000 9,000 21,600,000 21,600,000 MONTEREY PENINSULA CA WTR MGMT DIST 7/1/22 21,600 21,600 16,500,000 16,500,000 MOUNTAIN VIEW CALIF VRN 03/01/17 16,500 16,500 1,525,000 1,525,000 NORTH CITY WEST CALIF SCH FACS 7.85% 09/01/19 1,616 1,616 8,000,000 8,000,000 NORTHERN CALIF PWR AGY PUB P 5% 7/01/1999 8,081 8,081 12,000,000 12,000,000 OAKLAND CALIF JT PWRS FINCG AUTH VRN 08/01/21 12,000 12,000 1,800,000 1,800,000 ONTARIO CALIF INDL DEV AUTH 4/1/15 1,800 1,800 3,800,000 3,800,000 ORANGE CNTY CALIF APT DEV REV 11/01/08 3,800 3,800 19,500,000 19,500,000 ORANGE CNTY VRN 11/1/07 19,500 19,500 24,600,000 24,600,000 ORANGE COUNTY CALIF APT DEV REV VRN 11/1/2005 24,600 24,600 2,670,000 2,670,000 ORANGE CNTY CALIF APT DEV REV 04/01/23 2,670 2,670 6,500,000 6,500,000 ORANGE CNTY CALIF APT DEV REV 08/15/28 6,500 6,500 12,000,000 12,000,000 ORANGE CNTY CALIF HSG AUTH VRN 06/15/28 12,000 12,000 21,700,000 21,700,000 ORANGE COUNTY IRVINE COAST ASSESMENT VRN 21,700 21,700 9/2/18 3,700,000 3,700,000 ORANGE CO CA SANITATION DIST VRN 08/01/15 3,700 3,700 9,600,000 9,600,000 ORANGE COUNTY, CA SANITATION 8/1/17 9,600 9,600 8,800,000 8,800,000 ORANGE CNTY CA SANTN DISTS VRN 8/1/16 8,800 8,800 2,100,000 2,100,000 OTAY CALIF WATER DIST CTFS VRN 09/01/26 2,100 2,100 1,275,000 1,275,000 PARAMOUNT CALIF UNI SCH DIST CTFS PARTN 1,275 1,275 09/01/08 1,925,000 1,925,000 PARAMOUNT CALIF UNI SCH DIST CTFS PARTN 1,925 1,925 09/01/15 1,940,000 1,940,000 PARAMOUNT CALIF UNI SCH DIST CTFS 09/01/27 1,940 1,940 1,000,000 1,000,000 PASADENA CALIF ROSE BOWL IMPRVMNT VRN 1,000 1,000 12/01/16 3,400,000 3,400,000 RIVERSIDE CALIF ELECTRIC REV VRN 10/01/11 3,400 3,400 *144A* 20,925,000 20,925,000 RIVERSIDE CO CALIF VRN 12/1/15 20,925 20,925 4,500,000 4,500,000 RIVERSIDE COUNTY CALIFORNIA ASSET LEASING 4,582 4,582 CORP 3,000,000 3,000,000 RIVERSIDE CNTY CALIF 4.50% 09/30/99 3,037 3,037 9,400,000 9,400,000 RIVERSIDE CNTY CALIF CMNTY FACS DIST 09/01/14 9,400 9,400 8,000,000 8,000,000 RIVERSIDE CNTY CALIF SCHL 4.50% 10/01/98 8,000 8,000 8,000,000 8,000,000 RIVERSIDE CNTY CALIF SPL TAX 3.50% 09/01/28 8,000 8,000 11,000,000 11,000,000 ROSEVILLE CALIF FIN AUTH VRN 10/01/14 11,000 11,000 5,000,000 5,000,000 SACRAMENTO CNTY CALIF HSG AUTH 11/15/27 5,000 5,000 18,010,000 18,010,000 SACRAMENTO CNTY CALIF HSG REV VRN 09/15/07 18,010 18,010 12,000,000 12,000,000 SAN BERNARDINO CNTY CALIF 4.50% 09/30/99 12,129 12,129 22,000,000 22,000,000 SAN BERNARDINO CNTY CALIF HSG AUTH VRN 22,000 22,000 08/01/05 1,500,000 1,500,000 SAN DIEGO CALIF AREA LOCAL GOVT 1,500 1,500 7,740,000 7,740,000 SAN DIEGO CALIF HSG MULTIFAMILY VRN 12/01/08 7,740 7,740 19,165,000 19,165,000 SAN DIEGO HOUSING AUTH MULTI-FAMILY SERIES 19,165 19,165 1985 11,910,000 11,910,000 SAN DIEGO CALIF HSG AUTH VRN 12/01/08 11,910 11,910 14,250,000 14,250,000 SAN DIEGO CALIF HSG AUTH 14,250 14,250 2,500,000 2,500,000 SAN DIEGO CITY,CA IDA (SDG&E) SER A 2,500 2,500 15,830,000 15,830,000 SAN DIEGO VALIF PUB FACS FING AUTH SWR 15,830 15,830 05/15/25 4,490,000 4,490,000 SANDIEGO CNTY HSG REV VRN 8/15/13 4,490 4,490 7,000,000 7,000,000 SAN DIEGO CO, CA AUTH CP 3.45% 3/8/99 7,000 7,000 26,290,000 26,290,000 SAN FRANCISCO CALIF CITY & CNTY ARPT 05/01/29 26,290 26,290 9,775,000 9,775,000 SAN FRANCISCO CALIF CITY & CNTY ARPT COMMN 9,775 9,775 5/1/20 11,500,000 11,500,000 SAN FRANCISCO CAL.CITY & CNTY ARPT COMM 11,500 11,500 INTL*144A* 3,905,000 3,905,000 SAN FRANCISCO CAL.ARPT REV VRN 05/1/26 3,905 3,905 "AMT"*144A* 5,345,000 5,345,000 SAN FRAN CITY CALIF & CNTY ARPT VRN 5,345 5,345 05/01/21*144A* 1,500,000 1,500,000 SAN FRANCISCO CITY & CO (WINTERLAND MFH) 1,500 1,500 6/1/06 10,000,000 10,000,000 SAN FRANCISCO CALIF CITY & CNTY 4.5% 10,104 10,104 9/22/1999 7,900,000 7,900,000 SAN JOSE CALIF MULTIFAMILY HSG REV 11/01/07 7,900 7,900 3,100,000 3,100,000 SANTA ANNITA CALIF VRN 07/01/15 3,100 3,100 9,800,000 9,800,000 SANTA CLARA, CA ELECTRIC REV 7/1/10 9,800 9,800 1,600,000 1,600,000 SANTA CLARA CALIF ELEC REV 1,600 1,600 1,835,000 1,835,000 SANTA CLARA CALIF LOC GOVT FIN 7.25% 02/01/13 1,893 1,893 10,300,000 10,300,000 SOUTHERN CALIF PUB PWR AUTH VRN 7/1/19 10,300 10,300 4,030,000 4,030,000 SOUTHERN KERN CALIF USD VRN 09/01/26 4,030 4,030 1,700,000 1,700,000 TUSTIN CA IMPROVEMENT BOND VRN 09/02/13 1,700 1,700 1,000,000 1,000,000 UNIVERSITY CALIF REVS SER B - 1989 7.1% 1,032 1,032 9/01/99 11,300,000 11,300,000 UNIVERSITY OF CALIFORNIA REV VRN 09/01/19 11,300 11,300 3,300,000 3,300,000 VALLEJO CA IDB (MEYER CODEWARE IND) SERIES A 3,300 3,300 5,000,000 5,000,000 VICTOR VALLEY CALIF COMNTY COLLEGE DIST CTFS 5,000 5,000 PARTN 20,000,000 20,000,000 WATERUSE FINC AUTH, CALIF VRN 05/01/28 20,000 20,000 2,330,000 2,330,000 CA DEPT OF WATER RESOURCES WTR REV SER 1 2,330 2,330 10,000,000 10,000,000 CA GO CP 3.00% 10/21/98 10,000 10,000 15,000,000 15,000,000 CA PCR FIN AUTH (PACIFIC GAS & ELEC) SER D 15,000 15,000 2,200,000 2,200,000 CA PCR FIN AUTH (SO CA EDISON) SER 1985B 2,200 2,200 9,800,000 9,800,000 CA PCR FIN AUTH (SO CA EDISON) SER 85-D 9,800 9,800 5,300,000 5,300,000 CA PCR FIN AUTH (SO CA EDISON) SER 85-C 5,300 5,300 3,000,000 3,000,000 CHULA VISTA IDR, CA (SDG & E) SERIES 1992C 3,000 3,000 "AMT" 0 0 CONVERSION INTEREST 0 0 2,500,000 2,500,000 CA PCR FIN AUTH (SO CAL EDISON) SER 1985 2,500 2,500 35,000,000 35,000,000 LOS ANGELES DEPT WTR & PWR ELECTRIC PLANT 35,000 35,000 TECP 15,000,000 15,000,000 LOS ANGELES DEPT WTR & PWR ELECTRIC PLANT 15,000 15,000 TECP 10,000,000 10,000,000 LONG BEACH, CA HARBOR AMT 3.10% 12/09/98 10,000 10,000 3,500,000 3,500,000 LOS ANGELES DEPT WTR & PWR ELECTRIC PLANT 3,500 3,500 TECP 16,000,000 16,000,000 LOS ANGELES CO, CA CAPITAL ASSET LEASE CORP 16,000 16,000 10,000,000 10,000,000 LOS ANGELES DEPT WTR & PWR ELECTRIC PLANT 10,000 10,000 TECP 10,000,000 10,000,000 LOS ANGELES DEPT WTR & PWR ELECTRIC PLANT 10,000 10,000 TECP 1,500,000 1,500,000 LOS ANGELES, CA WASTEWATER SYS REV 3.0% 1,500 1,500 11/24/98 19,000,000 19,000,000 LOS ANGELES DEPT WTR & PWR ELECTRIC PLANT 19,000 19,000 TECP 21,000,000 21,000,000 MODESTO IRRIGATION DIST, CA COP 2.70% 21,000 21,000 10/09/98 20,000,000 20,000,000 PUERTO RICO GDB CP 3.00% 10/8/98 20,000 20,000 SOUTHERN CA METROPOLITAN WTR DIST 2.85% 4,000,000 4,000,000 11/10/98 4,000 4,000 10,000,000 10,000,000 SACRAMENTO MUNICIPAL UTILITY DIST, CA SER 1 10,000 10,000 9,000,000 9,000,000 SAN DIEGO COUNTY, CA TEETER OBLIGATION 9,000 9,000 SAN DIEGO CITY, CA IDA (SDG & E) 2.95% 5,200,000 5,200,000 12/07/98 5,200 5,200 5,700,000 5,700,000 SOUTHERN CA METROPOLITAN WTR DIST 5,700 5,700 --------------------------------------- 0 1,620,910 1,620,910 --------------------------------------- TOTAL INVESTMENTS - 100.56% (COST $0, $1,666,706 RESPECTIVELY) 0 1,666,706 1,666,706
NATIONS CALIFORNIA TAX EXEMPT FUND / PACIFIC HORIZON CALIFORNIA TAX EXEMPT FUND Pro Forma Combining Statement of Net Assets (unaudited) September 30,1998 Pacific Nations Horizon California California Tax Exempt Tax Exempt Adjustments to Pro Forma Fund Fund Pro Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) --------------------------------------------- -------------- TOTAL INVESTMENTS $ -- $ 1,666,706 $ -- $ 1,666,706 OTHER ASSETS AND LIABILITIES: Other assets and liabilities, net -- (9,311) -- (9,311) --------- ------------ ----------- ----------- Total Other Assets and Liabilities -- (9,311) -- (9,311) --------- ------------ ----------- ----------- NET ASSETS $ -- $ 1,657,395 $ -- $ 1,657,395 =========== =========== NET ASSETS BY CLASS: Advisor Class / Horizon Service $ -- $ 746,840 $ -- $ 746,840 Investor Class / Pacific Horizon -- 581,414 -- 581,414 Daily / Class S & Class X -- 329,141 -- 329,141 --------- ------------ ----------- ----------- $ -- $ 1,657,395 $ -- $ 1,657,395 --------- ------------ ----------- ----------- SHARES OUTSTANDING BY CLASS: Adviser Class / Horizon Service -- 746,904 -- 746,904 Investor Class / Pacific Horizon -- 581,455 -- 581,455 Daily / Class S & Class X -- 329,153 -- 329,153 --------- ------------ ----------- ----------- -- 1,657,512 -- 1,657,512 --------- ------------ ----------- ----------- NET ASSET VALUE PER SHARE BY CLASS: Adviser Class / Horizon Service $ -- $ 1.00 $ -- $ 1.00 Investor Class / Pacific Horizon $ -- $ 1.00 $ -- $ 1.00 Daily / Class S & Class X $ -- $ 1.00 $ -- $ 1.00
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS NATIONS CALIFORNIA TAX EXEMPT FUND / PACIFIC HORIZON CALIFORNIA TAX EXEMPT FUND Pro Forma Combining Statement of Operations (unaudited) Twelve Month Period Ending September 30,1998 Pacific Nations Horizon California California Tax Exempt Tax Exempt Adjustments to Pro Pro Forma Fund Fund Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) --------------------------------------------- --------------- INVESTMENT INCOME: Interest $0 $47,807 $0 $47,807 Dividends - - - - --------------------------------------------- --------------- Total Investment Income - 47,807 - 47,807 --------------------------------------------- --------------- EXPENSES: Investment Advisory - 1,405 703(a) 2,108 Administration - 1,405 - (a) 1,405 Transfer Agent - 57 165(b) 222 Custodian - 113 52 (b) 165 Legal and Audit Fees - 89 (36) (b) 53 Registration & Filing - 64 - 64 Trustees' Fees - 23 - 23 Interest Expense - - - - Other expenses - 183 (108) (b) 75 --------------------------------------------- --------------- Subtotal - 3,339 776 4,115 --------------------------------------------- --------------- SHAREHOLDER SERVICING AND DISTRIBUTION FEES Adviser Class / Horizon Service - 1,567 1,567 Investor Class / Pacific Horizon - 1,939 1,939 Daily / Class S & Class X - 1,896 (677) (a) 1,219 --------------------------------------------- --------------- - 5,402 (677) 4,725 --------------------------------------------- --------------- Fees waived and/or reimbursed by investment advisor, administrator and/or distributor - (875) (430) (c) (1,305) --------------------------------------------- --------------- TOTAL EXPENSES - 7,866 (331) 7,535 --------------------------------------------- --------------- --------------------------------------------- --------------- NET INVESTMENT INCOME - 39,941 331 40,272 --------------------------------------------- --------------- NET REALIZED GAIN/(LOSS) --------------------------------------------- --------------- ON INVESTMENTS - (59) - (59) --------------------------------------------- --------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $0 $39,882 $331 $40,213 ============================================= ===============
LEGEND: (A) REFLECTS ADJUSTMENT TO THE ACQUIRING FUND CONTRACTUAL FEE OBLIGATION. (B) ADJUSTMENT REFLECTS EXPECTED SAVINGS WHEN THE TWO FUNDS BECOME ONE. (C) REFLECTS ADJUSTMENT TO THE LEVEL OF THE ACQUIRING FUND'S VOLUNTARY EXPENSE REIMBURSEMENT. (D) NET OF EXPENSE OFFSET ARRANGEMENTS AMOUNTS TO LESS THAN .01% OF AVERAGE NET ASSETS. SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS Nations California Tax-Exempt Fund Pacific Horizon California Tax-Exempt Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of September 30, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of September 30, 1998 and the unaudited Pro Forma Combining Statement of Operations assumes the exchange occurred as of October 1,1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at September 30, 1998 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizon California Tax-Exempt Fund in exchange for shares of Nations California Tax-Exempt Fund. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward under the new name of Nations California Tax-Exempt Fund. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 1. 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. The investment advisory and administration fees have been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations California Tax-Exempt Fund at the time of the Reorganization at the combined level of average net assets for the twelve month period ended September 30, 1998.
Nations Government Reserves / Pacific Horizon Government Fund Pro Forma Combining Schedule of Investments (Unaudited) October 31,1998 Nations Pacific Government Horizon Pacific Reserves Government Fund Pro Forma Combined Nations Horizon Principal Principal Principal Government Government Fund Pro Forma Combined Amount Amount Amount Asset Description Reserves Value Value Value (in 000's) (in 000's) (in 000's) Investment Companies - 0.77% 9,105,000 0 9,105,000 DREYFUS TREASURY CASH MANAGEMENT 9,105 0 9,105 ---------------------------------------- 9,105 0 9,105 ---------------------------------------- Repurchase Agreements--42.56% 157,000,000 0 157,000,000 ABN-AMRO CHIC 5.625% 11/02/98 157,000 0 157,000 140,000,000 0 140,000,000 FIRST UNION CAPITAL 5.62% 11/02/98 140,000 0 140,000 20,000,000 0 20,000,000 GOLDMAN SACHS TERM 5.21% 11/02/98 20,000 0 20,000 0 50,000,000 50,000,000 HSBC 5.6% 11/2/98 0 50,000 50,000 0 23,515,000 23,515,000 J.P. MORGAN 5% 11/2/98 0 23,515 23,515 0 60,000,000 60,000,000 LEHMAN 5.6% 11/2/98 0 60,000 60,000 0 55,000,000 55,000,000 PRUDENTIAL 5.6% 11/2/98 0 55,000 55,000 ---------------------------------------- 317,000 188,515 505,515 ---------------------------------------- Time Deposits- Euro - 1.5% 17,847,000 0 17,847,000 BANK OF NEW YORK CAYMAN ISLAND 4.75% 17,847 0 17,847 11/02/98 ---------------------------------------- 17,847 0 17,847 ---------------------------------------- U.S. Government Agency Obligations-- 48.93% 0 11,245,000 11,245,000 FANNIE MAE 5.05% 11/10/98 0 11,243 11,243 0 15,000,000 15,000,000 FANNIE MAE 5.38% 02/09/99 0 15,015 15,015 0 5,000,000 5,000,000 FANNIE MAE 5.49% 08/03/99 0 4,995 4,995 0 5,000,000 5,000,000 FANNIE MAE 5.57% 05/07/99 0 4,996 4,996 0 3,000,000 3,000,000 FANNIE MAE 9.55 3/10/99 0 3,041 3,041 0 20,000,000 20,000,000 FANNIE MAE DISC NOTE 01/04/99 0 19,821 19,821 0 10,000,000 10,000,000 FANNIE MAE DISC NOTE 01/27/99 0 9,884 9,884 0 10,000,000 10,000,000 FANNIE MAE DISC NOTE 02/01/99 0 9,877 9,877 0 10,000,000 10,000,000 FANNIE MAE DISC NOTE 04/01/99 0 9,807 9,807 0 25,000,000 25,000,000 FANNIE MAE DISC NOTE 11/20/98 0 24,928 24,928 8,000,000 0 8,000,000 FANNIE MAE SERIES MTN 4.441% 4/28/99 7,998 0 7,998 6,000,000 5,000,000 11,000,000 FEDERAL FARM CREDIT BANK 5.70% 11/03/98 6,000 5,000 11,000 11,000,000 0 11,000,000 FEDERAL FARM CREDIT BANK, DN 5.65% 11,000 0 11,000 01/04/99 6,901,000 0 6,901,000 FEDERAL HOME LOAN BANK DISC NOTE 4/14/99 6,756 0 6,756 12,000,000 0 12,000,000 FEDERAL HOME LOAN BANK 5.24% 10/21/99 12,000 0 12,000 0 15,000,000 15,000,000 FEDERAL HOME LOAN BANK 08/12/99 0 14,994 14,994 0 8,400,000 8,400,000 FEDERAL HOME LOAN BANK 5.335% 01/11/99 0 8,395 8,395 0 5,000,000 5,000,000 FEDERAL HOME LOAN BANK 5.718% 05/06/99 0 4,999 4,999 0 5,000,000 5,000,000 FEDERAL HOME LOAN BANK 5.723% 05/05/99 0 4,999 4,999 8,000,000 9,760,000 17,760,000 FEDERAL HOME LOAN BANK DISC NOTE 01/04/99 7,928 9,673 17,601 9,000,000 0 9,000,000 FEDERAL HOME LOAN BANK, NOTE 5.65% 8,999 0 8,999 4/09/99 8,000,000 0 8,000,000 FEDERAL HOME LOAN BK DN 11/13/98 7,987 0 7,987 0 5,000,000 5,000,000 FEDERAL HOME LOAN MORTGAGE CORP 5.60% 0 4,998 4,998 04/21/99 0 3,237,000 3,237,000 FEDERAL HOME LOAN MORTGAGE CORP DISC 0 3,208 3,208 NOTE 01/04/99 8,905,000 10,000,000 18,905,000 FEDERAL HOME LOAN MORTGAGE CORP DISC 8,809 9,901 18,710 NOTE 01/15/99 0 10,000,000 10,000,000 FEDERAL HOME LOAN MORTGAGE CORP DISC 0 9,885 9,885 NOTE 01/19/99 5,000,000 20,000,000 25,000,000 FEDERAL HOME LOAN MORTGAGE CORP DISC 4,929 19,703 24,632 NOTE 02/17/99 0 20,000,000 20,000,000 FEDERAL HOME LOAN MORTGAGE CORP DISC 0 19,662 19,662 NOTE 03/05/99 0 15,000,000 15,000,000 FEDERAL HOME LOAN MORTGAGE CORP DISC 0 14,947 14,947 NOTE 11/25/98 0 25,000,000 25,000,000 FEDERAL HOME LOAN MORTGAGE CORP DISC 0 24,879 24,879 NOTE 12/04/98 0 8,760,000 8,760,000 FEDERAL HOME LOAN MORTGAGE CORP DISC 0 8,705 8,705 NOTE 12/18/98 0 1,148,000 1,148,000 FEDERAL HOME LOAN MORTGAGE CORP DISC 0 1,140 1,140 NOTE 12/22/98 6,000,000 0 6,000,000 FEDL HOME LN BK, DISC NOTE 2/12/99 5,915 0 5,915 7,151,000 0 7,151,000 FEDL HOME LN BK, DISC NOTE 02/11/99 7,044 0 7,044 15,000,000 0 15,000,000 FHLB 5.57% 3/09/99 14,999 0 14,999 4,000,000 0 4,000,000 FHLB 5.705% 5/05/99 4,013 0 4,013 13,000,000 0 13,000,000 FHLB 4.574% 6/17/99 12,998 0 12,998 12,000,000 0 12,000,000 FHLB 5.51% 7/06/99 11,992 0 11,992 7,000,000 0 7,000,000 FHLB DISC NOTE 12/11/98 6,959 0 6,959 20,000,000 0 20,000,000 FHLB FRN 4.62% 12/24/98 19,999 0 19,999 6,000,000 0 6,000,000 FHLB 5.415% 2/10/99 5,999 0 5,999 8,000,000 0 8,000,000 FHLMC 1/07/99 7,923 0 7,923 8,000,000 0 8,000,000 FHLMC 1/08/99 7,921 0 7,921 8,000,000 0 8,000,000 FHLMC 1/22/99 7,905 0 7,905 7,000,000 0 7,000,000 FHLMC 2/16/99 6,903 0 6,903 3,293,000 0 3,293,000 FHLMC 3/12/99 3,232 0 3,232 3,108,000 0 3,108,000 FHLMC 3/29/99 3,048 0 3,048 8,000,000 0 8,000,000 FHLMC DISC NOTE 1/26/99 7,904 0 7,904 5,034,000 0 5,034,000 FHLMC DISC NOTE 11/12/98 5,026 0 5,026 8,000,000 0 8,000,000 FHLMC DISC NOTE 2/19/99 7,884 0 7,884 6,703,000 0 6,703,000 FHLMC DISC NOTE 2/05/99 6,610 0 6,610 5,000,000 0 5,000,000 FNMA 5.66% 11/20/98 5,000 0 5,000 8,000,000 0 8,000,000 FNMA 5.63% 5/05/99 7,998 0 7,998 8,000,000 0 8,000,000 FNMA DISC NOTE 4.75 2/18/99 7,885 0 7,885 4,000,000 0 4,000,000 FREDDIE MAC DN 11/06/98 3,997 0 3,997 6,000,000 0 6,000,000 FREDDIE MAC DN 12/10/98 5,968 0 5,968 6,000,000 0 6,000,000 SLMA DUE 5.51% 9/16/99 6,000 0 6,000 12,000,000 0 12,000,000 SLMA FRN 5.19% 9/15/99 11,992 0 11,992 17,000,000 0 17,000,000 SLMA MED TERM NOTE 5.40% 2/10/99 16,993 0 16,993 ---------------------------------------- 302,513 278,695 581,208 ---------------------------------------- Total Investments 93.76% (Cost $646,465, $467,210, $1,113,675 respectively) 646,465 467,210 1,113,675
Nations Government Reserves / Pacific Horizon Government Fund Pro Forma Combining Statement of Net Assets (Unaudited) October 31,1998 Nations Pacific Government Horizon Adjustments to Pro Forma Reserves Government Fund Pro Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) --------------------------------------------- --------------- Total Investments $ 646,465 $ 467,210 $-- $ 1,113,675 Other Assets and Liabilities: Receivable for investments sold -- 188,067 -- 188,067 Payable for investments purchased -- (188,515) -- (188,515) Other assets and liabilities, net (678) (225) -- (903) --------------------------------------------- --------------- Total Other Assets and Liabilities (678) (673) -- (1,351) --------------------------------------------- --------------- Net Assets $ 645,787 $ 466,537 $-- $1,112,324 ============================================= =============== Net Assets by Class: Capital Class / Horizon (Primary) $ 160,300 $ 80,155 -- $ 240,455 Liquidity Class 42,718 -- -- 42,718 Adviser Class / Horizon Service 115,769 233,934 -- 349,703 Market Class 327,000 -- -- 327,000 Investor Class / Pacific Horizon -- 152,448 152,448 --------------------------------------------- --------------- $ 645,787 $ 466,537 $- $ 1,112,324 --------------------------------------------- --------------- Shares Outstanding by Class: Capital Class / Horizon (Primary) 160,301 80,183 -- 240,484 Liquidity Class 42,719 -- -- 42,719 Adviser Class / Horizon Service 115,769 234,030 -- 349,799 Market Class 327,000 -- -- 327,000 Investor Class / Pacific Horizon -- 152,584 -- 152,584 --------------------------------------------- --------------- 645,789 466,797 -- 1,112,586 --------------------------------------------- --------------- Net Asset Value per Share by Class: Capital Class / Horizon (Primary) $ 1.00 $ 1.00 $ -- $ 1.00 Liquidity Class $ 1.00 $ -- $ -- $ 1.00 Adviser Class / Horizon Service $ 1.00 $ 1.00 $ -- $ 1.00 Market Class $ 1.00 $ -- $ -- $ 1.00 Investor Class / Pacific Horizon $- $ 1.00 $ -- $ 1.00
See Notes to Pro Forma Financial Statements
Nations Government Reserves / Pacific Horizon Government Fund Pro Forma Combining Statement of Operations (unaudited) For the Twelve Month Period Ended October 31,1998 Nations Pacific Government Horizon Adjustments to Pro Pro Forma Reserves Government Fund Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) ---------------------------------------------- --------------- INVESTMENT INCOME: Interest $30,349 $25,066 $ - $55,415 Dividends 509 - - 509 ---------------------------------------------- --------------- Total Investment Income 30,858 25,066 - 55,924 ---------------------------------------------- --------------- EXPENSES: Investment Advisory 1,657 447 (602) (a) 1,503 Administration 553 448 - (a) 1,001 Transfer Agent 42 17 - (b) 59 Custodian 48 85 (23) (b) 110 Legal and Audit Fees 10 33 (26) (b) 17 Registration & Filing 101 159 - 260 Trustees' Fees 11 10 (12) (b) 9 Interest Expense - - - - Other expenses 24 32 (65) (b) 51 ---------------------------------------------- --------------- Subtotal 2,446 1,291 (728) 3,009 ---------------------------------------------- --------------- Shareholder Servicing and Distribution Fees Liquidity Class 407 - - 407 Adviser Class / Horizon Service 190 613 - 803 Market Class 1,321 - - 1,321 Investor Class / Pacific Horizon - 454 42 (a) 496 ---------------------------------------------- --------------- 1,918 1,067 42 3,027 ---------------------------------------------- --------------- Fees waived and/or reimbursed by investment - advisor, administrator and/or distributor (2,047) (204) 1,130(c) (1,121) ---------------------------------------------- --------------- Total Expenses 2,317 2,154 444 4,915 ---------------------------------------------- --------------- ---------------------------------------------- --------------- NET INVESTMENT INCOME 28,541 22,912 (444) 51,009 ---------------------------------------------- --------------- NET REALIZED GAIN/(LOSS) ON ---------------------------------------------- --------------- INVESTMENTS: - 3 - 3 ---------------------------------------------- --------------- NET INCREASE/(DECREASE) IN NET ASSETS ---------------------------------------------- --------------- RESULTING FROM OPERATIONS: $28,541 $22,915 $ (444) $51,012 ============================================== ===============
Legend: (a) Reflects adjustment to the acquiring fund contractual fee obligation. (b) Adjustment reflects expected savings when the two funds become one. (c) Reflects adjustment to the level of the acquiring fund's voluntary expense reimbursement. See Notes to Pro Forma Financial Statements Nations Government Reserves Pacific Horizon Government Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of October 31, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of October 31, 1998 and the unaudited Pro Forma Combining Statement of Operations for the year ended October 31, 1998 assumes the exchange occurred as of November 1, 1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at October 31, 1998 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizon Government Fund in exchange for shares of Nations Government Reserves. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward to the surviving entity and the results of operations of the Nations Government Reserves for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 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. The investment advisory and shareholder servicing and distribution fees have been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations Government Reserves at the time of the Reorganization at the combined level of average net assets for the twelve month period ended October 31, 1998.
Nations Government Reserves / Pacific Horizon Treasury Only Fund Pro Forma Combining Schedule of Investments (unaudited) October 31,1998 Pacific Nations Pacific Horizon Government Horizon Pro Forma Combined Nations Treasury Reserves Treasury Only Fund Principal Government Only Fund Pro Forma Combined Principal Amount Principal Amount Amount Asset Description Reserves Value Value Value (in 000's) (in 000's) (in 000's) Investment Companies - 0.75% 9,105,000 0 9,105,000 DREYFUS TREASURY CASH MANAGEMENT 9,105 0 9,105 ----------------------------------- 9,105 0 9,105 ----------------------------------- Repurchase Agreements--27.00% 157,000,000 0 157,000,000 ABN-AMRO CHIC 5.625% 11/02/98 157,000 0 157,000 140,000,000 0 140,000,000 FIRST UNION CAPITAL 5.62% 11/02/98 140,000 0 140,000 20,000,000 0 20,000,000 GOLDMAN SACHS TERM 5.21% 11/02/98 20,000 0 20,000 ----------------------------------- 317,000 0 317,000 ----------------------------------- Time Deposits- Euro - 1.52% 17,847,000 0 17,847,000 BANK OF NEW YORK CAYMAN ISLAND 4.75% 11/02/98 17,847 0 17,847 ----------------------------------- 17,847 0 17,847 ----------------------------------- U.S. Government Agency Obligations--25.77% 8,000,000 0 8,000,000 FANNIE MAE SERIES MTN 4.441% 4/28/99 7,998 0 7,998 6,000,000 0 6,000,000 FEDERAL FARM CREDIT BANK 5.70% 11/03/98 6,000 0 6,000 11,000,000 0 11,000,000 FEDERAL FARM CREDIT BANK, DN 5.65% 01/04/99 11,000 0 11,000 6,901,000 0 6,901,000 FEDERAL HOME LOAN BANK 4/14/99 6,756 0 6,756 12,000,000 0 12,000,000 FEDERAL HOME LOAN BANK 5.24% 10/21/99 12,000 0 12,000 8,000,000 0 8,000,000 FEDERAL HOME LOAN BANK DISC NOTE 01/04/99 7,928 0 7,928 9,000,000 0 9,000,000 FEDERAL HOME LOAN BANK, NOTE 5.65% 4/09/99 8,999 0 8,999 8,000,000 0 8,000,000 FEDERAL HOME LOAN BK DN 11/13/98 7,987 0 7,987 8,905,000 0 8,905,000 FEDERAL HOME LOAN MORTGAGE CORP DISC NOTE 8,809 0 8,809 01/15/99 5,000,000 0 5,000,000 FEDERAL HOME LOAN MORTGAGE CORP DISC NOTE 4,929 0 4,929 02/17/99 6,000,000 0 6,000,000 FEDL HOME LN BK, DISC NOTE 2/12/99 5,915 0 5,915 7,151,000 0 7,151,000 FEDL HOME LN BK, DISC NOTE 02/11/99 7,044 0 7,044 15,000,000 0 15,000,000 FHLB 5.57% 3/09/99 14,999 0 14,999 4,000,000 0 4,000,000 FHLB 5.705% 5/05/99 4,013 0 4,013 13,000,000 0 13,000,000 FHLB 4.574% 6/17/99 12,998 0 12,998 12,000,000 0 12,000,000 FHLB 5.51% 7/06/99 11,992 0 11,992 7,000,000 0 7,000,000 FHLB DISC NOTE 12/11/98 6,959 0 6,959 20,000,000 0 20,000,000 FHLB FRN 4.62% 12/24/98 19,999 0 19,999 6,000,000 0 6,000,000 FHLB 5.415% 2/10/99 5,999 0 5,999 8,000,000 0 8,000,000 FHLMC 1/07/99 7,923 0 7,923 8,000,000 0 8,000,000 FHLMC 1/08/99 7,921 0 7,921 8,000,000 0 8,000,000 FHLMC 1/22/99 7,905 0 7,905 7,000,000 0 7,000,000 FHLMC 2/16/99 6,903 0 6,903 3,293,000 0 3,293,000 FHLMC 3/12/99 3,232 0 3,232 3,108,000 0 3,108,000 FHLMC 3/29/99 3,048 0 3,048 8,000,000 0 8,000,000 FHLMC DISC NOTE 1/26/99 7,904 0 7,904 5,034,000 0 5,034,000 FHLMC DISC NOTE 11/12/98 5,026 0 5,026 8,000,000 0 8,000,000 FHLMC DISC NOTE 2/19/99 7,884 0 7,884 6,703,000 0 6,703,000 FHLMC DISC NOTE 2/05/99 6,610 0 6,610 5,000,000 0 5,000,000 FNMA 5.66% 11/20/98 5,000 0 5,000 8,000,000 0 8,000,000 FNMA 5.63% 5/05/99 7,998 0 7,998 8,000,000 0 8,000,000 FNMA DISC NOTE 4.75 2/18/99 7,885 0 7,885 4,000,000 0 4,000,000 FREDDIE MAC DN 11/06/98 3,997 0 3,997 6,000,000 0 6,000,000 FREDDIE MAC DN 12/10/98 5,968 0 5,968 6,000,000 0 6,000,000 SLMA DUE 5.51% 9/16/99 6,000 0 6,000 12,000,000 0 12,000,000 SLMA FRN 5.19% 9/15/99 11,992 0 11,992 17,000,000 0 17,000,000 SLMA MED TERM NOTE 5.40% 2/10/99 16,993 0 16,993 ----------------------------------- 302,513 0 302,513 ----------------------------------- U.S. Treasury Notes--38.56% 0 93,770,000 93,770,000 US TREASURY NOTE 5.00% 1/31/99 0 93,840 93,840 0 49,150,000 49,150,000 US TREASURY NOTE 5.00% 2/15/99 0 49,152 49,152 0 49,575,000 49,575,000 US TREASURY NOTE 5.125% 11/30/98 0 49,577 49,577 0 53,340,000 53,340,000 US TREASURY NOTE 5.125% 12/31/98 0 53,404 53,404 0 97,850,000 97,850,000 US TREASURY NOTE 5.50% 11/15/98 0 97,864 97,864 0 25,000,000 25,000,000 US TREASURY NOTE 5.75% 12/31/98 0 25,058 25,058 0 4,300,000 4,300,000 US TREASURY NOTE 5.875% 1/31/99 0 4,308 4,308 0 8,955,000 8,955,000 US TREASURY NOTE 6.25% 3/31/99 0 9,021 9,021 0 30,000,000 30,000,000 US TREASURY NOTE 8.875% 11/15/98 0 30,039 30,039 0 40,000,000 40,000,000 US TREASURY NOTE 8.875% 2/15/99 0 40,476 40,476 ----------------------------------- 0 452,739 452,739 ----------------------------------- Total Investments--93.6% (Cost $646,465, $452,739 and $1,099,204 respectively) 646,465 452,739 1,099,204
Nations Government Reserves / Pacific Horizon Treasury Only Fund Pro Forma Combining Statement of Net Assets (unaudited) October 31,1998 Pacific Nations Horizons Government Treasury Only Adjustments to Pro Pro Forma Reserves Fund Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) --------------------------------------------- --------------- Total Investments $646,465 $452,739 $- $1,099,204 Other Assets and Liabilities: Receivable for investments sold - 129,800 - 129,800 Payable for investments purchased - (75,652) - (75,652) Other assets and liabilities, net (678) 21,361 - 20,683 --------------------------------------------- --------------- Total Other Assets and Liabilities (678) 75,509 - 74,831 --------------------------------------------- --------------- Net Assets $645,787 $528,248 $- $1,174,035 ============================================= =============== Net Assets by Class: Capital Class / Horizon (Primary) $160,300 $43,786 $- $204,086 Liquidity Class $42,718 $ - $- $42,718 Adviser Class / Horizon Service $115,769 $257,224 $- $372,993 Market Class $327,000 $- $- $327,000 Investor Class / Pacific Horizon $- 227,238 $- $227,238 --------------------------------------------- --------------- $645,787 $528,248 $- $1,174,035 --------------------------------------------- --------------- Shares Outstanding by Class: Capital Class / Horizon (Primary) 160,301 43,787 - 204,088 Liquidity Class 42,719 - - 42,719 Adviser Class / Horizon Service 115,769 257,239 - 373,008 Market Class 327,000 - - 327,000 Investor Class / Pacific Horizon - 227,269 - 227,269 --------------------------------------------- --------------- 645,789 528,295 - 1,174,084 --------------------------------------------- --------------- Net Asset Value per Share by Class Capital Class / Horizon (Primary) $1.00 $ 1.00 $ - $1.00 Liquidity Class $1.00 $ - $ - $1.00 Adviser Class / Horizon Service $1.00 $ 1.00 $ - $1.00 Market Class $1.00 $ - $ - $1.00 Investor Class / Pacific Horizon $- $ 1.00 $ - $1.00
See Notes to Pro Forma Financial Statements
Nations Government Reserves / Pacific Horizon Treasury Only Fund Pro Forma Combining Statement of Operations (unaudited) For the Twelve Month Period Ending October 31,1998 Pacific Nations Horizons Government Treasury Only Adjustments to Pro Pro Forma Reserves Fund Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) --------------------------------------------- --------------- INVESTMENT INCOME: Interest $30,349 $23,607 $ - $53,956 Dividends 509 - - 509 --------------------------------------------- --------------- Total Investment Income 30,858 23,607 - 54,465 --------------------------------------------- --------------- EXPENSES: Investment Advisory 1,657 451 (602) (a) 1,506 Administration 553 451 - (a) 1,004 Transfer Agent 42 52 (21) (b) 73 Custodian 48 56 6 (b) 110 Legal and Audit Fees 10 38 (26) (b) 22 Registration & Filing 101 38 - 139 Trustees' Fees 11 7 (4) (b) 14 Interest Expense - - - - Other expenses 24 99 (85) (b) 38 --------------------------------------------- --------------- Subtotal 2,446 1,192 (732) 2,906 --------------------------------------------- --------------- Shareholder Servicing and Distribution Fees Liquidity Class 407 - 407 Adviser Class / Horizon Service 190 535 725 Market Class 1,321 - 1,321 Investor Class / Pacific Horizon - 652 61 (a) 713 ------------------------------------------------- --------------- Subtotal 1,918 1,187 61 3,166 ------------------------------------------------- --------------- Fees waived and/or reimbursed by investment - - - advisor, administrator and/or distributor (2,047) - 1,000(c) (1,047) --------------------------------------------- --------------- Total Expenses 2,317 2,379 329 5,025 --------------------------------------------- --------------- --------------------------------------------- --------------- NET INVESTMENT INCOME 28,541 21,228 (329) 49,440 --------------------------------------------- --------------- NET REALIZED GAIN/(LOSS) ON --------------------------------------------- --------------- INVESTMENTS: - (23) - (23) --------------------------------------------- --------------- NET INCREASE/(DECREASE) IN NET ASSETS ============================================= =============== RESULTING FROM OPERATIONS: $28,541 $21,205 $ (329) $49,417 ============================================= ===============
Legend: (a) Reflects adjustment to the acquiring fund contractual fee obligation. (b) Adjustment reflects expected savings when the two funds become one. (c) Reflects adjustment to the level of the acquiring fund's voluntary expense reimbursement. See Notes to Pro Forma Financial Statements Nations Government Reserves Pacific Horizon Treasury Only Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of October 31, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of October 31, 1998 and the unaudited Pro Forma Combining Statement of Operations assumes for the year ended October 31, 1998 the exchange occurred as of November 1, 1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at October 31, 1998 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizon Treasury Only Fund in exchange for shares of Nations Government Reserves. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward to the surviving entity and the results of operations of the Nations Government Reserves for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 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. The investment advisory and shareholder servicing and distribution fees have been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations Government Reserves at the time of the Reorganization at the combined level of average net assets for the twelve month period ended October 31, 1998.
NATIONS GOVERNMENT RESERVES / PACIFIC HORIZON GOVERNMENT & TREASURY ONLY FUNDS Pro Forma Combining Schedule of Investments (unaudited) October 31,1998 Pacific Horizon Nations Gov't Pacific Horizon Treasury Only Fund Pro Forma Combined Reserves Gov't Fund Principal Principal Principal Principal Amount Amount Amount Amount Description INVESTMENT COMPANIES - 0.55% 9,105,000 0 0 9,105,000 DREYFUS TREASURY CASH MANAGEMENT REPURCHASE AGREEMENTS - 30.81% 157,000,000 0 0 157,000,000 ABN-AMRO CHIC 5.625% 11/02/98 140,000,000 0 0 140,000,000 FIRST UNION CAPITAL 5.62% 11/02/98 20,000,000 0 0 20,000,000 GOLDMAN SACHS TERM 5.21% 11/02/98 0 50,000,000 0 50,000,000 HSBC 5.6% 11/2/98 0 23,515,000 0 23,515,000 J.P. MORGAN 5% 11/2/98 0 60,000,000 0 60,000,000 LEHMAN 5.6% 11/2/98 0 55,000,000 0 55,000,000 PRUDENTIAL 5.6% 11/2/98 TIME DEPOSITS- EURO - 1.09% 17,847,000 0 0 17,847,000 BANK OF NEW YORK CAYMAN ISLAND 4.75% 11/02/98 Pacific Nations Pacific Horizon Gov't Horizon Treasury Reserves Gov't Fund Only Fund Pro Forma Combined Description Value Value Value Value (in 000's) (in 000's) (in 000's) (in 000's) INVESTMENT COMPANIES - 0.55% DREYFUS TREASURY CASH MANAGEME 9,105 9,105 ------------------------------------------------- 9,105 9,105 ------------------------------------------------- REPURCHASE AGREEMENTS - 30.81% ABN-AMRO CHIC 5.625% 11/02/98 157,000 157,000 FIRST UNION CAPITAL 5.62% 11/02/98 140,000 140,000 GOLD SACHS TERM 5.21% 11/02/98 20,000 20,000 HSBC 5.6% 11/2/98 50,000 50,000 J.P. MORGAN 5% 11/2/98 23,515 23,515 LEHMAN 5.6% 11/2/98 60,000 60,000 PRUDENTIAL 5.6% 11/2/98 55,000 55,000 ------------------------------------------------- 317,000 188,515 505,515 ------------------------------------------------- TIME DEPOSITS- EURO - 1.09% BANK OF NEW YORK CAYMAN ISLAND 17,847 17,847 4.75% 11/02/98 ------------------------------------------------- 17,847 17,847 ------------------------------------------------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 35.43% 0 11,245,000 0 11,245,000 FANNIE MAE 5.05% 11/10/98 0 15,000,000 0 15,000,000 FANNIE MAE 5.38% 02/09/99 0 5,000,000 0 5,000,000 FANNIE MAE 5.49% 08/03/99 0 5,000,000 0 5,000,000 FANNIE MAE 5.57% 05/07/99 0 3,000,000 0 3,000,000 FANNIE MAE 9.55 3/10/99 0 20,000,000 0 20,000,000 FANNIE MAE DISC NOTE 01/04/99 U.S. GOVERNMENT AGENCY OBLIGATIONS - 35.43% FANNIE MAE 5.05% 11/10/98 11,243 11,243 FANNIE MAE 5.38% 02/09/99 15,015 15,015 FANNIE MAE 5.49% 08/03/99 4,995 4,995 FANNIE MAE 5.57% 05/07/99 4,996 4,996 FANNIE MAE 9.55 3/10/99 3,041 3,041 FANNIE MAE DISC NOTE 01/04/99 19,821 19,821
0 10,000,000 0 10,000,000 FANNIE MAE DISC NOTE 01/27/99 0 10,000,000 0 10,000,000 FANNIE MAE DISC NOTE 02/01/99 0 10,000,000 0 10,000,000 FANNIE MAE DISC NOTE 04/01/99 0 25,000,000 0 25,000,000 FANNIE MAE DISC NOTE 11/20/98 8,000,000 0 0 8,000,000 FANNIE MAE SERIES MTN 4.441% 4/28/99 6,000,000 5,000,000 0 11,000,000 FEDERAL FARM CREDIT BANK 5.70% 11/03/98 11,000,000 0 0 11,000,000 FEDERAL FARM CREDIT BANK, DN 5.65% 01/04/99 6,901,000 0 0 6,901,000 FEDERAL HOME LOAN BANK 4/14/99 12,000,000 0 0 12,000,000 FEDERAL HOME LOAN BANK 5.24% 10/21/99 0 15,000,000 0 15,000,000 FEDERAL HOME LOAN BANK 08/12/99 0 8,400,000 0 8,400,000 FEDERAL HOME LOAN BANK 5.335% 01/11/99 0 5,000,000 0 5,000,000 FEDERAL HOME LOAN BANK 5.718% 05/06/99 0 5,000,000 0 5,000,000 FEDERAL HOME LOAN BANK 5.723% 05/05/99 8,000,000 9,760,000 0 17,760,000 FEDERAL HOME LOAN BANK DISC NOTE 01/04/99 9,000,000 0 0 9,000,000 FEDERAL HOME LOAN BANK, NOTE 5.65% 4/09/99 8,000,000 0 0 8,000,000 FEDERAL HOME LOAN BK DN 11/13/98 0 5,000,000 0 5,000,000 FEDERAL HOME LOAN MORTGAGE CORP 5.60% 04/21/99 0 3,237,000 0 3,237,000 FEDERAL HOME LOAN MORTGAGE CORP DISC NOTE 01/04/99 8,905,000 10,000,000 0 18,905,000 FEDERAL HOME LOAN MORTGAGE CORP DISC NOTE 01/15/99 0 10,000,000 0 10,000,000 FEDERAL HOME LOAN MORTGAGE CORP DISC NOTE 01/19/99 5,000,000 20,000,000 0 25,000,000 FEDERAL HOME LOAN MORTGAGE CORP DISC NOTE 02/17/99 FANNIE MAE DISC NOTE 01/27/99 9,884 9,884 FANNIE MAE DISC NOTE 02/01/99 9,877 9,877 FANNIE MAE DISC NOTE 04/01/99 9,807 9,807 FANNIE MAE DISC NOTE 11/20/98 24,928 24,928 FANNIE MAE SERIES MTN 4.441% 7,998 7,998 4/28/99 FEDERAL FARM CREDIT BANK 5.70% 6,000 5,000 11,000 11/03/98 FEDERAL FARM CREDIT BANK, DN 11,000 11,000 5.65% 01/04/99 FEDERAL HOME LOAN BANK 4/14/99 6,756 6,756 FEDERAL HOME LOAN BANK 5.24% 12,000 12,000 10/21/99 FEDERAL HOME LOAN BANK 08/12/99 14,994 14,994 FEDERAL HOME LOAN BANK 5.335% 8,395 8,395 01/11/99 FEDERAL HOME LOAN BANK 5.718% 4,999 4,999 05/06/99 FEDERAL HOME LOAN BANK 5.723% 4,999 4,999 05/05/99 FEDERAL HOME LOAN BANK DISC NOTE 7,928 9,673 17,601 01/04/99 FEDERAL HOME LOAN BANK, NOTE 8,999 8,999 5.65% 4/09/99 FEDERAL HOME LOAN BK DN 11/13/98 7,987 7,987 FEDERAL HOME LOAN MORTGAGE CORP 4,998 4,998 5.60% 04/21/99 FEDERAL HOME LOAN MORTGAGE CORP 3,208 3,208 DISC NOTE 01/04/99 FEDERAL HOME LOAN MORTGAGE CORP 8,809 9,901 18,710 DISC NOTE 01/15/99 FEDERAL HOME LOAN MORTGAGE CORP 9,885 9,885 DISC NOTE 01/19/99 FEDERAL HOME LOAN MORTGAGE CORP 4,929 19,703 24,632 DISC NOTE 02/17/98
0 20,000,000 0 20,000,000 FEDERAL HOME LOAN MORTGAGE CORP DISC NOTE 03/05/99 0 15,000,000 0 15,000,000 FEDERAL HOME LOAN MORTGAGE CORP DISC NOTE 11/25/98 0 25,000,000 0 25,000,000 FEDERAL HOME LOAN MORTGAGE CORP DISC NOTE 12/04/98 0 8,760,000 0 8,760,000 FEDERAL HOME LOAN MORTGAGE CORP DISC NOTE 12/18/98 0 1,148,000 0 1,148,000 FEDERAL HOME LOAN MORTGAGE CORP DISC NOTE 12/22/98 6,000,000 0 0 6,000,000 FEDL HOME LN BK, DISC NOTE 2/12/99 7,151,000 0 0 7,151,000 FEDL HOME LN BK,DUE 02/11/99 15,000,000 0 0 15,000,000 FHLB 5.57% 3/09/99 4,000,000 0 0 4,000,000 FHLB 5.705% 5/05/99 13,000,000 0 0 13,000,000 FHLB 4.574% 6/17/99 12,000,000 0 0 12,000,000 FHLB 5.51% 7/06/99 7,000,000 0 0 7,000,000 FHLB DISC NOTE 12/11/98 20,000,000 0 0 20,000,000 FHLB FRN 4.62% 12/24/98 6,000,000 0 0 6,000,000 FHLB GOV AGENCIES 5.415% 2/10/99 8,000,000 0 0 8,000,000 FHLMC 1/07/99 8,000,000 0 0 8,000,000 FHLMC 1/08/99 8,000,000 0 0 8,000,000 FHLMC 1/22/99 7,000,000 0 0 7,000,000 FHLMC 2/16/99 3,293,000 0 0 3,293,000 FHLMC 3/12/99 3,108,000 0 0 3,108,000 FHLMC 3/29/99 8,000,000 0 0 8,000,000 FHLMC DISC NOTE 1/26/99 5,034,000 0 0 5,034,000 FHLMC DISC NOTE 11/12/98 8,000,000 0 0 8,000,000 FHLMC DISC NOTE 2/19/99 6,703,000 0 0 6,703,000 FHLMC DISC NOTE 2/05/99 5,000,000 0 0 5,000,000 FNMA 5.66% 11/20/98 8,000,000 0 0 8,000,000 FNMA 5.63% 5/05/99 8,000,000 0 0 8,000,000 FNMA DISC NOTE 4.75 2/18/99 4,000,000 0 0 4,000,000 FREDDIE MAC DN 11/06/98 6,000,000 0 0 6,000,000 FREDDIE MAC DN 12/10/98 6,000,000 0 0 6,000,000 SLMA DUE 5.51% 9/16/99 12,000,000 0 0 12,000,000 SLMA FRN 5.19% 9/15/99 FEDERAL HOME LOAN MORTGAGE CORP 19,662 19,662 DISC NOTE 03/05/99 FEDERAL HOME LOAN MORTGAGE CORP 14,947 14,947 DISC NOTE 11/25/98 FEDERAL HOME LOAN MORTGAGE CORP 24,879 24,879 DISC NOTE 12/04/98 FEDERAL HOME LOAN MORTGAGE CORP 8,706 8,706 DISC NOTE 12/18/98 FEDERAL HOME LOAN MORTGAGE CORP 1,140 1,140 DISC NOTE 12/22/98 FEDL HOME LN BK, DISC NOTE 2/12/99 5,915 5,915 FEDL HOME LN BK,DUE 02/11/99 7,044 7,044 FHLB 5.57% 3/09/99 14,999 14,999 FHLB 5.705% 5/05/99 4,013 4,013 FHLB 4.574% 6/17/99 12,998 12,998 FHLB 5.51% 7/06/99 11,992 11,992 FHLB DISC NOTE 12/11/98 6,959 6,959 FHLB FRN 4.62% 12/24/98 19,999 19,999 FHLB GOV AGENCIES 5.415% 2/10/99 5,999 5,999 FHLMC 1/07/99 7,923 7,923 FHLMC 1/08/99 7,921 7,921 FHLMC 1/22/99 7,905 7,905 FHLMC 2/16/99 6,903 6,903 FHLMC 3/12/99 3,232 3,232 FHLMC 3/29/99 3,048 3,048 FHLMC DISC NOTE 1/26/99 7,904 7,904 FHLMC DISC NOTE 1/12/98 5,026 5,026 FMC DISC NOTE 2/19/99 7,884 7,884 FMLMC DISC NOTE 2/05/99 6,610 6,610 FNMA 5.66% 11/20/98 5,000 5,000 FNMA 5.63% 5/05/99 7,998 7,998 FNMA DISC NOTE 4.75 2/18/99 7,885 7,885 FREDDIE MAC DN 11/06/98 3,997 3,997 FREDDIE MAC DN 12/10/98 5,968 5,968 SLMA DUE 5.51% 9/16/99 6,000 6,000 SLMA FRN 5.19% 9/15/99 11,992 11,992
17,000,000 0 0 17,000,000 SLMA MED TERM NOTE 5.40% 2/10/99 U.S. TREASURY NOTES - 27.60% 0 0 93,770,000 93,770,000 US TREASURY NOTE 5.00% 1/31/99 0 0 49,150,000 49,150,000 US TREASURY NOTE 5.00% 2/15/99 0 0 49,575,000 49,575,000 US TREASURY NOTE 5.125% 11/30/98 0 0 53,340,000 53,340,000 US TREASURY NOTE 5.125% 12/31/98 0 0 97,850,000 97,850,000 US TREASURY NOTE 5.50% 11/15/98 0 0 25,000,000 25,000,000 US TREASURY NOTE 5.75% 12/31/98 0 0 4,300,000 4,300,000 US TREASURY NOTE 5.875% 1/31/99 0 0 8,955,000 8,955,000 US TREASURY NOTE 6.25% 3/31/99 0 0 30,000,000 30,000,000 US TREASURY NOTE 8.875% 11/15/98 0 0 40,000,000 40,000,000 US TREASURY NOTE 8.875% 2/15/99 SLMA MED TERM NOTE 5.40% 2/10/99 16,993 16,993 ------------------------------------------------ 302,513 278,695 581,208 ------------------------------------------------ U.S. TREASURY NOTES - 27.60% 93,840 US TREASURY NOTE 5.00% 1/31/99 93,840 US TREASURY NOTE 5.00% 2/15/99 49,152 49,152 US TREASURY NOTE 5.125% 11/30/98 49,577 49,577 US TREASURY NOTE 5.125% 12/31/98 53,404 53,404 US TREASURY NOTE 5.50% 11/15/98 97,864 97,864 US TREASURY NOTE 5.75% 12/31/98 25,058 25,058 US TREASURY NOTE 5.875% 1/31/99 4,308 4,308 US TREASURY NOTE 6.25% 3/31/99 9,021 9,021 US TREASURY NOTE 8.875% 11/15/98 30,039 30,039 US TREASURY NOTE 8.875% 2/15/99 40,476 40,476 ------------------------------------------------- 452,739 452,739 ------------------------------------------------- Total Investment--95.48% (Cost 646,465 467,210 452,739 1,566,414 $646,465, $467,210, $452,739, $1,566,414, respectively) NATIONS GOVERNMENT RESERVES / PACIFIC HORIZON GOVERNMENT & TREASURY ONLY FUNDS Pro Forma Combining Statement of Net Assets (unaudited) October 31,1998 Nations Pacific Pacific Adjustments to Pro Forma Government Horizon Horizon Pro Forma Combined Reserves Government Treasury Fund Only Fund (in 000's) (in 000's) (in 000's) (in 000's) (in 000's) ------------------------------------------------------- -------------- TOTAL INVESTMENTS $646,465 $467,210 $452,739 $1,566,414
OTHER ASSETS AND LIABILITIES: Receivable for investments sold - 188,067 129,800 - 317,867 Payable for investments purchased - (188,515) (75,652) - (264,167) Other assets and liabilities, net (678) (225) 21,361 - 20,458 --------------------------------------- ----------- -------------- Total Other Assets and Liabilities (678) (673) 75,509 - 74,158 --------------------------------------- ----------- -------------- NET ASSETS 645,787 466,537 528,248 - 1,640,572 ======================================= =========== ============== NET ASSETS BY CLASS: Capital Class / Horizon (Primary) $160,300 $80,155 $43,786 $ - $ 284,241 Liquidity Class $ 42,718 $ - $ - $ - $ 42,718 Advisor Class / Horizon Service $115,769 $233,934 $257,224 $ - $ 606,927 Market Class $327,000 $ - $ - $ - $ 327,000 - - - Investor Class / Pacific Horizon $ - $152,448 $227,238 $ - $ 379,686 ---------------------------------------- ---------- -------------- $645,787 $466,537 $528,248 $ - $1,640,572 ---------------------------------------- ---------- -------------- SHARES OUTSTANDING BY CLASS: Capital Class / Horizon (Primary) 160,301 80,183 43,788 - 284,272 Liquidity Class 42,719 - - - 42,719 Advisor Class / Horizon Service 115,769 234,030 257,239 - 607,038 Market Class 327,000 - - - 327,000
Investor Class / Pacific Horizon - 227,268 152,584 - 379,852 ------------------------------------------------------- -------------- 645,789 528,295 466,797 - 1,640,881 ------------------------------------------------------- -------------- NET ASSET VALUE PER SHARE BY CLASS: Capital Class / Horizon (Primary) $1.00 $ 1.00 $ 1.00 $ - $ 1.00 Liquidity Class $1.00 $ - $ - $ - $ 1.00 Adviser Class / Horizon Service $1.00 $ 1.00 $ 1.00 $ - $ 1.00 Market Class $1.00 $ - $ - $ - $ 1.00 Investor Class / Pacific Horizon $ - $ 1.00 $ 1.00 $ - $ 1.00
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS
NATIONS GOVERNMENT RESERVES / PACIFIC HORIZON GOVERNMENT & TREASURY ONLY FUNDS Pro Forma Combining Statement of Operations (unaudited) For the Twelve Month Period Ending October 31,1998 Nations Pacific Pacific Adjustments to Pro Forma Government Horizon Horizon Pro Forma Combined Reserves Government Treasury Fund Only Fund (in 000's) (in 000's) (in 000's) (in 000's) (in 000's) ------------------------------------------------------- -------------- INVESTMENT INCOME: Interest $30,349 $25,066 $23,607 $ - $79,022 Dividends 508 - - - 508 ------------------------------------------------------- -------------- Total Investment Income 30,857 25,066 23,607 - 79,530 ------------------------------------------------------- --------------
EXPENSES: Investment Advisory 1,657 447 451 (377) (a) 2,178 Administration 553 448 451 1,452 Transfer Agent 42 17 52 (6) (b) 105 Custodian 48 85 56 189 Legal and Audit Fees 10 33 38 (52) (b) 29 Registration & Filing 101 159 38 (20) (b) 278 Trustees' Fees 11 10 7 (10) (b) 18 Interest Expense - - - - - Other expenses 24 92 99 (120)(b) 95 ------------------------------------------------------- -------------- Subtotal 2,446 1,291 1,192 (585) 4,344 ------------------------------------------------------- -------------- SHAREHOLDER SERVICING AND DISTRIBUTION FEES Liquidity Class 407 - - - 407 Adviser Class / Horizon Service 190 613 535 - 1,338 Market Class 1,321 - - - 1,321 Investor Class / Pacific Horizon - 454 652 104(a) 1,210 ------------------------------------------------------- -------------- Subtotal 1,918 1,067 1,187 104 4,276 ------------------------------------------------------- --------------
Fees waived and/or reimbursed by investment
advisor, administrator and/or distributor (2,047) (204) - 812(c) (1,439) ------------------------------------------------------- --------------
TOTAL EXPENSES 2,317 2,154 2,379 331 7,181 ------------------------------------------------------- -------------- ------------------------------------------------------- -------------- NET INVESTMENT INCOME 28,540 22,912 21,228 (331) 72,349 ------------------------------------------------------- -------------- NET REALIZED GAIN/(LOSS) ON INVESTMENTS: - 3 (23) - (20) NET INCREASE/(DECREASE) IN NET ASSETS ======================================================= ============== RESULTING FROM OPERATIONS: $28,540 $22,915 $ $21,205 (331) $72,329 ======================================================= ==============
LEGEND: (A) REFLECTS ADJUSTMENT TO THE ACQUIRING FUND CONTRACTUAL FEE OBLIGATION. (B) ADJUSTMENT REFLECTS EXPECTED SAVINGS WHEN THE TWO FUNDS BECOME ONE. (C) REFLECTS ADJUSTMENT TO THE LEVEL OF THE ACQUIRING FUND'S VOLUNTARY EXPENSE REIMBURSEMENT. SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS Nations Government Reserves Pacific Horizon Government Fund Pacific Horizon Treasury Only Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of October 31, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of October 31, 1998 and the unaudited Pro Forma Combining Statement of Operations for the year ended October 31, 1998 assumes the exchange occurred as of November 1, 1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at October 31, 1998 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizon Treasury Only Fund and the Pacific Horizon Government Fund in exchange for shares of Nations Government Reserves. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward to the surviving entity and the results of operations of the Nations Government Reserves for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 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. The investment advisory and shareholder servicing and distribution fees have been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations Government Reserves at the time of the Reorganization at the combined level of average net assets for the twelve month period ended October 31, 1998.
Nations Intermediate Bond Fund / Pacific Horizons Intermediate Bond Fund Pro Forma Combining Statement of Net Assets (unaudited) September 30,1998 Nations Pacific Horizons Intermediate Intermediate Adjustments to Pro Pro Forma Bond Fund Bond Fund Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) --------------------------------------------------------------------- Investment in Master Investment Trust, Series I- Investment Grade Bond Portfolio $ - $ 103,614 $ - $ 103,614 Other Assets and Liabilities: Other assets and liabilities, net - (475) - (475) Total Other Assets and Liabilities - (475) - (475) Net Assets - 103,139 - 103,139 ===================================================================== Net Assets by Class: Investor A / Class A $ - $ 67,798 $ - $ 67,798 $ $ $ $ Investor C / Class K - 498 - 498 $ $ $ $ Seafirst Class - 34,843 - 34,843 $ $ $ $ - 103,139 - 103,139 Shares Outstanding by Class: Investor A / Class A - 6,838 - 6,838 Investor C / Class K - 50 - 50 Seafirst Class - 3,120 - 3,120 --------------------------------------------------------------------- - 10,008 - 10,008 --------------------------------------------------------------------- Net Asset Value per Share by Class: Investor A / Class A $ - $ 9.91 $ - $ 9.91 Investor C / Class K $ - $ 9.98 $ - $ 9.98 Seafirst Class $ - $ 11.17 $ - $ 11.17 See Notes to Pro Forma Financial Statements
Nations Intermediate Bond Fund / Pacific Horizons Intermediate Bond Fund Pro Forma Combining Statement of Operations (unaudited) September 30,1998 Nations Pacific Horizons Intermediate Intermediate Adjustments to Pro Pro Forma Bond Fund Bond Fund Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) INVESTMENT INCOME: Investment Income from Master Investment Trust, Series 1 - Investment Grade Bond Portfolio Interest $0 $4,855 $0 $4,855 Dividends - - - - - 4,855 - 4,855 Expenses - 233 202 435 Less: Fee waivers and expense reimbursements - (21) 21 - - 212 223 435 Net Investment Income from Master Investment Trust, Series I - Investment Grade Bond Portfolio - 4,643 (223) 4,420 EXPENSES: Investment Advisory - 35 (35) - Administration - 123 16 139 Transfer Agent - 19 19 Custodian - - - Legal and Audit Fees - 19 19 Registration & Filing - 6 6 Trustees' Fees - 2 2 Interest Expense - - - Other expenses - 92 (45) 47 Subtotal - 261 (29) 232 Shareholder Servicing and Distribution Fees Investor A / Class A - 152 - 152 Investor B / Class B - - - - Investor C / Class K - 4 - 4 Seafirst Class - 43 - 43 Subtotal - 199 - 199 Fees waived and/or reimbursed by investment advisor, administrator and/or distributor - 40 (40) - Total Expenses - 500 (69) 431 NET INVESTMENT INCOME - 4,143 (154) 3,989 NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) on investments - 1,014 - 1,014 Net change in unrealized appreciation/ (depreciation) of investments - 1,420 - 1,420 Net realized and unrealized gain/(loss) --------------------------------------------------------------------- on investments - 2,434 - 2,434 --------------------------------------------------------------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $0 $6,577 ($154) $6,423 =====================================================================
Legend: (a) Reflects adjustment to the acquiring fund contractual fee obligation. (b) Adjustment reflects expected savings when the two funds become one. (c) Reflects adjustment to the level of the acquiring fund's voluntary expense reimbursement. (d) Net of expense offset arrangements amounts to less than .01% of average net assets. See Notes to Pro Forma Financial Statements Nations Intermediate Bond Fund Pacific Horizon Intermediate Bond Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of September 30, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of September 30, 1998 and the unaudited Pro Forma Combining Statement of Operations assumes the exchange occurred as of October 1,1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at September 30, 1998 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizon Intermediate Bond Fund in exchange for shares of Nations Intermediate Bond Fund. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward under the new name of Nations Intermediate Bond Fund. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the 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. The investment advisory and administration fees and Investor C shareholders servicing and distribution fees have been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations Intermediate Bond Fund at the time of the Reorganization at the combined level of average net assets for the twelve month period ended September 30, 1998.
Nations Master Investment Trust, Series I - Investment Grade Bond Portfolio / Master Investment Trust, Series I - Investment Grade Bond Portfolio Pro Forma Combining Schedule of Investments (unaudited) September 30,1998 Pacific Horizon Nations Intermediate Pro Forma Pro Forma Intermediate Bond Intermediate Nations Pacific Intermediate Bond Portfolio Portfolio Bond Portfolio Intermediate Horizon Bond Principal Principal Principal Bond Portfolio Portfolio Portfolio Amount Amount Amount Asset Description Value Value Value (in 000's) (in 000's) (in 000's) ASSET BACKED SECURITIES---19.0% AESOP Funding II, Series 1997-1, 2,000,000 2,000,000 Class A1, 6.22, 10/20/01 2,041 2,041 Asset Securitization Corp., Series 1,900,000 1,900,000 1997-D5, Class A1C, 6.75, 02/14/41 2,041 2,041 Chevy Chase Auto Receivables Trust, 1,222,000 1,222,000 Series 1998, Class A , 5.91, 12/15/04 1,245 1,245 Circuit City Credit Card Master Trust, Series 1995-1, Class A, 6.375, 1,000,000 1,000,000 08/15/05 1,027 1,027 Citibank Credit Card Master Trust I, Series 1997-6, Class A ZCB, 5.04, 2,000,000 2,000,000 08/15/06 1,481 1,481 Commercial Mortgage Acceptance Corp., Series 1998-C1, Class A2 , 6.49, 1,850,000 1,850,000 05/15/08 1,937 1,937 Contimortgage Home Equity Loan Trust, 2,000,000 2,000,000 Series 1996-4, Class A5, 6.6, 10/15/11 2,059 2,059 Contimortgage Home Equity Loan Trust, Series 1997-3, Class A5, 7.01, 2,000,000 2,000,000 08/15/13 2,122 2,122 First Chicago Master Trust II , 1,340,000 1,340,000 5.8706, 02/15/04 1,346 1,346 General Growth Properties, Series 1, 1,900,000 1,900,000 Class A2, 6.602, 11/15/07 2,000 2,000 GMAC Commercial Mortgage Securities, Inc., Series 1997-C2, Class A3 , 2,300,000 2,300,000 6.566, 11/15/07 2,420 2,420 Lehman Brothers Commercial Conduit Mortgage Trust, Series 1998-C1, Class 2,100,000 2,100,000 A3, 6.48, 01/18/08 2,196 2,196 Nomura Asset Securities Corp., Series 2,180,000 2,180,000 1998-D6, Class A1B, 6.59, 03/17/28 2,286 2,286 Standard Credit Card Master Trust, Series 1995-3, Class A , 7.85, 2,500,000 2,500,000 02/07/02 2,586 2,586 The Money Store Home Equity Trust, Series 1996-B, Class A6, 7.38, 1,000,000 1,000,000 05/15/17 1,035 1,035 World Omni Automobile Lease Securitization Trust, Series 1997-A, 2,245,000 2,245,000 Class A4, 6.9, 06/25/03 2,358 2,358 ------------------------------------------ 0 30,180 30,180 ------------------------------------------ COLLATERALIZED MORTGAGE OBLIGATIONS---8.3% Credit Suisse First Boston Mortgage Securities Corp., Series 1998-C1, 1,250,000 1,250,000 Class A1B, 6.48, 05/17/08 1,309 1,309 Criimi Mae Corp., Series 1998-1, 2,212,000 2,212,000 Class A1, 5.697, 10/20/01 2,222 2,222 Donaldson Lufkin Jenrette Commercial Mortgage Corp., Series 1998-CG1, 1,300,000 1,300,000 Class A1B, 6.41, 06/10/31 1,354 1,354 First Union-Lehman Brothers-Bank of America Commercial Mortgage, Series 2,250,000 2,250,000 1998-C2, Class A2, 6.56, 11/18/08 2,341 2,341 Mortgage Capital Funding, Inc., Series 1998-MC1, Class A2, 6.663, 2,950,000 2,950,000 01/18/08 3,123 3,123 Mortgage Capital Funding, Inc., Series 1998-MC2, Class A2, 6.423, 1,300,000 1,300,000 05/18/08 1,354 1,354 Vendee Mortgage Trust, Series 1998-1, Class 2, Interest Only Obligation, 63,491,000 63,491,000 0.455, 02/15/28 873 873 Vendee Mortgage Trust, Series 1998-3, Class 10, Interest Only Obligation, 59,000,000 59,000,000 0.316, 09/01/28 664 664 ------------------------------------------ 0 13,240 13,240 ------------------------------------------ CORPORATE BONDS---30.07% Banks--1.75% 1,500,000 1,500,000 Banco Latinoamericano, Series 144A, 1,485 1,485 6.59, 10/16/01 1,250,000 1,250,000 Capital One Bank, 7, 04/30/01 1,292 1,292 ------------------------------------------ 0 2,777 2,777 ------------------------------------------ Brokerage--1.93% 1,500,000 1,500,000 Bear Stearns Companies, Inc., 6.125, 1,532 1,532 02/01/03 1,500,000 1,500,000 Salomon Smith Barney Holdings, Inc., 1,533 1,533 6.25, 05/15/03 ------------------------------------------ 0 3,065 3,065 ------------------------------------------ Cable & Media--2.7% 1,300,000 1,300,000 Cox Radio, Inc., Series 144A, 6.25, 1,341 1,341 05/15/03 1,500,000 1,500,000 TCI Communications, Inc., 6.375, 1,568 1,568 05/01/03 1,350,000 1,350,000 Time Warner Inc., Pass-Through 1,380 1,380 Certificates, 6.1, 12/30/01 ------------------------------------------ 0 4,289 4,289 ------------------------------------------ Chemicals--0.79% 1,200,000 1,200,000 Praxair, Inc., 6.75, 03/01/03 1,263 1,263 ------------------------------------------ 0 1,263 1,263 ------------------------------------------ Commercial Services--1.91% 1,500,000 1,500,000 News America Holdings, Inc., 8.625, 1,678 1,678 02/01/03 1,300,000 1,300,000 Service Corp. International, 6.3, 1,354 1,354 03/15/03 ------------------------------------------ 0 3,032 3,032 ------------------------------------------ Diversified Manufacturing--0.86% 1,300,000 1,300,000 Belo (A.H.) Corp., 6.875, 06/15/02 1,359 1,359 ------------------------------------------ 0 1,359 1,359 ------------------------------------------ Energy--1.62% 1,300,000 1,300,000 PSE&G Capital Corp. , 6.74, 10/23/01 1,350 1,350 1,200,000 1,200,000 Williams Companies, Inc. , 6.125, 1,224 1,224 02/01/01 ------------------------------------------ 0 2,574 2,574 ------------------------------------------ Financial Services---10.49% 1,200,000 1,200,000 AON Corp., 7.4, 10/01/02 1,296 1,296 1,675,000 1,675,000 Associates Corp. of North America, 1,740 1,740 7.5, 04/15/02 1,300,000 1,300,000 Case Credit Corp., 6.125, 02/15/03 1,347 1,347 1,500,000 1,500,000 Finova Capital Corp., 6.625, 09/15/01 1,558 1,558 1,800,000 1,800,000 Ford Motor Credit Corp., 6.55, 1,897 1,897 09/10/02 2,000,000 2,000,000 General Motors Acceptance Corp. , 2,095 2,095 6.875, 07/15/01 1,500,000 1,500,000 Hanson Overseas B.V., 7.375, 01/15/03 1,609 1,609 1,300,000 1,300,000 Household Finance Corp. , 6.125, 1,344 1,344 07/15/12 2,200,000 2,200,000 Prudential Security Financial Corp. , 2,287 2,287 6.506, 07/15/08 1,400,000 1,400,000 USG Corp., 9.25, 09/15/01 1,496 1,496 ------------------------------------------ 0 16,669 16,669 ------------------------------------------ Food & Kindred Products--2.18% 1,550,000 1,550,000 James River Corp., 8.375, 11/15/01 1,693 1,693 1,750,000 1,750,000 Nabisco, Inc., 6.125, 09/01/98 1,776 1,776 ------------------------------------------ 0 3,469 3,469 ------------------------------------------ Insurance--2.46% 2,700,000 2,700,000 Aetna Services, Inc. , 6.75, 08/15/01 2,828 2,828 1,000,000 1,000,000 Hartford Life, Inc., 6.9, 06/15/04 1,084 1,084 ------------------------------------------ 0 3,912 3,912 ------------------------------------------ Retail Stores--1.68% 1,220,000 1,220,000 Federated Department Stores , 8.125, 1,333 1,333 10/15/02 1,300,000 1,300,000 Sears Roebuck Acceptance Corp., 6, 1,339 1,339 03/20/03 ------------------------------------------ 0 2,672 2,672 ------------------------------------------ Utilities--1.69% 1,400,000 1,400,000 Consumers Energy Co., Series 144A, 1,456 1,456 6.2, 05/01/03 1,200,000 1,200,000 KN Energy, Inc., 6.45, 03/01/03 1,228 1,228 ------------------------------------------ 0 2,684 2,684 ------------------------------------------ Total Corporate Bonds (Cost $47,722) 0 47,765 47,765 MEDIUM TERM NOTES--2.2% 2,000,000 2,000,000 Lehman Brothers Holdings, 6.9, 2,037 2,037 01/29/01 1,400,000 1,400,000 Worldcom Inc. , 6.4, 08/15/05 1,477 1,477 ------------------------------------------ 0 3,514 3,514 ------------------------------------------ U.S. TREASURY OBLIGATIONS---28.97% U.S. Treasury Strips--2.37% 2,250,000 2,250,000 U.S. Treasury Strips, 05/15/09 1,359 1,359 2,000,000 2,000,000 U.S. Treasury Strips, 08/15/23 541 541 2,750,000 2,750,000 U.S. Treasury Strips, 05/15/07 1,858 1,858 ------------------------------------------ 0 3,758 3,758 ------------------------------------------ U.S. Treasury Notes---26.6% 5,700,000 5,700,000 U.S. Treasury Note, 7.75, 01/31/00 5,935 5,935 1,000,000 1,000,000 U.S. Treasury Note, 6.625, 06/30/01 1,057 1,057 6,000,000 6,000,000 U.S. Treasury Note, 6.25, 10/31/01 6,315 6,315 15,150,000 15,150,000 U.S. Treasury Note, 5.75, 08/15/03 16,070 16,070 9,000,000 9,000,000 U.S. Treasury Note, 5.5, 12/31/00 9,209 9,209 3,150,000 3,150,000 U.S. Treasury Note, 7, 07/15/06 3,667 3,667 ------------------------------------------ 0 42,253 42,253 ------------------------------------------ Total U.S. Treasury Obligations (Cost $44,904) 0 46,011 46,011 U.S. GOVERNMENT AGENCY OBLIGATIONS---9.6% FannieMae 30 Year Fixed Obligation 13,200,000 13,200,000 (TBA), 7, 04/01/00 13,569 13,569 FannieMae, Pool Association, Pool 1,261,000 1,261,000 #345858, 6.259, 08/01/36 1,298 1,298 Government National Mortgage 11,000 11,000 Association Pool #136688, 10, 09/15/15 12 12 Government National Mortgage 196,000 196,000 Association Pool #166744, 10, 07/15/16 214 214 Government National Mortgage 62,000 62,000 Association Pool #209480, 10, 07/15/17 68 68 Government National Mortgage 85,000 85,000 Association Pool #227082, 10, 08/15/17 93 93 ------------------------------------------ 0 15,254 15,254 ------------------------------------------ SHORT TERM INVESTMENTS---9.5% - 7,524,000 7,524,000 Temporary Investment Cash Fund 7,524 7,524 7,524,000 7,524,000 Temporary Investment Fund 7,524 7,524 ------------------------------------------ 0 15,048 15,048 ------------------------------------------ Total Investments---107.6% (Cost $0,$167,432, $167,432 respectively) 0 171,012 171,012
Nations Master Investment Trust, Series I - Investment Grade Bond Portfolio / Master Investment Trust, Series I - Investment Grade Bond Portfolio Pro Forma Combining Statement of Net Assets (unaudited) September 30,1998 Nations Pacific Horizons Investment Grade Investment Grade Adjustments to Pro Pro Forma Bond Portfolio Bond Portfolio Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) $ $ $ $ Total Investments - 171,012 - 171,012 Other Assets and Liabilities: Other assets and liabilities, net - (12,140) - (12,140) Total Other Assets and Liabilities - (12,140) - (12,140) Net Assets - 158,872 - 158,872 ========================================================================= Net Assets by Class: $ $ $ $ World Horizon Class - 55,258 - 55,258 $ $ $ $ Pacific Horizon Class - 103,614 - 103,614 $ $ $ $ - 158,872 - 158,872 Shares Outstanding by Class: World Horizon Class - 4,097 - 4,097 Pacific Horizon Class - 7,686 - 7,686 - 11,783 - 11,783 Net Asset Value per Share by Class: $ $ World Horizon Class - $ 13.49 $ - 13.49 $ $ Pacific Horizon Class - $ 13.48 $ - 13.48
See Notes to Pro Forma Financial Statements
Nations Master Investment Trust, Series I - Investment Grade Bond Portfolio / Master Investment Trust, Series I - Investment Grade Bond Portfolio Pro Forma Combining Statement of Operations (unaudited) September 30,1998 Nations Pacific Horizons Investment Grade Investment Grade Adjustments to Pro Pro Forma Bond Portfolio Bond Portfolio Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) INVESTMENT INCOME: Investment Income: Interest $0 $8,017 $0 $8,017 Dividends - - - - - 8,017 - 8,017 EXPENSES: Investment Advisory - 388 156(a) 544 Administration - 68 68 Transfer Agent - - - Custodian - 18 (8) 10 Legal and Audit Fees - 25 (5) 20 Registration & Filing - - - Trustees' Fees - 16 (5) 11 Interest Expense - - - Other expenses - 122 (60) 62 Subtotal - 637 78 715 Fees waived and/or reimbursed by investment advisor, administrator and/or distributor - (196) 196 - Total Expenses - 441 274 715 NET INVESTMENT INCOME - 7,576 (274) 7,302 NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: Net realized gain/(loss) on investments - 1,634 - 1,634 Net change in unrealized appreciation/ (depreciation) of investments - 2,790 - 2,790 Net realized and unrealized gain/(loss) on investments - 4,424 - 4,424 NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $0 $12,000 ($274) $11,726 Legend: (a) Reflects adjustment to the acquiring fund contractual fee obligation. (b) Adjustment reflects expected savings when the two funds become one. (c) Reflects adjustment to the level of the acquiring fund's voluntary expense reimbursement. (d) Net of expense offset arrangements amounts to less than .01% of average net assets.
See Notes to Pro Forma Financial Statements Nations Investment Grade Bond Master Portfolio Pacific Horizon Investment Grade Bond Master Portfolio Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of September 30, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of September 30, 1998 and the unaudited Pro Forma Combining Statement of Operations assumes the exchange occurred as of October 1,1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at September 30, 1998 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizon Investment Grade Bond Master Portfolio in exchange for shares of Nations Investment Grade Bond Master Portfolio. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward under the new name of Nations Intermediate Bond Master Portfolio. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 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. The investment advisory and administration fees have been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations Intermediate Bond Master Portfolio at the time of the Reorganization at the combined level of average net assets for the twelve month period ended September 30, 1998. Nations Municipal Reserves / Pacific Horizon Tax Exempt Fund Pro Forma Combining Schedule of Investments (unaudited) October 31,1998
Nations Nations Pacific Municipal Pacific Horizon Municipal Horizon Tax Pro Forma Reserves Tax Exempt Fund Pro Forma Par Reserves Exempt Fund Market Combined Par Par Combined Security Description Market Value Value Market Value (in 000's) (in 000's) (in 000's) Investment Companies - 0.2% 1,650,000 0 1,650,000 AIM TAX EXEMPT FUND 1,650 0 1,650 575,000 0 575,000 FEDERATED TAX EXEMPT MONEY MARKET FUND 575 0 575 ------------------------------------------ 2,225 0 2,225 ------------------------------------------ Municipal Bonds And Notes - Alabama - 1.19% 6,100,000 0 6,100,000 AL HFA SER A FRN 3.1% 03/01/2015 6,100 0 6,100 ARAB ALA INDL DEV BRD FRN 3.35% 680,000 0 680,000 6/01/02 680 0 680 1,600,000 0 1,600,000 FOLEY AL IDB FRN 3.25% 12/01/00 1,600 0 1,600 NORTH ALA ENVI IMPT AUTH FRN 3.65% 1,000,000 0 1,000,000 12/01/00 1,000 0 1,000 PHOENIX CITY ALA IND DEV FRN 3.75% 2,470,000 0 2,470,000 6/01/28 2,470 0 2,470 PHOENIX CNTY AL INDL DEV BOARD 3.70% 1,350,000 0 1,350,000 12/01/15 1,350 0 1,350 ------------------------------------------ 13,200 0 13,200 ------------------------------------------ Municipal Bonds and Notes - Alaska - 0.9% ALASKA ST HSG FIN CORP 12/01/19 0 9,995,000 9,995,000 *144A* 0 9,995 9,995 ------------------------------------------ 0 9,995 9,995 ------------------------------------------ Municipal Bonds and Notes - Arizona - 1.49% 0 2,200,000 2,200,000 APACHE CNTY ARIZ INDL DEV AUTH INDL 0 2,200 2,200 DEV REV 7,700,000 1,000,000 8,700,000 APACHE CNTY AZ IDA INDL DEV RE 3.15% 7,700 1,000 8,700 12/15/18 3,250,000 0 3,250,000 ARIZONA EDL LN MARKETING CORP 6.55% 3,279 0 3,279 3/01/99 1,300,000 0 1,300,000 MARICOPA CNTY ARIZ PLLTN CTL 3.7% 1,300 0 1,300 5/01/29 1,000,000 0 1,000,000 PINAL CNTY AZ IDA PCR FRN 3.1% 1,000 0 1,000 12/01/11 ------------------------------------------ 13,279 3,200 16,479 ------------------------------------------
Municipal Bonds and Notes - Arkansas - 0.31% 0 3,400,000 3,400,000 ARKANSAS ST DEVL FIN AUTH 3.70% 0 3,400 3,400 07/01/30 ------------------------------------------ 0 3,400 3,400 ------------------------------------------ Municipal Bonds And Notes - California - 1.99% 2,500,000 0 2,500,000 CA HIGH ED LOAN 3.65% 4/01/00 2,500 0 2,500 400,000 0 400,000 LOS ANGELES CA AIRPORT 3.65% 12/01/25 400 0 400 0 1,700,000 1,700,000 ONTARIO CALIF INDL DEV AUTH 4/1/15 0 1,700 1,700 0 14,700,000 14,700,000 ORANGE COUNTY IRVINE COAST ASSESMENT 0 14,700 14,700 VRN 9/2/18 1,500,000 0 1,500,000 REGIONALS ARPTS IMPT CA FRN 3.75% 1,500 0 1,500 12/01/25 1,200,000 0 1,200,000 SAN DIEGO CA IDB FRN 2.9% 10/01/07 1,200 0 1,200 ------------------------------------------ 5,600 16,400 22,000 ------------------------------------------ Municipal Bonds And Notes - Colorado - 2.05% 1,485,000 0 1,485,000 CO HLTH FACS AUTH REV FRN 3.15% 1,485 0 1,485 12/01/04 3,070,000 0 3,070,000 COLORADO POST2ND EDL FACS AUTH 3.15% 3,070 0 3,070 6/01/11 3,600,000 0 3,600,000 COLORADO STDT OBLG AUTH VRN 3.05% 3,600 0 3,600 8/01/00 2,000,000 0 2,000,000 COLORADO STUDENT OBLIG BD FRN 3.15% 2,000 0 2,000 7/01/20 4,985,000 0 4,985,000 DENVER COLO CITY CNYT MULTI 3.35% 4,985 0 4,985 10/15/08 1,035,000 0 1,035,000 LARIMAR CNTY CO INDL DEV REV F 3.15% 1,035 0 1,035 6/01/10 3,000,000 0 3,000,000 MOFFAT CNTY CO POLLUTN CTL FRN 3.2% 3,000 0 3,000 7/01/10 3,500,000 0 3,500,000 PITKIN CNTY CO IDR SER A 3.7% 4/01/16 3,500 0 3,500 ------------------------------------------ 22,675 0 22,675 ------------------------------------------ Municipal Bonds and Notes - District of Columbia - 3.90% 0 4,700,000 4,700,000 DISTRICT COLUMBIA 0 4,700 4,700 0 13,300,000 13,300,000 DISTRICT COLUMBIA VRN 10/1/07 0 13,300 13,300 0 18,800,000 18,800,000 DISTRICT COLUMBIA VRN 10/1/07 0 18,800 18,800 0 4,100,000 4,100,000 DISTRICT COLUMBIA VRN 10/1/07 0 4,100 4,100 0 2,200,000 2,200,000 DISTRICT OF COLUMBIA VAR-REF-A-4 0 2,200 2,200 ------------------------------------------ 0 43,100 43,100 ------------------------------------------
Municipal Bonds And Notes - Florida - 7.41% 2,775,000 0 2,775,000 BREVARD CNTY FLA HSG FIN AUTH 3.2% 2,775 0 2,775 12/01/10 0 10,395,000 10,395,000 FLORIDA BRD OF EDUCATION 3.65% 0 10,395 10,395 06/01/23 *144A* 1,700,000 0 1,700,000 FLORIDA HSG FIN AGY MULTI FAM 3.25% 1,700 0 1,700 6/01/07 1,845,000 0 1,845,000 FORT WALTON BEACH FLA INDL DEV 3.4% 1,845 0 1,845 10/01/11 7,000,000 0 7,000,000 INDIAN RIVER CNTY FL HOSP FRN 3.2% 7,000 0 7,000 10/01/15 0 5,000,000 5,000,000 JACKSONVILLE, FL PCR (FL PWR & LGHT) 0 5,000 5,000 3.30% 11/9/98 800,000 0 800,000 ORANGE COUNTY FL HFA FRN 3.1% 3/01/18 800 0 800 5,500,000 0 5,500,000 PALM BEACH CO FL 3.05% 5/01/25 5,500 0 5,500 0 5,300,000 5,300,000 PINELLAS COUNTY, FL HOUSING VRN 0 5,300 5,300 06/15/25 0 2,500,000 2,500,000 SARASOTA CO PUBLIC HOSP 93A 3.65% 0 2,500 2,500 12/10/98 SARASOTA CO, FL PUB HSP DIST 0 4,000,000 4,000,000 (SARASOTA HSP PRJ) 0 4,000 4,000 SARASOTA CO, FL PUBLIC HOSP DIST 0 10,000,000 10,000,000 SERIES 91 0 10,000 10,000 SARASOTA CO,FL PUB HSP DIST(SARASOTA 0 5,000,000 5,000,000 HSP PRJ) 0 5,000 5,000 SUNSHINE ST GON'T FIN COMMISSION REV 0 10,000,000 10,000,000 BNDS SER86 0 10,000 10,000 SUNSHINE ST GOV'T FIN COMMISSION REV 0 10,000,000 10,000,000 BNDS SER 1986 0 10,000 10,000 ------------------------------------------ 19,620 62,195 81,815 ------------------------------------------ Municipal Bonds And Notes - Georgia - 4.87% 3,000,000 0 3,000,000 BURKE CNTY GA DEV AUTH POLLUTN 3.7% 3,000 0 3,000 4/01/25 2,200,000 0 2,200,000 BURKE CNTY GA DEV AUTH POLLUTN 3.7% 2,200 0 2,200 9/01/25 1,140,000 0 1,140,000 CLAYTON CNTY GA HSG AUTH FRN 3.15% 1,140 0 1,140 1/01/21 3,945,000 0 3,945,000 CLAYTON CNTY GA MULTIFAMILY FR 3.15% 3,945 0 3,945 1/01/21 2,000,000 0 2,000,000 COBB CNTY GA DEV AUTH REV FRN 3.15% 2,000 0 2,000 8/01/08 1,900,000 0 1,900,000 COBB CNTY GA RES CARE FACS 3.15% 1,900 0 1,900 8/01/15 3,585,000 0 3,585,000 COLUMBIA CNTY GA RES ELDERLY A 3.15% 3,585 0 3,585 1/01/21 1,400,000 0 1,400,000 DE KALB CNTY GA HSG AUTH MULTI 3.30% 1,400 0 1,400 12/01/20 3,500,000 0 3,500,000 FULTON CNTY GA 3.15% 12/01/10 3,500 0 3,500
3,500,000 0 3,500,000 FULTON CNTY GA 3.15% 7/01/14 3,500 0 3,500 FULTON CNTY GA DEV AUTH REV 3.15% 3,000,000 0 3,000,000 4/01/17 3,000 0 3,000 0 15,000,000 15,000,000 GAINESVILLE GA REDEVL VRN 01/01/23 0 15,000 15,000 1,150,000 0 1,150,000 GEORGIA (STATE OF) MEAG S'94D # 1 FRN 3.25% 1/01/22 1,150 0 1,150 0 1,500,000 1,500,000 MUNICIPAL ELEC AUTH GA VRN 06/01/20 0 1,500 1,500 7,000,000 0 7,000,000 SMYRNA GA SG AUTH FRN 3.15% 6/01/25 7,000 0 7,000 ------------------------------------------ 37,320 16,500 53,820 ------------------------------------------ Municipal Bonds and Notes - Hawaii - 1.36% 0 14,990,000 14,990,000 HAWAII ST 04/01/09 0 14,990 14,990 ------------------------------------------ 0 14,990 14,990 ------------------------------------------ Municipal Bonds and Notes - Idaho - 1.79% 0 2,500,000 2,500,000 IDAHO HEALTH FACILITY 5/1/22 0 2,500 2,500 IDAHO ST TAX ANTIC NOTES 4.50% 0 15,000,000 15,000,000 06/30/99 0 15,086 15,086 POWER CNTY IDAHO POLLUTN CTL R 3.75% 2,200,000 0 2,200,000 12/01/10 2,200 0 2,200 ------------------------------------------ 2,200 17,586 19,786 ------------------------------------------ Municipal Bonds And Notes - Illinois - 9.46% 2,000,000 0 2,000,000 CHICAGO IL O'HARE INTL ARPT FR 3.70% 2,000 0 2,000 12/01/17 0 1,135,000 1,135,000 CHICAGO ILL INDL DEV REV 12/01/16 0 1,135 1,135 0 8,000,000 8,000,000 CHICAGO ILL PK DIST 4.30% 09/17/99 0 8,050 8,050 0 12,500,000 12,500,000 CHICAGO ILL TENDER NTS- SER C 10/31/99 0 12,500 12,500 0 6,800,000 6,800,000 CHICAGO ILL VAR-EQUIP NTS 3.8% 0 6,800 6,800 01/01/06 1,050,000 0 1,050,000 CHICAGO O'HARE AIRPORT FRN 3.7% 1,050 0 1,050 12/01/17 0 4,450,000 4,450,000 ELMHURST ILLINOIS FRN HOSP REV: JOINT 0 4,450 4,450 COMM HLTH 1,700,000 0 1,700,000 IL DEV FIN AUTH INDL FRN 3.35% 5/01/15 1,700 0 1,700 2,000,000 0 2,000,000 IL DEV FIN AUTH REV 3.05% 2,000 0 2,000 12/01/28 2,000,000 0 2,000,000 IL DEV FIN AUTH REV 3.25% 9/01/18 2,000 0 2,000 870,000 0 870,000 IL DFA IDR FRN 3.35% 6/01/12 870 0 870 1,400,000 0 1,400,000 IL EFA REVS FRN 3.15% 12/01/25 1,400 0 1,400 3,600,000 0 3,600,000 ILL HLTH FACS FRN 3.7% 8/15/25 3,600 0 3,600
2,000,000 0 2,000,000 ILLINOIS DEV FIN AUTH FRN 3.05% 2,000 0 2,000 10/15/14 2,300,000 0 2,300,000 ILLINOIS DEV FIN AUTH INDL FRN 3.35% 2,300 0 2,300 5/01/09 0 6,400,000 6,400,000 ILLINOIS EDL FACS AUTH REVS 3.60% 0 6,400 6,400 12/01/25 0 1,755,000 1,755,000 ILLINOIS HEALTH FACILITIES AUTHORITY 0 1,755 1,755 11/1/20 0 5,800,000 5,800,000 ILLINOIS HEALTH FACILITY AUTH 0 5,800 5,800 RESURRECTION 5/1/11 0 26,200,000 26,200,000 ILLINOIS HEALTH FACS AUTH REV 01/01/28 0 26,200 26,200 0 9,000,000 9,000,000 ILLINOIS HEALTH FACS AUTH REV ADJ SER 0 9,000 9,000 A V/R 1,975,000 0 1,975,000 LOMBARD IL (CLOVER CREEKAPTS) 4% 1,975 0 1,975 12/15/06 LOMBARD VILLAGE IL IPR FRN 3.45% 1,500,000 0 1,500,000 10/01/13 1,500 0 1,500 ------------------------------------------ 22,395 82,090 104,485 ------------------------------------------ Municipal Bonds And Notes - Indiana - 1.69% 760,000 0 760,000 AUBURN IND ECON DEV REV FRN DU 3.3% 760 0 760 9/01/00 0 2,895,000 2,895,000 INDIANA HEALTH FAC FING AUTH 4.25% 0 2,896 2,896 12/01/98 2,085,000 0 2,085,000 INDIANA HLTH FINANCE AUTH 3.25% 2,085 0 2,085 12/01/16 2,700,000 0 2,700,000 INDIANAPOLIS IN ECON DEV (EDGC 3.1% 2,700 0 2,700 12/01/08 0 8,000,000 8,000,000 JASPER CO, IN PCR (NORTHERN IN PUB 0 8,000 8,000 SVC) SER A 770,000 0 770,000 KENDALLVILLE IN MC CRAY FRN 3.25% 770 0 770 1/01/04 1,200,000 0 1,200,000 PRINCETON IND POLLTN CTL REV 3.75% 1,200 0 1,200 3/01/19 265,000 0 265,000 ROCKPORT IND POLLUTION CTL REV 3.75% 265 0 265 7/01/25 ------------------------------------------ 7,780 10,896 18,676 ------------------------------------------ Municipal Bonds and Notes - Iowa - 0.42% 0 4,700,000 4,700,000 IOWA HIGHER ED LN AUTH REV 12/1/15 FRN 0 4,700 4,700 ------------------------------------------ 0 4,700 4,700 ------------------------------------------ Municipal Bonds And Notes - Kentucky - 2.30% 1,440,000 0 1,440,000 JEFFERSON CNTY KY BLDGS REV NO 3.15% 1,440 0 1,440 6/01/11 1,160,000 0 1,160,000 JEFFERSON CNTY KY HOSP FRN 3.55% 1,160 0 1,160 12/01/14 1,700,000 0 1,700,000 JEFFERSONTOWN KY INDL BLDG REV 3.3% 1,700 0 1,700 4/01/20 0 6,000,000 6,000,000 KENTUCKY ASSET/LIABILITY COMMN GEN 4% 0 6,025 6,025 06/25/99
0 15,000,000 15,000,000 KENTUCKY ASSET/LIABILTY COMM TRANS 0 15,087 15,087 4.50% 06/25/99 ------------------------------------------ 4,300 21,112 25,412 ------------------------------------------ Municipal Bonds And Notes - Louisiana - 7.33% 8,000,000 5,500,000 13,500,000 ASCENSION PARISH LA PCR FRN DU 3.15% 8,000 5,500 13,500 12/01/09 7,400,000 0 7,400,000 ASCENSION PARISH LA PLLTN REV 3.7% 7,400 0 7,400 9/01/23 1,300,000 0 1,300,000 LA ST OFFSHORE TERM AUTH DEEPW 3.7% 1,300 0 1,300 9/01/08 2,300,000 0 2,300,000 LAKE CHARLES LA HBR & TERM FRN 3.25% 2,300 0 2,300 8/01/07 0 11,600,000 11,600,000 LOUISIANA GENERAL OBLIGATION T/E 0 11,600 11,600 94-13-02 *144A* 0 9,900,000 9,900,000 LOUISIANA PUB FACS AUTH HOSP VRN 0 9,900 9,900 09/01/27 0 5,400,000 5,400,000 LOUISIANA PUBLIC FACS AUTH VRN 0 5,400 5,400 09/01/25 0 10,500,000 10,500,000 PLAQUEMINES LA PORT HBR & TERM DIST 0 10,500 10,500 PORT FACS REV 0 9,500,000 9,500,000 PLAQUEMINES LA PORT HBR & TERM DIST 0 9,504 9,504 VRN 9/1/08 4,500,000 0 4,500,000 SOUTH LA PORT COMM MARINE FRN 3.0% 4,500 0 4,500 7/01/21 0 5,050,000 5,050,000 WEST BATON ROUGE, LA IDA (DOW 0 5,050 5,050 CHEMICAL) ------------------------------------------ 23,500 57,454 80,954 ------------------------------------------ Municipal Bonds and Notes - Maine - 0.18% 0 1,985,000 1,985,000 MAINE HEALTH & HIGHER EDL FACS AUTH 0 1,985 1,985 REV 12/01/25 ------------------------------------------ 0 1,985 1,985 ------------------------------------------ Municipal Bonds And Notes - Maryland - 1.37% 15,000,000 0 15,000,000 BALTIMORE MD INDL DEV AUTH 3.10% 15,000 0 15,000 8/01/16 170,000 0 170,000 MONTGOMERY CNTY MD IDR FRN 3.65% 170 0 170 4/01/14 ------------------------------------------ 15,170 0 15,170 ------------------------------------------ Municipal Bonds and Notes - Massachusetts - 3.17% 0 35,000,000 35,000,000 MASSACHUETTS ST VAR-REF-SER B 9/01/16 0 35,000 35,000 ------------------------------------------ 0 35,000 35,000 ------------------------------------------ Municipal Bonds And Notes - Michigan - 0.84%
1,000,000 0 1,000,000 DELTA CO MI 1,000 0 1,000 EDL MUNI BOND 3.7% 12/01/13 0 6,500,000 6,500,000 MICHIGAN MUN BD AUTH REV 4.25% 0 6,534 6,534 08/27/99 1,800,000 0 1,800,000 UNIVERSITY OF MICH MED SVC PLA 3.75% 1,800 0 1,800 12/01/27 ------------------------------------------ 2,800 6,534 9,334 ------------------------------------------ Municipal Bonds And Notes - Minnesota - 0.22% 2,410,000 0 2,410,000 MINNEAPOLIS MINN AMT REV FRN 2,410 0 2,410 3.15% 11/01/16 ------------------------------------------ 2,410 0 2,410 ------------------------------------------ Municipal Bonds And Notes - Mississippi - 0.23% 2,500,000 0 2,500,000 FLOWOOD MISS INDL DEV REV FRN 3.3% 2,500 0 2,500 11/01/01 ------------------------------------------ 2,500 0 2,500 ------------------------------------------ Municipal Bonds and Notes - Missouri - 1.43% 0 5,500,000 5,500,000 MISSOURI HIGHER ED LN AUTH STUDENT 0 5,500 5,500 VAR 06/01/20 1,800,000 0 1,800,000 MISSOURI HLTH & ED WA U SER FR 3.15% 1,800 0 1,800 9/01/10 0 1,800,000 1,800,000 MISSOURI ST HEALTH & EDL FACS AUTH 0 1,800 1,800 REV 05/15/38 6,700,000 0 6,700,000 MO ST HLTH & EDL FACS FRN 3.1% 6/01/14 6,700 0 6,700 ------------------------------------------ 8,500 7,300 15,800 ------------------------------------------ Municipal Bonds And Notes - Nebraska - 0.2% 2,250,000 0 2,250,000 DOUGLAS CNTY NEB SCH DIST 4.25% 2,251 0 2,251 1/15/99 ------------------------------------------ 2,251 0 2,251 ------------------------------------------ Municipal Bonds And Notes - Nevada - 0.32% 300,000 0 300,000 GRAND FORKS ND HLTH CARE FACS 3.65% 300 0 300 12/01/25 3,250,000 0 3,250,000 GRAND FORKS ND HOSP FACS REV 3.65% 3,250 0 3,250 12/01/16 ------------------------------------------ 3,550 0 3,550 ------------------------------------------ Municipal Bonds And Notes - New Jersey - 0.45% 5,000,000 0 5,000,000 NEW JERSEY ST HWY AUTH GARDEN 5,000 0 5,000 3.36% ------------------------------------------ 6/01/17 5,000 0 5,000 ------------------------------------------
Municipal Bonds And Notes - New Mexico - 0.53% 5,900,000 0 5,900,000 DONA ANA CNTY NM FRN 3.1% 11/01/13 5,900 0 5,900 ------------------------------------------ 5,900 0 5,900 ------------------------------------------ Municipal Bonds and Notes - New York - 1.58% 0 11,500,000 11,500,000 NEW YORK LOCAL GOVERNMENT EAGLES 0 11,500 11,500 04/01/17 *144A* 0 6,000,000 6,000,000 NEW YORK MTA 1993C VRDCS 0 6,000 6,000 10/31/07 *144A* ------------------------------------------ 0 17,500 17,500 ------------------------------------------ Municipal Bonds and Notes - North Carolina - 3.64% 0 1,300,000 1,300,000 NORTH CAROLINA MED CARE 0 1,300 1,300 COMM HOSP REV VRN 09/01/02 0 10,000,000 10,000,000 NORTH CAROLINA MEDICAL CARE VRN 0 10,000 10,000 11/15/09 0 6,500,000 6,500,000 NORTH CAROLINA MUNI POWER AGENCY 0 6,500 6,500 (CATAWBA PROJ) 0 6,200,000 6,200,000 NORTH CAROLINA MUNI POWER AGENCY 0 6,200 6,200 (CATAWBA PROJ)#1 0 10,000,000 10,000,000 NORTH CAROLINA MUNICIPAL POWER AGENCY 0 10,000 10,000 CATAWABA 0 6,200,000 6,200,000 WAKE COUNTY N C INDL FACS & PCR VRN 0 6,200 6,200 09/01/15 ------------------------------------------ 0 40,200 40,200 ------------------------------------------ Municipal Bonds And Notes - Ohio - 3.30% 960,000 0 960,000 CENTERVILLE OH HLTH FRN 3.15% 11/01/13 960 0 960 5,000,000 0 5,000,000 CLINTON CNTY OH ARPT 3.15% 6/01/11 5,000 0 5,000 895,000 0 895,000 CUYHOGA CNTY OH IDR FRN 3.25% 5/01/11 895 0 895 1,000,000 0 1,000,000 GREENE CNTY OH IDR FRN 3.4% 9/01/16 1,000 0 1,000 2,060,000 0 2,060,000 LUCAS CNTY OHIO INDL DEV REV F 3.3% 2,060 0 2,060 7/01/09 10,000,000 0 10,000,000 LUCAS CO OH TOLEDO ZOO 3.25% 10/01/05 10,000 0 10,000 2,279,000 0 2,279,000 OHIO FINANCING AGY HSG FRN 3.5% 2,279 0 2,279 12/01/15 1,300,000 0 1,300,000 OHIO ST AIR QUALITY DEV AUTH F 3.7% 1,300 0 1,300 12/01/15 2,300,000 0 2,300,000 OHIO ST AIR QUALITY DEV FRN AU 3.7% 2,300 0 2,300 12/01/15 1,210,000 0 1,210,000 OHIO ST POLLUTION CTL REV 3.7% 5/01/22 1,210 0 1,210
0 2,000,000 2,000,000 OHIO STATE WTR DEV AUTH SOLID WASTE 0 2,000 2,000 DISP REV 5,000,000 0 5,000,000 OTTAWA CO OHIO BANS 4% 8/06/99 5,011 0 5,011 1,350,000 0 1,350,000 SUMMIT CO OH IDR FRN 3.25% 2/01/07 1,350 0 1,350 1,065,000 0 1,065,000 TOLEDO-LUCAS CNTY OHIO PORT FR 3.35% 1,065 0 1,065 12/01/21 ------------------------------------------ 34,430 2,000 36,430 ------------------------------------------ Municipal Bonds and Notes - Oklahoma - 1.71% 0 18,925,000 18,925,000 OKLAHOMA ST 0 18,925 18,925 WTR RES BRD ST LN 3.50% ------------------------------------------ 09/01/24 0 18,925 18,925 ------------------------------------------ Municipal Bonds and Notes - Oregon - 1.87% 0 10,000,000 10,000,000 MEDFORD OREGON HOSP FACS AUTH VRN 0 10,000 10,000 05/15/27 4,595,000 0 4,595,000 OREGON ST HSG & CMNTY SVCS DEP 3.85% 4,595 0 4,595 12/03/98 4,100,000 0 4,100,000 PORT OF PORTLAND OR HORIZON 3.75% 4,100 0 4,100 6/15/27 2,000,000 0 2,000,000 PORT PORTLAND (SCHNITZER STEEL 3.2% 2,000 0 2,000 11/01/07 ------------------------------------------ 10,695 10,000 20,695 ------------------------------------------ Municipal Bonds and Notes - Pennsylvania - 10.63% 0 8,225,000 8,225,000 ALLEGHANY CO. PA INDUSTRIAL REVENUE 0 8,225 8,225 9/1/11 0 3,700,000 3,700,000 ALLEGHENY CNTY PA INDL DEV 09/01/11 0 3,700 3,700 3,900,000 0 3,900,000 DELAWARE CNTY INDL DEV POLLUTN 3.7% 3,900 0 3,900 12/01/09 1,000,000 0 1,000,000 DELAWARE CNTY INDL DEV POLLUTN 3.7% 1,000 0 1,000 10/01/19 3,100,000 0 3,100,000 ELK CNTY PA INDL DEV AUTH REV 3.3% 3,100 0 3,100 0 4,600,000 4,600,000 3/01/09 0 4,600 4,600 EMMAUS PA GEN AUTH REV 03/01/24 2,100,000 0 2,100,000 PHILADELPHIA PA AUTH DEV FRN 3.7% 2,100 0 2,100 7/01/25 0 13,250,000 13,250,000 PHILADELPHIA PA TRANS 4.25% 06/30/99 0 13,302 13,302 0 20,600,000 20,600,000 QUAKERTOWN PA GEN AUTH REV 7/1/26 0 20,600 20,600 0 46,600,000 46,600,000 QUAKERTOWN PA HOSP AUTH VRN 07/01/05 0 46,600 46,600 0 7,300,000 7,300,000 SCHUYLKILL CNTY PA IDA VRN 12/01/22 0 7,300 7,300 1,240,000 0 1,240,000 SCHUYLKILL CNTY PA INDL DEV FR 3.15% 1,240 0 1,240 2/01/12 1,760,000 0 1,760,000 SCHUYLKILL CNTY PA INDL DEV FR 3.3% 1,760 0 1,760
2/01/12 ------------------------------------------ 13,100 104,327 117,427 ------------------------------------------ Municipal Bonds And Notes - South Carolina - 1.08% 4,000,000 0 4,000,000 ANDERSON CNTY SC INDL REV 4,000 0 4,000 3.25% 11/01/12 1,000,000 0 1,000,000 CHEROKEE CNTY SC FRN 3.5% 11/01/04 1,000 0 1,000 3,100,000 0 3,100,000 SC JOBS EDA HFA FRN 3.15% 10/01/19 3,100 0 3,100 1,300,000 0 1,300,000 SOUTH CAROLINA JOB DEV AUTH FR 3.25% 1,300 0 1,300 12/01/01 1,800,000 0 1,800,000 SOUTH CAROLINA JOBS FRN 3.15% 6/01/18 1,800 0 1,800 700,000 0 700,000 YORK CNTY SC POLLTN CTL REV 3.2% 700 0 700 9/15/14 ------------------------------------------ 11,900 0 11,900 ------------------------------------------ 730,000 0 730,000 Municipal Bonds And Notes - 730 0 730 South Dakota - 0.07% ------------------------------------------ SOUTH DAKOTA ECON DEV FIN AUTH 730 0 730 3.5% 8/01/08 ------------------------------------------ Municipal Bonds and Notes - Tennessee - 3.18% 0 8,500,000 8,500,000 BRISTOL,TN HEALTH & EDUCATION FAC 95A 0 8,500 8,500 3/1/14*144A* 2,000,000 0 2,000,000 DICKSON COUNTY TN 3.15% 11/01/12 2,000 0 2,000 6,685,000 0 6,685,000 FRANKLIN CNTY TN HLTH & EDL 3.1% 6,685 0 6,685 9/01/18 1,265,000 0 1,265,000 JEFFERSON CTY TN IDB FRN 3.2% 11/01/24 1,265 0 1,265 0 9,350,000 9,350,000 MET GOVT NASHVILLE VRN 11/15/26 0 9,350 9,350 5,600,000 0 5,600,000 METRO NASHVILLE ARPT AUTH FACS 3.65% 5,600 0 5,600 10/01/12 1,700,000 0 1,700,000 SPRINGFIELD TN INDL DEV BRD FR 3.35% 1,700 0 1,700 11/15/09 ------------------------------------------ 17,250 17,850 35,100 ------------------------------------------ Municipal Bonds and Notes - Texas - 8.80% 0 1,500,000 1,500,000 ANGELINA NECHES RIVER AUTH TX 5/1/14 0 1,500 1,500 0 9,250,000 9,250,000 BRAZOS RIVER HARBOR NAVIGATION DIST, 0 9,250 9,250 TX 0 6,700,000 6,700,000 GRAND PRAIRIE TEX HSG VRN 6/1/10 0 6,700 6,700 0 2,300,000 2,300,000 GRAPEVINE TEX INDL DEV CORP ARPT REV 0 2,300 2,300
100,000 0 100,000 GRAPEVINE TEX INDL DEV CORP FR SERIES A2 100 0 100 3.65% 12/01/24 400,000 0 400,000 GRAPEVINE TEX INDL FRN SERIES A1 3.65% 12/01/24 400 0 400 1,100,000 0 1,100,000 GRAPEVINE TEX INDL FRN SERIES B2 3.65% 12/01/24 1,100 0 1,100 3,200,000 200,000 3,400,000 GUADALUPE BLANCO RIV AUTH TX F 3.75% 3,200 200 3,400 11/01/15 0 900,000 900,000 GULF COAST WASTE DISP AUTH TEX POLLU. 0 900 900 VRN 10/1/17 0 4,000,000 4,000,000 HARRIS CNTY TEXAS PCR VRN 04/01/27 0 4,000 4,000 4,000,000 0 4,000,000 HARRIS CNTY TX FRN 3.7% 12/01/26 4,000 0 4,000 2,900,000 0 2,900,000 HARRIS CNTY TX HEALTH FACS FRN 3.7% 2,900 0 2,900 12/01/25 900,000 0 900,000 LONE STAR TEX ARPT IMPT AUTH 3.65% 900 0 900 12/01/14 300,000 0 300,000 LONE STAR TEX ARPT IMPT AUTH 3.65% 300 0 300 12/01/14 1,100,000 0 1,100,000 LONE STAR TEX ARPT IMPT AUTH 3.65% 1,100 0 1,100 12/01/14 600,000 0 600,000 LONE STAR TX ARPT IMPT AUTH FR 3.65% 600 0 600 12/01/14 700,000 0 700,000 LONE STAR TX ARPT IMPT AUTH FR 3.65% 700 0 700 12/01/14 930,000 0 930,000 LONE STAR TX ARPT IMPT AUTH FR 3.65% 930 0 930 12/01/14 4,300,000 0 4,300,000 MC ALLEN TX HEALTH FRN 3.3% 12/01/24 4,303 0 4,303 0 5,000,000 5,000,000 N CENTRAL TX HLTH FAC (METH HOSP) SER 0 5,000 5,000 91-A 1,200,000 0 1,200,000 NUECES CNTY TX HLTH FACS DEV C 3.2% 1,200 0 1,200 7/01/15 0 16,600,000 16,600,000 NUECES RIVER AUTH TEXAS VRN 03/01/27 0 16,600 16,600 *144A* 4,000,000 0 4,000,000 SABINE RIVER AUTH TX POLLUTN F 3.75% 4,000 0 4,000 3/01/26 5,000,000 0 5,000,000 TEXAS MUN GAS CORP FRN 3.05% 1/15/23 5,000 0 5,000 0 15,000,000 15,000,000 TEXAS ST 4.50% 08/31/99 0 15,146 15,146 1,000,000 0 1,000,000 TRINITY RIVER TX IDA FRN 3.225% 1,000 0 1,000 11/01/14 3,900,000 0 3,900,000 WEST SIDE CALHOUN CNTY FRN 3.7% 3,900 0 3,900 12/01/15 ------------------------------------------ 35,633 61,596 97,229 ------------------------------------------ Municipal Bonds and Notes - Utah - 1.82% 0 6,000,000 6,000,000 EMERY CNTY UTAH PCR DAILY VRN 11/1/24 0 6,000 6,000 0 9,900,000 9,900,000 INTERMOUNTAIN PWR AGY UT VRN 0 9,900 9,900 07/01/03 *144A* 0 4,200,000 4,200,000 SALT LAKE CNTY UTAH POLLUTN CTL VRN 0 4,200 4,200
2/1/08 ------------------------------------------ 0 20,100 20,100 ------------------------------------------ Municipal Bonds and Notes - Vermont - 0.98% 0 5,500,000 5,500,000 VERMONT ED & HLTH BLDG-MIDDLEBURY COL 0 5,500 5,500 3.75 5/1/28 0 3,575,000 3,575,000 VERMONT EDL & HLTH BLDGS FING AGY REV 0 3,575 3,575 11/01/27 0 1,800,000 1,800,000 VERMONT EDL & HLTH BLDGS FING AGY REV 0 1,800 1,800 12/01/25 ------------------------------------------ 0 10,875 10,875 ------------------------------------------ Municipal Bonds And Notes - Virginia - 1.64% 5,800,000 0 5,800,000 ALBEMARLE CNTY VA INDL DEV AUT 3.1% 5,800 0 5,800 2/01/26 7,125,000 0 7,125,000 MADISON CNTY VA INDL DEV 3.2% 6/01/13 7,125 0 7,125 3,595,000 0 3,595,000 RICHMOND VA EQUIP NOTES 4.25% 5/15/99 3,603 0 3,603 1,575,000 0 1,575,000 WINCHESTER VA INDL DEV AUTH FR 3.45% 1,575 0 1,575 8/01/07 ------------------------------------------ 18,103 0 18,103 ------------------------------------------ Municipal Bonds And Notes - Washington - 1.18% 800,000 0 800,000 PORT SKAGIT CNTY WA IND DEV VA 800 0 800 3.4% 12/01/20 0 1,000,000 1,000,000 WASHINGTON ST HSG FIN COMMN 01/01/10 0 1,000 1,000 WASHINGTON ST PUB PWR SUPPLY SYS 0 9,195,000 9,195,000 NUCLEAR *144A* 0 9,195 9,195 0 2,000,000 2,000,000 WASHINGTON STATE HEALTH CARE FACS VRN 0 2,000 2,000 1/1/23 ------------------------------------------ 800 12,195 12,995 ------------------------------------------ Municipal Bonds And Notes - West Virginia - 0.15% 1,600,000 0 1,600,000 OHIO CNTY WVA IDR FRN 3.85% 12/01/01 1,600 0 1,600 ------------------------------------------ 1,600 0 1,600 ------------------------------------------ Municipal Bonds And Notes - Wisconsin - 0.86% 3,000,000 0 3,000,000 MENASHA WIS JT SCH DIST 3.15% 9/30/99 3,001 0 3,001 940,000 0 940,000 MILWAUKEE WI IDR (MANDEL CO) F 3.5% 940 0 940 4/01/07 3,000,000 0 3,000,000 WATERTOWN WI UNIF SCH DIST 3.1% 3,001 0 3,001 10/28/99 0 2,500,000 2,500,000 WISCONSIN ST OPERATING NTS 4.50% 0 2,515 2,515 06/15/99 ------------------------------------------ 6,942 2,515 9,457 ------------------------------------------
Municipal Bonds And Notes - Wyoming - 0.29% 1,500,000 0 1,500,000 SUBLETTE CNTY WYO PLLTN CTL 3.8% 1,500 0 1,500 7/01/17 0 1,650,000 1,650,000 SUBLETTE CNTY WYO POLLUTION CTL REV 0 1,650 1,650 VRN 11/01/2014 ------------------------------------------ 1,500 1,650 3,150 ------------------------------------------ Total Investments- 100.43% (Cost 374,858 734,170 1,109,028 $374,858, $734,170, $1,109,028 respectively)
Nations Municipal Reserves / Pacific Horizon Tax Exempt Fund Pro Forma Combining Statement of Net Assets (unaudited) October 31,1998
Nations Pacific Municipal Horizon Tax Adjustments to Pro Pro Forma Reserves Exempt Fund Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) ---------- ---------- ---------- ---------- Total Investments $ 374,858 $ 734,170 $ - $ 1,109,028 Other Assets and Liabilities: Other assets and liabilities, net 512 (5,294) - (4,782) ---------- --------- ----------- ------------ Total Other Assets and Liabilities 512 (5,294) - (4,782) ---------- --------- ----------- ------------ Net Assets $ 375,370 $ 728,876 $ - $ 1,104,246 ========== ========= =========== ============ Net Assets by Class: Capital Class / Horizon (Primary) $ 117,664 $ 338,926 $ - $ 456,590 Liquidity Class 66,738 - - 66,738 Adviser Class / Horizon Service 49,969 191,122 - 241,091 Market Class 140,999 - - 140,999 Investor Class / Pacific Horizon - 144,281 - 144,281 Daily / Class S & Class X - 54,547 - 54,547 ---------- --------- ----------- ------------ $ 375,370 $ 728,876 $ - $ 1,104,246 ---------- --------- ----------- ------------ Shares Outstanding by Class: Capital Class / Horizon (Primary) 117,665 339,076 - 456,741 Liquidity Class 66,738 - - 66,738 Adviser Class / Horizon Service 49,969 191,151 - 241,120 Market Class 141,000 - - 141,000 Investor Class / Pacific Horizon - 144,307 - 144,307 Daily / Class S & Class X - 54,547 - 54,547 ---------- --------- ----------- ------------ 375,372 729,081 - 1,104,453 ---------- --------- ----------- ------------ Net Asset Value per Share by Class: Capital Class / Horizon (Primary) $ 1.00 $ 1.00 $ - $ 1.00 Liquidity Class $ 1.00 $ - $ - $ 1.00 Adviser Class / Horizon Service $ 1.00 $ 1.00 $ - $ 1.00 Market Class $ 1.00 $ - $ - $ 1.00 Investor Class / Pacific Horizon $ - $ 1.00 $ - $ 1.00 Daily / Class S & Class X $ - $ 1.00 $ - $ 1.00 See Notes to Pro Forma Financial Statements
Nations Municipal Reserves / Pacific Horizons Tax Exempt Fund Pro Forma Combining Statement of Operations (unaudited) For the Twelve Month Period Ending October 31,1998 Nations Pacific Municipal Horizon Tax Adjustments to Pro Pro Forma Reserves Exempt Fund Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) ---------------------------------------------- ---------- INVESTMENT INCOME: Interest $10,108 $25,946 $0 $36,054 Dividends 141 - - 141 ------- ------- -------- ------- Total Investment Income 10,249 25,946 - 36,195 ------- ------- -------- ------- EXPENSES: Investment Advisory 855 724 (65)(a) 1,514 Administration 285 724 - (a) 1,009 Transfer Agent 40 23 51 (b) 114 Custodian 26 88 (34) (b) 80 Legal and Audit Fees 11 64 (43) (b) 32 Registration & Filing 116 64 - 180 Trustees' Fees 6 29 (20) (b) 15 Interest Expense 44 - - 44 Other expenses (12) 172 (73) (b) 87 ------- ------- -------- ------- Subtotal 1,371 1,888 (184) 3,075 ------- ------- -------- ------- Shareholder Servicing and Distribution Fees Liquidity Class 625 - 625 Adviser Class / Horizon Service 100 482 582 Market Class 542 - 542 Investor Class / Pacific Horizon - 448 42 (a) 490 Daily / Class S & Class X - 328 (131) (a) 197 ------- ------- -------- ------- Subtotal 1,267 1,258 (89) 2,436 ------- ------- -------- ------- Fees waived and/or reimbursed by investment advisor, administrator and/or distributor (1,445) (147) 535(c) (1,057) ------- ------- -------- ------- Total Expenses 1,193 2,999 262 4,454 ------- ------- -------- ------- NET INVESTMENT INCOME 9,056 22,947 (262) 31,741 ------- ------- -------- ------- NET REALIZED GAIN/(LOSS) ON INVESTMENTS (1) (18) - (19) ------- ------- -------- ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $9,055 $22,929 ($262) $31,722 ======= ======= ======== =======
Legend: (a) Reflects adjustment to the acquiring fund contractual fee obligation. (b) Adjustment reflects expected savings when the two funds become one. (c) Reflects adjustment to the level of the acquiring fund's voluntary expense reimbursement. See Notes to Pro Forma Financial Statements Nations Municipal Reserves Pacific Horizon Tax-Exempt Money Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of October 31, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of October 31, 1998 and the unaudited Pro Forma Combining Statement of Operations for the year ended October 31, 1998 assumes the exchange occurred as of November 1, 1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at October 31, 1998 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizon Tax-Exempt Money Fund in exchange for shares of Nations Municipal Reserves. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward to the surviving entity and the results of operations of the Nations Municipal Reserves for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 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. The investment advisory and shareholder servicing and distribution fees have been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations Municipal Reserves at the time of the Reorganization at the combined level of average net assets for the twelve month period ended October 31, 1998. Nations Treasury Reserves / Pacific Horizon Treasury Fund Pro Forma Combining Schedule of Investments (unaudited) October 31,1998
Nations Pacific Treasury Horizon Pro Forma Nations Treasury Pacific Horizon Pro Forma Par Reserves Treasury Combined Reserves Par Treasury Par Combined Security Description Market Market Market Value Value Value (in 000's) (in 000's) (in 000's) INVESTMENT COMPANIES - 1.27% 49,531,000 0 49,531,000 AIM TREASURY 49,531 49,531 22,050,000 0 22,050,000 DREYFUS TREASURY CASH MANAGEMENT 22,050 22,050 ------------------------------------- 71,581 0 71,581 ------------------------------------- REPURCHASE AGREEMENTS - 80.40% 547,000,000 0 547,000,000 ABN-AMRO 5.4% 11/02/98 547,000 547,000 0 275,000,000 275,000,000 BARCLAYS CAPITAL INC.,5.38%,11/2/98 275,000 275,000 105,000,000 0 105,000,000 BEAR STEARNS CO 5.6% 11/02/98 105,000 105,000 0 400,000,000 400,000,000 CIBC OPPENHEIMER CORP., 5.38%,11/2/98 400,000 400,000 0 400,000,000 400,000,000 CREDIT SUISSE FIRST BOSTON CORP. 400,000 400,000 5.45%,11/2/98 277,113,000 0 277,113,000 CS FIRST BOSTON 11/02/98 277,113 277,113 90,000,000 0 90,000,000 DEUTSCHE BANK REPO 5.4% 11/02/98 90,000 90,000 50,000,000 0 50,000,000 DRESDNER KLEINWORT 4.9% 11/02/98 50,000 50,000 45,000,000 0 45,000,000 DRESDNER KLEINWORT 5.58% 11/02/98 45,000 45,000 105,000,000 0 105,000,000 FIRST UNION CAPITAL 5.42% 11/02/98 105,000 105,000 100,000,000 0 100,000,000 GOLD SACHS REPO 5.21% 11/02/98 100,000 100,000 0 400,000,000 400,000,000 GOLDMAN SACHS & CO.,5.38%,11/2/98 400,000 400,000 105,000,000 0 105,000,000 HSBC SECURITIES, INC. 5.42%, 11/02/98 105,000 105,000 0 400,000,000 400,000,000 HSBC SECURITIES INC.,5.42%,11/2/98 400,000 400,000 0 126,439,000 126,439,000 J.P. MORGAN SECURITIES, INC., 5.00%, 11/2/98 126,439 126,439
110,000,000 0 110,000,000 JP MORGAN SEC 4.83% 11/03/98 110,000 110,000 170,000,000 0 170,000,000 LEHMAN BROTHERS INC 5.5% 11/02/98 170,000 170,000 0 300,000,000 300,000,000 LEHMAN BROTHERS INC., 5.38%,11/2/98 300,000 300,000 0 300,000,000 300,000,000 MORGAN STANLEY & CO.INC., 5.38%, 11/2/98 300,000 300,000 105,000,000 0 105,000,000 MORGAN STANLEY DEAN 5.56% 11/02/98 105,000 105,000 0 14,052,000 14,052,000 THE BANK OF NEW YORK, 5.20%, 11/2/98 14,052 14,052 0 10,000,000 10,000,000 THE BANK OF NEW YORK, 5.40%, 11/2/98 10,000 10,000 105,000,000 0 105,000,000 WESTDEUTLANDESBANK 5.6% 11/02/98 105,000 105,000 ------------------------------------- 1,914,113 2,625,491 4,539,604 ------------------------------------- TIME DEPOSITS- EURO - .53% 30,152,000 0 30,152,000 BANK OF NEW YORK CAYMAN ISLAND 4.75% 11/02/98 30,152 30,152 ------------------------------------- 30,152 30,152 ------------------------------------- U.S. TREASURY NOTES--22.77% 100,000,000 75,000,000 175,000,000 US TREASURY NOTE 6.25% 5/31/99 100,926 75,717 176,643 30,000,000 0 30,000,000 US TREASURY NOTE 6% 6/30/99 30,089 30,089 75,000,000 25,000,000 100,000,000 US TREASURY NOTE 6.375% 4/30/99 75,443 25,099 100,542 45,000,000 150,000,000 195,000,000 US TREASURY NOTE 5.875% 1/31/99 45,043 150,103 195,146 65,000,000 0 65,000,000 US TREASURY NOTE 5.875% 7/31/99 65,382 65,382 50,000,000 0 50,000,000 US TREASURY NOTE 5.875% 8/31/99 50,152 50,152 15,000,000 25,000,000 40,000,000 US TREASURY NOTE 5.5% 2/28/99 14,999 24,996 39,995 50,000,000 50,000,000 100,000,000 US TREASURY NOTE 5.0% 2/15/99 50,039 50,047 100,086 0 250,000,000 250,000,000 US TREASURY NOTE 5.875% 02/28/99 250,241 250,241 0 25,000,000 25,000,000 US TREASURY NOTE 6.375% 1/15/99 25,040 25,040 0 50,000,000 50,000,000 US TREASURY NOTE 6.375% 5/15/99 50,496 50,496 0 25,000,000 25,000,000 US TREASURY NOTE 6.50% 04/30/99 25,113 25,113 0 100,000,000 100,000,000 US TREASURY NOTE 6.75% 05/31/99 101,219 101,219 0 75,000,000 75,000,000 US TREASURY NOTE 8.875% 2/15/99 75,758 75,758 ------------------------------------- 432,073 853,829 1,285,902 ------------------------------------- ------------------------------------- Total Investments--104.97% (Cost $2,447,919, $3,479,320, $5.927,239, respectively) 2,447,919 3,479,320 5,927,239 -------------------------------------
Nations Treasury Reserves / Pacific Horizon Treasury Fund Pro Forma Combining Statement of Net Assets (unaudited) October 31,1998 Nations Pacific Treasury Horizon Adjustments to Pro Forma Reserves Treasury Fund Pro Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) ----------------------------------------- -------------- Total Investments $ 2,447,919 $ 3,479,320 $- $ 5,927,239 Other Assets and Liabilities: Receivable for securities sold -- 2,578,844 -- 2,578,844 Payable for securities purchased -- (2,675,987) -- (2,675,987) Payable for reverse repurchase agreement (277,113) -- (277,113) Other assets and liabilities, net 47,057 46,320 -- 93,377 ----------- ---------- ----------- ----------- Total Other Assets and Liabilities (230,056) (50,823) -- (280,879) ----------- ----------- ----------- ----------- Net Assets $ 2,217,863 $ 3,428,497 $ -- $ 5,646,360 =========== =========== =========== =========== Net Assets by Class: Capital Class / Horizon (Primary) $ 466,959 $ 704,992 $-- $ 1,171,951 Liquidity Class 294,293 -- -- 294,293 Adviser Class / Horizon Service 345,679 1,777,222 -- 2,122,901 Market Class 1,110,932 -- -- 1,110,932 Investor Class / Pacific Horizon -- 432,672 432,672 Service Class / Class Y -- 99,148 99,148 Daily / Class S & Class X -- 414,463 414,463 ----------- ----------- ----------- ----------- $ 2,217,863 $ 3,428,497 $-- $ 5,646,360 ----------- ----------- ----------- ----------- Shares Outstanding by Class: Capital Class / Horizon (Primary) 466,882 705,088 -- 1,171,970 Liquidity Class 294,311 -- -- 294,311 Adviser Class / Horizon Service 345,699 1,777,331 -- 2,123,030 Market Class 1,111,000 -- -- 1,111,000 Investor Class / Pacific Horizon -- 432,816 -- 432,816 Service Class / Class Y -- 99,147 -- 99,147 Daily / Class S & Class X -- 414,460 -- 414,460 ----------- ----------- ----------- ----------- 2,217,892 3,428,842 -- 5,646,734 ----------- ----------- ----------- ----------- Net Asset Value per Share by Class: Capital Class / Horizon (Primary) $ 1.00 $ 1.00 $ -- $ 1.00 Liquidity Class $ 1.00 $ -- $ -- $ 1.00 Adviser Class / Horizon Service $ 1.00 $ 1.00 $ -- $ 1.00 Market Class $ 1.00 $ -- $ -- $ 1.00 Investor Class / Pacific Horizon $ -- $ 1.00 $ -- $ 1.00 Service Class / Class Y $ -- $ 1.00 $ -- $ 1.00 Daily / Class S & Class X $ -- $ 1.00 $ -- $ 1.00
See Notes to Pro Forma Financial Statements
Nations Treasury Reserves / Pacific Horizon Treasury Fund Pro Forma Combining Statement of Operations (unaudited) For the Twelve Month Period Ending October 31,1998 Nations Pacific Treasury Horizon Adjustments to Pro Forma Reserves Treasury Fund Pro Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) ----------------------------------------- -------------- INVESTMENT INCOME: Interest $79,852 $173,632 $0 $253,484 Dividends 2,891 - - 2,891 ----------------------------------------- -------------- Total Investment Income 82,743 173,632 - 256,375 ----------------------------------------- -------------- EXPENSES: Investment Advisory 4,503 3,143 (657) (a) 6,989 Administration 1,500 3,159 - (a) 4,659 Transfer Agent 101 60 (30) (b) 131 Custodian 91 289 (42) (b) 338 Legal and Audit Fees 29 174 (42) (b) 161 Registration & Filing 127 204 - 331 Trustees' Fees 21 57 (44) (b) 34 Interest Expense - - - - Other expenses 63 319 (50) (b) 332 ----------------------------------------- -------------- Subtotal 6,435 7,405 (865) 12,975 ----------------------------------------- -------------- Shareholder Servicing and Distribution Fees Liquidity Class 4,114 - - 4,114 Adviser Class / Horizon Service 723 4,463 - 5,186 Market Class 1,987 - - 1,987 Investor Class / Pacific Horizon - 1,103 103(a) 1,206 Service Class / Class Y - 773 - 773 Daily / Class S & Class X - 1,312 119(a) 1,431 ----------------------------------------- -------------- Subtotal 6,824 7,651 222 14,697 ----------------------------------------- -------------- Fees waived and/or reimbursed by investment advisor, administrator and/or distributor (7,415) - 3,750(c) (3,665) ----------------------------------------- -------------- Total Expenses 5,844 15,056 3,107 24,007 ----------------------------------------- -------------- ----------------------------------------- -------------- NET INVESTMENT INCOME 76,899 158,576 (3,107) 232,368 ----------------------------------------- -------------- NET REALIZED GAIN/(LOSS) ON INVESTMENTS (2) 19 - 17 ----------------------------------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS ========================================= ============== RESULTING FROM OPERATIONS $76,897 $158,595 ($3,107) $232,385 ========================================= ==============
Legend: (a) Reflects adjustment to the acquiring fund contractual fee obligation. (b) Adjustment reflects expected savings when the two funds become one. (c) Reflects adjustment to the level of the acquiring fund's voluntary expense reimbursement. (d) Net of expense offset arrangements amounts to less than .01% of average net assets. See Notes to Pro Forma Financial Statements Nations Treasury Reserves Pacific Horizon Treasury Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As of October 31, 1998 the Trust offered five separate portfolios. The unaudited Pro Forma Combining Portfolio of Investments and the unaudited Pro Forma Combining Statement of Assets and Liabilities assumes the exchange described in the next paragraph occurred as of October 31, 1998 and the unaudited pro Forma Combining Statement of Operations for the year ended October 31, 1998 assumes the exchange occurred as of November 1, 1997. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at October 31, 1998 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Pacific Horizons Treasury Fund in exchange for shares of Nations Treasury Reserves. Under generally accepted accounting principles, the historical cost of investment securities will be carried forward to the surviving entity and the results of operations of the Nations Treasury Reserves for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma Combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 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. The investment advisory and shareholder servicing and distribution fees been calculated for the combined fund based on the contractual rates expected to be in effect for the Nations Treasury Reserves at the time of the Reorganization at the combined level of average net assets for the twelve month period ended October 31, 1998. NATIONS INSTITUTIONAL RESERVES FILE NOS. 333-70027 Exhibit Number Description - - -------------- ----------- Ex-99.17 Form of Proxy Ballot EX-99.17 2 PROXY CARDS EXH. 99.17 PACIFIC HORIZON FUNDS, INC. ASSET ALLOCATION FUND PROXY CARD SPECIAL MEETING OF SHAREHOLDERS-APRIL 12, 1999 The undersigned hereby appoints Stephen M. Wyane, Jay F. Nesblatt, Gary M. Gardners and J. Robert Dugan (the "Proxies") and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware at 10:00 A.M. (EASTERN TIME), on Monday, April 12, 1999, and at any adjournment or adjournments thereof. The proxies will cast votes according to the number of shares of the PACIFIC HORIZON ASSET ALLOCATION FUND (the "Fund") which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1, 1999. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY (1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641 OR (2) TOUCHTONE VOTING AT (800) 690-6903 OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM; (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE YOUR PROXY CARD. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL BE VOTED IN FAVOR OF THE PROPOSAL. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PACIFIC HORIZON ASSET ALLOCATION FUND VOTE ON PROPOSAL 1. To approve an Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates (a) the transfer of all of the assets and liabilities of the Fund to a corresponding fund of Nations Institutional Reserves in exchange for shares of a designated class of such Nations Fund of equal value; (b) the distribution of shares of designated classes of the corresponding Nations Fund to shareholders of each Pacific Horizon Fund; (c) the transfer of all the assets and liabilities of Pacific Horizon; and (d) the dissolution under state law and the Investment Company Act of 1940, as amended, of Pacific Horizon. |_|FOR |_|AGAINST |_|ABSTAIN THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON. In their discretion, the Proxies, and either of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. -------------------- ----------- Signature Date -------------------- ----------- Signature (Joint Owners) Date PACIFIC HORIZON FUNDS, INC. BLUE CHIP FUND PROXY CARD SPECIAL MEETING OF SHAREHOLDERS-APRIL 12, 1999 The undersigned hereby appoints Stephen M. Wyane, Jay F. Nesblatt, Gary M. Gardners and J. Robert Dugan (the "Proxies") and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00 A.M. (EASTERN TIME), on Monday, April 12, 1999, and at any adjournment or adjournments thereof. The proxies will cast votes according to the number of shares of the PACIFIC HORIZON BLUE CHIP FUND (the "Fund") which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1, 1999. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY (1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641 OR (2) TOUCHTONE VOTING AT (800) 690-6903 OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM; (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE YOUR PROXY CARD. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL BE VOTED IN FAVOR OF THE PROPOSAL. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PACIFIC HORIZON BLUE CHIP FUND VOTE ON PROPOSAL 1. To approve an Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates (a) the transfer of all of the assets and liabilities of the Fund to a corresponding fund of Nations Institutional Reserves in exchange for shares of a designated class of such Nations Fund of equal value, (b) the distribution of shares of designated classes of the corresponding Nations Fund to shareholders of each Pacific Horizon Fund and (c) the transfer of all the assets and liabilities of Pacific Horizon; and (d) the dissolution under state law and the deregistration under the Investment Company Act of 1940, as amended, of Pacific Horizon. In the case of the Pacific Horizon Blue Chip Fund and Pacific Horizon Intermediate Bond Fund only, to approve an additional Agreement and Plan of Reorganization for Master Investment Trust, Series I, which provides for (a) the transfer of assets and liabilities of the Blue Chip and Investment Grade Bond Portfolios of Master Investment Trust, Series I in exchange for shares of corresponding portfolios of Nations Master Investment Trust of equal value; (b) the distribution of shares of the corresponding portfolio of Nations Master Investment Trust to shareholders of the portfolios of Master Investment Trust, Series I; and (c) the termination under state law and deregistration under the 1940 Act of Master Investment Trust, Series I. |_|FOR |_|AGAINST |_|ABSTAIN THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON. In their discretion, the Proxies, and either of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. -------------------- ----------- Signature Date -------------------- ----------- Signature (Joint Owners) Date PACIFIC HORIZON FUNDS, INC. CALIFORNIA MUNICIPAL BOND FUND PROXY CARD SPECIAL MEETING OF SHAREHOLDERS-APRIL 12, 1999 The undersigned hereby appoints Stephen M. Wyane, Jay F. Nesblatt, Gary M. Gardners and J. Robert Dugan (the "Proxies") and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00 A.M. (EASTERN TIME), on Monday, April 12, 1999, and at any adjournment or adjournments thereof. The proxies will cast votes according to the number of shares of the PACIFIC HORIZON CALIFORNIA MUNICIPAL BOND FUND (the "Fund") which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1, 1999. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641 OR (2) TOUCHTONE VOTING AT (800) 690-6903 OR ON-LINE VOTING AT WWW.PROXYVOTE.COM; (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE YOUR PROXY CARD. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PACIFIC HORIZON CALIFORNIA MUNICIPAL BOND FUND VOTE ON PROPOSAL 1. To approve an Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates (a) the transfer of all of the assets and liabilities of the Fund to a corresponding fund of Nations Institutional Reserves in exchange for shares of a designated class of such Nations Fund of equal value; (b) the distribution of shares of designated classes of the corresponding Nations Fund to shareholders of each Pacific Horizon Fund; (c) the transfer of all the assets and liabilities of Pacific Horizon; and (d) the dissolution under state law and the Investment Company Act of 1940, as amended, of Pacific Horizon. |_|FOR |_|AGAINST |_|ABSTAIN THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON. In their discretion, the Proxies, and either of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. -------------------- ----------- Signature Date -------------------- ----------- Signature (Joint Owners) Date PACIFIC HORIZON FUNDS, INC. CALIFORNIA TAX-EXEMPT MONEY MARKET FUND PROXY CARD SPECIAL MEETING OF SHAREHOLDERS-APRIL 12, 1999 The undersigned hereby appoints Stephen M. Wyane, Jay F. Nesblatt, Gary M. Gardners and J. Robert Dugan (the "Proxies") and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00 A.M. (EASTERN TIME), on Monday, April 12, 1999, and at any adjournment or adjournments thereof. The proxies will cast votes according to the number of shares of the PACIFIC HORIZON CALIFORNIA TAX-EXEMPT MONEY MARKET FUND (the "Fund") which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1, 1999. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY (1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641 OR (2) TOUCHTONE VOTING AT (800) 690-6903 OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM; (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE YOUR PROXY CARD. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL BE VOTED IN FAVOR OF THE PROPOSAL. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PACIFIC HORIZON CALIFORNIA TAX-EXEMPT MONEY MARKET FUND VOTE ON PROPOSAL 1. To approve an Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates (a) the transfer of all of the assets and liabilities of the Fund to a corresponding fund of Nations Institutional Reserves in exchange for shares of a designated class of such Nations Fund of equal value; (b) the distribution of shares of designated classes of the corresponding Nations Fund to shareholders of each Pacific Horizon Fund; (c) the transfer of all the assets and liabilities of Pacific Horizon; and (d) the dissolution under state law and the Investment Company Act of 1940, as amended, of Pacific Horizon. |_|FOR |_|AGAINST |_|ABSTAIN THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON. In their discretion, the Proxies, and either of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. -------------------- ----------- Signature Date -------------------- ----------- Signature (Joint Owners) Date PACIFIC HORIZON FUNDS, INC. CAPITAL INCOME FUND PROXY CARD SPECIAL MEETING OF SHAREHOLDERS-APRIL 12, 1999 The undersigned hereby appoints Stephen M. Wyane, Jay F. Nesblatt, Gary M. Gardners and J. Robert Dugan (the "Proxies") and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific Horizon") to be held 400 Bellevue Parkway, Wilmington, Delaware, at 10:00 A.M. (EASTERN TIME), on Monday, April 12, 1999, and at any adjournment or adjournments thereof. The proxies will cast votes according to the number of shares of the PACIFIC HORIZON CAPITAL INCOME FUND (the "Fund") which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1, 1999. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY (1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641 OR (2) TOUCHTONE VOTING AT (800) 690-6903 OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM; (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE YOUR PROXY CARD. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL BE VOTED IN FAVOR OF THE PROPOSAL. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PACIFIC HORIZON CAPITAL INCOME FUND VOTE ON PROPOSAL 1. To approve an Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates (a) the transfer of all of the assets and liabilities of the Fund to a corresponding fund of Nations Institutional Reserves in exchange for shares of a designated class of such Nations Fund of equal value; (b) the distribution of shares of designated classes of the corresponding Nations Fund to shareholders of each Pacific Horizon Fund; (c) the transfer of all the assets and liabilities of Pacific Horizon; and (d) the dissolution under state law and the Investment Company Act of 1940, as amended, of Pacific Horizon. |_|FOR |_|AGAINST |_|ABSTAIN THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON. In their discretion, the Proxies, and either of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. -------------------- ----------- Signature Date -------------------- ----------- Signature (Joint Owners) Date PACIFIC HORIZON FUNDS, INC. GOVERNMENT FUND PROXY CARD SPECIAL MEETING OF SHAREHOLDERS-APRIL 12, 1999 The undersigned hereby appoints Stephen M. Wyane, Jay F. Nesblatt, Gary M. Gardners and J. Robert Dugan (the "Proxies") and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00 A.M. (EASTERN TIME), on Monday, April 12, 1999, and at any adjournment or adjournments thereof. The proxies will cast votes according to the number of shares of the PACIFIC HORIZON GOVERNMENT FUND (the "Fund") which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1, 1999. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY (1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641 OR (2) TOUCHTONE VOTING AT (800) 690-6903 OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM; (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE YOUR PROXY CARD. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL BE VOTED IN FAVOR OF THE PROPOSAL. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PACIFIC HORIZON GOVERNMENT FUND VOTE ON PROPOSAL 1. To approve an Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates (a) the transfer of all of the assets and liabilities of the Fund to a corresponding fund of Nations Institutional Reserves in exchange for shares of a designated class of such Nations Fund of equal value; (b) the distribution of shares of designated classes of the corresponding Nations Fund to shareholders of each Pacific Horizon Fund; (c) the transfer of all the assets and liabilities of Pacific Horizon; and (d) the dissolution under state law and the Investment Company Act of 1940, as amended, of Pacific Horizon. |_|FOR |_|AGAINST |_|ABSTAIN THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON. In their discretion, the Proxies, and either of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. -------------------- ----------- Signature Date -------------------- ----------- Signature (Joint Owners) Date PACIFIC HORIZON FUNDS, INC. INTERMEDIATE BOND FUND PROXY CARD SPECIAL MEETING OF SHAREHOLDERS-APRIL 12, 1999 The undersigned hereby appoints Stephen M. Wyane, Jay F. Nesblatt, Gary M. Gardners and J. Robert Dugan (the "Proxies") and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00 A.M. (EASTERN TIME), on Monday, April 12, 1999, and at any adjournment or adjournments thereof. The proxies will cast votes according to the number of shares of the PACIFIC HORIZON INTERMEDIATE BOND FUND (the "Fund") which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1, 1999. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY (1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641 OR (2) TOUCHTONE VOTING AT (800) 690-6903 OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM; (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE YOUR PROXY CARD. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL BE VOTED IN FAVOR OF THE PROPOSAL. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PACIFIC HORIZON INTERMEDIATE BOND FUND VOTE ON PROPOSAL 1. To approve an Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates, (a) the transfer of all of the assets and liabilities of the Fund to a corresponding fund of Nations Institutional Reserves in exchange for shares of a designated class of such Nations Fund of equal value, (b) the distribution of shares of designated classes of the corresponding Nations Fund to shareholders of each Pacific Horizon Fund and (c) the transfer of all of the assets and liabilities of Pacific Horizon; (d) the dissolution under state law and the deregistration under Investment Company Act of 1940, as amended, of Pacific Horizon in the case of the Pacific Horizon Blue Chip Fund, and Pacific Horizon Intermediate Bond Fund only, to approve an additional proposed Agreement and Plan of Reorganization for Master Investment Trust, Series I, which provides for (a) the transfer of assets and liabilities of the Blue Chip and Investment Grade Bond Portfolios of Master Investment Trust, Series I, in exchange for shares of corresponding portfolios of Nations Master Investment Trust of equal value; (b) the distribution of shares of the corresponding portfolio of Nations Master Investment Trust to shareholders of the portfolios of Master Investment Trust, Series I; and (c) the termination under state law and deregistration under the 1940 Act of Master Investment Trust, Series I. |_|FOR |_|AGAINST |_|ABSTAIN THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON. In their discretion, the Proxies, and either of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. ------------------------ ----------- Signature Date ------------------------ ----------- Signature (Joint Owners) Date PACIFIC HORIZON FUNDS, INC. PRIME FUND PROXY CARD SPECIAL MEETING OF SHAREHOLDERS-APRIL 12, 1999 The undersigned hereby appoints Stephen M. Wyane, Jay F. Nesblatt, Gary M. Gardners and J. Robert Dugan (the "Proxies") each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00 A.M. (EASTERN TIME), on Monday, April 12, 1999, and at any adjournment or adjournments thereof. The proxies will cast votes according to the number of shares of the PACIFIC HORIZON PRIME FUND (the "Fund") which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1, 1999. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY (1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641 OR (2) TOUCHTONE VOTING AT (800) 690-6903 OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM; (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE YOUR PROXY CARD. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL BE VOTED IN FAVOR OF THE PROPOSAL. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PACIFIC HORIZON PRIME FUND VOTE ON PROPOSAL 1. To approve an Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates (a) the transfer of all of the assets and liabilities of the Fund to a corresponding fund of Nations Institutional Reserves in exchange for shares of a designated class of such Nations Fund of equal value; (b) the distribution of shares of designated classes of the corresponding Nations Fund to shareholders of each Pacific Horizon Fund; (c) the transfer of all the assets and liabilities of Pacific Horizon; and (d) the dissolution under state law and the Investment Company Act of 1940, as amended, of Pacific Horizon. |_|FOR |_|AGAINST |_|ABSTAIN THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON. In their discretion, the Proxies, and either of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. -------------------- ----------- Signature Date -------------------- ----------- Signature (Joint Owners) Date PACIFIC HORIZON FUNDS, INC. TAX-EXEMPT MONEY FUND PROXY CARD SPECIAL MEETING OF SHAREHOLDERS-APRIL 12, 1999 The undersigned hereby appoints Stephen M. Wyane, Jay F. Nesblatt, Gary M. Gardners and J. Robert Dugan (the "Proxies") and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00 A.M. (EASTERN TIME), on Monday, April 12, 1999, and at any adjournment or adjournments thereof. The proxies will cast votes according to the number of shares of the PACIFIC HORIZON TAX-EXEMPT MONEY FUND (the "Fund") which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1, 1999. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY (1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641 OR (2) TOUCHTONE VOTING AT (800) 690-6903 OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM; (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE YOUR PROXY CARD. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL BE VOTED IN FAVOR OF THE PROPOSAL. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PACIFIC HORIZON TAX-EXEMPT MONEY MARKET FUND VOTE ON PROPOSAL 1. To approve an Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for (a) the transfer of all of the assets and liabilities of the Fund to a corresponding fund of Nations Institutional Reserves in exchange for shares of a designated class of such Nations fund, (b) the distribution of shares of designated classes of the corresponding Nations Fund to shareholders of each Pacific Horizon Fund and (c) the dissolution under state law and the Investment Company Act of 1940, as amended, the ("1940 Act") of Pacific Horizon and in the case of the Pacific Horizon Blue Chip Fund, an additional Agreement and Plan of Reorganization. |_|FOR |_|AGAINST |_|ABSTAIN THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON. In their discretion, the Proxies, and either of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. ------------------------ ----------- Signature Date ------------------------ ----------- Signature (Joint Owners) Date PACIFIC HORIZON FUNDS, INC. TREASURY FUND PROXY CARD SPECIAL MEETING OF SHAREHOLDERS-APRIL 12, 1999 The undersigned hereby appoints Stephen M. Wyane, Jay F. Nesblatt, Gary M. Gardners and J. Robert Dugan (the "Proxies") and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00 A.M. (EASTERN TIME), on Monday, April 12, 1999, and at any adjournment or adjournments thereof. The proxies will cast votes according to the number of shares of the PACIFIC HORIZON TREASURY FUND (the "Fund") which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1, 1999. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY (1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641 OR (2) TOUCHTONE VOTING AT (800) 690-6903 OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM; (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE YOUR PROXY CARD. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL BE VOTED IN FAVOR OF THE PROPOSAL. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PACIFIC HORIZON TREASURY FUND VOTE ON PROPOSAL 1. To approve an Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates (a) the transfer of all of the assets and liabilities of the Fund to a corresponding fund of Nations Institutional Reserves in exchange for shares of a designated class of such Nations Fund of equal value; (b) the distribution of shares of designated classes of the corresponding Nations Fund to shareholders of each Pacific Horizon Fund; (c) the transfer of all the assets and liabilities of Pacific Horizon; and (d) the dissolution under state law and the Investment Company Act of 1940, as amended, of Pacific Horizon. |_|FOR |_|AGAINST |_|ABSTAIN THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON. In their discretion, the Proxies, and either of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. ------------------------ ----------- Signature Date ------------------------ ----------- Signature (Joint Owners) Date PACIFIC HORIZON FUNDS, INC. TREASURY ONLY FUND PROXY CARD SPECIAL MEETING OF SHAREHOLDERS-APRIL 12, 1999 The undersigned hereby appoints Stephen M. Wyane, Jay F. Nesblatt, Gary M. Gardners and J. Robert Dugan (the "Proxies") and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00 A.M. (EASTERN TIME), on Monday, April 12, 1999, and at any adjournment or adjournments thereof. The proxies will cast votes according to the number of shares of the PACIFIC HORIZON TREASURY ONLY FUND (the "Fund") which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and with all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said attorneys and Proxies, or either of them, may lawfully do by virtue thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1, 1999. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY (1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641 OR (2) TOUCHTONE VOTING AT (800) 690-6903 OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM; (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE YOUR PROXY CARD. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL BE VOTED IN FAVOR OF THE PROPOSAL. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PACIFIC HORIZON TREASURY ONLY FUND VOTE ON PROPOSAL 1. To approve an Agreement and Plan of Reorganization, attached to the Combined Proxy Statement/Prospectus for the Meeting, which provides for and contemplates (a) the transfer of all of the assets and liabilities of the Fund to a corresponding fund of Nations Institutional Reserves in exchange for shares of a designated class of such Nations Fund of equal value; (b) the distribution of shares of designated classes of the corresponding Nations Fund to shareholders of each Pacific Horizon Fund; (c) the transfer of all the assets and liabilities of Pacific Horizon; and (d) the dissolution under state law and the Investment Company Act of 1940, as amended, of Pacific Horizon. |_|FOR |_|AGAINST |_|ABSTAIN THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON. In their discretion, the Proxies, and either of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. -------------------- ----------- Signature Date -------------------- ----------- Signature (Joint Owners) Date -----END PRIVACY-ENHANCED MESSAGE-----