As filed with the Securities and Exchange Commission on April 30, 1999 Registration No. 333-________ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 - -------------------------------------------------------------------------------- FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X| Pre-Effective Amendment No. ___ |_| Post-Effective Amendment No. ___ |_| REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1940 |_| Amendment No. ___ |_| (Check appropriate box or boxes) ------------------------ THE CAPITOL MUTUAL FUNDS (Exact Name of Registrant as specified in Charter) 111 Center Street Little Rock, Arkansas 72201 (Address of Principal Executive Offices, including Zip Code) -------------------------- Registrant's Telephone Number, including Area Code: (800) 626-2275 Richard H. Blank, Jr. c/o Stephens Inc. 111 Center Street Little Rock, Arkansas 72201 (Name and Address of Agent for Service) With copies to: Robert M. Kurucza, Esq. Robert B. Carroll, Esq. Marco E. Adelfio, Esq. Brian F. McNally, Esq. Morrison & Foerster LLP BankAmerica Corporation 2000 Pennsylvania Ave., N.W. One Bank of America Plaza Suite 5500 101 South Tryon Street Washington, D.C. 20006 Charlotte, NC 28255-0001 It is proposed that this filing will become effective on May 30, 1999 pursuant to Rule 488. No filing fee is required under the Securities Act of 1933 because an indefinite number of shares of beneficial interest in the Registrant, without par value, has previously been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended. The Registrant filed on July 10, 1998, the notice required by Rule 24f-2 for its fiscal year ended April 30, 1998 (File No. 33-33144; 811-6030). NATIONS INSTITUTIONAL RESERVES CROSS-REFERENCE SHEET PART A - ------ ITEM NO. ITEM CAPTION PROSPECTUS CAPTION - -------- ------------ ------------------ 1 Beginning of Registration COVER PAGE OF REGISTRATION STATEMENT; Statement and Outside Front CROSS-REFERENCE SHEET; FRONT COVER PAGE OF Cover Page of Prospectus PROXY STATEMENT/PROSPECTUS 2 Beginning and Outside Back TABLE OF CONTENTS Cover Page of Prospectus 3 Fee Table, Synopsis APPENDIX II -- EXPENSE SUMMARIES OF THE Information, and Risk Factors FUNDS; SUMMARY -- ABOUT THE PROPOSED CONSOLIDATION; SUMMARY-- ABOUT THE PROPOSED CONSOLIDATION: FEES AND EXPENSES; SUMMARY -- ABOUT THE PROPOSED CONSOLIDATION: THE CONSOLIDATION AGREEMENT; SUMMARY -- ABOUT THE PROPOSED CONSOLIDATION: PURPOSE OF THE CONSOLIDATION; SUMMARY -- ABOUT THE PROPOSED CONSOLIDATION: OVERVIEW OF THE FUNDS; SUMMARY -- ABOUT THE PROPOSED CONSOLIDATION: RISK FACTORS; SUMMARY -- ABOUT THE PROPOSED CONSOLIDATION: FEDERAL INCOME TAX CONSEQUENCES; SUMMARY -- ABOUT THE PROPOSED CONSOLIDATION: BOARD CONSIDERATION; SUMMARY -- VOTING INFORMATION 4 Information About the THE CONSOLIDATION - DESCRIPTION OF THE Transaction CONSOLIDATION AGREEMENT; THE CONSOLIDATION - PURPOSE OF THE CONSOLIDATION; THE CONSOLIDATION - COMPARISON OF CORPORATE/TRUST STRUCTURE; THE CONSOLIDATION - CAPITALIZATION OF EACH FUND; THE CONSOLIDATION - COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES; THE CONSOLIDATION - COMPARISON OF TOTAL EXPENSE RATIONS; THE CONSOLIDATION INVESTMENT ADVISER AND OTHER SERVICE PROVIDERS; THE CONSOLIDATION - SALES LOADS, SHAREHOLDER TRANSACTIONS AND SERVICES; THE CONSOLIDATION - DISTRIBUTION AND SHAREHOLDER SERVICING ARRANGEMENTS; THE CONSOLIDATION - FEDERAL INCOME TAX CONSEQUENCES; THE CONSOLIDATION - BOARD CONSIDERATIONS; THE CONSOLIDATION - OTHER INFORMATION 5 Information About the OTHER INFORMATION - HOW TO OBTAIN Registrant ADDITIONAL INFORMATION ABOUT THE FUNDS; OTHER INFORMATION - FINANCIAL STATEMENTS; OTHER INFORMATION - SHAREHOLDER INQUIRIES 6 Information About the Company OTHER INFORMATION - HOW TO OBTAIN Being Acquired ADDITIONAL INFORMATION ABOUT THE FUNDS; OTHER INFORMATION - FINANCIAL STATEMENTS; OTHER INFORMATION - SHAREHOLDER INQUIRIES 7 Voting Information INFORMATION RELATING TO VOTING MATTERS - GENERAL INFORMATION; INFORMATION RELATING TO VOTING MATTERS - QUORUM; INFORMATION RELATING TO VOTING MATTERS - ANNUAL MEETINGS AND SHAREHOLDER MEETINGS; INFORMATION RELATING TO VOTING MATTERS - SHAREHOLDER APPROVAL; INFORMATION RELATING TO VOTING MATTERS - OTHER BUSINESS 8 Interest of Certain Persons NOT APPLICABLE and Experts 9 Additional Information NOT APPLICABLE Required for Reoffering by Persons Deemed to be Underwriters PART B - ------ STATEMENT OF ADDITIONAL ITEM NO. ITEM CAPTION INFORMATION CAPTION - -------- ------------ ------------------- 10 Cover Page COVER PAGE 11 Table of Contents TABLE OF CONTENTS 12 Additional Information About INCORPORATION OF DOCUMENTS BY REFERENCE IN the Registrant STATEMENT OF ADDITIONAL INFORMATION 13 Additional Information About NOT APPLICABLE the Company Being Acquired 14 Financial Statements EXHIBITS TO STATEMENT OF ADDITIONAL INFORMATION PART C - ------ ITEM NO. - -------- 15-17 Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C of this Registration Statement. THE FOLLOWING ITEMS ARE HEREBY INCORPORATED BY REFERENCE INTO VARIOUS PARTS OF THIS REGISTRATION STATEMENT: NATIONS INSTITUTIONAL RESERVES ("RESERVES") From Post-Effective Amendment No. 22 of Reserves' Registration Statement, filed August 27, 1998 (SEC File Nos. 33-33144; 811-6030): Prospectuses for the Trust, Investor, Market and Daily Shares of Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves and the Marsico shares of Nations Cash Reserves, dated September 1, 1998, as supplemented. Statement of Additional Information for Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves, dated September 1, 1998. The audited financial statements and related independent accountants' reports for the Nations Government Reserves and Nations Municipal Reserves, contained in the Annual Report for the fiscal year ended March 31, 1999. NATIONS FUND TRUST ("NATIONS") From Post-Effective Amendment No. 57 of Nations' Registration Statement, filed July 31, 1998 (SEC File Nos. 002-97817; 811-4305): Prospectuses for the Primary A, Primary B, Investor A, Investor B, Investor C, and Daily Shares of Nations Government Fund and Nations Tax-Exempt Fund, dated August 1, 1998, as supplemented. Statement of Additional Information for Nations Government Fund and Nations Tax-Exempt Fund, dated August 1, 1998. The audited financial statements and related independent accountants' reports for the Nations Government Fund and Nations Tax-Exempt Fund, contained in the Annual Report for the fiscal year ended March 31, 1999. NATIONS FUND, INC. ("NATIONS") From Post-Effective Amendment No. 37 of Nations' Registration Statement, filed July 31, 1998 (SEC File Nos. 33-4038; 811-4614): Prospectuses for the Primary A, Primary B, Investor A, Investor B, Investor C, Daily and Marsico Shares of Nations Prime Fund, dated August 1, 1998, as supplemented. Prospectuses for the Primary A, Primary B, Investor A, Investor B, Investor C, and Daily Shares of Nations Treasury Fund, dated August 1, 1998, as supplemented. Statement of Additional Information for Nations Prime Fund and Nations Treasury Fund, dated August 1, 1998. The audited financial statements and related independent accountants' reports for the Nations Prime Fund and Nations Treasury Fund, contained in the Annual Report for the fiscal year ended March 31, 1999. NATIONS FUND, INC. NATIONS FUND TRUST One Bank of America Plaza 101 South Tryon Street Charlotte, North Carolina 28255 TELEPHONE: 800-652-5096 June 9, 1999 Dear Shareholder: On behalf of the Board of Directors of Nations Fund, Inc. and the Board of Trustees of Nations Fund Trust (together, the "Companies"), we are pleased to invite you to a special meeting of shareholders of the Companies' Nations Prime Fund, Nations Treasury Fund, Nations Government Money Market Fund and Nations Tax-Exempt Fund (collectively, the "Money Market Funds") to be held at 10:00 a.m. (Eastern time) on August 13, 1999, at One Bank of America Plaza, 33rd Floor, Charlotte, North Carolina (the "Meeting"). At the Meeting, you will be asked to approve the proposed consolidation (the "Consolidation") of your Money Market Fund into a corresponding money market fund of Nations Institutional Reserves (collectively, the "Reserves Money Market Funds"). The Reserves Money Market Funds have substantially similar investment objectives and are managed in substantially the same way as their corresponding Money Market Funds. They are managed by the same investment adviser and investment sub-adviser, and have the same service providers. In addition, with the exception of Investor B shareholders of Nations Tax-Exempt Fund, their total operating expense ratios (after waivers) are the same as those of the shares you hold today, and the features and services that will be available to you following the Consolidation will be similar to those available to you today. The Consolidation is intended to benefit shareholders by: o improving efficiency in the operation of the combined funds, including potentially achieving economies of scale and greater portfolio diversification; o facilitating investment management, administration and marketing of the combined funds; and o eliminating duplicative shareholder costs and portfolio holdings. The Consolidation is also being proposed in connection with an effort to streamline the operations of the Nations Funds family, which currently includes six open-end registered investment companies, including the Companies. If the Consolidation is approved and other necessary approvals are obtained, the number of open-end registered investment companies would be reduced by two. Management believes that this streamlining could provide additional cost savings to Money Market Fund shareholders by potentially lowering expense ratios and enhancing returns. If shareholder approval is obtained and the other conditions to the Consolidation are satisfied, it is anticipated that the Money Market Funds will be consolidated into the Reserves Money Market Funds on or about August 20, 1999, when your Money Market Fund shares will be exchanged for shares of a designated class of a corresponding Reserves Money Market Fund of equal dollar value. THE COMPANIES' BOARDS OF DIRECTORS AND TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE TO APPROVE THE PROPOSED CONSOLIDATION. The formal Notice of Special Meeting, a Combined Proxy Statement/Prospectus and a Proxy Ballot are enclosed. The proposed Consolidation and the reasons for the unanimous recommendation of each of the Companies' Boards are discussed in more detail in the enclosed materials, which you should read carefully. If you 1 have any questions about the Consolidation, please do not hesitate to contact the Companies at the toll-free number set forth above. We look forward to your attendance at the Meeting or receiving your Proxy Ballot(s) so that your shares may be voted at the Meeting. Sincerely, A. Max Walker President and Chairman of the Boards of the Companies 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 BELOW. - ------------------------------------------------------------------------------------------------ Two Quick And Easy Ways To Vote Your Proxy As a valued Time 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 1. Read the enclosed Proxy Statement and have 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 3. Enter the 12-digit Control Number found on on your Proxy Ballot(s). your 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. - ------------------------------------------------------------------------------------------------ 2 NATIONS FUND TRUST NATIONS FUND, INC. One Bank of America Plaza 101 South Tryon Street Charlotte, North Carolina 28255 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS To Be Held On August 13, 1999 To Nations Money Market Fund Shareholders: PLEASE TAKE NOTE THAT a special meeting of the shareholders (the "Meeting") of the Nations Government Money Market Fund and Nations Tax-Exempt Fund, each a series of Nations Fund Trust (the "Trust"), and Nations Prime Fund and Nations Treasury Fund, each a series of Nations Fund, Inc. (the "Company"), will be held at 10:00 a.m., Eastern time, on August 13, 1999, at One Bank of America Plaza, 33rd Floor, Charlotte, North Carolina, for purpose of considering and voting upon: ITEM 1. A proposed Agreement and Plan of Consolidation, dated as of June 2, 1999 (the "Consolidation Agreement"), by and among the Trust and the Company, on behalf of their respective money market funds (the "Money Market Funds"), and Nations Institutional Reserves, on behalf of Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves (collectively, the "Reserves Money Market Funds"). The Consolidation Agreement provides for the transfer of the assets and liabilities of the Money Market Funds to corresponding Reserves Money Market Funds, in exchange for shares of equal value of corresponding classes of Reserves Money Market Funds (the "Consolidation"). 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 AND TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSAL. Shareholders of record as of the close of business on May 13, 1999 are entitled to notice of, and to vote at, the Meeting or any adjournment(s) thereof. SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY BALLOT, WHICH IS BEING SOLICITED BY THE TIME HORIZON BOARD OF TRUSTEES. 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 THE COMPANY OR THE TRUST A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON. By Order of the Boards of Directors and Trustees, Richard H. Blank, Jr. Secretary June 9, 1999 3 COMBINED PROXY STATEMENT/PROSPECTUS Dated June 9, 1999 NATIONS INSTITUTIONAL RESERVES NATIONS FUND TRUST NATIONS FUND, INC. One Bank of America Plaza 101 South Tryon Street Charlotte, North Carolina 28255 1-800-652-5096 This combined proxy statement/prospectus ("Proxy/Prospectus") is furnished in connection with the solicitation of proxies by the Board of Directors/Trustees of Nations Fund, Inc. and Nations Fund Trust (collectively, the "Companies") for a Special Meeting of Shareholders of the Companies' Nations Prime Fund ("Prime Fund"), Nations Treasury Fund ("Treasury Fund"), Nations Government Money Market Fund ("Government Fund") and Nations Tax-Exempt Fund ("Tax-Exempt Fund")(collectively, the "Money Market Funds") to be held August 13, 1999 at 10:00 a.m. (Eastern time) at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina. This Special Meeting and any adjournment(s) are referred to as the "Meeting." The Meeting has been called to consider the following proposal, and to conduct such other business as may come before the Meeting. Proposal: To approve an Agreement and Plan of Consolidation, dated as of June 9, 1999 (the "Consolidation Agreement"), by and among the Companies, on behalf of their respective Money Market Funds, and Nations Institutional Reserves, on behalf of Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves (collectively, the "Reserves Money Market Funds"). The Consolidation Agreement provides for the transfer of the assets and liabilities of the Money Market Funds to corresponding Reserves Money Market Funds, in exchange for shares of equal value of corresponding classes of the Reserves Money Market Funds (the "Consolidation"). This Proxy/Prospectus is the Money Market Funds' proxy statement for the Meeting and will be mailed to shareholders on or about June 2, 1999. It is also a prospectus for shares of the Reserves Money Market Funds. The Proxy/Prospectus sets forth concisely the information that a Money Market Fund shareholder should know before voting and should be retained for future reference. Additional information about the Consolidation is set forth in the Statement of Additional Information dated June 2, 1999. The information contained in the current Reserves Money Market Fund prospectuses is incorporated by reference into this Proxy/Prospectus. In addition, a copy of the appropriate Reserves Money Market Fund prospectus accompanies this Proxy/Prospectus. These documents also are available on the website of the Securities and Exchange Commission (the "SEC") at www.sec.gov. 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 RESERVES MONEY MARKET 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 RESERVES MONEY MARKET FUNDS IS STEPHENS INC. 4 TABLE OF CONTENTS PAGE I. SUMMARY About the Proposed Consolidation................................. X A. Fees and Expenses......................................... X B. The Consolidation Agreement............................... X C. Purpose of the Consolidation.............................. X D. Overview of the Funds..................................... X E. Risk Factors.............................................. X F. Federal Income Tax Consequences........................... X G. Board Consideration....................................... X . Voting Information............................................... X II. THE CONSOLIDATION Description of the Consolidation Agreement....................... X Purpose of the Consolidation..................................... X Comparison of Corporate/Trust Structure.......................... X Capitalization of Each Fund...................................... X Comparison of Investment Objectives and Policies................. X Comparison of Total Expense Ratios............................... X Investment Adviser and Other Service Providers................... X Distribution and Shareholder Servicing Arrangements.............. X Sales Loads, Shareholder Transactions and Services............... X Federal Income Tax Consequences.................................. X Board Consideration.............................................. X Other Information................................................ X III. INFORMATION RELATING TO VOTING MATTERS General Information.............................................. X Quorum........................................................... X Annual Meetings and Shareholder Meetings......................... X Shareholder Approval............................................. X Other Business................................................... X IV. OTHER INFORMATION How to Obtain Additional Information About the Funds............. X Financial Statements............................................. X Shareholder Inquiries............................................ X APPENDICES I. FORM OF THE CONSOLIDATION AGREEMENT II. EXPENSE SUMMARIES OF THE FUNDS 5 I. SUMMARY The following is a summary of certain information relating to the proposal to be considered at the Meeting. More complete information about the proposal is contained throughout the Proxy/Prospectus. About the Proposed Consolidation A. Fees and Expenses. The following table shows, as of February 28, 1999, (i) the current annualized total operating expense ratio of each class of the Money Market Funds and the Reserves Money Market Funds before and after fee waivers and/or expense reimbursements, and (ii) the pro forma annualized total operating expense ratio of the Reserves Money Market Funds, before and after fee waivers and/or expense reimbursements, based upon the fee arrangements that are expected to be in place upon consummation of the Consolidation. The table shows that, with one exception, the pro forma total operating expense ratio for each class of the Reserves Money Market Funds, taking into account voluntary fee waivers and/or expense reimbursements, is the same of that of the corresponding class of shares of the Money Market Funds. The table also shows that a majority of Money Market Fund classes will experience lower total operating expense ratios even without taking into account voluntary fee waivers and/or expense reimbursements. For more detail concerning fund expense ratios, see Appendix II. Total Expense Information - ---------------------------------------------------------------------------------------------------------------------------------- Money Market Fund/ Total Reserves Money Market Fund/ Total Reserves Money Market Fund/ Pro Forma Share Class Operating Share Class Operating Class Post-Consolidation Total Expenses Expenses Operating Before/After Before/After Expenses Waivers Waivers Before/After Waivers - ------------------------------------------------------------------------------------------------------------------------------------ Prime Fund Cash Reserves Cash Reserves Primary A Shares 0.34%/0.30% Trust Shares 0.39%/0.30% Trust Shares 0.39%/0.30% Primary B Shares 0.59%/0.55% Investor Shares 0.64%/0.55% Investor Shares 0.64%/0.55% Investor A Shares 0.69%/0.65% Market Shares 0.74%/0.65% Market Shares 0.74%/0.65% Investor B Shares 0.69%/0.50% Investor Shares 0.64%/0.55% Investor Shares 0.64%/0.55% Investor C Shares 0.59%/0.55% Investor Shares 0.64%/0.55% Investor Shares 0.64%/0.55% Daily Shares 1.04%/0.80% Daily Shares 0.89%/0.80% Daily Shares 0.89%/0.80% Marsico Shares 0.59%/0.55% Marsico Shares 0.64%/0.55% Marsico Shares 0.64%/0.55% - ------------------------------------------------------------------------------------------------------------------------------------ Treasury Fund Treasury Reserves Treasury Reserves Primary A Shares 0.35%/0.30% Trust Shares 0.40%/0.30% Trust Shares 0.40%/0.30% Primary B Shares 0.60%/0.55% Investor Shares 0.65%/0.55% Investor Shares 0.65%/0.55% Investor A Shares 0.70%/0.65% Market Shares 0.75%/0.65% Market Shares 0.75%/0.65% Investor B Shares 0.70%/0.55% Investor Shares 0.65%/0.55% Investor Shares 0.65%/0.55% Investor C Shares 0.60%/0.55% Investor Shares 0.65%/0.55% Investor Shares 0.65%/0.55% Daily Shares 1.05%/0.80% Daily Shares 0.90%/0.80% Daily Shares 0.90%/0.80% - ------------------------------------------------------------------------------------------------------------------------------------ Government Fund Government Reserves Government Reserves Primary A Shares 0.59%/0.30% Trust Shares 0.39%/0.30% Trust Shares 0.39%/0.30% Primary B Shares 0.84%/0.55% Investor Shares 0.64%/0.55% Investor Shares 0.64%/0.55% Investor A Shares 0.94%/0.65% Market Shares 0.74%/0.65% Market Shares 0.74%/0.65% Investor B Shares 0.94%/0.55% Investor Shares 0.64%/0.55% Investor Shares 0.64%/0.55% Investor C Shares 0.84%/0.55% Investor Shares 0.64%/0.55% Investor Shares 0.64%/0.55% Daily Shares 1.29%/0.80% Daily Shares 0.89%/0.80% Daily Shares 0.89%/0.80% - ------------------------------------------------------------------------------------------------------------------------------------ 6 - ---------------------------------------------------------------------------------------------------------------------------------- Money Market Fund/ Total Reserves Money Market Fund/ Total Reserves Money Market Fund/ Pro Forma Share Class Operating Share Class Operating Class Post-Consolidation Total Expenses Expenses Operating Before/After Before/After Expenses Waivers Waivers Before/After Waivers - ------------------------------------------------------------------------------------------------------------------------------------ Tax-Exempt Fund Municipal Reserves Municipal Reserves Primary A Shares 0.54%/0.30% Trust Shares 0.42%/0.30% Trust Shares 0.39%/0.30% Primary B Shares 0.79%/0.55% Investor Shares 0.67%/0.55% Investor Shares 0.64%/0.55% Investor A Shares 0.89%/0.65% Market Shares 0.77%/0.65% Market Shares 0.74%/0.65% Investor B Shares 0.89%/0.50% Investor Shares 0.67%/0.55% Investor Shares 0.64%/0.55% Investor C Shares 0.79%/0.55% Investor Shares 0.67%/0.55% Investor Shares 0.64%/0.55% Daily Shares 1.24%/0.80% Daily Shares 0.92%/0.80% Daily Shares 0.89%/0.80% - ------------------------------------------------------------------------------------------------------------------------------------ B. The Consolidation Agreement. The Companies' Boards of Directors and Trustees have unanimously approved the Consolidation Agreement and recommend that shareholders vote for the Consolidation. If approved by shareholders and all conditions to the proposed consolidation have been satisfied, consummation of the Consolidation will result in shareholders of each class of the Money Market Funds becoming shareholders of a corresponding Reserves Money Market Fund class. The Consolidation Agreement provides for (i) the transfer of all of the assets and liabilities of the Money Market Funds to corresponding Reserves Money Market Funds, as set forth below, in exchange for shares of designated classes of the Reserves Money Market Funds; and (ii) the distribution of such Reserves Money Market Fund shares to shareholders of the Money Market Funds in liquidation of the Money Market Funds. Upon completion of the Consolidation, each Money Market Fund shareholder will hold shares of a corresponding Reserves Money Market Fund that are equal in value to the shares of the Money Market Fund held by the shareholder immediately before the Consolidation. The Consolidation also contemplates the dissolution under state law and the deregistration under the 1940 Act, of Nations Fund, Inc. The map below shows each class of each Money Market Fund and the designated class of each corresponding Reserves Money Market Fund that shareholders would receive as a result of the Consolidation: CONSOLIDATION MAP MONEY MARKET FUND SHAREHOLDERS WOULD RECEIVE SHARES OF THE OWNING SHARES OF THE FOLLOWING FOLLOWING RESERVES MONEY FUNDS AND CLASSES: MARKET FUNDS AND CLASSES: Nations Prime Fund Nations Cash Reserves Primary A Shares Trust Shares Primary B Shares Investor Shares Investor A Shares Market Shares Investor B Shares Investor Shares Investor C Shares Investor Shares Daily Shares Daily Shares Marsico Class Marsico Class (New) Nations Treasury Fund Nations Treasury Reserves Primary A Shares Trust Shares Primary B Shares Investor Shares Investor A Shares Market Shares Investor B Shares Investor Shares Investor C Shares Investor Shares Daily Shares Daily Shares 7 MONEY MARKET FUND SHAREHOLDERS OWNING WOULD RECEIVE SHARES OF THE SHARES OF THE FOLLOWING FUNDS AND FOLLOWING RESERVES MONEY MARKET CLASSES: FUNDS AND CLASSES: - ------------------------------------- ------------------------------ Nations Gov't Money Market Fund Nations Government Reserves Primary A Shares Trust Shares Primary B Shares Investor Shares Investor A Shares Market Shares Investor B Shares Investor Shares Investor C Shares Investor Shares Daily Shares Daily Shares Nations Tax-Exempt Fund Nations Municipal Reserves Primary A Shares Trust Shares Primary B Shares Investor Shares Investor A Shares Market Shares Investor B Shares Investor Shares Investor C Shares Investor Shares Daily Shares Daily Shares The Consolidation Agreement must be approved by a vote of a majority of the shareholders of each Money Market Fund. In addition, for shareholders of the Nations Prime Fund and Nations Treasury Fund only, in order for Nations Fund, Inc. to dissolve and de-register, a majority of all Nations Fund, Inc. shareholders voting in the aggregate must approve such actions. Accordingly, a vote for the Consolidation Agreement by Nations Prime Fund and Nations Treasury Fund shareholders includes a vote for the dissolution of Nations Fund, Inc. Other Nations Fund, Inc. shareholders are receiving proxy materials relating to types of transactions similar to the Consolidation and will likewise be voting on the dissolution and the deregistration of Nations Fund, Inc. However, the Consolidation is not contingent upon the approval of the dissolution and deregistration of Nations Fund, Inc. The Meeting of the Money Market Funds' shareholders is scheduled for August 13, 1999. The Consolidation, if approved, is expected to occur on or about August 20, 1999. For more information about the Consolidation Agreement, see "The Consolidation--Description of the Consolidation Agreement." C. Purpose of the Consolidation. Because the Money Market Funds and their corresponding Reserves Money Market Funds have substantially similar investment objectives and are managed in substantially the same way, management believes that it makes sense to combine like Funds. Except for Investor B shares of the Nations Tax-Exempt Fund, the total operating expense ratio (after waivers) for the Reserves Money Market Fund shares will be the same as the total operating expense ratio of the Money Market Fund shares that are currently held. It is anticipated that assuming necessary approvals are obtained, the features and services that will be available to shareholders of a Reserves Money Market Fund will be similar to those available to Money Market Fund shareholders. The Consolidation is intended to benefit shareholders by: o improving efficiency in the operation of the combined funds, including potentially achieving economies of scale and greater portfolio diversification; o facilitating investment management, administration and marketing of the combined funds; o eliminating duplicative shareholder costs and portfolio holdings. The Consolidation is also being proposed in connection with an effort to streamline the operations of the Nations Funds family, which currently includes six open-end registered investment companies, including the Companies. If the Consolidation is approved and other necessary approvals are obtained, the number of open-end registered investment companies would be reduced by two. Management believes that this streamlining could provide additional cost savings to Money Market Fund shareholders by potentially lowering expense ratios and enhancing returns. Over time, if various requisite shareholder approvals are obtained, Nations Fund, Inc. and other 8 registered investment companies in the Nations Funds family will de-register and be dissolved under state law. This streamlining should provide additional future benefits to Money Market Fund shareholders by way of potentially lower expense ratios and enhanced returns through elimination of class and fund redundancy and the achievement of greater economies of scale and larger portfolios. For more information about the purpose of the Consolidation, including expected benefits of the Consolidation, see "The Consolidation--Purpose of the Consolidation." D. Overview of the Funds. Set forth below is a brief comparison of certain key features of the Funds. Investment Objectives and Policies. The investment objective and policies of the Money Market Funds are substantially similar to the investment objective and policies of the corresponding Reserves Money Market Funds. Comparison of Investment Objectives - ------------------------------------------------------------------------------------------ Money Market Fund Corresponding Reserves Money Market Fund Nations Prime Fund: seeks the maximization Nations Cash Reserves: seeks to preserve of current income to extent consistent with principal value and maintain a high the preservation of capital and the degree of liquidity while providing maintenance of liquidity. current income. - ------------------------------------------------------------------------------------------ Nations Treasury Fund: seeks the Nations Treasury Reserves: seeks to maximization of current income to the extent preserve principal value and maintain a consistent with the preservation of capital high degree of liquidity while providing and the maintenance of liquidity. current income. - ------------------------------------------------------------------------------------------ Nations Tax-Exempt Fund: seeks a high level Nations Municipal Reserves: seeks to of current interest income exempt from preserve principal value and maintain a Federal income taxes as is consistent with high degree of liquidity while providing liquidity and stability of principal. current income exempt from Federal income taxes. - ------------------------------------------------------------------------------------------ Nations Government Money Market Fund: seeks Nations Government Reserves: seeks to a high level of current income as is preserve principal value and maintain a consistent with liquidity and stability of high degree of liquidity while providing principal. current income. - ------------------------------------------------------------------------------------------ All of the Money Market Funds and Reserves Money Market Funds are money market mutual funds which are operated in accordance with Rule 2a-7 under the 1940 Act. As noted, the investment policies of the Money Market Funds and corresponding Reserves Money Market Funds are substantially similar. There are some differences, however. For example, while Nations Government Reserves, effective May 1999, does not engage in repurchase agreements, the Nations Government Money Market Mutual Fund may do so. For additional information about the similarities and differences between the investment objectives and policies of the Funds, see "The Consolidation--Comparison of Investment Objectives and Policies." Operating Expenses. Taking into account voluntary fee waivers and/or expense reimbursements, total operating expense ratios of each class of shares of the Money Market Funds, with the exception of Investor B shares of Nations Tax-Exempt Fund, are currently, and after the Consolidation are expected to be, identical to the total operating expense ratios of the designated class of shares of the corresponding Reserves Money Market Funds. In addition, a substantial majority of Money Market Fund classes involved in the Consolidation will experience lower total operating expense ratios without taking into account any fee waivers and/or expense reimbursements. The current and pro forma total operating expense ratios (before and after waivers) for each Fund and class are shown on page 4. For more detailed expense information, see "Appendix II." 9 Service Providers. The Funds have the same investment adviser, investment sub-adviser, co-administrators, distributor, custodian transfer agent and independent accountants, as discussed under "The Consolidation--Investment Adviser and Other Service Providers." Purchase, Redemption and Other Procedures. It is expected that, assuming necessary approvals are obtained, the purchase, redemption, dividend, exchange and other policies and procedures of the Reserves Money Market Funds will be similar to those of the Money Market Funds as of the closing of the Consolidation. Please note that no front-end or contingent deferred sales loads will be imposed on any shareholder of the Money Market Funds as a result of the exchange of shares in the Consolidation. For more information concerning these policies and procedures, see "The Consolidation--Shareholder Transactions and Services." E. Risk Factors. Because of the substantial similarities in the investment objectives and policies of the Money Market Funds and their corresponding Reserves Money Market Funds, an investment in the Money Market Funds will generally involve risks that are substantially similar to those of the corresponding Reserves Money Market Funds. Because all of the 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 all of the 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, the shares of the Funds are not themselves issued or guaranteed by the U.S. Government or any of its agencies. F. Federal Income Tax Consequences. The exchange of shares in the Consolidation is not expected to result in the recognition, for federal income tax purposes, of gain or loss by the Money Market Funds, the Reserves Money Market Funds or their respective shareholders. For more information about the tax consequences of the Consolidation, see "The Consolidation--Federal Income Tax Consequences." G. Board Consideration. In considering the Consolidation Agreement, the Board of Directors of the Company and the Board of Trustees of the Trust, including the non-interested Directors and Trustees, were advised by their legal counsel as to their fiduciary duties under Maryland law, Massachusetts law and the Investment Company Act of 1940, as amended (the "1940 Act"), and the required determinations that Board should make under the Act in connection with the Consolidation. After considering the relevant factors, the Board of Directors of the Company, including all of the non-interested Directors/Trustees, found on behalf of the Money Market Funds that participation in the Consolidation, as contemplated by the Consolidation Agreement, is in the best interests of the Money Market Funds and that the interests of the shareholders of the Money Market Funds will not be diluted as a result of the Consolidation. Similarly, the Board of Nations Institutional Reserves found on behalf of the Reserves Money Market Funds that participation in the Consolidation, as contemplated by the Consolidation Agreement, is in the best interests of the Reserves Money Market Funds and that the interests of the shareholders of the Reserves Money Market Funds will not be diluted as a result of the Consolidation. For more information on the Board's considerations, see "The Consolidation--Board Consideration." The Companies' Boards of Directors/Trustees unanimously recommend that Money Market Fund shareholders vote FOR the Consolidation Agreement. Voting Information. This Proxy/Prospectus is being furnished in connection with the solicitation of proxies by the Companies' Boards of Directors/Trustees. Only Money Market Fund shareholders of record at the close of business on May 13, 1999 will be entitled to vote at the Meeting. Each whole or fractional share is entitled to a whole or fractional vote. Shares represented by a properly executed proxy will be voted in accordance with the instructions thereon or, if no specification is made, the persons named as proxies will vote in favor of each proposal set forth in the Notice of Meeting. Proxies may be revoked at any time before they are exercised by attending the meeting and voting in person or by submitting to the Company (i) a written notice of revocation or (ii) a subsequently executed proxy. For additional information, including a description of the shareholder votes required for approval of the proposal to be considered at the Meeting, see "Information Relating to Voting Matters." 10 II. THE CONSOLIDATION Important additional information about the Consolidation and the Consolidation Agreement is set forth below. This description is qualified by reference to the Appendices at the end of this document. Description of the Consolidation Agreement. The Consolidation Agreement provides that at the Closing, the assets and liabilities of each Money Market Fund will be transferred to a corresponding Reserves Money Market Fund in exchange for full and fractional shares of designated classes of such Reserves Money Market Fund. The shares issued by the Reserves Money Market Funds in the Consolidation will have an aggregate value equal to the aggregate value of the shares of the Money Market Funds that are outstanding immediately before the Closing. Immediately after the transfer of its assets and liabilities in exchange for Reserves Money Market Fund shares, the Money Market Funds will distribute the shares of the corresponding Reserves Money Market Funds received in the Consolidation to its shareholders in liquidation of the Money Market Funds. The Reserves Money Market Fund will establish an account for each former shareholder of the Money Market Funds reflecting the appropriate number of Reserves Money Market Fund shares distributed. These accounts will be identical in all material respects to the accounts currently maintained by the Money Market Funds for each shareholder. Upon completion of the Consolidation, all outstanding shares of the Money Market Funds will be canceled, and the Money Market Funds will wind up their affairs and be dissolved under Maryland law and/or Massachusetts law. In addition, if requisite approvals are obtained from other shareholders of series of Nations Fund, Inc. voting on similar proposals, Nations Fund, Inc. will wind up its affairs, be de-registered under the 1940 Act and be dissolved under Maryland law. Exchange or redemption requests received thereafter will be deemed to be exchange or redemption requests for shares of the Reserves Money Market Fund distributed to the former shareholders of the Money Market Funds. NationsBanc Advisors, Inc. ("NBAI") or its affiliates will bear all customary expenses associated with the Consolidation, including the costs associated with the Meeting and the Voting Materials. Purpose of the Consolidation. As discussed above, because the Money Market Funds and their respective corresponding Reserves Money Market Funds are managed almost identically, management believes that it makes sense to combine like Funds. The Consolidation is intended to benefit shareholders by: o improving efficiency in the operation of the combined funds, including potentially achieving economies of scale and greater portfolio diversification; o facilitating investment management, administration and marketing of the combined funds; and o eliminating duplicative shareholder costs and portfolio holdings. The Consolidation is also being proposed in connection with an effort to streamline the operations of the Nations Funds family, which currently includes six open-end registered investment companies, including the Companies. If the Consolidation is approved and other necessary approvals are obtained, the number of open-end registered investment companies would be reduced by two. Management believes that this streamlining could provide additional cost savings to Money Market Fund shareholders by potentially lowering expense ratios and enhancing returns. 11 After fee waivers and/or expense reimbursements, the total operating expense ratios of the classes of the Money Market Funds are equal to those of the designated classes of the corresponding Reserves Money Market Fund. Although some of these benefits will accrue to the investment adviser, administrator and distributor of the funds, some are expected to accrue to the benefit of shareholders over time. For example, shareholders may benefit from lower operating expense ratios and greater portfolio diversification. Comparison of Corporate/Trust Structure. The Companies and Nations Institutional Reserves are registered as an open-end management investment companies under the 1940 Act and are three of several registered investment companies in the Nations Funds Family, which collectively offer over seventy separate mutual funds. Nations Fund, Inc. is organized as a Maryland corporation. Both Nations Fund Trust and Nations Institutional Reserves are organized as Massachusetts business trusts. In general, the charter documents governing Nations Fund, Inc. are similar to those documents governing Nations Fund Trust and Nations Institutional Reserves. 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, Nations Fund, Inc. shareholders have no personal liability for Nations Fund, Inc.'s acts or obligations. By contrast, under Massachusetts law, interestholders of a Massachusetts business trust like Nations Fund Trust or Nations Institutional Reserves could, under certain circumstances, be held personally liable for the obligations of the trust. However, both Nations Fund Trust and Nations Institutional Reserves have provisions in their 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, all shareholders in the Nations Funds family may be asked to approve certain changes to the corporate structure of Nations Fund Trust and Nations Institutional Reserves, 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. It is expected that if all shareholder approvals are obtained that Nations Fund, Inc. will be dissolved on or about the Fall of 1999. Capitalization of Each Fund. The following table shows the total net assets, number of shares outstanding and net asset value per share of each Money Market Fund and each corresponding Reserves Money Market Fund. This information is generally referred to as the "capitalization" of each Fund. The term "pro forma capitalization" simply means the expected capitalization of the Reserves Money Market Funds after they have combined with the Money Market Funds, i.e., as if the Consolidation had already occurred. The following table sets forth as of March 31, 1999 the capitalization of each Money Market Fund, the Reserves Money Market Funds and the pro forma capitalization of each Reserves Money Market Fund adjusted to give effect to the Consolidation. The ongoing investment performance and daily share purchase and redemption activity of each fund affects capitalization. Therefore, the capitalization of each fund on the closing date is likely to vary from the capitalization shown in the following table. As of March 31, 1999, there were no assets in the Trust Class, Investor Class and Daily Class of shares of the Reserves Money Market Funds. The tables below reflect this fact. However, in May 1999, certain of these and other existing Money Market funds of Nations Institutional Reserves share classes received substantial additional assets as a result of the reorganization of the Pacific Horizon Money Market Funds, a former family of funds advised by Bank of America, into the Reserves Money Market Funds. The following tables do not reflect the inflow of such assets. 12 Pro Forma Capitalization Table As of March 31, 1999 1. The table below reflects current and pro forma capitalization information for the combination of the Nations Prime Fund and Nations Cash Reserves. - ----------------------------------------------------------------------------------------------- Net Asset Value Total Net Assets Shares Per Share Outstanding - ----------------------------------------------------------------------------------------------- Nations Prime Fund $3,079,750,399 3,080,222,092 $1.00 (Primary A Shares) (Primary A (Primary A Shares) $81,735,577 Shares) $1.00 (Primary B Shares) 81,739,046 (Primary B Shares) $694,162,132 (Primary B $1.00 (Investor A Shares) Shares) (Investor A $737,463,225 694,263,771 Shares) (Investor B Shares) (Investor A $1.00 $11,083,981 Shares) (Investor B (Investor C Shares) 737,571,824 Shares) $2,693,887,910 (Investor B $1.00 (Daily Shares) Shares) (Investor C $17,440,039 11,085,909 Shares) (Marsico Shares) (Investor C $1.00 Shares) (Daily Shares) 2,694,279,930 $1.00 (Daily Shares) (Marsico Shares) 17,440,039 (Marsico Shares) - ----------------------------------------------------------------------------------------------- Nations Cash Reserves $0 0 $0 (Trust Shares) (Trust Shares) (Trust Shares) $0 0 $0 (Investor Shares) (Investor Shares) (Investor Shares) $1,529,501,565 1,529,500,010 $1.00 (Market Shares) (Market Shares) (Market Shares) $0 0 $0 (Investor Shares) (Investor (Investor Shares) $0 Shares) $0 (Investor Shares) 0 (Investor Shares) $0 (Investor Shares) $0 (Daily Shares) 0 (Daily Shares) (Daily Shares) - ----------------------------------------------------------------------------------------------- Pro Forma Cash Reserves $3,079,750,399 3,080,222,092 $1.00 (Trust Shares) (Trust Shares) (Trust Shares) $81,735,577 81,739,046 $1.00 (Investor Shares) (Investor Shares) (Investor Shares) $2,223,663,697 2,223,763,781 $1.00 (Market Shares) (Market Shares) (Market Shares) $737,463,225 737,571,824 $1.00 (Investor Shares) (Investor Shares) (Investor Shares) $11,083,981 11,085,909 $1.00 (Investor Shares) (Investor Shares) (Investor Shares) $2,693,887,910 2,694,279,930 $1.00 (Daily Shares) (Daily Shares) (Daily Shares) $17,440,039 $17,440,039 $1.00 (Marsico Shares) (Marsico Shares) (Marsico Shares) - ----------------------------------------------------------------------------------------------- 13 2. The table below reflects current and pro forma capitalization information for the combination of the Nations Treasury Fund and Nations Treasury Reserves. - ----------------------------------------------------------------------------------------------- Net Asset Value Total Net Assets Shares Per Share Outstanding - ----------------------------------------------------------------------------------------------- Nations Treasury Fund $745,637,802 745,934,155 $1.00 (Primary A Shares) (Primary A (Primary A Shares) $19,572,609 Shares) $1.00 (Primary B Shares) 19,579,273 (Primary B Shares) $1,480,321,761 (Primary B $1.00 (Investor A Shares) Shares) (Investor A $269,399,679 1,480,901,458 Shares) (Investor B Shares) (Investor A $1.00 $174,960 Shares) (Investor B (Investor C Shares) 269,513,193 Shares) $217,961,481 (Investor B $1.00 (Daily Shares) Shares) (Investor C 175,014 Shares) (Investor C $1.00 Shares) (Daily Shares 218,054,631 (Daily Shares) - ----------------------------------------------------------------------------------------------- Nations Treasury Reserves $0 0 $0 (Trust Shares) (Trust Shares) (Trust Shares) $0 0 $0 (Investor Shares) (Investor Shares) (Investor Shares) $1,175,931,309 1,176,000,010 $1.00 (Market Shares) (Market Shares) (Market Shares) $0 0 $0 (Investor Shares) (Investor (Investor Shares) $0 Shares) $0 (Investor Shares) 0 (Investor Shares) $0 (Investor Shares) $0 (Daily Shares) 0 (Daily Shares) (Daily Shares) - ----------------------------------------------------------------------------------------------- Pro Forma Treasury Reserves $745,637,802 745,934,155 $1.00 (Trust Shares) (Trust Shares) (Trust Shares) $19,572,609 19,579,273 $1.00 (Investor Shares) (Investor Shares) (Investor Shares) $2,656,253,070 2,656,901,468 $1.00 (Market Shares) (Market Shares) (Market Shares) $269,399,679 269,513,193 $1.00 (Investor Shares) (Investor Shares) (Investor Shares) $174,960 175,014 $1.00 (Investor Shares) (Investor Shares) (Investor Shares) $217,961,481 218,054,631 $1.00 (Daily Shares) (Daily Shares) (Daily Shares) - ----------------------------------------------------------------------------------------------- 14 3. The table below reflects current and pro forma capitalization information for the combination of the Nations Government Money Market Fund and Nations Government Reserves. - ----------------------------------------------------------------------------------------------- Net Asset Value Total Net Assets Shares Per Share Outstanding - ----------------------------------------------------------------------------------------------- Nations Government Money Market $268,868,419 268,908,080 $1.00 Fund (Primary A Shares) (Primary A (Primary A Shares) $1,293,058 Shares) $1.00 (Primary B Shares) 1,293,415 (Primary B Shares) $12,178,109 (Primary B $1.00 (Investor A Shares) Shares) (Investor A $80,253,066 12,180,399 Shares) (Investor B Shares) (Investor A $1.00 $42,483 Shares) (Investor B (Investor C Shares) 80,267,966 Shares) $47,356,001 (Investor B $1.00 (Daily Shares) Shares) (Investor C 42,491 Shares) (Investor C $1.00 Shares) (Daily Shares 49,359,847 (Daily Shares) - ----------------------------------------------------------------------------------------------- Nations Government Reserves $0 0 $0 (Trust Shares) (Trust Shares) (Trust Shares) $0 0 $0 (Investor Shares) (Investor Shares) (Investor Shares) $324,500,127 324,500,010 $1.00 (Market Shares) (Market Shares) (Market Shares) $0 0 $0 (Investor Shares) (Investor (Investor Shares) $0 Shares) $0 (Investor Shares) 0 (Investor Shares) $0 (Investor Shares) $0 (Daily Shares) 0 (Daily Shares) (Daily Shares) - ----------------------------------------------------------------------------------------------- Pro Forma Government Reserves $268,868,419 268,908,080 $1.00 (Trust Shares) (Trust Shares) (Trust Shares) $1,293,058 1,293,415 $1.00 (Investor Shares) (Investor Shares) (Investor Shares) $336,678,236 336,680,409 $1.00 (Market Shares) (Market Shares) (Market Shares) $80,253,066 80,267,966 $1.00 (Investor Shares) (Investor Shares) (Investor Shares) $42,483 42,491 $1.00 (Investor Shares) (Investor Shares) (Investor Shares) $47,356,001 47,359,847 $1.00 (Daily Shares) (Daily Shares) (Daily Shares) - ----------------------------------------------------------------------------------------------- 15 4. The table below reflects current and pro forma capitalization information for the combination of the Nations Tax-Exempt Fund and Nations Municipal Reserves. - ----------------------------------------------------------------------------------------------- Net Asset Value Total Net Assets Shares Per Share Outstanding - ----------------------------------------------------------------------------------------------- Nations Tax-Exempt Fund $2,083,237,842 2,083,804,338 $1.00 (Primary A Shares) (Primary A (Primary A Shares) $9,844,126 Shares) $1.00 (Primary B Shares) 9,836,560 (Primary B Shares) $53,591,782 (Primary B $1.00 (Investor A Shares) Shares) (Investor A $255,562,123 53,557,196 Shares) (Investor B Shares) (Investor A $1.00 $217,788 Shares) (Investor B (Investor C Shares) 255,425,959 Shares) $332,727,815 (Investor B $1.00 (Daily Shares) Shares) (Investor C 217,642 Shares) (Investor C $1.00 Shares) (Daily Shares 332,560,709 (Daily Shares) - ----------------------------------------------------------------------------------------------- Nations Municipal Reserves $0 0 $0 (Trust Shares) (Trust Shares) (Trust Shares) $0 0 $0 (Investor Shares) (Investor Shares) (Investor Shares) $160,999,271 161,000,010 $1.00 (Market Shares) (Market Shares) (Market Shares) $0 0 $0 (Investor Shares) (Investor (Investor Shares) $0 Shares) $0 (Investor Shares) 0 (Investor Shares) $0 (Investor Shares) $0 (Daily Shares) 0 (Daily Shares) (Daily Shares) - ----------------------------------------------------------------------------------------------- Pro Forma Municipal Reserves $2,083,237,842 2,083,804,338 $1.00 (Trust Shares) (Trust Shares) (Trust Shares) $9,844,126 9,836,560 $1.00 (Investor Shares) (Investor Shares) (Investor Shares) $214,591,053 214,557,206 $1.00 (Market Shares) (Market Shares) (Market Shares) $255,562,123 255,425,959 $1.00 (Investor Shares) (Investor Shares) (Investor Shares) $217,788 217,642 $1.00 (Investor Shares) (Investor Shares) (Investor Shares) $332,727,815 332,560,709 $1.00 (Daily Shares) (Daily Shares) (Daily Shares) - ----------------------------------------------------------------------------------------------- Comparison of Investment Objectives and Policies. The investment objectives and policies of the funds, except as described below, are substantially similar. The chart below highlights the investment objective and policies of each Fund and some of each Fund's key investment policies. 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. Each Fund's dollar-weighted average portfolio maturity may not exceed 90 days. Rule 2a-7 would permit the Funds to invest their assets in both First Tier Securities and Second Tier Securities, as those terms are defined by the SEC. However, the Funds invest only in First Tier Securities. Additional information about each Fund's investment objective and policies is contained in its prospectus and statement of additional information. 16 Nations Prime Fund Nations Cash Reserves ------------------ --------------------- Investment Seeks the maximization of current Seeks to preserve principal value and Objective: income to extent consistent with the maintain a high degree of liquidity preservation of capital and the while providing current income. maintenance of liquidity. Investment The Fund may invest in U.S. Treasury The Fund may invest in U.S. Treasury Policies: bills, notes and bonds and other Obligations; U.S. Government instruments issued directly by the U.S. Obligations; commercial paper; Government ("U.S. Treasury obligations of thrift institutions; Obligations"), and other obligations U.S. commercial banks and U.S. and issued or guaranteed as to payment of London branches of foreign banks, principal and interest by the U.S. provided such institutions have total Government, its agencies or assets greater than $1 billion; instrumentalities (together with U.S. short-term corporate obligations of Treasury Obligations, "U.S. Government issuers of commercial paper; high Obligations"), bank and commercial quality short-term taxable obligations instruments that may be available in issued by state and local governments, the money markets, high quality their agencies and instrumentalities; short-term taxable obligations issued repurchase and reverse repurchase by state and local governments, their agreements secured by the above agencies and instrumentalities and instruments. The Fund also may invest repurchase agreements relating to U.S. in guaranteed investment contracts, Government Obligations and qualified instruments issued by certain trusts, first tier money market collateral. partnerships or other special purpose The Fund also may invest in guaranteed issuers. investment contracts, instruments issued by certain trusts, partnerships The Fund also reserves the right to or other special purpose issuers. The concentrate more than 25% of its Fund also may lend its portfolio investments in U.S. dollar denominated securities. obligations of U.S. banks, foreign branches of U.S. banks and U.S. branches of foreign banks. Nations Treasury Fund Nations Treasury Reserves --------------------- ------------------------- Investment Seeks the maximization of current Seeks to preserve principal value and Objective: income to the extent consistent with maintain a high degree of liquidity the preservation of capital and the while providing current income. maintenance of liquidity. Investment The Fund under normal circumstances The Fund under normal circumstances Policies: will invest at least 65% of its assets will invest at least 65% of its assets in U.S. Treasury Obligations and in U.S. Treasury Obligations and repurchase agreements secured by such repurchase agreements secured by such obligations. The Fund also may obligations. The Fund also may invest purchase securities issued by other in Separately Traded Registered investment companies, consistent with Interest and Principal Securities, or the Fund's investment objective and STRIPS. The Fund also may purchase policies, and may engage in reverse securities issued by other investment repurchase agreements. The Fund also companies, consistent with the Fund's may lend its portfolio securities. investment objective and policies, and may engage in reverse repurchase agreements. The Fund also may lend its portfolio securities. 17 Nations Government Money Market Fund Nations Government Reserves ------------------------------------ --------------------------- Investment Seeks a high level of current income as Seeks to preserve principal value and Objective: is consistent with liquidity and maintain a high degree of liquidity stability of principal. while providing current income. Investment The Fund may invest in U.S. Government The Fund may invest in U.S. Government Policies: Obligations. Although the Fund may Obligations. The Fund may not invest invest in repurchase agreements it does in repurchase agreements. The Fund not currently intend to do so. The also may purchase securities issued by Fund also may purchase securities other investment companies, consistent issued by other investment companies, with the Fund's investment objective consistent with the Fund's investment and policies, and may engage in objective and policies, and may engage reverse repurchase agreements. The in reverse repurchase agreements. The Fund also may lend its portfolio Fund also may lend its portfolio securities. The Fund also may lend securities. its portfolio securities. Nations Tax-Exempt Fund Nations Municipal Reserves ----------------------- -------------------------- Investment Seeks a high level of current interest Seeks to preserve principal value and Objective: income exempt from Federal income taxes maintain a high degree of liquidity as is consistent with liquidity and while providing current income exempt stability of principal. from Federal income taxes. Investment The Fund under normal conditions The Fund under normal conditions Policies: invests at least 80% of its assets in a invests at least 80% of its assets in diversified portfolio of obligations Municipal Securities. A portion of issued by or on behalf of states, the Fund's assets, however, may be territories and possessions of the invested in private activity bonds, United States, the District of the interest on which may be treated Columbia, and their political as a specific tax preference item subdivisions, agencies, under the Federal alternative minimum instrumentalities and authorities, the tax. The Fund also may purchase interest on which, in the opinion of securities issued by other investment bond counsel or counsel to the issuer, companies, consistent with the Fund's is exempt from regular Federal income investment objective and policies. tax ("Municipal Securities"). A The Fund also may invest in portion of the Fund's assets, however, instruments issued by certain trusts, may be invested in private activity partnerships or other special purpose bonds, the interest on which may be issuers, including pass-through treated as a specific tax preference certificates representing item under the Federal alternative participations in, or debt instruments minimum tax. The Fund also may backed by, the securities and other purchase securities issued by other assets owned by such issuers. investment companies, consistent with the Fund's investment objective and policies. The Fund also may invest in instruments issued by certain 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. Investment Adviser and Other Service Providers. The Funds have the same investment adviser, investment sub-adviser and service providers. Upon completion of the Consolidation, these entities will continue to serve the Funds in the capacities indicated below. 18 Service Providers for the Funds ------------------------------- Investment Adviser NBAI Investment Sub-Adviser TradeStreet Distributor Stephens Inc. ("Stephens") Co-Administrator NBAI Co-Administrator Stephens Sub-Administrator The Bank of New York Custodian The Bank of New York Transfer Agent First Data Investor Services Group, Inc. Sub-Transfer Agent NationsBank, N.A. (for Primary A and B shares only) Independent Accountants PricewaterhouseCoopers LLP Investment Advisory Services. NBAI is the investment adviser for each fund. Each fund pays an advisory fee, computed daily and paid monthly, to NBAI based on the fund's average daily net assets. Currently, the maximum advisory fee rate is 0.40% for the Nations Government Money Market Fund and Nations Tax-Exempt Fund; 0.20% for the Nations Prime Fund and Nations Treasury Fund and 0.15% for the Reserves Money Market Funds. TradeStreet is the investment sub-adviser for each Fund. NBAI pays TradeStreet sub-advisory fees, computed daily and paid monthly, at the maximum annual rate of 0.055% of the Money Market Funds' average daily net assets and 0.033% of the Reserves Money Market Funds' average daily net assets. Distribution and Shareholder Servicing Arrangements. All Funds. Shares of the Money Market Funds and Reserves Money Market Funds are distributed by Stephens Inc. ("Stephens"), a broker-dealer registered with the Commission under the Securities and Exchange Act of 1934 (the "1934 Act"). Pursuant to distribution plans ("Distribution Plans") adopted by certain classes of the Funds, such Funds may compensate or reimburse Stephens for any activities or expenses primarily intended to result in the sale of such Funds shares, including sales related services provided by banks, broker/dealers or other financial institutions ("Selling Agents") that have entered into a Sales Support Agreement with Stephens. Pursuant to shareholder servicing plans ("Shareholder Servicing Plans") adopted by certain classes of the Funds, such Funds may compensate or reimburse broker/dealers, banks and other financial institutions ("Servicing Agents") that provide shareholder support services to their customers who own shares of such Funds. Pursuant to administration plans adopted by certain classes of the Funds, such Funds may compensate or reimburse broker/dealers, banks and other financial institutions ("Administration Agents") that provide support services to Servicing Agents or provide shareholder support services to their customers who own shares of such Funds. Money Market Funds. Primary A Shares. Primary A Shares of the Money Market Funds do not pay any fees under a Distribution Plan or a Shareholder Servicing Plan. Primary B and Investor C Shares. Primary B and Investor C Shares of the Money Market Funds do not pay any fees under a Distribution Plan. The Companies have adopted a Shareholder Servicing Plan with respect to the Primary B and Investor C Shares of the Funds. Pursuant to the Shareholder Servicing Plan, each Fund may compensate or reimburse Servicing Agents that provide shareholder support services to their customers who own shares of a Fund. Payments under the Shareholder Servicing Plan will be calculated daily and paid monthly and may not exceed 0.25% (on an annual basis) of the average daily net assets of the Primary B and Investor C Shares of the Funds. 19 Investor A and Investor B Shares. The Companies have adopted a Distribution Plan pursuant to Rule 12b-1 with respect to each Money Market Fund's Investor A and Investor B Shares. This Distribution Plan provides that each Fund may pay Stephens, Selling Agents that have entered into a Sales Support Agreement with Stephens, or Servicing Agents that have entered into a Shareholder Servicing Agreement with the Funds up to 0.10% (on an annual basis) of the average daily net asset value of the Investor A and Investor B Shares of the Funds. In addition, the Companies have adopted a Shareholder Servicing Plan with respect to the Investor A and Investor B Shares of the Funds. Pursuant to the Shareholder Servicing Plan, each Fund may compensate or reimburse Servicing Agents that provide shareholder support services to their customers who own shares of a Fund. Payments under the Shareholder Servicing Plan will be calculated daily and paid monthly and may not exceed 0.25% (on an annual basis) of the average daily net assets of the Investor A and Investor B Shares of the Funds. Daily Shares. The Companies have adopted a Distribution Plan and a Shareholder Servicing Plan with respect to Daily Shares of the Money Market 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 annual rates not to exceed 0.45% of the average daily net asset value of the Funds' Daily Shares. The Companies also have approved a Shareholder Servicing Plan for the Funds that permit the Funds 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 annual rates not to exceed 0.25% of the average daily net asset value of the Funds' Daily Shares. Marsico Shares. Nations Fund, Inc. has adopted a Shareholder Administration Plan pursuant to which institutions provide shareholder administration services to their customers who from time to time beneficially own Marsico Shares of Nations Prime Fund. Payments under the Shareholder Administration Plan will be calculated daily and paid monthly and may not exceed 0.10% (on an annual basis) of the average daily net assets of the Marsico Shares of Nations Prime Fund. Nations Fund, Inc. has also adopted a Shareholder Servicing Plan with respect to the Marsico Shares of Nations Prime Fund. Pursuant to the Shareholder Servicing Plan, Nations Prime Fund may compensate or reimburse Servicing Agents that provide shareholder support services to their customers who own shares of the fund. Payments under the Shareholder Servicing Plan will be calculated daily and paid monthly and may not exceed 0.25% (on an annual basis) of the average daily net assets of the Marsico Shares of Nations Prime Fund. Reserves Money Market Funds. Trust Shares. Trust Shares of the Reserves Money Market Funds do not pay any fees under a Distribution Plan. Nations Institutional Reserves has adopted a Shareholder Servicing Plan with regard to the Trust Shares of the Funds. The Shareholder Servicing Plan provides that each Fund may pay Servicing Agents that have entered into a Shareholder Servicing Agreement with a Fund up to 0.10% (on an annual basis) of the average daily net asset value of the Trust Shares of the Funds. Investor Shares. Nations Institutional Reserves has adopted a Distribution Plan pursuant to Rule 12b-1 with respect to the Investor Shares of the Reserves Money Market Funds. Pursuant to the Distribution Plan, each Fund may pay Stephens for expenses incurred in connection with the marketing or distribution of the Fund's shares, including sales-related services provided by Selling Agents that have entered into a Sales Support Agreement with Stephens. Payments under the Distribution Plan will be calculated daily and paid monthly and may not exceed 0.10% (on an annual basis) of the average daily net assets of Investor Shares of the Funds. Nations Institutional Reserves has also adopted a Shareholder Servicing Plan with respect to the Investor Shares of the Funds. Pursuant to the Shareholder Servicing Plan, each Fund may compensate or reimburse Servicing Agents that provide shareholder support services to their customers who own shares of a Fund. Payments under the Shareholder Servicing Plan will be calculated daily and paid monthly and may not exceed 0.25% (on an annual basis) of the average daily net assets of the Investor Shares of the Funds. 20 Market Shares. Nations Institutional Reserves has adopted a Distribution Plan pursuant to Rule 12b-1 with respect to the Market Shares of the Reserves Money Market Funds. Pursuant to the Distribution Plan, each Fund may pay Stephens for expenses incurred in connection with the marketing or distribution of the Fund's shares, including sales related services provided by Selling Agents that have entered into a Sales Support Agreement with Stephens. Payments under the Distribution Plan will be calculated daily and paid monthly and may not exceed 0.20% (on an annual basis) of the average daily net assets of the Market Shares of the Funds. Nations Institutional Reserves has also adopted a Shareholder Servicing Plan with respect to the Market Shares of the Funds. Pursuant to the Shareholder Servicing Plan, each Fund may compensate or reimburse Servicing Agents that provide shareholder support services to their customers who own shares of a Fund. Payments under the Shareholder Servicing Plan will be calculated daily and paid monthly and may not exceed 0.25% (on an annual basis) of the average daily net assets of the Market Shares of the Funds. Daily Shares. Nations Institutional Reserves has adopted a Distribution Plan pursuant to Rule 12b-1 with respect to the Daily Shares of the Reserves Money Market Funds. Pursuant to the Distribution Plan, each Fund may pay Stephens for expenses incurred in connection with the marketing or distribution of the Fund's shares, including sales related services provided by Selling Agents that have entered into a Sales Support Agreement with Stephens. Payments under the Distribution Plan will be calculated daily and paid monthly and may not exceed 0.35% (on an annual basis) of the average daily net assets of Daily Shares of a Fund. Nations Institutional Reserves has also adopted a Shareholder Servicing Plan with respect to the Daily Shares of the Funds. Pursuant to the Shareholder Servicing Plan, each Fund may compensate or reimburse Servicing Agents that provide shareholder support services to their customers who own shares of a Fund. Payments under the Shareholder Servicing Plan will be calculated daily and paid monthly and may not exceed 0.25% (on an annual basis) of the average daily net assets of the Daily Shares of the Funds. Marsico Shares. Nations Institutional Reserves has adopted an Administration Plan pursuant to which institutions provide administration support services to Servicing Agents whose customers own Marsico Shares of Nations Cash Reserves. Payments under the Administration Plan will be calculated daily and paid monthly and may not exceed 0.10% (on an annual basis) of the average daily net assets of the Marsico Shares of Nations Cash Reserves. In addition, Nations Cash Reserves has adopted a Shareholder Servicing Plan with respect to the Marsico Shares of the fund. Pursuant to the Shareholder Servicing Plan, Nations Cash Reserves may compensate or reimburse Servicing Agents that provide shareholder support services to their customers who own shares of the fund. Payments under the Shareholder Servicing Plan will be calculated daily and paid monthly and may not exceed 0.25% (on an annual basis) of the average daily net assets of the Marsico Shares of Nations Cash Reserves. Sales Loads, Shareholder Transactions and Services. Shares of the Money Market Funds and Reserves Money Market Funds are sold without any front-end or contingent deferred sales charges. It is anticipated that, assuming necessary approvals are obtained, that the purchase, redemption, exchange, dividend and other policies and procedures of the classes of the Reserves Money Market Funds will be similar to those of the corresponding classes of the Money Market Funds as of the closing of the Consolidation. [Please see Appendix ___ for more details concerning these policies and procedures]. Federal Income Tax Consequences. Each Money Market Fund and Reserves Money Market 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 Money Market Fund and each corresponding Reserves Money Market Fund has been, and expects to continue to be, relieved of federal income tax liability. Consummation of the Consolidation with respect to each Money Market Fund and the corresponding Reserves Money Market Fund is subject to the condition that the Companies receive an opinion from Morrison & Foerster LLP substantially to the effect that, for federal income tax purposes: (i) the transfer of all of the assets and liabilities of the Money Market Fund to the corresponding Reserves Money Market Fund in exchange for the Reserves Money Market Fund shares, and the distribution of those shares to shareholders of the Money Market Fund, will constitute a "reorganization" within the meaning of Section 368(a) of the Code, and the Money Market Fund and the Reserves Money Market Fund will each be a "party to a reorganization" within the meaning of Section 368(b) of the Code in respect of the Consolidation; (ii) no gain or loss will be recognized by the Money Market Fund upon the transfer of its assets and liabilities to the Reserves Money Market Fund solely in exchange for the Reserves Money Market Fund shares; (iii) no gain or loss will be recognized by the Money Market Fund upon the receipt of the assets and assumption of liabilities of the Money Market Fund solely in exchange for the Reserves Money Market Fund shares; (iv) the basis of the Money Market Fund's assets received by the pursuant to the Consolidation will be the same as the basis of those assets in the hands of the Money Market Fund immediately prior to the Consolidation; (v) the holding period of the Money Market Fund's assets in the hands of the Reserves Money Market Fund will include the period for which such assets have been held by the Money Market Fund; (vi) no gain or loss will be recognized by the Money Market Fund on the distribution to its shareholders of the Reserves Money Market Fund shares; (vii) no gain or loss will be recognized by the shareholders of the Money Market Fund upon their receipt of the Reserves Money Market Fund shares in exchange for such shareholders' shares of the Money Market Fund; (viii) the basis of the Reserves Money Market Fund shares received by the shareholders of the Money Market Fund will be the same as the basis of the Money Market Fund shares surrendered by such shareholders pursuant to the Consolidation; (ix) the holding period for the Reserves Money Market Fund shares received by a Money Market Fund shareholder will include the period during which such shareholders held the Money Market Fund shares surrendered in exchange therefor, provided that such Money Market Fund shares are held as a capital asset in the hands of the Money Market Fund shareholder on the date of the exchange; and (x) the Reserves Money Market Fund will succeed to and take into account the tax attributes described in Section 381(c) of the Code of the corresponding Money Market Fund as of the Closing Date, subject to the conditions and limitations specified in the Code. 21 The opinion of Morrison & Foerster LLP will be based on the Code, applicable U.S. Treasury Regulations, judicial authority, and administrative rulings and practice, all as of the date of the opinion. These laws and authorities are subject to change, possibly with retroactive effect. The opinion will also not address any state, local or foreign tax consequences of Consolidation. In addition, the Internal Revenue Service is not bound by the opinion, and neither of the Companies has requested or will request an advance ruling from the Internal Revenue Service as to any of the tax consequences of the Consolidation. Accordingly, the Internal Revenue Service could take different positions concerning the tax consequences of Consolidation and such positions could be sustained. Furthermore, a Money Market Fund shareholder's tax treatment of the Consolidation will vary depending upon its particular situation. A Money Market Fund shareholder may also be subject to special rules not addressed in the opinion of Morrison & Foerster LLP if it is a certain kind of shareholder of a Money Market Fund, including: o an insurance company; o a tax-exempt organization; o a financial institution or broker-dealer; o a person who is neither a citizen nor resident of the United States; or o a holder of Money Market Fund shares as part of a hedge, straddle or conversion transaction. Money Market Fund shareholders are urged to consult with their own tax advisors regarding the particular tax consequences of the Consolidation to them, including the applicability and effect of any state, local or foreign laws, and the effect of possible changes in applicable tax laws. Board Consideration. At a series of meetings held in the Spring of 1999, the Companies' Boards of Directors/Trustees considered and then unanimously voted to approve the Consolidation Agreement. In reviewing the proposed Consolidation, the Boards considered the potential impact of the Consolidation on each fund's shareholders. In particular, the Board considered the fact that certain redundancies were created because the Money Market Funds and the Reserves Money Market Funds were managed in a substantially similar manner. The Boards (with the advice and assistance of independent counsel) also reviewed, among other things: (1) the Consolidation as part of the proposed streamlining of all or a part of the Nations Funds family; (2) the future expected costs savings to fund shareholders as a result of the Consolidation; (3) the investment objective, policies and limitations of the Money Market Funds, their compatibility with those of the Reserves Money Market Funds and the relative performance of the funds; (4) the anticipated tax-free nature of the Consolidation; (5) the investment advisory and other fees paid by the funds, and the historical and projected expense ratios of the Money Market Funds as compared with those of the Reserves Money Market Funds, including the fact that total operating expense ratios (after fee waivers and/or expense reimbursements) would be, with one exception, the same for Money Market Funds and the Reserves Money Market Funds, and that a substantial majority of Money Market Fund classes involved in the Consolidation would experience lower total operating expense ratios (before any waivers and/or expense reimbursements) after the Consolidation; and (6) the fact that the customary expenses associated with the Consolidation would not be borne by fund shareholders. Based upon its evaluation of these factors, and in light of their fiduciary duties under federal and state law, the Companies' Boards of Directors/Trustees, including all of the non-interested members of the Boards, has determined that the proposed Consolidation is in the best interests of the shareholders of each fund and that the interests of the shareholders of the respective funds will not be diluted as a result of the Consolidation. 22 The Companies' Boards of Directors/Trustees unanimously recommends that shareholders vote FOR the Consolidation Agreement. Other Information. The Consolidation may be abandoned at any time before the Closing upon the mutual consent of both funds. At any time before or (to the extent permitted by law) after approval of the agreement by the shareholders of the Money Market Funds (i) the parties may, by written agreement authorized by the Companies' Boards of Directors/Trustees and with or without the approval of their shareholders, amend any of the provisions of the Consolidation Agreement and (ii) either party may waive any default by the other party or the failure to satisfy any of the conditions to its obligations (the waiver to be in writing and authorized by the Companies Boards of Directors/Trustees with or without the approval of such party's shareholders). III. INFORMATION RELATING TO VOTING MATTERS General Information. The Proxy/Prospectus is being furnished in connection with the solicitation of proxies for the Meeting by the Companies' Boards of Directors/Trustees. It is expected that the solicitation of proxies will be primarily by mail. Officers and agents of the Companies also may solicit proxies by telephone, telegraph or personal interview. Any third party retained to assist in the solicitation will be paid by NBAI or its affiliates. Any shareholder giving a proxy may revoke it at any time before it is exercised (i) by submitting to the relevant Company a written notice of revocation, (ii) by submitting to the relevant Company a subsequently executed proxy or by attending the Meeting and voting in person. Only shareholders of record at the close of business on May 13, 1999, will be entitled to vote at the Meeting. On that date, the following number of Money Market Fund shares were outstanding and entitled to be voted. Money Market Fund Shares Entitled to be Voted ----------------- --------------------------- Nations Prime Fund Primary A shares xx Primary B shares xx Investor A shares xx Investor B shares xx Investor C shares xx Daily Shares xx Marsico shares xx Nations Treasury Fund Primary A shares xx Primary B shares xx Investor A shares xx Investor B shares xx Investor C shares xx Daily Shares xx Nations Tax-Exempt Fund Primary A shares xx Primary B shares xx Investor A shares xx Investor B shares xx Investor C shares xx Daily Shares xx Nations Government Money Market Fund Primary A shares xx Primary B shares xx Investor A shares xx Investor B shares xx Investor C shares xx Daily Shares xx 23 Each whole and fractional share is entitled to a whole or fractional vote. If the accompanying proxy is executed and returned in time for the Meeting, the shares covered thereby will be voted in accordance with the proxy on all matters that may properly come before the Meeting. Significant Shareholders. As of May 13, 1999, the officers and Directors show of the Company as a group owned less than 1% of any of the funds. The tables below show the name, address and share ownership of each person known to the Company to have beneficial or record ownership with respect to 5% or more of a class of a fund as of May 13, 1999. Class; Amount Percentage Name and of Shares Percentage Percentage of Fund Fund Address Owned; of Class of Fund Post-Closing Type of Ownership - ------------------- ---------------------- --------------- ----------- ---------- --------- - ------------------- ---------------------- --------------- ----------- ---------- --------- - ------------------- ---------------------- --------------- ----------- ---------- --------- For purposes of the 1940 Act, any person who owns directly or through one or more controlled companies more than 25% of the voting securities of a company is presumed to "control" such company. Accordingly, to the extent that a shareholder identified in the foregoing table is identified as the beneficial holder of more than 25% of a class, or is identified as the holder of record of more than 25% of a class and has voting and/or investment power, it may be presumed to control such class. Quorum. In the event that a quorum is not present at the Meeting, or in the event that a quorum is present at the Meeting but sufficient votes to approve the Consolidation Agreement are not received, one or more adjournment(s) may be proposed to permit further solicitation of proxies. For Nations Fund, Inc., 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. For Nations Fund Trust, 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 its Declaration of Trust and By-Laws, may adjourn for a reasonable period after the date of the Meeting. 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 quorum is constituted with respect to the Money Market Funds by the presence in person or by proxy of the holders of more than one-third of the outstanding shares of the Money Market Funds 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 Consolidation Agreement. Broker "non-votes" (that is, proxies from brokers or nominees indicating that such persons have not received instructions from the beneficial owners or other persons entitled to vote shares on a particular matter with respect to which the brokers or nominees do not have discretionary power) will be treated the same way as abstentions. 24 Annual Meetings and Shareholder Meetings. The Companies do not presently intend to hold annual meetings of shareholders for the election of 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 the Money Market Funds have the right to call a meeting of shareholders. Shareholder Approval. The Consolidation Agreement is being submitted for approval at the Meeting by the Money Market Fund's shareholders pursuant to the Nations Fund, Inc.'s Articles of Incorporation and By-Laws and Nations Fund Trust's Declaration of Trust and By-Laws, and was unanimously approved by the Companies' Boards of Directors/Trustees. The Consolidation Agreement must be approved by a majority of a Money Market Fund's shares voted at the meeting. With respect to the approval of the Consolidation Agreement, the term "majority of the outstanding shares" of a Money Market Fund means more than 50% of the shares of the Money Market Fund voted at the Meeting. A vote of the shareholders of the Reserves Money Market Funds is not being solicited, since their approval or consent is not necessary for the Consolidation. For shareholders of Nations Prime Fund and Nations Treasury Fund: The Consolidation Agreement contemplates the dissolution of Nations Fund, Inc. Accordingly, a vote for the Consolidation Agreement includes a vote for the dissolution of Nations Fund, Inc. The dissolution of Nations Fund, Inc. must be approved by a majority of the outstanding shares of all of the mutual funds of Nations Fund, Inc., including those mutual funds not part of this Proxy/Prospectus. Separate proxy solicitation materials are being mailed to the shareholders of all other series of Nations Fund, Inc. seeking the approval of similar proposals. Other Business. The Company's Board of Directors knows of no other business to be brought before the Meeting. However, if any other matters come before the Meeting, it is the intention that proxies which do not contain specific restrictions to the contrary will be voted on such matters in accordance with the judgment of the persons named in the enclosed form of proxy. IV. OTHER INFORMATION How to Obtain Additional Information About The Funds. Additional information about each Fund is included in its most recent prospectus and statement of additional information. You may obtain a prospectus or statement of additional information without charge by calling 1-800-321-7854 or by writing the Companies at: Nations Fund, Inc./Nations Fund Trust, c/o Stephens Inc., NationsBank, One Bank of America Plaza, 33rd Floor, Charlotte, North Carolina 28255. This Proxy/Prospectus is accompanied by a current prospectus for the Reserves Money Market Funds. Reports and other information filed by the Companies can be inspected and copied at the Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. 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. The information contained in each fund's prospectus is incorporated by reference into this Proxy/Prospectus. Financial Statements. The audited financial statements and financial highlights for the Funds for the fiscal year ended March 31, 1999, and the independent accountants report thereon, are incorporated by reference into the Statement of Additional Information related to this Proxy/Prospectus. The Financial Highlights included therein are incorporated by reference into this Proxy/Prospectus. Shareholder Inquiries. For additional information call 1-800-652-5096 or write to the Companies at the address on the cover page of this Proxy/Prospectus. 25 * * * SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT BY TELEFACSIMILE (FRONT AND BACK) AT (704) 388-2641 OR IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. 26 APPENDIX I FORM OF AGREEMENT AND PLAN OF CONSOLIDATION FOR NATIONS FUND TRUST, NATIONS FUND, INC. AND NATIONS INSTITUTIONAL RESERVES June 9, 1999 I-1 This AGREEMENT AND PLAN OF CONSOLIDATION (the "Agreement") is made as of this ____ day of June, 1999 by: Nations Fund Trust (the "Trust"), a Massachusetts business trust, for itself and on behalf of Nations Government Money Market Mutual Fund and Nations Tax-Exempt Fund; Nations Fund, Inc. (the "Company"), a Maryland corporation, for itself and on behalf of Nations Prime Fund and Nations Treasury Fund; and Nations Institutional Reserves ("Reserves"), a Massachusetts business trust, for itself and on behalf of Nations Cash Reserves, Nations Treasury Reserves, Nations Municipal Reserves and Nations Government Reserves. WHEREAS, the Trust, the Company and Reserves are open-end management investment companies registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940, as amended (the "1940 Act"); WHEREAS, the parties desire that the Fund Assets and Liabilities (as defined below) of the Nations Prime Fund, Nations Treasury Fund, Nations Tax-Exempt Fund and Nations Government Money Market Fund (collectively, the "Acquired Funds") be conveyed to and be acquired and assumed, respectively, by Nations Cash Reserves, Nations Treasury Reserves, Nations Municipal Reserves and Nations Government Reserves (collectively, the "Acquiring Funds") in exchange for shares of equal U.S. dollar value of such Acquiring Fund which shall thereafter promptly be distributed to the shareholders of the corresponding Acquired Fund in connection with its liquidation as described in this Agreement and set forth in Schedule A attached hereto (the "Consolidation"); and WHEREAS, the parties intend that the Consolidation qualify as a "reorganization," within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that the Acquiring Funds and the Acquired Funds will each be a "party to a reorganization," within the meaning of Section 368(b) of the Code, with respect to the Consolidation. NOW, THEREFORE, in accordance with the terms and conditions described herein, the Acquired Funds and Acquiring Funds shall be consolidated as follows: 1. Conveyance of Fund Assets and Liabilities of the Acquired Funds. (a) Except as provided below, at the Effective Time of the Consolidation (as defined in Section 8) all assets of every kind, and all interests, rights, privileges and powers of the Acquired Funds (the "Fund Assets"), subject to all liabilities of the Acquired Funds existing as of the Effective Time of the Consolidation (the "Liabilities"), shall be transferred by each Acquired Fund to each corresponding Acquiring Fund and shall be accepted and assumed by such Acquiring Fund, as more particularly set forth in this Agreement, such that at and after the Effective Time of the Consolidation: (i) all Fund Assets of the Acquired Funds shall become the assets of the Acquiring Funds; and (ii) all Liabilities of the Acquired Funds shall attach to the Acquiring Funds, enforceable against the Acquiring Funds to the same extent as if originally incurred by it. (b) It is understood and agreed that the Fund Assets shall include all property and assets of any nature whatsoever, including, without limitation, all cash, cash equivalents, securities, claims (whether absolute or contingent, known or unknown, accrued or unaccrued) and receivables (including dividend and interest receivables) owned or exercisable by the Acquired Funds, and any deferred or prepaid expenses shown as an asset on the Acquired Funds' books, that the Liabilities of the Acquired Funds shall include all liabilities, whether known or unknown, accrued or unaccrued, absolute or contingent, in all cases, existing at the Effective Time of the Consolidation. I-2 (c) At least fifteen (15) business days prior to the Closing Date (as defined in Section 8), the Acquired Funds will provide to, or cause to be provided to, the Acquiring Funds, a schedule of its securities, other assets and its known liabilities. It is understood and agreed that the Acquired Funds may sell any of the securities or other assets shown on such schedule prior to the Effective Time of the Consolidation but will not, without the prior approval of the Acquiring Funds, acquire any additional securities other than securities that the Acquiring Funds is not permitted to purchase in accordance with its stated investment objective and policies. At least ten (10) business days prior to the Closing Date, the Acquiring Funds will advise the Acquired Funds of any investments of the Acquired Funds shown on such schedule that the Acquiring Funds would not be permitted to hold, pursuant to its stated investment objective and policies or otherwise. The Acquired Funds, if requested by the Acquiring Funds, will dispose of any such securities prior to the Closing Date to the extent practicable and consistent with applicable legal requirements. In addition, if it is determined that the investment portfolios of the Acquired Funds and Acquiring Funds, when aggregated, would contain investments exceeding certain percentage limitations applicable to the Acquiring Funds, the Acquired Funds, if requested by the Acquiring Funds, will dispose of a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Effective Time of the Consolidation. (d) The Fund Assets shall be transferred and conveyed to the Acquiring Funds on the following basis: (1)In exchange for the transfer of the Fund Assets, the Acquiring Funds shall simultaneously issue to the Acquired Funds at the Effective Time of the Consolidation full and fractional Shares of the Acquiring Funds, as set forth in Schedule A attached hereto, having an aggregate net asset value equal to the net value of the Fund Assets minus Liabilities so conveyed and assumed, all determined in accordance with this Agreement. In this regard, the number of full and fractional shares of the Acquiring Funds delivered to the Acquired Funds shall be determined by dividing the value of the Fund Assets minus Liabilities, computed in the manner and as of the time and date set forth in this Agreement, by the net asset value of one Acquiring Funds share of such designated class, computed in the manner and as of the time and date set forth in this Agreement. (2)The net asset value of shares to be delivered by the Acquiring Funds, and the net value of the Fund Assets minus Liabilities to be conveyed by the Acquired Funds and assumed by the Acquiring Funds, shall, in each case, be determined as of the Valuation Time as defined in Section 3. The net asset value of Shares of the Acquiring Funds shall be computed in accordance with its then current valuation procedures. In determining the value of the Fund Assets, each security to be included in the Fund Assets shall be priced in accordance with the Acquiring Funds' then current valuation procedures. 2. Liquidation of the Acquired Funds. At the Effective Time of the Consolidation, the Acquired Funds shall make a liquidating distribution to their shareholders as follows: Shareholders of record of the Acquired Funds shall be credited with full and fractional shares of the respective Shares that are issued by the Acquiring Funds in connection with the Consolidation corresponding to the Acquired Funds shares that are held of record by the shareholder at the Effective Time of the Consolidation. Each such shareholder also shall have the right to receive any unpaid dividends or other distributions which were declared before the Effective Time of the Consolidation with respect to the Acquired Funds shares that are held of record by the shareholder at the Effective Time of the Consolidation, and Reserves shall record on its books the ownership of the respective Acquiring Funds shares by such shareholders (the "Transferor Record Holders"). All of the issued and outstanding shares of the Acquired Funds at the Effective Time of the Consolidation shall be redeemed and canceled on the books of Reserves at such time. As soon as reasonably possible after the Effective Time of the Consolidation, the Trust and the Company shall wind up the affairs of their respective Acquired Funds and shall file any final regulatory reports, including but not limited to any Form N-SAR and Rule 24f-2 filings, with respect to the Acquired Funds, and also shall take all other steps as are necessary and proper to effect the termination or declassification of the Acquired Funds in accordance with all applicable laws. 3. Valuation Time. The "Valuation Time" shall be the time as of which the net asset value of each class of shares of each of the Acquired Funds and the Acquiring Funds is determined pursuant to their respective valuation procedures on the Closing Date or such earlier or later time as may be mutually agreed to in writing by the parties hereto. I-3 4. Certain Representations, Warranties and Agreements of the Trust on behalf of its Acquired Funds. The Trust, on behalf of itself and, where appropriate, its respective Acquired Funds, represents and warrants to, and agrees with, Reserves on behalf of the corresponding Acquiring Funds as follows, with such representations, warranties and agreements made on behalf of the Acquired Funds on a several (and not joint, or joint and several) basis: (a) The Trust is a business trust, duly created, validly existing and in good standing under the laws of the Commonwealth of Massachusetts. The Trust is registered with the SEC as an open-end management investment company under the 1940 Act, and such registration is in full force and effect. (b) The Trust has the power to own all of its properties and assets and to consummate the transactions contemplated herein, and has all necessary federal, state and local authorizations to carry on its business as now being conducted and to consummate the transactions contemplated by this Agreement. (c) This Agreement has been duly authorized by the Board of Trustees of the Trust on behalf of its respective Acquiring Funds, and has been executed and delivered by duly authorized officers of the Trust, and represents a valid and binding contract, enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, arrangement, moratorium, and other similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The execution and delivery of this Agreement does not, and, subject to the approval of shareholders referred to in Section 6, the consummation of the transactions contemplated by this Agreement will not, violate the Declaration of Trust or By-Laws of the Trust, or any material agreement or arrangement to which the Trust is a party or by which it is bound. (d) The Trust's Acquired Funds have elected to qualify and have qualified as regulated investment companies under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, as of and since their first taxable year; have been regulated investment companies under such Part of the Code at all times since the end of their first taxable year when they so qualified; and qualify and shall continue to qualify as regulated investment companies for their taxable year ending upon its liquidation. (e) The Trust has valued, and will continue to value, the portfolio securities and other assets of its Acquired Funds in accordance with applicable legal requirements. (f) The proxy materials included within the Registration Statement on Form N-14 (the "N-14 Registration Statement") from its effective date with the SEC, through the time of the shareholders meeting referred to in Section 6 and the Effective Time of the Consolidation, insofar as they relate to the Trust, (i) shall comply in all material respects with the provisions of the Securities Exchange Act of 1934 as amended (the "1934 Act") and the 1940 Act, the rules and regulations thereunder, and state securities laws, and (ii) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein not misleading. (g) All of the issued and outstanding shares of the Trust's Acquired Funds have been validly issued and are fully paid and non-assessable, and were offered for sale and sold in conformity with the registration requirements of all applicable federal and state securities laws. (h) The Trust shall operate the business of its Acquired Funds in the ordinary course between the date hereof and the Effective Time of the Consolidation, it being agreed that such ordinary course of business will include the declaration and payment of customary dividends and distributions and any other dividends and distributions deemed advisable in anticipation of the Consolidation. Notwithstanding anything herein to the contrary, the Trust may take all appropriate action necessary in order for the Trust to receive the opinion provided for in Sections 9(e) and 10(g). I-4 (i) At the Effective Time of the Consolidation, the Trust's Acquired Funds will have good and marketable title to the Fund Assets and full right, power and authority to assign, deliver and otherwise transfer such assets. (j) At the Effective Time of the Consolidation, all federal and other tax returns and reports of the Acquired Funds required by law to have been filed by such time shall have been filed, and all federal and other taxes shall have been paid so far as due, or provision shall have been made for the payment thereof and, to the best knowledge of management of the Trust, no such return or report shall be currently under audit and no assessment shall have been asserted with respect to such returns or reports. 5. Certain Representations, Warranties and Agreements of the Company on behalf of its Acquired Funds. The Company, on behalf of itself and, where appropriate, its respective Acquired Funds, represents and warrants to, and agrees with, Reserves on behalf of the corresponding Acquiring Funds as follows, with such representations, warranties and agreements made on behalf of the Acquired Funds on a several (and not joint, or joint and several) basis: (a) The Company is a corporation, duly created, validly existing and in good standing under the laws of the State of Maryland. The Company is registered with the SEC as an open-end management investment company under the 1940 Act, and such registration is in full force and effect. (b) The Company has the power to own all of its properties and assets and to consummate the transactions contemplated herein, and has all necessary federal, state and local authorizations to carry on its business as now being conducted and to consummate the transactions contemplated by this Agreement. (c) This Agreement has been duly authorized by the Board of Directors of the Company on behalf of its respective Acquiring Funds, and has been executed and delivered by duly authorized officers of the Company, and represents a valid and binding contract, enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, arrangement, moratorium, and other similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The execution and delivery of this Agreement does not, and, subject to the approval of shareholders referred to in Section 7, the consummation of the transactions contemplated by this Agreement will not, violate the Articles of Incorporation or By-Laws of the Company, or any material agreement or arrangement to which the Company is a party or by which it is bound. (d) The Company's Acquired Funds have elected to qualify and have qualified as regulated investment companies under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, as of and since their first taxable year; have been regulated investment companies under such Part of the Code at all times since the end of their first taxable year when they so qualified; and qualify and shall continue to qualify as regulated investment companies for their taxable year ending upon its liquidation. (e) The Company has valued, and will continue to value, the portfolio securities and other assets of its Acquired Funds in accordance with applicable legal requirements. (f) The proxy materials included within the Registration Statement on Form N-14 (the "N-14 Registration Statement") from its effective date with the SEC, through the time of the shareholders meeting referred to in Section 7 and the Effective Time of the Consolidation, insofar as they relate to the Company, (i) shall comply in all material respects with the provisions of the Securities Exchange Act of 1934 as amended (the "1934 Act") and the 1940 Act, the rules and regulations thereunder, and state securities laws, and (ii) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein not misleading. I-5 (g) All of the issued and outstanding shares of the Company's Acquired Funds have been validly issued and are fully paid and non-assessable, and were offered for sale and sold in conformity with the registration requirements of all applicable federal and state securities laws. (h) The Company shall operate the business of its Acquired Funds in the ordinary course between the date hereof and the Effective Time of the Consolidation, it being agreed that such ordinary course of business will include the declaration and payment of customary dividends and distributions and any other dividends and distributions deemed advisable in anticipation of the Consolidation. Notwithstanding anything herein to the contrary, the Company may take all appropriate action necessary in order for the Company to receive the opinion provided for in Sections 9(e) and 10(g). (i) At the Effective Time of the Consolidation, the Company's Acquired Funds will have good and marketable title to the Fund Assets and full right, power and authority to assign, deliver and otherwise transfer such assets. (j) At the Effective Time of the Consolidation, all federal and other tax returns and reports of the Acquired Funds required by law to have been filed by such time shall have been filed, and all federal and other taxes shall have been paid so far as due, or provision shall have been made for the payment thereof and, to the best knowledge of management of the Company, no such return or report shall be currently under audit and no assessment shall have been asserted with respect to such returns or reports. 6. Certain Representations, Warranties and Agreements of Reserves on behalf of the Acquiring Funds. Reserves, on behalf of itself and where appropriate, the Acquiring Funds, represents and warrants to, and agrees with each of the Trust and the Company on behalf of their respective Acquired Funds as follows, with such representations, warranties and agreements made on behalf of the Acquiring Funds on a several (and not joint, or joint and several) basis: (a) Reserves is a business trust duly created, validly existing and in good standing under the laws of the Commonwealth or Massachusetts. Nations Portfolios is registered with the SEC as an open-end management investment company under the 1940 Act and such registration is in full force and effect. (b) Reserves has the power to own all of its properties and assets and to consummate the transactions contemplated herein, and has all necessary federal, state and local authorizations to carry on its business as now being conducted and to consummate the transactions contemplated by this Agreement. (c) This Agreement has been duly authorized by the Board of Trustees of Reserves on behalf of the Acquiring Funds, and executed and delivered by duly authorized officers of Reserves, and represents a valid and binding contract, enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement will not, violate the Articles of Incorporation or By-Laws of Nations Portfolios or any material agreement or arrangement to which it is a party or by which it is bound. (d) The Acquiring Funds has elected to qualify and has qualified as a regulated investment company under Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, as of and since its first taxable year; has been a regulated investment company under such Part of the Code at all times since the end of its first taxable year when it so qualified; and qualifies and shall continue to qualify as a regulated investment company for its current taxable year. I-6 (e) Nations Portfolios has valued, and will continue to value, the portfolio securities and other assets of the Acquiring Funds in accordance with applicable legal requirements. (f) The N-14 Registration Statement, including the proxy materials contained therein, from its effective date with the SEC through the time of the shareholders meeting referred to in Section 6 and at the Effective Time of the Consolidation, insofar as it relates to Nations Portfolios, or the Acquiring Funds, or the Primary A Shares, Primary B Shares, Investor A Shares, Investor B Shares or Investor C Shares of the Acquiring Funds to be issued pursuant thereto (i) shall comply in all material respects with the provisions of the Securities Act of 1933, as amended, (the "1933 Act"), the 1934 Act and the 1940 Act, the rules and regulations thereunder, and state securities laws, and (ii) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein not misleading. (g) The shares of the Acquiring Funds to be issued and delivered to the Acquired Funds for the account of the shareholders of the Acquired Funds, pursuant to the terms hereof, shall have been duly authorized as of the Effective Time of the Consolidation and, when so issued and delivered, shall be duly and validly issued, fully paid and non-assessable, and no shareholder of the Acquiring Funds shall have any preemptive right of subscription or purchase in respect thereto. (h) All of the issued and outstanding shares of the Acquiring Funds have been validly issued and are fully paid and non-assessable, and were offered for sale and sold in conformity with the registration requirements of all applicable federal and state securities laws. (i) Nations Portfolios shall operate the business of the Acquiring Funds in the ordinary course between the date hereof and the Effective Time of the Consolidation, except that Nations Portfolios shall complete all measures in respect of the Acquiring Funds prior to the Effective Time of the Consolidation to ensure that the Consolidation does not qualify as a "reorganization" within the meaning of Section 368 of the Code, regardless of whether such measures are in the ordinary course. It is understood that such ordinary course of business will include the declaration and payment of customary dividends and distributions and any other dividends and distributions deemed advisable in anticipation of the Consolidation. (j) At the Effective Time of the Consolidation, all federal and other tax returns and reports of the Acquiring Funds required by law to have been filed by such time shall have been filed, and all federal and other taxes shall have been paid so far as due, or provision shall have been made for the payment thereof and, to the best knowledge of management of Nations Portfolios, no such return or report shall be currently under audit and no assessment shall have been asserted with respect to such returns or reports. 7. Shareholder Action. As soon as practicable after the effective date of the N-14 Registration Statement each the Trust and the Company shall hold a meeting(s) of the shareholders of each's respective Acquired Funds for the purpose of considering and voting upon: (a) approval of this Agreement and the Consolidation contemplated hereby; and (b) such other matters as may be determined by the Board of Directors of the Company or the Board of Trustees of the Trust. 8. Regulatory Filings. As soon as practicable, each of the Trust and the Company shall file an N-14 Registration Statement with the SEC, which shall include all proxy materials required in connection with the Acquired Funds shareholder approval referenced in Section 7, and, where required, with appropriate state securities regulatory authorities. I-7 9. Closing Date, Effective Time of the Consolidation. The "Closing Date" shall be August 20, 1999, or such earlier or later date as may be mutually agreed in writing by the parties hereto. Delivery of the Fund Assets and the shares of the Acquiring Funds to be issued pursuant to Section 1 and the liquidation of the Acquired Funds pursuant to Section 2 shall occur on the day following the Closing Date, whether or not such day is a business day, or on such other date, and at such place and time, as may be mutually agreed in writing, by the parties hereto. The date and time at which such actions are taken are referred to herein as the "Effective Time of the Consolidation." To the extent any Fund Assets are, for any reason, not transferred at the Effective Time of the Consolidation, the Trust and the Company shall cause such Fund Assets to be transferred in accordance with this Agreement at the earliest practicable date thereafter. 10.Conditions to the Trust's Obligations on Behalf of its Acquired Funds. The obligations of the Trust hereunder shall be subject to the following conditions precedent: (a) This Agreement and the Consolidation shall have been approved by the Board of Trustees of the Trust and by a majority of the shareholders of its Acquired Funds in the manner required by applicable law and this Agreement. (b) All representations and warranties of the Trust made in this Agreement shall be true and correct in all material respects as if made at and as of the Valuation Time and the Effective Time of the Consolidation. (c) The Trust shall have delivered a certificate executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory and dated as of the Closing Date, to the effect that the representations and warranties of the Acquiring Funds made in this Agreement are true and correct at and as of the Valuation Time and that, to the best of its knowledge, the Fund Assets include only assets which the Trust's Acquiring Funds may properly acquire under its investment objectives, policies and limitations and may otherwise be lawfully acquired by such Acquiring Funds. (d) The Trust shall have received an opinion of Morrison & Foerster LLP, as counsel to the Trust in form reasonably satisfactory to Reserves and dated the Closing Date, substantially to the effect that (i) the Trust is a business trust duly established and validly existing under the laws of the Commonwealth of Massachusetts; (ii) the shares of the corresponding Acquiring Funds to be delivered to the Trust's Acquired Funds as provided for by this Agreement are duly authorized and upon delivery will be validly issued, fully paid and non-assessable by the Trust; (iii) this Agreement has been duly authorized, executed and delivered by the Trust, and represents a legal, valid and binding contract, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws relating to or affecting creditors' rights generally and court decisions with respect thereto, and such counsel shall express no opinion with respect to the application of equitable principles in any proceeding whether at law or in equity; (iv) the execution and delivery of this Agreement did not, and the consummation of the transactions contemplated by this Agreement will not, violate the Declaration of Trust or By-Laws of the Trust or any material contract known to such counsel to which the Trust is a party or by which it is bound; and (v) no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Trust of the transactions contemplated by this Agreement, except such as have been obtained under the 1933 Act, the 1934 Act, the 1940 Act, the rules and regulations under those Acts and such as may be required by state securities laws or such as may be required subsequent to the Effective Time of the Consolidation. Such opinion may rely on the opinion of other counsel to the extent set forth in such opinion, provided such other counsel is reasonably acceptable to Reserves. I-8 (e) The Trust shall have received an opinion of Morrison & Foerster LLP, based upon reasonable representations made in certificates provided by the Trust, its affiliates and/or principal shareholders of the Trust's Acquired Funds and/or the corresponding Acquiring Funds, addressed to the Trust in a form reasonably satisfactory to them, and dated the Closing Date, with respect to the matters specified in Subsection 11(g). (f) The Trust shall have received (i) a memorandum addressed to the Trust, in a form reasonably satisfactory to them, prepared by Morrison & Foerster LLP, or another person approved by the parties, concerning the registration of shares to be issued by Trust pursuant to this Agreement under applicable state securities laws or the exemption from registration under such laws, and (ii) assurance reasonably satisfactory to it that all permits and other authorizations necessary under state securities laws to consummate the transactions contemplated by this Agreement have been obtained. (g) The N-14 Registration Statement shall have become effective under the 1933 Act and no stop order suspending the effectiveness shall have been instituted, or to the knowledge of the Trust, contemplated by the SEC. (h) No action, suit or other proceeding shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein. (i) The SEC shall not have issued any unfavorable advisory report under Section 25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act. (j) The Trust on behalf of the Acquired Funds shall have performed and complied in all material respects with each of its agreements and covenants required by this Agreement to be performed or complied with by it prior to or at the Valuation Time and the Effective Time of the Consolidation. (k) The Trust shall have received a duly executed instrument whereby the corresponding Acquiring Funds assume all of the liabilities of the Trust's Acquired Funds. 11.Conditions to the Company's Obligations on Behalf of its Acquired Funds. The obligations of the Company hereunder shall be subject to the following conditions precedent: (a) This Agreement and the Consolidation shall have been approved by the Board of Directors of the Company and by a majority of the shareholders of its Acquired Funds in the manner required by applicable law and this Agreement. (b) All representations and warranties of the Company made in this Agreement shall be true and correct in all material respects as if made at and as of the Valuation Time and the Effective Time of the Consolidation. (c) The Company shall have delivered a certificate executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory and dated as of the Closing Date, to the effect that the representations and warranties of the Acquiring Funds made in this Agreement are true and correct at and as of the Valuation Time and that, to the best of its knowledge, the Fund Assets include only assets which the Company's Acquiring Funds may properly acquire under its investment objectives, policies and limitations and may otherwise be lawfully acquired by such Acquiring Funds. I-9 (d) The Company shall have received an opinion of Morrison & Foerster LLP, as counsel to the Company in form reasonably satisfactory to Reserves and dated the Closing Date, substantially to the effect that (i) the Company is a business trust duly established and validly existing under the laws of the Commonwealth of Massachusetts; (ii) the shares of the corresponding Acquiring Funds to be delivered to the Company's Acquired Funds as provided for by this Agreement are duly authorized and upon delivery will be validly issued, fully paid and non-assessable by the Company; (iii) this Agreement has been duly authorized, executed and delivered by the Company, and represents a legal, valid and binding contract, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws relating to or affecting creditors' rights generally and court decisions with respect thereto, and such counsel shall express no opinion with respect to the application of equitable principles in any proceeding whether at law or in equity; (iv) the execution and delivery of this Agreement did not, and the consummation of the transactions contemplated by this Agreement will not, violate the Articles of Incorporation or By-Laws of the Company or any material contract known to such counsel to which the Company is a party or by which it is bound; and (v) no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Company of the transactions contemplated by this Agreement, except such as have been obtained under the 1933 Act, the 1934 Act, the 1940 Act, the rules and regulations under those Acts and such as may be required by state securities laws or such as may be required subsequent to the Effective Time of the Consolidation. Such opinion may rely on the opinion of other counsel to the extent set forth in such opinion, provided such other counsel is reasonably acceptable to Reserves. (e) The Company shall have received an opinion of Morrison & Foerster LLP, based upon reasonable representations made in certificates provided by the Company, its affiliates and/or principal shareholders of the Company's Acquired Funds and/or the corresponding Acquiring Funds, addressed to the Company in a form reasonably satisfactory to them, and dated the Closing Date, with respect to the matters specified in Subsection 11(g). (f) The Company shall have received (i) a memorandum addressed to the Company, in a form reasonably satisfactory to them, prepared by Morrison & Foerster LLP, or another person approved by the parties, concerning the registration of shares to be issued by Company pursuant to this Agreement under applicable state securities laws or the exemption from registration under such laws, and (ii) assurance reasonably satisfactory to it that all permits and other authorizations necessary under state securities laws to consummate the transactions contemplated by this Agreement have been obtained. (g) The N-14 Registration Statement shall have become effective under the 1933 Act and no stop order suspending the effectiveness shall have been instituted, or to the knowledge of the Company, contemplated by the SEC. (h) No action, suit or other proceeding shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein. (i) The SEC shall not have issued any unfavorable advisory report under Section 25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act. (j) The Company on behalf of the Acquired Funds shall have performed and complied in all material respects with each of its agreements and covenants required by this Agreement to be performed or complied with by it prior to or at the Valuation Time and the Effective Time of the Consolidation. (k) The Company shall have received a duly executed instrument whereby the corresponding Acquiring Funds assume all of the liabilities of the Company's Acquired Funds. 12.Conditions to Reserves's Obligations on behalf of the Acquiring Funds. The obligations of Reserves hereunder shall be subject to the following conditions precedent: I-10 (a) This Agreement and the Consolidation shall have been approved by the Board of Trustees of Reserves on behalf of the Acquiring Funds and by a majority of the shareholders of the Acquired Funds in the manner required by applicable law and this Agreement. (b) Reserves shall have delivered to each of the Trust and the Company a statement of assets and liabilities of the Acquired Funds, showing the tax costs of such securities by lot and the holding periods of such securities, as of the Valuation Time, certified by the Treasurer or Assistant Treasurer of Nations Reserves as having been prepared in accordance with generally accepted accounting principles consistently applied. (c) Reserves shall have duly executed and delivered to each of the Trust and the Company such bills of sale, assignments, certificates and other instruments of transfer ("Transfer Documents") as the Trust and/or the Company may deem necessary or desirable to transfer all of the Acquired Funds' right, title and interest in and to the Fund Assets. (d) All representations and warranties of Reserves made in this Agreement shall be true and correct in all material respects as if made at and as of the Valuation Time and the Effective Time of the Consolidation. (e) Reserves shall have delivered a certificate executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory to each of the Trust and the Company and dated as of the Closing Date, to the effect that the representations and warranties of the Acquired Funds made in this Agreement are true and correct at and as of the Valuation Time. (f) Reserves shall have received an opinion of Morrison & Foerster LLP, as counsel to Reserves, in a form reasonably satisfactory to the Trust and the Company and dated the Closing Date, substantially to the effect that (i) Reserves is a business trust duly established and validly existing under the laws of the Commonwealth of Massachusetts; (ii) this Agreement has been duly authorized, executed and delivered by Reserves and represents a legal, valid and binding contract, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws relating to or affecting creditors' rights generally and court decisions with respect thereto, and such counsel shall express no opinion with respect to the application of equitable principles in any proceeding, whether at law or in equity; (iii) the execution and delivery of this Agreement did not, and the consummation of the transactions contemplated by this Agreement will not, violate the Declaration of Trust or By-Laws of Reserves or any material contract known to such counsel to which Reserves is a party or by which it is bound; and (iv) no consent, approval, authorization or order of any court or governmental authority is required for the consummation by Reserves of the transactions contemplated by this Agreement, except such as have been obtained under the 1933 Act, the 1934 Act, the 1940 Act, the rules and regulations under those Acts and such as may be required under the state securities laws or such as may be required subsequent to the Effective Time of the Consolidation. Such opinion may rely on the opinion of other counsel to the extent set forth in such opinion, provided such other counsel is reasonably acceptable to Reserves. (g) Reserves shall have received an opinion of Morrison & Foerster LLP, based upon reasonable representations made in certificates provided by Reserves, its affiliates and/or principal shareholders of the Acquired Funds and/or the Acquiring Funds, addressed to Reserves in a form reasonably satisfactory to the Trust and the Company, and dated the Closing Date, substantially to the effect that, for federal income tax purposes, the Consolidation will qualify as a "reorganization," within the meaning of Section 368(a) of the Code, and the Acquired Funds and the Acquiring Funds will each be a "party to a reorganization," within the meaning of Section 368(b) of the Code, with respect to the Consolidation. I-11 (h) The Fund Assets to be transferred to the Acquiring Funds under this Agreement shall include no assets which the Acquiring Funds may not properly acquire pursuant to its investment objectives, policies or restrictions or may not otherwise lawfully acquire. (i) The N-14 Registration Statement shall have become effective under the 1933 Act and no stop order suspending such effectiveness shall have been instituted or, to the knowledge of Reserves, contemplated by the SEC. (j) No action, suit or other proceeding shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit or obtain damages or other relief in connection with this Agreement or the transactions contemplated herein. (k) The SEC shall not have issued any unfavorable advisory report under Section 25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act. (l) Reserves on behalf of the Acquiring Funds shall have performed and complied in all material respects with each of its agreements and covenants required by this Agreement to be performed or complied with by it prior to or at the Valuation Time and the Effective Time of the Consolidation. 13.Survival of Representations and Warranties. The representations and warranties of Reserves on behalf of the Acquiring Funds set forth in this Agreement shall survive the delivery of the Fund Assets to the Acquiring Funds and the issuance of the shares of the Acquiring Funds at the Effective Time of the Consolidation. 14.Termination of Agreement. This Agreement may be terminated by a party at or, in the case of Subsection 12(c), below, at any time prior to, the Effective Time of the Consolidation by a vote of a majority of its Board members as provided below: (a) By Reserves on behalf of the Acquiring Funds if the conditions set forth in Section 10 and 11 are not satisfied as specified in said Section; (b) By the Trust on behalf of its Acquired Funds if the conditions set forth in Section 12 are not satisfied as specified in said Section; (c) By the Company on behalf of its Acquired Funds if the conditions set forth in Section 12 are not satisfied as specified in said Section; and (c) By mutual written consent of Reserves, the Company and the Trust. 15.Governing Law. This Agreement and the transactions contemplated hereby shall be governed, construed and enforced in accordance with the laws of the State of Maryland, except to the extent preempted by federal law. 16.Brokerage Fees and Expenses. (a) Reserves represents and warrants that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein. (b) NationsBanc Advisors, Inc. or its affiliates will be responsible for the customary expenses related to entering into and carrying out the provisions of this Agreement, whether or not the transactions contemplated hereby are consummated. I-12 17.Amendments This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of the Trust, acting on behalf of its Acquired Funds or the Company, acting on behalf of its Acquired Funds, and Reserves, acting on behalf of the Acquiring Funds; provided, however, that following the meetings of the shareholders of the Acquired Funds, no such amendment may have the effect of changing the provisions for determining the number of shares of the Acquiring Funds to be issued to the Transferor Record Holders under this Agreement to the detriment of such Transferor Record Holders, or otherwise materially and adversely affecting the Acquired Funds, without the Acquired Funds obtaining its shareholders' further approval. At any time prior to or (to the fullest extent permitted by law) after approval of this Agreement by the shareholders of the Acquired Funds, the Trust on behalf of its Acquired Funds, or the Company, on behalf of its Acquiring Funds, may waive any breach by Reserves, on behalf of the Acquiring Funds, or the failure to satisfy any of the conditions to its obligations (such waiver to be in writing and signed by an officer of such registered investment companies). At any time prior to or (to the fullest extent permitted by law) after approval of this Agreement by the shareholders of the Acquired Funds, Reserves, on behalf of the Acquiring Funds, may waive any breach by the Trust on behalf of its Acquired Funds, or the Company, on behalf of its Acquiring Funds, or the failure to satisfy any of the conditions to either of their obligations (such waiver to be in writing and signed by an officer of such registered investment companies). 18. Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. I-13 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers designated below as of the date first written above. NATIONS FUND, INC. On behalf of its Acquired Funds identified on Schedule A By:____________________________________________ Richard H. Blank, Jr. Secretary and Treasurer NATIONS FUND TRUST On behalf of its Acquired Funds identified on Schedule A By:____________________________________________ Richard H. Blank, Jr. Secretary and Treasurer NATIONS INSTITUTIONAL RESERVES On behalf of its Acquiring Funds identified on Schedule A By:____________________________________________ Richard H. Blank, Jr. Secretary and Treasurer I-14 SCHEDULE A SHAREHOLDERS OWNING SHARES OF THE WOULD RECEIVE SHARES OF THE FOLLOWING TRUST'S ACQUIRED FUNDS FOLLOWING RESERVES ACQUIRING AND CLASSES: FUNDS AND CLASSES: Nations Gov't Money Market Fund Nations Government Reserves Primary A Shares Trust Shares Primary B Shares Investor Shares Investor A Shares Market Shares Investor B Shares Investor Shares Investor C Shares Investor Shares Daily Shares Daily Shares Nations Tax-Exempt Fund Nations Municipal Reserves Primary A Shares Trust Shares Primary B Shares Investor Shares Investor A Shares Market Shares Investor B Shares Investor Shares Investor C Shares Investor Shares Daily Shares Daily Shares SHAREHOLDERS OWNING SHARES OF THE WOULD RECEIVE SHARES OF THE FOLLOWING COMPANY'S ACQUIRED FOLLOWING RESERVES ACQUIRING FUNDS AND CLASSES: FUNDS AND CLASSES: Nations Prime Fund Nations Cash Reserves Primary A Shares Trust Shares Primary B Shares Investor Shares Investor A Shares Market Shares Investor B Shares Investor Shares Investor C Shares Investor Shares Daily Shares Daily Shares Marsico Class Marsico Class Nations Treasury Fund Nations Treasury Reserves Primary A Shares Trust Shares Primary B Shares Investor Shares Investor A Shares Market Shares Investor B Shares Investor Shares Investor C Shares Investor Shares Daily Shares Daily Shares I-15 APPENDIX II Expense Summaries of the Money Market Funds and Reserves Money Market Funds ----------------------------------------------- The following tables (a) compare the fees and expenses as of February 28, 1999, for each class of the Money Market Funds and the designated classes of the corresponding Reserves Money Market Funds; and (b) show the estimated fees and expenses for the combined Fund on a pro forma basis after giving effect to the Consolidation. The fees and expenses, as of February 28, 1999, for the Reserves Money Market Funds have been adjusted to reflect changes in investment advisory and administration fee rates that are expected to become effective in May, 1999. As of February 28, 1999, there were no assets in the Trust Class, Investor Class and Daily Class of shares of the Reserves Money Market Funds. However, in May 1999, the Reserves Money Market Funds received substantial additional assets as a result of the reorganization of the Pacific Horizon Money Market Funds, a former family of funds advised by Bank of America, into the Reserves Money Market Funds. The pro forma expense ratios in the following tables do reflect the inflow of such assets. 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 actual expense levels may be greater or less than those shown. II-1 NATIONS GOVERNMENT FUND-PRIMARY A SHARES NATIONS GOVERNMENT RESERVES-TRUST SHARES Nations Nations Government Government Combined Fund Reserves Fund Pro Forma Shareholder Transaction Expenses: Maximum Sales Load Imposed on Purchases ... None None None Maximum Sales Load Imposed on Reinvested Dividends................... None None None Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.13% 0.10% 0.10% Shareholder Servicing Plan................. 0.00% 0.10% 0.10% Other Expenses (after waivers)**........... 0.17% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.30% 0.30% 0.30% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.40% for Nations Government Fund, and 0.15% for Nations Government Reserves and the Combined Fund. ** Other Expenses (absent waivers) would be 0.19% for Nations Government Fund, and 0.14% for Nations Government Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.59% for Nations Government Fund, and 0.39% 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: Nations Nations Government Government Combined Fund Reserves Fund Pro Forma 1 year ................................... $3 $3 $3 3 years .................................. $10 $10 $10 5 years .................................. $17 $17 $17 10 years ................................. $38 $38 $38 - -------------------- * 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 NATIONS GOVERNMENT FUND-PRIMARY B SHARES NATIONS GOVERNMENT RESERVES-INVESTOR SHARES Nations Nations Government Government Combined Fund Reserves Fund Pro Forma Shareholder Transaction Expenses: Maximum Sales Load Imposed on Purchases ... None None None Maximum Sales Load Imposed on Reinvested Dividends................... None None None Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.13% 0.10% 0.10% 12b-1 Fees................................. 0.00% 0.10% 0.10% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.17% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.55% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.40% for Nations Government Fund, and 0.15% for Nations Government Reserves and the Combined Fund. ** Other Expenses (absent waivers) would be 0.19% for Nations Government Fund, and 0.14% for Nations Government Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.84% for Nations Government Fund, and 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: Nations Nations Combined Government Government Fund 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-3 NATIONS GOVERNMENT FUND-INVESTOR A SHARES NATIONS GOVERNMENT RESERVES-MARKET SHARES Nations Nations Government Government Combined Fund Reserves Fund Pro Forma Shareholder Transaction Expenses: Maximum Sales Load Imposed on Purchases ... None None None Maximum Sales Load Imposed on Reinvested Dividends................... None None None Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.13% 0.10% 0.10% 12b-1 Fees................................. 0.10% 0.20% 0.20% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.17% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.65% 0.65% 0.65% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.40% for Nations Government Fund, and 0.15% for Nations Government Reserves and the Combined Fund. ** Other Expenses (absent waivers) would be 0.19% for Nations Government Fund, and 0.14% for Nations Government Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.94% for Nations Government Fund, and 0.74% 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: Nations Nations Government Government Combined Fund Reserves Fund Pro Forma 1 year ................................... $7 $7 $7 3 years .................................. $21 $21 $21 5 years .................................. $36 $36 $36 10 years ................................. $81 $81 $81 - -------------------- * 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-4 NATIONS GOVERNMENT FUND-INVESTOR B SHARES NATIONS GOVERNMENT RESERVES-INVESTOR SHARES Nations Nations Government Government Combined Fund Reserves Fund Pro Forma Shareholder Transaction Expenses: Maximum Sales Load Imposed on Purchases ... None None None Maximum Sales Load Imposed on Reinvested Dividends................... None None None Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.13% 0.10% 0.10% 12b-1 Fees**............................... 0.00% 0.10% 0.10% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)***.......... 0.17% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):**** 0.55% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.40% for Nations Government Fund, and 0.15% for Nations Government Reserves and the Combined Fund. ** 12b-1 Fees (absent waivers) would be 0.10% for Nations Government Fund. *** Other Expenses (absent waivers) would be 0.19% for Nations Government Fund, and 0.14% for Nations Government Reserves and the Combined Fund. **** Total Fund Operating Expenses (absent waivers) would be 0.94% for Nations Government Fund, and 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: Nations Nations Combined Government Government Fund 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-5 NATIONS GOVERNMENT FUND-INVESTOR C SHARES NATIONS GOVERNMENT RESERVES-INVESTOR SHARES Nations Nations Combined Government Government Fund 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.13% 0.10% 0.10% 12b-1 Fees................................. 0.00% 0.10% 0.10% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.17% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.55% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.40% for Nations Government Fund, and 0.15% for Nations Government Reserves and the Combined Fund. ** Other Expenses (absent waivers) would be 0.19% for Nations Government Fund, and 0.14% for Nations Government Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.84% for Nations Government Fund, and 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: Nations Nations Combined Government Government Fund 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-6 NATIONS GOVERNMENT FUND-DAILY SHARES NATIONS GOVERNMENT RESERVES-DAILY SHARES Nations Nations Combined Government Government Fund 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.13% 0.10% 0.10% 12b-1 Fees**............................... 0.25% 0.35% 0.35% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)***.......... 0.17% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):**** 0.80% 0.80% 0.80% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.40% for Nations Government Fund, and 0.15% for Nations Government Reserves and the Combined Fund. ** 12b-1 Fees (absent waivers) would be 0.45% for Nations Government Fund. *** Other expenses (absent waivers) would be 0.19% for Nations Government Fund, and 0.14% for Nations Government Reserves and the Combined Fund. **** Total Fund Operating Expenses (absent waivers) would be 1.29% for Nations Government Fund, and 0.89% 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: Nations Nations Combined Government Government Fund Fund Reserves Pro Forma 1 year ................................... $8 $8 $8 3 years .................................. $26 $26 $26 5 years .................................. $44 $44 $44 10 years ................................. $99 $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-7 NATIONS TAX EXEMPT FUND-PRIMARY A SHARES NATIONS MUNICIPAL RESERVES-TRUST SHARES Nations Combined Nations Tax Municipal Fund Exempt 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% Shareholder Servicing Plan***.............. 0.00% 0.10% 0.10% Other Expenses (after waivers)***.......... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.30% 0.30% 0.30% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.40% for Nations Tax Exempt Fund, and 0.15% for Nations Municipal Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.14% for Nations Tax-Exempt Fund, 0.17% for Nations Municipal Reserves and 0.14% for the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.54% for Nations Tax Exempt Fund, 0.42% for Nations Municipal Reserves, and 0.39% for 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 Nations Combined Tax Exempt Municipal Fund Fund Reserves Pro Forma 1 year ................................... $3 $3 $3 3 years .................................. $10 $10 $10 5 years .................................. $17 $17 $17 10 years ................................. $38 $38 $38 - -------------------- * 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-8 NATIONS TAX EXEMPT FUND-PRIMARY B SHARES NATIONS MUNICIPAL RESERVES-INVESTOR SHARES Nations Combined Nations Tax Municipal Fund Exempt 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% 12b-1 Fees................................. 0.00% 0.10% 0.10% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.55% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.40% for Nations Tax Exempt Fund, and 0.15% for Nations Municipal Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.14% for Nations Tax-Exempt Fund, 0.17% for Nations Municipal Reserves and 0.14% for the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.79% for Nations Tax Exempt Fund, 0.67% for Nations Municipal Reserves, and 0.64% for 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 Nations Combined Tax Exempt Municipal Fund 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-9 NATIONS TAX EXEMPT FUND-INVESTOR A SHARES NATIONS MUNICIPAL RESERVES-MARKET SHARES Nations Combined Nations Tax Municipal Fund Exempt 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% 12b-1 Fees................................. 0.10% 0.20% 0.20% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.65% 0.65% 0.65% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.40% for Nations Tax Exempt Fund, and 0.15% for Nations Municipal Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.14% for Nations Tax-Exempt Fund, 0.17% for Nations Municipal Reserves and 0.14% for the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.89% for Nations Tax Exempt Fund, 0.77% for Nations Municipal Reserves, and 0.74% for 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 Nations Combined Tax Exempt Municipal Fund Fund Reserves Pro Forma 1 year ................................... $7 $7 $7 3 years .................................. $21 $21 $21 5 years .................................. $36 $36 $36 10 years ................................. $81 $81 $81 - -------------------- * 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-10 NATIONS TAX EXEMPT FUND-INVESTOR B SHARES NATIONS MUNICIPAL RESERVES-INVESTOR SHARES Nations Combined Nations Tax Municipal Fund Exempt 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% 12b-1 Fees**............................... 0.00% 0.10% 0.10% Shareholder Servicing Plan***.............. 0.20% 0.25% 0.25% Other Expenses (after waivers)****......... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):***** 0.50% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.40% for Nations Tax Exempt Fund, and 0.15% for Nations Municipal Reserves and the Combined Fund. ** 12b-1 Fees (absent waivers) would be 0.10% for Nations Tax Exempt Fund. *** Shareholder Servicing Fees (absent waivers) would be 0.25% for Nations Tax Exempt Fund. **** Other expenses (absent waivers) would be 0.14% for Nations Tax-Exempt Fund, 0.17% for Nations Municipal Reserves and 0.14% for the Combined Fund. ***** Total Fund Operating Expenses (absent waivers) would be 0.89% for Nations Tax Exempt Fund, 0.67% for Nations Municipal Reserves, and 0.64% for 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 Nations Combined Tax Exempt Municipal Fund Fund Reserves Pro Forma 1 year ................................... $5 $6 $6 3 years .................................. $16 $18 $18 5 years .................................. $28 $31 $31 10 years ................................. $63 $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-11 NATIONS TAX EXEMPT FUND-INVESTOR C SHARES NATIONS MUNICIPAL RESERVES-INVESTOR SHARES Nations Combined Nations Tax Municipal Fund Exempt 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% 12b-1 Fees................................. 0.00% 0.10% 0.10% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.55% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.40% for Nations Tax Exempt Fund, and 0.15% for Nations Municipal Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.14% for Nations Tax-Exempt Fund, 0.17% for Nations Municipal Reserves and 0.14% for the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.79% for Nations Tax Exempt Fund, 0.67% for Nations Municipal Reserves, and 0.64% for 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 Nations Combined Tax Exempt Municipal Fund 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-12 NATIONS TAX EXEMPT FUND-DAILY SHARES NATIONS MUNICIPAL RESERVES-DAILY SHARES Nations Combined Nations Tax Municipal Fund Exempt 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% 12b-1 Fees**............................... 0.25% 0.35% 0.35% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)***.......... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):**** 0.80% 0.80% 0.80% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.40% for Nations Tax Exempt Fund, and 0.15% for Nations Municipal Reserves and the Combined Fund. ** 12b-1 Fees (absent waivers) would be 0.45% for Nations Tax Exempt Fund. *** Other expenses (absent waivers) would be 0.14% for Nations Tax-Exempt Fund, 0.17% for Nations Municipal Reserves and 0.14% for the Combined Fund. **** Total Fund Operating Expenses (absent waivers) would be 1.24% for Nations Tax Exempt Fund, 0.92% for Nations Municipal Reserves, and 0.89% for 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 Nations Combined Government Government Fund Fund Reserves Pro Forma 1 year ................................... $8 $8 $8 3 years .................................. $26 $26 $26 5 years .................................. $44 $44 $44 10 years ................................. $99 $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-13 NATIONS PRIME FUND-PRIMARY A SHARES NATIONS CASH RESERVES-TRUST SHARES Nations Nations Combined Prime Fund Cash 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% Shareholder Servicing Plan................. 0.00% 0.10% 0.10% Other Expenses (after waivers)**........... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.30% 0.30% 0.30% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Prime Fund, and 0.15% for Nations Cash Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.14% for Nations Prime Fund and 0.14% for Nations Cash Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.34% for Nations Prime Fund, and 0.39% 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: Nations Nations Combined Prime Cash Fund Fund Reserves Pro Forma 1 year ................................... $3 $3 $3 3 years .................................. $10 $10 $10 5 years .................................. $17 $17 $17 10 years ................................. $38 $38 $38 - -------------------- * 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-14 NATIONS PRIME FUND-PRIMARY B SHARES NATIONS CASH RESERVES-INVESTOR SHARES Nations Combined Nations Cash 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% 12b-1 Fees................................. 0.00% 0.10% 0.10% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.55% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Prime Fund, and 0.15% for Nations Cash Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.14% for Nations Prime Fund and 0.14% for Nations Cash Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.59% for Nations Prime Fund, and 0.64% 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: Nations Nations Combined Prime Cash Fund 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-15 NATIONS PRIME FUND-INVESTOR A SHARES NATIONS CASH RESERVES-MARKET SHARES Nations Combined Nations Cash 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% 12b-1 Fees................................. 0.10% 0.20% 0.20% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.65% 0.65% 0.65% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Prime Fund, and 0.15% for Nations Cash Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.14% for Nations Prime Fund and 0.14% for Nations Cash Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.69% for Nations Prime Fund, and 0.74% 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: Nations Nations Combined Prime Cash Fund Fund Reserves Pro Forma 1 year ................................... $7 $7 $7 3 years .................................. $21 $21 $21 5 years .................................. $36 $36 $36 10 years ................................. $81 $81 $81 - -------------------- * 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-16 NATIONS PRIME FUND-INVESTOR B SHARES NATIONS CASH RESERVES-INVESTOR SHARES Nations Combined Nations Cash 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% 12b-1 Fees (after waivers)**............... 0.00% 0.10% 0.10% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)***.......... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):**** 0.55% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Prime Fund, and 0.15% for Nations Cash Reserves and the Combined Fund. ** 12b-1 Fees (absent waivers) would be 0.10% for Nations Prime Fund. *** Other expenses (absent waivers) would be 0.14% for Nations Prime Fund and 0.14% for Nations Cash Reserves and the Combined Fund. **** Total Fund Operating Expenses (absent waivers) would be 0.69% for Nations Prime Fund, and 0.64% 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: Nations Nations Combined Prime Cash Fund 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-17 NATIONS PRIME FUND-INVESTOR C SHARES NATIONS CASH RESERVES-INVESTOR SHARES Nations Nations Combined Prime Fund Cash 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% 12b-1 Fees................................. 0.00% 0.10% 0.10% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.55% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Prime Fund, and 0.15% for Nations Cash Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.14% for Nations Prime Fund and 0.14% for Nations Cash Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.59% for Nations Prime Fund, and 0.64% 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: Nations Nations Combined Prime Cash Fund 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-18 NATIONS PRIME FUND-DAILY SHARES NATIONS CASH RESERVES-DAILY SHARES Nations Combined Nations Cash 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% 12b-1 Fees**............................... 0.25% 0.35% 0.35% Shareholder Servicing Plan***.............. 0.25% 0.25% 0.25% Other Expenses (after waivers)****......... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):**** 0.80% 0.80% 0.80% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Prime Fund, and 0.15% for Nations Cash Reserves and the Combined Fund. ** 12b-1 Fees (absent waivers) would be 0.45% for Nations Prime Fund. *** Other expenses (absent waivers) would be 0.14% for Nations Prime Fund and 0.14% for Nations Cash Reserves and the Combined Fund. **** Total Fund Operating Expenses (absent waivers) would be 1.04% for Nations Prime Fund, and 0.89% 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: Nations Nations Combined Prime Cash Fund Fund Reserves Pro Forma 1 year ................................... $8 $8 $8 3 years .................................. $26 $26 $26 5 years .................................. $44 $44 $44 10 years ................................. $99 $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-19 NATIONS PRIME FUND-MARSICO SHARES NATIONS CASH RESERVES-MARSICO SHARES Nations Combined Nations Cash 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.18% 0.10% 0.10% Administration Plan........................ 0.00% 0.10% 0.10% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.12% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.55% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Prime Fund, and 0.15% for Nations Cash Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.14% for Nations Prime Fund and 0.14% for Nations Cash Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.59% for Nations Prime Fund, and 0.64% 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: Nations Nations Combined Prime Cash Fund 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-20 NATIONS TREASURY FUND-PRIMARY A SHARES NATIONS TREASURY RESERVES-TRUST SHARES Nations Nations Combined Treasury 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.17% 0.10% 0.10% Shareholder Servicing Plan................. 0.00% 0.10% 0.10% Other Expenses (after waivers)**........... 0.13% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.30% 0.30% 0.30% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Treasury Fund, and 0.15% for Nations Treasury Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.15% for Nations Treasury Fund and 0.15% for Nations Treasury Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.35% for Nations Treasury Fund, and 0.40% 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 Nations Combined Treasury Treasury Fund Fund Reserves Pro Forma 1 year ................................... $3 $3 $3 3 years .................................. $10 $10 $10 5 years .................................. $17 $17 $17 10 years ................................. $38 $38 $38 - -------------------- * 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 NATIONS TREASURY FUND-PRIMARY B SHARES NATIONS TREASURY RESERVES-INVESTOR SHARES Nations Combined Nations Treasury 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.17% 0.10% 0.10% 12b-1 Fees................................. 0.00% 0.10% 0.10% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.13% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses:*** 0.55% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Treasury Fund, and 0.15% for Nations Treasury Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.15% for Nations Treasury Fund and 0.15% for Nations Treasury Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.60% for Nations Treasury Fund, and 0.65% 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 Nations Combined Prime Cash Fund 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-22 NATIONS TREASURY FUND-INVESTOR A SHARES NATIONS TREASURY RESERVES-MARKET SHARES Nations Combined Nations Treasury 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.17% 0.10% 0.10% 12b-1 Fees................................. 0.10% 0.20% 0.20% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.13% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.65% 0.65% 0.65% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Treasury Fund, and 0.15% for Nations Treasury Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.15% for Nations Treasury Fund and 0.15% for Nations Treasury Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.70% for Nations Treasury Fund, and 0.75% 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 Nations Combined Treasury Treasury Fund Fund Reserves Pro Forma 1 year ................................... $7 $7 $7 3 years .................................. $21 $21 $21 5 years .................................. $36 $36 $36 10 years ................................. $81 $81 $81 - -------------------- * 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 NATIONS TREASURY FUND-INVESTOR B SHARES NATIONS TREASURY RESERVES-INVESTOR SHARES Nations Combined Nations Treasury 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.17% 0.10% 0.10% 12b-1 Fees (after waivers)**............... 0 0.10% 0.10% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)***.......... 0.13% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses:**** 0.55% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Treasury Fund, and 0.15% for Nations Treasury Reserves and the Combined Fund. ** 12b-1 Fees (absent waivers) would be 0.10% for Nations Treasury Fund. *** Other expenses (absent waivers) would be 0.15% for Nations Treasury Fund and 0.15% for Nations Treasury Reserves and the Combined Fund. **** Total Fund Operating Expenses (absent waivers) would be 0.70% for Nations Treasury Fund, and 0.65% 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 Nations Combined Prime Cash Fund 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-24 NATIONS TREASURY FUND-INVESTOR C SHARES NATIONS TREASURY RESERVES-INVESTOR SHARES Nations Nations Combined Treasury 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.17% 0.10% 0.10% 12b-1 Fees................................. 0.00% 0.10% 0.10% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)**........... 0.13% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses (after waivers):*** 0.55% 0.55% 0.55% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Treasury Fund, and 0.15% for Nations Treasury Reserves and the Combined Fund. ** Other expenses (absent waivers) would be 0.15% for Nations Treasury Fund and 0.15% for Nations Treasury Reserves and the Combined Fund. *** Total Fund Operating Expenses (absent waivers) would be 0.60% for Nations Treasury Fund, and 0.65% 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 Nations Combined Prime Cash Fund 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-25 NATIONS TREASURY FUND-DAILY SHARES NATIONS TREASURY RESERVES-DAILY SHARES Nations Nations Combined Treasury 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 Deferred Sales Load(as a percentage of None None None redemption proceeds) .................. Redemption Fees ........................... None None None Exchange Fee .............................. None None None Annual Fund Operating Expenses: (as a percentage of average net assets) Management Fees (after waivers)* .......... 0.17% 0.10% 0.10% 12b-1 Fees (after waivers)**............... 0.25% 0.35% 0.35% Shareholder Servicing Plan................. 0.25% 0.25% 0.25% Other Expenses (after waivers)***.......... 0.13% 0.10% 0.10% ---- ---- ---- Total Fund Operating Expenses:**** 0.80% 0.80% 0.80% ==== ==== ==== - -------------------- * Management Fees (absent waivers) would be 0.20% for Nations Treasury Fund, and 0.15% for Nations Treasury Reserves and the Combined Fund. ** 12b-1 Fees (absent waivers) would be 0.45% for Nations Treasury Fund. *** Other expenses (absent waivers) would be 0.15% for Nations Treasury Fund and 0.15% for Nations Treasury Reserves and the Combined Fund. **** Total Fund Operating Expenses (absent waivers) would be 1.05% for Nations Treasury Fund, and 0.90% 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 Nations Combined Prime Cash Fund Fund Reserves Pro Forma 1 year ................................... $8 $8 $8 3 years .................................. $26 $26 $26 5 years .................................. $44 $44 $44 10 years ................................. $99 $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-26 STATEMENT OF ADDITIONAL INFORMATION DATED JUNE 9, 1999 NATIONS INSTITUTIONAL RESERVES NATIONS FUND TRUST NATIONS FUND, INC. One Bank of America Plaza, 33rd Floor Charlotte, North Carolina 28255 1-800-321-7854 (AUGUST 13, 1999 SPECIAL MEETING OF SHAREHOLDERS OF NATIONS FUND TRUST AND NATIONS FUND, INC.) This Statement of Additional Information is not a prospectus but should be read in conjunction with the Proxy/Prospectus dated the date hereof, for the Special Meeting of Shareholders of Nations Fund Trust and Nations Fund, Inc. to be held on August 13, 1999. Copies of the Proxy/Prospectus may be obtained at no charge by writing or calling Nations Fund Trust, Nations Institutional Reserves or Nations Fund, Inc. at the addresses or telephone numbers set forth above. Unless otherwise indicated, capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Proxy/Prospectus. INCORPORATION OF DOCUMENTS BY REFERENCE IN STATEMENT OF ADDITIONAL INFORMATION Further information about the Primary A, Primary B, Investor A, Investor B, Investor C, and Daily Class Shares of Nations Government Money Market Fund and Nations Tax-Exempt Fund is contained in and incorporated herein by reference to the Statement of Additional Information for Nations Fund Trust dated August 1, 1998, as supplemented. Further information about the Trust, Investor, Market, and Daily Class Shares of Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves is contained in and incorporated herein by reference to the Statement of Additional Information for Nations Institutional Reserves dated September 1, 1998, as supplemented. Further information about the Primary A, Primary B, Investor A, Investor B, Investor C, Daily, and Marsico Class Shares of Nations Prime Fund and the Primary A, Primary B, Investor A, Investor B, Investor C, and Daily Class Shares of Nations Treasury Fund is contained in and incorporated herein by reference to the Statement of Additional Information for Nations Fund, Inc. dated August 1, 1998, as supplemented. The audited financial statements and related Report of Independent Accountants for the year ended March 31, 1999 for the Nations Government Money Market Fund and Nations Tax-Exempt Fund are incorporated herein by reference. No other parts of the annual and semi-annual reports are incorporated herein by reference. The audited financial statements and related Report of Independent Accountants for the year ended March 31, 1999 for Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves are incorporated herein by reference. No other parts of the annual reports are incorporated herein by reference. The audited financial statements and related Report of Independent Accountants for the year ended March 31, 1999 for the Nations Prime Fund and Nations Treasury Fund are incorporated herein by reference. No other parts of the annual reports are incorporated herein by reference. The audited financial statements and related Report of Independent Accountants for the year ended March 31, 1999 for the Nations Prime Fund and Nations Treasury Fund are incorporated herein by reference. No other parts of the annual reports are incorporated herein by reference. 1 TABLE OF CONTENTS General Information................................................. 3 Introductory Note to PRO FORMA Financial Information................ 4 2 GENERAL INFORMATION The Consolidation contemplates the transfer of all of the assets and liabilities of each money market fund of Nations Fund Trust and Nations Fund, Inc. (the "Money Market Funds") to a corresponding money market fund of Nations Institutional Reserves (the "Reserves Money Market Funds") in exchange for shares of designated classes of the Reserves Money Market Funds. The shares issued by the Reserves Money Market Funds will have an aggregate value equal to the aggregate value of the shares of the respective Money Market Funds that were outstanding immediately before the closing of the Consolidation. After the transfer of their assets and liabilities in exchange for shares of the Reserves Money Market Funds, the Money Market Funds will distribute the shares of the Reserves Money Market Funds to their shareholders in liquidation of the Money Market Funds. Each shareholder owning shares of the Money Market Fund at the closing will receive shares of the corresponding Reserves Money Market Fund of equal value, and will receive any unpaid dividends or distributions that were declared before the closing. Nations Institutional Reserves will establish an account for each former shareholder of the Money Market Funds reflecting the appropriate number of Reserves Money Market Funds shares distributed to the shareholder. These accounts will be substantially identical to the accounts maintained by the Money Market Funds for each shareholder. Upon completion of the consolidation with respect to the Money Market Funds, all outstanding shares of the Money Market Funds will have been redeemed and cancelled in exchange for shares of the Reserves Money Market Funds distributed, and the Money Market Funds will wind up their affairs. Other than in the normal course of business, it is not expected that there will be any material realignment of the portfolio holdings of the Money Market Funds after the Consolidation. For further information about the transaction, see the Proxy/Prospectus. 3 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 Nations Prime Fund, Nations Treasury Fund, Nations Government Money Market Fund and Nations Tax-Exempt Fund to Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves, respectively, accounted for as if each transfer had occurred as of March 31, 1999. In addition, each PRO FORMA combined statement has been prepared based upon the proposed fee and expense structure of Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations Municipal Reserves. In addition, the following unaudited PRO FORMA information does not reflect the consummation of the reorganization of the Pacific Horizon Government Fund and Pacific Horizon Treasury Only Fund into Nations Government Reserves, nor does it reflect the consummation of the reorganization of the Pacific Horizon Tax-Exempt Money Fund into Nations Municipal Reserves. These reorganizations are expected to take place in May 1999. Accordingly, it is anticipated that as of the consummation of the Consolidation of the Money Market Funds and the Reserves Money Market Funds, a significant level of assets will be invested in the Reserves Money Market Funds. In addition, the following unaudited PRO FORMA information does not reflect the consummation of the reorganization of the Pacific Horizon Prime Fund into Nations Cash Reserves, nor does it reflect the consummation of the reorganization of the Pacific Horizon Treasury Fund into Nations Treasury Reserves. These reorganizations are expected to take place in May 1999. Accordingly, it is anticipated that as of the consummation of the Consolidation of the Money Market Funds and the Reserves Money Market Funds, a significant level of assets will be invested in the Reserves Money Market Funds. The PRO FORMA financial information should be read in conjunction with the historical financial statements and notes thereto of Nations Prime Fund, Nations Treasury Fund, Nations Government Money Market Fund and Nations Tax-Exempt Fund included or incorporated herein by reference in this Statement of Additional Information. Each combination of the above money market funds of Nations Fund Trust and Nations Fund, Inc. with those of Nations Institutional Reserves will be accounted for as a tax-free consolidation. 4 NATIONS CASH RESERVES / NATIONS PRIME FUND Pro Forma Combining Schedule of Investments (unaudited) March 31,1999 Nations Nations Pro Forma Description Coupon Maturity Nations Nations Pro Forma Cash Reserves Prime Combined Rate Date Cash Reserves Prime Value Shares/Par Shares/Par Shares/Par Value Value BANK OBLIGATIONS - 11.39% CERTIFICATES OF DEPOSIT - DOMESTIC - 0.28% BANKERS TRUST 5.770 04/28/1999 23,500,000 20,000,000 43,500,000 23,497,838 19,998,160 43,495,998 ---------------------------------------- TOTAL CERTIFICATES OF DEPOSIT - DOMESTIC 23,497,838 19,998,160 43,495,998 CERTIFICATES OF DEPOSIT - YANKEE - 4.88% BANK OF NOVA SCOTIA 5.330 03/03/2000 35,000,000 20,000,000 55,000,000 34,987,573 19,992,899 54,980,472 BAYERISCHE VEREINSBANK, (NEW YORK) 5.075 02/10/2000 50,000,000 40,000,000 90,000,000 49,983,365 39,986,692 89,970,057 COMMEZBANK, (NEW YORK) 5.270 03/01/2000 50,000,000 35,000,000 85,000,000 49,995,242 34,996,670 84,991,912 CREDIT AGRICOLE, (NEW YORK) 5.750 04/01/1999 40,000,000 50,000,000 90,000,000 40,000,000 50,000,000 90,000,000 DEUTSCHE BANK, (NEW YORK) 5.120 01/10/2000 50,000,000 40,000,000 90,000,000 50,000,000 40,000,000 90,000,000 DEUTSCHE BANK, (NEW YORK) 5.160 01/12/2000 50,000,000 40,000,000 90,000,000 50,000,000 40,000,000 90,000,000 DEUTSCHE BANK, (NEW YORK) 5.100 02/18/2000 50,000,000 40,000,000 90,000,000 49,985,078 39,988,062 89,973,140 SOCIETE GENERALE, (NEW YORK) 5.750 04/16/1999 30,000,000 30,000,000 60,000,000 29,985,630 29,985,630 59,971,260 SOCIETE GENERALE, (NEW YORK) 5.800 04/28/1999 30,000,000 30,000,000 29,985,630 29,985,630 UNION BANK OF SWITZERLAND, (NEW YORK) 5.080 01/13/2000 50,000,000 25,000,000 75,000,000 49,988,631 24,994,315 74,982,946 ---------------------------------------- TOTAL CERTIFICATES OF DEPOSIT - YANKEE 434,911,149 319,944,268 754,855,417 TIME DEPOSITS - EURO - 6.23% CREDIT AGRICOLE 5.125 04/01/1999 200,000,000 200,000,000 200,000,000 200,000,000 FIRST CHICAGO 5.125 04/01/1999 100,000,000 100,000,000 200,000,000 100,000,000 100,000,000 200,000,000 SOCIETE GENERALE 5.125 04/01/1999 90,000,000 135,000,000 225,000,000 90,000,000 135,000,000 225,000,000 WESTDEUTCHE LANDESBANKEN 5.188 04/01/1999 190,000,000 150,000,000 340,000,000 190,000,000 150,000,000 340,000,000 ---------------------------------------- TOTAL TIME DEPOSITS - EURO 580,000,000 385,000,000 965,000,000 TOTAL BANK OBLIGATIONS 1,038,408,987 724,942,428 1,763,351,415 CORPORATE OBLIGATIONS - 71.53% COMMERCIAL PAPER - 44.98% ALEX BROWN, INC. 05/04/1999 50,000,000 50,000,000 49,775,417 49,775,417 AON CORPORATION 04/07/1999 13,000,000 12,000,000 25,000,000 12,989,383 11,990,200 24,979,583 AON CORPORATION 04/27/1999 10,309,000 10,309,000 10,272,667 10,272,667 AON CORPORATION 05/12/1999 50,000,000 32,139,000 82,139,000 49,720,972 31,959,647 81,680,619 BANKERS TRUST COMPANY OF NEW YORK 04/12/1999 35,000,000 35,000,000 34,944,389 34,944,389 BANKERS TRUST COMPANY OF NEW YORK 04/15/1999 25,000,000 25,000,000 50,000,000 24,949,444 24,949,444 49,898,889 BANKERS TRUST COMPANY OF NEW YORK 06/29/1999 30,000,000 30,000,000 29,628,425 29,628,425 BANKERS TRUST COMPANY OF NEW YORK 07/20/1999 50,000,000 25,000,000 75,000,000 49,251,389 24,625,694 73,877,083 BARTON CAPITAL 04/27/1999 36,648,000 35,000,000 71,648,000 36,518,307 34,876,139 71,394,446 BARTON CAPITAL 05/21/1999 28,332,000 28,332,000 28,140,759 28,140,759 BETA FINANCE 06/22/1999 15,500,000 15,500,000 15,328,768 15,328,768 CIESCO LP 05/19/1999 50,000,000 50,000,000 49,678,000 49,678,000 COUNTRYWIDE HOME LOAN 05/19/1999 25,000,000 50,000,000 75,000,000 24,836,333 49,672,667 74,509,000 COUNTRYWIDE HOME LOAN 05/24/1999 115,000,000 50,000,000 165,000,000 114,169,225 49,638,569 163,807,794 EDISON SECURITIZATION 04/23/1999 45,000,000 30,000,000 75,000,000 44,862,500 29,908,333 74,770,833 EDISON SECURITIZATION 05/11/1999 95,084,000 35,000,000 130,084,000 94,567,987 34,809,444 129,377,432 EDISON SECURITIZATION 05/12/1999 60,000,000 40,000,000 100,000,000 59,644,667 39,763,111 99,407,778 EDISON SECURITIZATION 06/30/1999 87,100,000 87,100,000 86,037,460 86,037,460 EDISON SECURITIZATION 08/27/1999 57,786,000 57,786,000 56,614,806 56,614,806 FINOVA CAPITAL CORPORATION 05/04/1999 25,000,000 25,000,000 50,000,000 24,888,625 24,888,625 49,777,250 FINOVA CAPITAL CORPORATION 05/24/1999 25,000,000 25,000,000 50,000,000 24,819,653 24,819,653 49,639,306 FINOVA CAPITAL CORPORATION 06/09/1999 50,000,000 50,000,000 100,000,000 49,529,458 49,529,458 99,058,917 FINOVA CAPITAL CORPORATION 06/10/1999 20,000,000 20,000,000 19,809,056 19,809,056 FINOVA CAPITAL CORPORATION 06/15/1999 20,000,000 15,000,000 35,000,000 19,795,833 14,846,875 34,642,708 FINOVA CAPITAL 06/16/1999 50,000,000 35,000,000 85,000,000CORPORATION 49,482,778 34,637,944 84,120,722 FINOVA CAPITAL CORPORATION 06/25/1999 20,000,000 20,000,000 19,767,667 19,767,667 FINOVA CAPITAL CORPORATION 06/28/1999 50,000,000 50,000,000 49,398,667 49,398,667 GENERAL ELECTRIC CAPITAL CORPORATION 10/04/1999 60,000,000 40,000,000 100,000,000 58,527,500 39,018,333 97,545,833 GOLDMAN SACHS 04/14/1999 120,000,000 60,000,000 180,000,000 119,776,707 59,888,417 179,665,124 HITACHI AMERICA 04/13/1999 9,000,000 10,000,000 19,000,000 8,983,500 9,981,667 18,965,167 HITACHI AMERICA 05/11/1999 12,000,000 13,000,000 25,000,000 11,927,333 12,921,278 24,848,611 HITACHI AMERICA 05/14/1999 16,000,000 17,000,000 33,000,000 15,896,418 16,889,944 32,786,362 INTERNATIONAL SECURITIZATION CORP. 04/15/1999 50,000,000 50,000,000 100,000,000 49,905,306 49,905,306 99,810,611 INTERNATIONAL SECURITIZATION CORP. 04/22/1999 35,250,000 50,000,000 85,250,000 35,147,188 49,854,167 85,001,354 INTERNATIONAL SECURITIZATION CORP. 04/29/1999 55,050,000 45,000,000 100,050,000 54,839,536 44,827,994 99,667,531 INTERNATIONAL SECURITIZATION CORP. 04/30/1999 75,000,000 75,000,000 150,000,000 74,704,965 74,704,965 149,409,931 INTERNATIONAL SECURITIZATION CORP. 06/09/1999 14,585,000 14,585,000 14,445,227 14,445,227 INTERNATIONAL SECURITIZATION CORP. 06/17/1999 50,000,000 41,680,000 91,680,000 49,480,250 41,246,736 90,726,986 LEHMAN BROTHERS HOLDINGS 04/26/1999 60,000,000 57,000,000 117,000,000 59,791,667 56,801,080 116,592,747 LEHMAN BROTHERS HOLDINGS 04/27/1999 50,000,000 23,000,000 73,000,000 49,816,375 22,915,533 72,731,908 LEHMAN BROTHERS HOLDINGS 05/03/1999 110,000,000 90,000,000 200,000,000 109,506,222 89,596,000 199,102,222 LEHMAN BROTHERS HOLDINGS 05/05/1999 60,000,000 40,000,000 100,000,000 59,712,700 39,808,467 99,521,167 LEHMAN BROTHERS HOLDINGS 05/18/1999 50,000,000 35,000,000 85,000,000 49,668,389 34,767,872 84,436,261 LEHMAN BROTHERS HOLDINGS 09/22/1999 50,000,000 50,000,000 100,000,000 48,774,750 48,774,750 97,549,500 LEXINGTON PARKER CAPITAL CO. 06/22/1999 56,306,000 56,306,000 55,683,975 55,683,975 LEXINGTON PARKER CAPITAL CO. 09/02/1999 214,878,000 214,878,000 210,346,342 210,346,342 MITSUBISHI INTERNATIONAL CORP. 04/23/1999 21,572,000 21,572,000 21,504,767 21,504,767 MITSUBISHI INTERNATIONAL CORP. 05/18/1999 33,100,000 33,100,000 32,870,966 32,870,966 MITSUBISHI INTERNATIONAL CORP. 05/26/1999 20,000,000 20,000,000 19,845,389 19,845,389 MITSUBISHI INTERNATIONAL CORP. 06/30/1999 5,000,000 5,000,000 4,936,500 4,936,500 MOAT FUNDING LLC 04/07/1999 53,688,000 79,460,000 133,148,000 53,643,886 79,394,612 133,038,499 MOAT FUNDING LLC 04/12/1999 28,545,000 20,000,000 48,545,000 28,502,175 19,969,994 48,472,169 MOAT FUNDING LLC 05/17/1999 32,287,000 30,000,000 62,287,000 32,084,848 29,812,167 61,897,014 MOAT FUNDING LLC 05/28/1999 26,643,000 25,000,000 51,643,000 26,438,404 24,808,021 51,246,425 MOAT FUNDING LLC 06/07/1999 35,000,000 15,000,000 50,000,000 34,679,517 14,862,650 49,542,167 MOAT FUNDING LLC 06/14/1999 25,000,000 25,000,000 24,742,028 24,742,028 MOAT FUNDING LLC 06/14/1999 25,000,000 25,000,000 24,742,028 24,742,028 MOAT FUNDING LLC 06/21/1999 20,000,000 21,571,000 41,571,000 19,778,600 21,332,209 41,110,809 MOAT FUNDING LLC 06/28/1999 29,270,000 29,270,000 28,920,126 28,920,126 MOAT FUNDING LLC 06/29/1999 13,511,000 50,000,000 63,511,000 13,350,001 49,404,194 62,754,196 MOAT FUNDING LLC 08/24/1999 29,851,000 20,000,000 49,851,000 29,261,857 19,605,278 48,867,135 MOAT FUNDING LLC 09/21/1999 15,000,000 13,889,000 28,889,000 14,647,513 13,562,620 28,210,133 MOAT FUNDING LLC 10/20/1999 50,000,000 23,349,000 73,349,000 48,611,250 22,700,482 71,311,732 NATIONAL BANK OF CANADA 08/23/1999 20,000,000 20,000,000 40,000,000 19,608,000 19,608,000 39,216,000 NATIONAL BANK OF CANADA 09/01/1999 25,000,000 20,000,000 45,000,000 24,475,125 19,580,100 44,055,225 NATIONAL BANK OF CANADA 09/08/1999 25,000,000 20,000,000 45,000,000 24,460,000 19,568,000 44,028,000 NEW CENTER ASSET TRUST 04/15/1999 40,000,000 25,000,000 65,000,000 39,924,556 24,952,847 64,877,403 PHH CORPORATION 05/11/1999 25,000,000 25,000,000 24,860,833 24,860,833 PHH CORPORATION 05/13/1999 25,000,000 25,000,000 24,853,875 24,853,875 PHH CORPORATION 08/10/1999 25,000,000 25,000,000 50,000,000 24,540,590 24,540,590 49,081,181 PHH CORPORATION 08/11/1999 25,000,000 25,000,000 50,000,000 24,538,000 24,538,000 49,076,000 PHH CORPORATION 08/25/1999 50,000,000 50,000,000 48,959,750 48,959,750 PHH CORPORATION 08/30/1999 50,000,000 50,000,000 48,924,125 48,924,125 SAFECO CORPORATION 04/30/1999 12,300,000 20,000,000 32,300,000 12,250,260 19,919,122 32,169,382 SAFECO CORPORATION 05/12/1999 25,000,000 38,000,000 63,000,000 24,859,063 37,785,776 62,644,839 SAFECO CORPORATION 05/17/1999 20,000,000 20,000,000 40,000,000 19,872,733 19,872,733 39,745,467 SAFECO CORPORATION 06/10/1999 45,000,000 45,000,000 90,000,000 44,567,000 44,567,000 89,134,000 SAFECO CORPORATION 06/10/1999 31,000,000 65,000,000 96,000,000 30,700,517 64,368,444 95,068,961 SAFECO CORPORATION 06/23/1999 24,000,000 24,000,000 48,000,000 23,724,993 23,724,993 47,449,987 SAFECO CORPORATION 06/28/1999 30,000,000 30,000,000 29,642,133 29,642,133 SAFECO CORPORATION 07/08/1999 45,000,000 45,000,000 44,400,975 44,400,975 SIGMA FINANCE CORPORATION 06/09/1999 15,000,000 15,000,000 14,859,988 14,859,988 SIGMA FINANCE CORPORATION 06/23/1999 60,000,000 50,000,000 110,000,000 59,329,083 49,440,903 108,769,986 SIGMA FINANCE CORPORATION 06/30/1999 35,000,000 35,000,000 34,573,875 34,573,875 SIGMA FINANCE CORPORATION 07/07/1999 43,987,000 43,987,000 43,409,805 43,409,805 SPICE TRUST 04/28/1999 275,000,000 275,000,000 273,972,750 273,972,750 SPICE TRUST 04/28/1999 30,000,000 30,000,000 29,887,725 29,887,725 SPICE TRUST 04/28/1999 360,000,000 360,000,000 358,655,400 358,655,400 TULIP FUNDING CORPORATION 04/23/1999 100,000,000 100,000,000 99,703,611 99,703,611 TULIP FUNDING CORPORATION 04/26/1999 67,064,000 67,064,000 66,838,125 66,838,125 TULIP FUNDING CORPORATION 05/19/1999 64,084,000 75,000,000 139,084,000 63,666,172 74,511,000 138,177,172 TULIP FUNDING CORPORATION 06/04/1999 36,638,000 20,000,000 56,638,000 36,318,842 19,825,778 56,144,620 VARIABLE FUNDING CAPITAL CORPORATION 04/01/1999 74,609,000 100,000,000 174,609,000 74,609,000 100,000,000 174,609,000 VICTORY REC 04/19/1999 50,000,000 50,000,000 49,878,750 49,878,750 VICTORY REC 04/26/1999 34,426,000 34,426,000 34,310,051 34,310,051 VICTORY REC 05/12/1999 17,095,000 34,077,000 51,172,000 17,000,379 33,888,384 50,888,763 VICTORY REC 05/17/1999 30,000,000 55,296,000 85,296,000 29,813,700 54,952,612 84,766,312 VICTORY REC 05/18/1999 32,235,000 50,000,000 82,235,000 32,030,469 49,682,750 81,713,219 VICTORY REC 06/14/1999 28,035,000 28,035,000 27,754,354 27,754,354 VICTORY REC 06/15/1999 15,082,000 10,000,000 25,082,000 14,928,981 9,898,542 24,827,522 VICTORY REC 06/16/1999 37,972,000 37,972,000 37,582,407 37,582,407 WCP FUNDING 04/28/1999 25,000,000 25,000,000 24,909,063 24,909,063 WCP FUNDING 04/28/1999 22,500,000 22,500,000 22,418,156 22,418,156 WCP FUNDING 06/04/1999 50,000,000 50,000,000 49,568,000 49,568,000 ----------------------------------------- TOTAL COMMERCIAL PAPER 3,784,842,772 3,174,751,395 6,959,594,168 CORPORATE BONDS & NOTES - 26.55% BANKERS TRUST COMPANY OF NEW YORK 5.780 04/28/1999 45,000,000 32,000,000 77,000,000 44,998,407 31,998,867 76,997,274 BANKERS TRUST COMPANY OF NEW YORK 4.860 04/30/1999 40,000,000 40,000,000 80,000,000 39,998,082 39,998,082 79,996,163 BANKERS TRUST COMPANY OF NEW YORK 4.920 08/06/1999 40,000,000 60,000,000 100,000,000 39,998,608 59,997,912 99,996,521 BANKERS TRUST COMPANY OF NEW YORK 4.919 09/14/1999 45,000,000 50,000,000 95,000,000 45,000,000 50,000,000 95,000,000 BEAR STEARNS AND COMPANY INC. 5.800 06/14/1999 48,000,000 48,000,000 48,022,697 48,022,697 BEAR STEARNS AND COMPANY INC. 4.907 07/28/1999 50,000,000 50,000,000 100,000,000 50,000,000 50,000,000 100,000,000 BEAR STEARNS AND COMPANY INC. 5.396 11/04/1999 69,000,000 50,000,000 119,000,000 69,000,000 50,000,000 119,000,000 BEAR STEARNS AND COMPANY INC. 5.374 11/04/1999 75,000,000 50,000,000 125,000,000 75,000,000 50,000,000 125,000,000 BEAR STEARNS AND COMPANY INC. 5.150 01/25/2000 40,000,000 40,000,000 80,000,000 40,000,000 40,000,000 80,000,000 BEAR STEARNS AND COMPANY INC. 5.170 02/10/2000 50,000,000 40,000,000 90,000,000 50,000,000 40,000,000 90,000,000 BEAR STEARNS AND COMPANY INC. 5.180 02/18/2000 30,000,000 40,000,000 70,000,000 30,000,000 40,000,000 70,000,000 BEAR STEARNS AND COMPANY INC. 5.340 03/02/2000 60,000,000 40,000,000 100,000,000 60,000,000 40,000,000 100,000,000 CHASE MANHATTAN BANK 5.685 08/03/1999 20,000,000 25,000,000 45,000,000 19,995,769 24,994,711 44,990,480 CHRYSLER FINANCE COMPANY 12.750 11/01/1999 8,250,000 8,250,000 8,618,226 8,618,226 CREDIT SUISSE FIRST BOSTON 5.100 05/17/1999 50,000,000 50,000,000 50,000,000 50,000,000 CREDIT SUISSE FIRST BOSTON 4.965 11/09/1999 70,000,000 30,000,000 100,000,000 69,958,162 29,982,069 99,940,231 FIRST UNION 5.010 10/27/1999 110,000,000 90,000,000 200,000,000 110,000,000 90,000,000 200,000,000 FIRST UNION 5.300 03/01/2000 60,000,000 40,000,000 100,000,000 60,000,000 40,000,000 100,000,000 GOLDMAN SACHS 4.995 05/10/1999 100,000,000 100,000,000 200,000,000 100,000,000 100,000,000 200,000,000 GOLDMAN SACHS 5.260 01/07/2000 100,000,000 100,000,000 200,000,000 100,000,000 100,000,000 200,000,000 GOLDMAN SACHS 5.280 02/24/2000 50,000,000 35,000,000 85,000,000 49,999,099 34,999,369 84,998,468 LEHMAN BROTHERS 10.000 05/15/1999 13,500,000 13,500,000 13,563,354 13,563,354 LEXINGTON PARKER CAPITAL COMPANY 4.905 04/27/1999 75,000,000 50,000,000 125,000,000 75,000,000 50,000,000 125,000,000 LIBERTY LIGHTHOUSE FUNDING 5.760 07/23/1999 25,000,000 25,000,000 50,000,000 24,999,226 24,999,226 49,998,452 LIBERTY LIGHTHOUSE FUNDING 4.920 08/06/1999 50,000,000 50,000,000 100,000,000 50,000,000 50,000,000 100,000,000 LIBERTY LIGHTHOUSE FUNDING 4.920 08/27/1999 50,000,000 50,000,000 100,000,000 50,000,000 50,000,000 100,000,000 LIBERTY LIGHTHOUSE FUNDING 4.919 09/15/1999 125,000,000 125,000,000 250,000,000 124,991,206 124,991,206 249,982,412 LIBERTY LIGHTHOUSE FUNDING 4.960 11/05/1999 25,000,000 25,000,000 50,000,000 25,000,000 25,000,000 50,000,000 LIBERTY LIGHTHOUSE FUNDING 5.260 02/10/2000 35,000,000 35,000,000 35,000,000 35,000,000 MERRILL LYNCH 4.961 05/11/1999 50,000,000 50,000,000 100,000,000 50,000,000 50,000,000 100,000,000 MERRILL LYNCH 4.900 06/11/1999 70,000,000 80,000,000 150,000,000 70,000,000 80,000,000 150,000,000 MERRILL LYNCH 4.970 10/08/1999 67,000,000 25,000,000 92,000,000 67,000,000 25,000,000 92,000,000 MORGAN STANLEY DEAN WITTER 5.100 03/15/2001 50,000,000 50,000,000 50,000,000 50,000,000 PHH CORPORATION 5.009 06/14/1999 50,000,000 50,000,000 100,000,000 50,000,000 50,000,000 100,000,000 PHH CORPORATION 4.995 07/06/1999 40,000,000 60,000,000 100,000,000 39,998,948 59,998,422 99,997,370 SIGMA FINANCE CORP 5.190 02/18/2000 45,000,000 40,000,000 85,000,000 45,000,000 40,000,000 85,000,000 SIGMA FINANCE CORP 5.220 02/23/2000 50,000,000 40,000,000 90,000,000 50,000,000 40,000,000 90,000,000 SIGMA FINANCE CORP 5.330 03/01/2000 60,000,000 40,000,000 100,000,000 60,000,000 40,000,000 100,000,000 SMM TRUST 5.449 03/15/2000 100,000,000 50,000,000 150,000,000 100,000,000 50,000,000 150,000,000 SOCIETE GENERALE 4.855 06/01/1999 100,000,000 100,000,000 99,936,727 99,936,727 SOCIETE GENERALE 4.853 08/11/1999 125,000,000 65,000,000 190,000,000 124,954,996 64,974,365 189,929,361 TRAVELERS GROUP 7.000 05/15/1999 7,000,000 7,000,000 7,015,927 7,015,927 ----------------------------------------- TOTAL CORPORATE BONDS & NOTES 2,131,096,780 1,978,886,883 4,109,983,663 TOTAL CORPORATE OBLIGATIONS 5,915,939,552 5,153,638,27811,069,577,830 GUARANTEED INVESTMENT CONTRACT - 8.06 ALLSTATE INSURANCE 5.107 11/01/1999 25,000,000 25,000,000 25,000,000 25,000,000 ALLSTATE INSURANCE 5.107 01/01/2050 25,000,000 25,000,000 25,000,000 25,000,000 ANCHOR NATIONAL LIFE 5.070 07/01/2030 50,000,000 50,000,000 50,000,000 50,000,000 ANCHOR NATIONAL LIFE 5.136 01/01/2050 25,000,000 25,000,000 25,000,000 25,000,000 COMMONWEALTH LIFE INSURANCE CO 5.060 04/05/1999 75,000,000 50,000,000 125,000,000 75,000,000 50,000,000 125,000,000 COMMONWEALTH LIFE INSURANCE COMPANY 5.160 01/01/2050 62,000,000 62,000,000 62,000,000 62,000,000 COMMONWEALTH LIFE INSURANCE COMPANY 5.160 01/01/2050 10,000,000 10,000,000 10,000,000 10,000,000 FIRST ALLMERICA FINANCIAL LIFE 5.070 11/24/2000 50,000,000 50,000,000INSURANCE 50,000,000 50,000,000 FIRST ALLMERICA FINANCIAL LIFE 5.090 05/15/2003 50,000,000 50,000,000INSURANCE 50,000,000 50,000,000 FIRST ALLMERICA FINANCIAL LIFE 5.120 09/22/2003 50,000,000 50,000,000INSURANCE 50,000,000 50,000,000 FIRST ALLMERICA FINANCIAL LIFE 5.140 05/25/2004 50,000,000 50,000,000INSURANCE 50,000,000 50,000,000 GENERAL AMERICAN LIFE INSURANCE 5.140 04/08/2008 50,000,000 50,000,000COMPANY 50,000,000 50,000,000 GENERAL AMERICAN LIFE INSURANCE 5.140 01/01/2050 50,000,000 50,000,000COMPANY 50,000,000 50,000,000 JACKSON NATIONAL LIFE 5.180 01/03/2000 50,000,000 50,000,000 50,000,000 50,000,000 JACKSON NATIONAL LIFE 5.090 01/01/2050 50,000,000 50,000,000 50,000,000 50,000,000 LIFE INSURANCE COMPANY OF VIRGINIA 4.951 09/01/1999 50,000,000 50,000,000 50,000,000 50,000,000 LIFE INSURANCE COMPANY OF VIRGINIA 4.951 03/01/2000 25,000,000 25,000,000 25,000,000 25,000,000 LIFE INSURANCE COMPANY OF VIRGINIA 4.951 03/01/2000 25,000,000 25,000,000 25,000,000 25,000,000 LIFE OF GEORGIA INSURANCE 5.176 01/01/2050 60,000,000 60,000,000 60,000,000 60,000,000 NEW YORK LIFE 5.106 11/15/1999 100,000,000 50,000,000 150,000,000 100,000,000 50,000,000 150,000,000 PEOPLES SECURITY LIFE INSURANCE 5.210 12/04/2040 20,000,000 20,000,000COMPANY 20,000,000 20,000,000 PEOPLES SECURITY LIFE INSURANCE 5.160 01/01/2050 20,000,000 20,000,000COMPANY 20,000,000 20,000,000 PEOPLES SECURITY LIFE INSURANCE 5.010 01/01/2050 25,000,000 25,000,000COMPANY 25,000,000 25,000,000 SUNAMERICA LIFE INSURANCE 5.166 01/01/2050 50,000,000 50,000,000 50,000,000 50,000,000 TRAVELERS INSURANCE 5.040 09/30/1999 50,000,000 25,000,000 75,000,000 50,000,000 25,000,000 75,000,000 TRAVELERS INSURANCE 5.013 02/03/2000 25,000,000 25,000,000 25,000,000 25,000,000 ----------------------------------------- TOTAL GUARANTEED INVESTMENT CONTRACT 500,000,000 747,000,000 1,247,000,000 MUNICIPAL BONDS & NOTES - 1.22% ILLINOIS STUDENT 4.930 05/01/2010 28,800,000 28,800,000 28,800,000 28,800,000 MISSOURI ST 5.000 09/01/2004 20,600,000 20,600,000 20,600,000 20,600,000 VIRGINIA ST HSG 4.950 01/01/2046 40,000,000 100,000,000 140,000,000 40,000,000 100,000,000 140,000,000 ----------------------------------------- TOTAL MUNICIPAL BONDS & NOTES 40,000,000 149,400,000 189,400,000 REPURCHASE AGREEMENT - 6.36% AGREEMENT WITH ABN-AMRO 5.050 04/01/1999 240,000,000 240,000,000 240,000,000 240,000,000 AGREEMENT WITH DEUTSCHE BANK 5.230 04/01/1999 100,000,000 100,000,000 200,000,000 100,000,000 100,000,000 200,000,000 AGREEMENT WITH FIRST BOSTON 5.120 04/01/1999 30,000,000 30,000,000 30,000,000 30,000,000 AGREEMENT WITH LEHMAN BROTHERS 5.150 04/01/1999 140,000,000 140,000,000 140,000,000 140,000,000 AGREEMENT WITH MERRILL LYNCH 5.200 04/01/1999 100,000,000 100,000,000 200,000,000 100,000,000 100,000,000 200,000,000 AGREEMENT WITH SALOMON SMITH BARNEY 5.050 04/01/1999 175,000,000 175,000,000 175,000,000 175,000,000 ----------------------------------------- TOTAL REPURCHASE AGREEMENT 545,000,000 440,000,000 985,000,000 INVESTMENT COMPANIES - 1.44% AIM LIQUID ASSET 4.900 107,496,559 10,462,000 117,958,559 107,496,559 10,462,000 117,958,559 AIM PRIME FUND 4.875 18,474,000 2,917,000 21,391,000 18,474,000 2,917,000 21,391,000 DREYFUS CASH MGMT PLUS 4.863 31,484,000 52,280,000 83,764,000 31,484,000 52,280,000 83,764,000 ----------------------------------------- TOTAL INVESTMENT COMPANIES 157,454,559 65,659,000 223,113,559 TOTAL INVESTMENTS - 100% 15,477,442,804 NATIONS CASH RESERVES / NATIONS PRIME FUND Pro Forma Combining Statement of Net Assets (Unaudited) March 31, 1999 tions Prime Nations Cash Adjustments to Pro Forma Pro Forma Combined Resreves in 000's) (in 000's) (in 000's) (in 000's) ----------------------------------------------------- -------------------- TOTAL INVESTMENTS $ 7,280,640 $8,196,803 $ - $ 15,477,443 OTHER ASSETS AND LIABILITIES: Receivable for investments sold - - - - Payable for investments purchased - - - - Other assets and liabilities, net 135,794 (37,320) - 98,474 ---------------------------------------------------------- -------------------- Total Other Assets and Liabilities 135,794 (37,320) - 98,474 ---------------------------------------------------------- -------------------- ========================================================== ==================== NET ASSETS 7,416,434 8,159,483 - 15,575,917 ========================================================== ==================== NET ASSETS BY CLASS: Daily\Daily 2,718,028 - - 2,718,028 Primary B\Investor B\Investor C\Investor 831,359 - - 831,359 Primary A\Trust 3,153,372 - - 3,153,372 Service - - - - Capital - 4,379,430 - 4,379,430 Liquidity - 1,423,382 - 1,423,382 Advisor - 870,170 - 870,170 Investor A\Market 695,703 1,486,502 - 2,182,205 Marsico 17,970 - - 17,970 ---------------------------------------------------------- -------------------- 7,416,434 8,159,483 - 15,575,917 ---------------------------------------------------------- -------------------- SHARES OUTSTANDING BY CLASS: Daily\Daily 2,718,420 - - 2,718,420 Primary B\Investor B\Investor C\Investor 831,473 - - 831,473 Primary A\Trust 3,153,844 - - 3,153,844 Service - - - - Capital - 4,379,424 - 4,379,424 Liquidity - 1,423,380 - 1,423,380 Advisor - 870,169 - 870,169 Investor A\Market 695,805 1,486,500 - 2,182,305 Marsico 17,970 - - 17,970 ---------------------------------------------------------- -------------------- 15,576,986 7,417,513 8,159,473 - ---------------------------------------------------------- -------------------- NET ASSET VALUE PER SHARE BY CLASS: Daily\Daily $1.00 n/a $ - 1.00 Primary B\Investor B\Investor C\Investor $1.00 n/a $ - $1.00 Primary A\Trust $1.00 n/a $ - $1.00 Service n/a n/a $ - n/a Capital n/a $1.00 $ - $1.00 Liquidity n/a $1.00 $ - $1.00 Advisor n/a $1.00 $ - $1.00 Investor A\Market $1.00 $1.00 $ - $1.00 Marsico $1.00 n/a $ - $1.00 SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS NATIONS CASH RESERVES / NATIONS PRIME FUND Pro Forma Combining Statement of Operations (Unaudited) For the Twelve Month Period Ending March 31, 1999 INVESTMENT INCOME: Interest $369,451 $377,289 $ - $746,740 Dividends - 10,550 - 10,550 ---------------------------------------------------- -------------------- Total Investment Income 369,451 387,839 - 757,290 ---------------------------------------------------- -------------------- EXPENSES: (a) Investment Advisory 13,566 21,328 (14,106) 20,788 Administration 6,749 7,109 - 13,858 Transfer Agent 1,067 161 - 1,228 Custodian 363 474 - 837 Legal and Audit Fees 428 192 (30) (b) 590 Registration & Filing 161 1,192 - 1,353 Trustees' Fees 15 5 - 20 Interest Expense - - - - Other expenses 339 87 - 425 ---------------------------------------------------- -------------------- Subtotal 22,688 30,548 (14,136) 39,100 ---------------------------------------------------- -------------------- SHAREHOLDER SERVICING AND DISTRIBUTION FEES Daily\Daily 10,025 - (1,432) (a) 8,593 Primary B\Investor B\Investor C\Investor 2,647 - 74 (a) 2,721 Primary A\Trust - - 2,779 (a) 2,779 Service - - - - Liquidity - 11,252 - 11,252 Advisor - 1,937 - 1,937 Investor A\Market 6,155 4,952 1,758 (a) 12,866 Marsico 5 - 1 (a) 6 ---------------------------------------------------- -------------------- 18,832 18,141 3,181 40,154 ---------------------------------------------------- -------------------- Fees waived and/or reimbursed by investment - Advisor, administrator and/or distributor (6,001) (25,852) 20,765 (c) (11,087) ---------------------------------------------------- -------------------- TOTAL EXPENSES 35,519 22,837 9,810 68,166 ---------------------------------------------------- -------------------- ---------------------------------------------------- -------------------- NET INVESTMENT INCOME 333,932 365,002 (9,810) 689,124 ---------------------------------------------------- -------------------- NET REALIZED GAIN/(LOSS) ON ---------------------------------------------------- -------------------- INVESTMENTS: 17 23 - 40 ---------------------------------------------------- -------------------- NET INCREASE/(DECREASE) IN NET ASSETS ==================================================== ==================== RESULTING FROM OPERATIONS: $333,949 365,025 $ (9,810) $689,164 ==================================================== ==================== Nations Cash Reserves Nations Prime Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") and Nations Funds, Inc. (the "Company") are registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as open-end investment companies. As of March 31, 1999 the Trust offered five separate portfolios and the Company offered nine portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of March 31, 1999 and the unaudited Pro Forma Combining Statement of Operations assumes the exchange occurred as of April 1,1999. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at March 31, 1999 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Nations 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 Prime Fund for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 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 Cash Reserves at the time of the Reorganization at the combined level of average net assets for the twelve month period ended March 31, 1999. Nations Treasury Reserves / Nations Treasury Fund Pro Forma Combining Schedule of Investments (unaudited) March 31,1999 Nations Nations Pro Forma Description Coupon Maturity Treasury Res Treasury Combined Rate Date Shares/Par Shares/Par Shares/Par U.S. GOVERNMENT AND AGENCY OBLIGATIONS U.S. Treasury Notes - 20.91% 75,000,000 125,000,000 200,000,000 US T-NOTE 6.375% 4/30/99 6.375 04/30/1999 100,000,000 25,000,000 125,000,000 US T-NOTE 6.25% 5/31/99 6.250 05/31/1999 30,000,000 20,000,000 50,000,000 U.S T-NOTE 6% 6/30/99 6.000 06/30/1999 65,000,000 60,000,000 125,000,000 US T-NOTE 5.875% 07/31/99 5.875 07/31/1999 50,000,000 50,000,000 100,000,000 US T-NOTE 5.875% 8/31/99 5.875 08/31/1999 25,000,000 25,000,000 US T-NOTE 5.75% 9/30/99 5.750 09/30/1999 90,000,000 110,000,000 200,000,000 US T-NOTE 5.625% 11/30/99 5.625 11/30/1999 73,000,000 80,000,000 153,000,000 US T-NOTE 5.875% 2/15/00 5.875 02/15/2000 50,000,000 75,000,000 125,000,000 US T-NOTE 5.5% 02/29/00 5.500 02/29/2000 Total U.S. Government and Agency Obligations REPURCHASE AGREEMENTS - 77.64% 638,000,000 660,000,000 1,298,000,000Agreement with ABN-AMRO Bank 4.970 04/01/1999 127,000,000 130,000,000 257,000,000 Agreement with Barclays Capital 4.900 04/01/1999 127,000,000 130,000,000 257,000,000 Agreement with Bear Stearns and Company, Inc 4.900 04/01/1999 125,000,000 125,000,000 250,000,000 Agreement with CIBC Wood Gundy Securities Corp 5.000 04/01/1999 127,000,000 130,000,000 257,000,000 Agreement with Deutsche Bank 5.000 04/01/1999 16,000,000 16,000,000 Agreement with Dresdner Klein 5.000 04/01/1999 127,000,000 130,000,000 257,000,000 Agreement with First Union Capital Corporation 4.970 04/01/1999 127,000,000 130,000,000 257,000,000 Agreement with J.P. Morgan Securities Inc. 5.050 04/01/1999 112,000,000 113,000,000 225,000,000 Agreement with Lehman Brothers Inc. 4.880 04/06/1999 90,000,000 90,000,000 180,000,000 Agreement with Morgan Stanley Group Inc. 4.810 04/30/1999 127,000,000 130,000,000 257,000,000 Agreement with Salomon Smith Barney, Inc. 5.050 04/01/1999 127,000,000 130,000,000 257,000,000 Agreement with Societe Generale 5.050 04/01/1999 86,000,000 86,000,000 Agreement with Warburg Dillon 5.100 04/01/1999 127,000,000 130,000,000 257,000,000 Agreement with Westdeutsch5.000desbanken, Girozentrale 04/01/1999 Total Repurchase Agreements INVESTMENT COMPANIES - 1.45% 17,175,000 22,032,000 39,207,000 AIM TREASURY FUND #812 4.801 17,328,000 20,151,000 37,479,000 DREYFUS TREASURY CASH 4.631 Total Investment Companies TOTAL INVESTMENTS - 100.00% Nations Nations Pro Forma Description Nations Nations Pro Forma Treasury Res Treasury Combined Treasury Treasury Value Res Shares/Par Shares/Par Shares/Par Value Value U.S. GOVERNMENT AND AGENCY OBLIGATIONS U.S. Treasury Notes - 20.91% 75,000,000 125,000,000 200,000,000 US T-NOTE 6.375% 4/30/99 75,071,359 125,092,127 200,163,486 100,000,000 25,000,000 125,000,000 US T-NOTE 6.25% 5/31/99 100,263,248 25,065,644 125,328,892 30,000,000 20,000,000 50,000,000 U.S T-NOTE 6% 6/30/99 30,033,365 20,022,244 50,055,609 65,000,000 60,000,000 125,000,000 US T-NOTE 5.875% 07/31/99 65,169,954 60,164,297 125,334,250 50,000,000 50,000,000 100,000,000 US T-NOTE 5.875% 8/31/99 50,075,908 50,075,908 100,151,816 25,000,000 25,000,000 US T-NOTE 5.75% 9/30/99 25,125,591 25,125,591 90,000,000 110,000,000 200,000,000 US T-NOTE 5.625% 11/30/99 90,576,769 110,713,067 201,289,836 73,000,000 80,000,000 153,000,000 US T-NOTE 5.875% 2/15/00 73,652,798 80,696,938 154,349,736 50,000,000 75,000,000 125,000,000 US T-NOTE 5.5% 02/29/00 50,289,476 75,423,471 125,712,947 ---------------------------------------- Total U.S. Government and Agency Obligations 535,132,877 572,379,287 1,107,512,164 REPURCHASE AGREEMENTS - 77.64% 638,000,000 660,000,000 1,298,000,000Agreement with ABN-AMRO Bank 638,000,000 660,000,000 1,298,000,000 127,000,000 130,000,000 257,000,000 Agreement with Barclays Capital 127,000,000 130,000,000 257,000,000 127,000,000 130,000,000 257,000,000 Agreement with Bear Stearns and Company, Inc 127,000,000 130,000,000 257,000,000 125,000,000 125,000,000 250,000,000 Agreement with CIBC Wood Gundy Securities Corp 125,000,000 125,000,000 250,000,000 127,000,000 130,000,000 257,000,000 Agreement with Deutsche Bank 127,000,000 130,000,000 257,000,000 16,000,000 16,000,000 Agreement with Dresdner Klein 16,000,000 16,000,000 127,000,000 130,000,000 257,000,000 Agreement with First Union Capital Corporation 127,000,000 130,000,000 257,000,000 127,000,000 130,000,000 257,000,000 Agreement with J.P. Morgan Securities Inc. 127,000,000 130,000,000 257,000,000 112,000,000 113,000,000 225,000,000 Agreement with Lehman Brothers Inc. 112,000,000 113,000,000 225,000,000 90,000,000 90,000,000 180,000,000 Agreement with Morgan Stanley Group Inc. 90,000,000 90,000,000 180,000,000 127,000,000 130,000,000 257,000,000 Agreement with Salomon Smith Barney, Inc. 127,000,000 130,000,000 257,000,000 127,000,000 130,000,000 257,000,000 Agreement with Societe Generale 127,000,000 130,000,000 257,000,000 86,000,000 86,000,000 Agreement with Warburg Dillon 86,000,000 86,000,000 127,000,000 130,000,000 257,000,000 Agreement with Westdeutsch5.000desbanken, Girozentrale 127,000,000 130,000,000 257,000,000 ---------------------------------------- Total Repurchase Agreements 1,997,000,00 2,114,000,000 4,111,000,000 INVESTMENT COMPANIES - 1.45% 17,175,000 22,032,000 39,207,000 AIM TREASURY FUND #812 17,175,000 22,032,000 39,207,000 17,328,000 20,151,000 37,479,000 DREYFUS TREASURY CASH 17,328,000 20,151,000 37,479,000 ---------------------------------------- Total Investment Companies 34,503,000 42,183,000 76,686,000 TOTAL INVESTMENTS - 100.00% 5,295,198,164 Nations Treasury Reserves / Nations Treasury Fund Pro Forma Combining Statement of Net Assets (Unaudited) March 31,1999 Nations Treasury Treasury Reserves Adjustments to Pro Forma Pro Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) --------------------------------------------------------- ------------------- Total Investments $ 2,728,562 $ 2,566,636 $- $ 5,295,198 Other Assets and Liabilities: Receivable for investments sold - - - - Payable for investments purchased - - - - Other assets and liabilities, net (283,952) 635,276 - 351,324 --------------------------------------------------------- ------------------- Total Other Assets and Liabilities (283,952) 635,276 - 351,324 --------------------------------------------------------- ------------------- ========================================================= =================== Net Assets 2,444,610 3,201,912 - 5,646,522 ========================================================= =================== Net Assets by Class: Daily\Daily 219,592 - - 219,592 Primary B\Investor B\Investor C\Investor 282,329 - - 282,329 Primary A\Trust 766,456 - - 766,456 Service - - - - Capital - 1,382,687 - 1,382,687 Liquidity - 304,387 - 304,387 Advisor - 344,906 - 344,906 Investor A\Market 1,176,233 1,169,931 - 2,346,164 --------------------------------------------------------- ------------------- 2,444,610 3,201,912 - 5,646,522 --------------------------------------------------------- ------------------- Shares Outstanding by Class: Daily\Daily 219,685 - - 219,685 Primary B\Investor B\Investor C\Investor 282,449 - - 282,449 Primary A\Trust 766,752 - - 766,752 Service - - - - Capital - 1,382,716 - 1,382,716 Liquidity - 304,406 - 304,406 Advisor - 344,926 - 344,926 Investor A\Market 1,176,813 1,170,000 - 2,346,813 --------------------------------------------------------- ------------------- 2,445,699 3,202,048 - 5,647,747 --------------------------------------------------------- ------------------- Net Asset Value per Share by Class: Daily\Daily $1.00 n/a $ - $1.00 Primary B\Investor B\Investor C\Investor $1.00 n/a $ - $1.00 Primary A\Trust $1.00 n/a $ - $1.00 Service n/a n/a $ - n/a Capital n/a $1.00 $ - $1.00 Liquidity n/a $1.00 $ - $1.00 Advisor n/a $1.00 $ - $1.00 Investor A\Market $1.00 $1.00 $ - $1.00 See Notes to Pro Forma Financial Statements Nations Treasury Reserves / Nations Treasury Fund Pro Forma Combining Statement of Operations (Unaudited) For the Twelve Month Period Ending March 31, 1999 INVESTMENT INCOME: Interest $146,302 $102,822 $ - $249,123 Dividends - 1,979 - 1,979 -------------------------------------------------- ---------------- Total Investment Income 146,302 104,800 - 251,102 -------------------------------------------------- ---------------- EXPENSES: Investment Advisory 5,535 6,034 (4,421) (a) 7,147 Administration 2,754 2,011 - 4,765 Transfer Agent 500 19 - 519 Custodian 218 162 - 380 Legal and Audit Fees 307 65 (30) (b) 342 Registration & Filing 203 559 - 761 Trustees' Fees 15 21 - 36 Interest Expense - - - - Other expenses 168 20 - 188 -------------------------------------------------- ---------------- Subtotal 9,699 8,892 (4,451) 14,139 -------------------------------------------------- ---------------- Shareholder Servicing and Distribution Fees Daily\Daily 1,273 (182) (a) 1,091 Primary B\Investor B\Investor C\Investor 1,203 19 (a) 1,223 Primary A\Trust - 719 (a) 719 Service - - Capital - - - Liquidity 3,390 - 3,390 Advisor - 770 - 770 Investor A\Market 5,262 3,660 1,504 (a) 10,426 -------------------------------------------------- ---------------- 7,739 7,820 2,060 17,619 -------------------------------------------------- ---------------- Fees waived and/or reimbursed by investment - advisor, administrator and/or distributor (2,123) (7,898) 5,256 (4,765) -------------------------------------------------- ---------------- Total Expenses 15,315 8,814 2,865 26,994 -------------------------------------------------- ---------------- -------------------------------------------------- ---------------- NET INVESTMENT INCOME 130,987 95,987 (2,865) 224,109 -------------------------------------------------- ---------------- NET REALIZED GAIN/(LOSS) ON -------------------------------------------------- ---------------- INVESTMENTS: (9) (2) - (11) -------------------------------------------------- ---------------- NET INCREASE/(DECREASE) IN NET ASSETS ================================================== ================ RESULTING FROM OPERATIONS: $130,978 $95,985 $ (2,865) $224,098 ================================================== ================ 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 Nations Treasury Money Market Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves (the "Trust") and Nations Funds, Inc. (the "Company") are registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as open-end investment companies. As of March 31, 1999 the Trust offered five separate portfolios and the Company offered nine portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of March 31, 1999 and the unaudited Pro Forma Combining Statement of Operations assumes the exchange occurred as of April 1,1999. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at March 31, 1999 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Nations Treasury Fund in exchange for shares of Nations Tresury 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 Fund for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 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 Treasury Reserves at the time of the Reorganization at the combined level of average net assets for the twelve month period ended March 31, 1999. NATIONS GOVERNMENT RESERVES/NATIONS GOVERNMENT MONEY MARKET FUND Pro Forma Combining Schedule of Investments (unaudited) March 31,1999 Nations Nation Pro Forma Description Coupon Maturity Nations Nations Pro Forma Gov't Reserves Gov't MM Combined Rate Date Gov't Reserves Gov't MM Value Shares/Par Shares/Par Shares/Par Value Value U.S. Government and Agency Obligations- 63.97% Federal Farm Credit Bank (FFCB)- 1.54% 5,000,000 5,000,000 Federal Farm Credit Bank 04/12/1999 4,992,743 4,992,743 6,000,000 6,000,000 12,000,000 Federal Farm Credit Bank 5.500 04/01/1999 6,000,000 6,000,000 12,000,000 --------------------------------------- Total Federal Farm Credit Bank 6,000,000 10,992,743 16,992,743 Federal Home Loan Bank (FHLB) 48.98% 70,000,000 70,000,000 Federal Home Loan Bank 04/01/1999 70,000,000 70,000,000 6,000,000 6,000,000 Federal Home Loan Bank 04/05/1999 5,996,833 5,996,833 6,000,000 6,000,000 Federal Home Loan Bank 04/07/1999 5,995,250 5,995,250 6,000,000 6,000,000 Federal Home Loan Bank 04/09/1999 5,993,840 5,993,840 6,901,000 10,000,000 16,901,000 Federal Home Loan Bank 04/14/1999 6,889,487 9,982,883 16,872,370 6,000,000 6,000,000 12,000,000 Federal Home Loan Bank 04/15/1999 5,988,707 5,988,707 11,977,413 15,000,000 15,000,000 Federal Home Loan Bank 04/23/1999 14,957,161 4,957,161 8,000,000 8,000,000 Federal Home Loan Bank 04/30/1999 7,969,711 7,969,711 15,000,000 15,000,000 Federal Home Loan Bank 05/05/1999 14,933,211 4,933,294 4,850,000 4,850,000 Federal Home Loan Bank 05/12/1999 4,823,487 4,823,487 10,000,000 10,000,000 Federal Home Loan Bank 05/19/1999 9,936,800 9,936,800 10,000,000 10,000,000 20,000,000 Federal Home Loan Bank 05/21/1999 9,934,167 9,934,167 19,868,333 8,000,000 8,000,000 16,000,000 Federal Home Loan Bank 05/26/1999 7,941,211 7,941,211 15,882,422 8,000,000 8,000,000 16,000,000 Federal Home Loan Bank 05/28/1999 7,939,960 7,939,960 15,879,920 8,000,000 8,000,000 16,000,000 Federal Home Loan Bank 06/15/1999 7,921,167 7,921,167 15,842,333 10,000,000 8,000,000 18,000,000 Federal Home Loan Bank 06/25/1999 9,887,611 7,910,089 17,797,700 8,000,000 8,000,000 16,000,000 Federal Home Loan Bank 07/14/1999 7,893,920 7,893,920 15,787,840 8,000,000 8,000,000 16,000,000 Federal Home Loan Bank 08/04/1999 7,869,444 7,869,444 15,738,889 8,000,000 8,000,000 Federal Home Loan Bank 08/06/1999 7,867,356 7,867,356 10,000,000 10,000,000 Federal Home Loan Bank 08/13/1999 9,823,939 9,823,939 10,000,000 10,000,000 Federal Home Loan Bank 5.570 04/07/1999 9,999,859 9,999,859 9,000,000 9,000,000 18,000,000 Federal Home Loan Bank 5.650 04/09/1999 8,999,948 8,999,941 7,999,896 4,000,000 4,000,000 8,000,000 Federal Home Loan Bank 5.705 05/05/1999 4,002,395 4,002,395 8,004,789 8,000,000 8,000,000 Federal Home Loan Bank 5.723 05/05/1999 7,999,735 7,999,735 13,000,000 12,000,000 25,000,000 Federal Home Loan Bank 4.781 06/17/1999 12,999,314 11,999,367 4,998,682 12,000,000 8,000,000 20,000,000 Federal Home Loan Bank 5.510 07/06/1999 11,997,002 7,998,001 19,995,003 12,000,000 12,000,000 24,000,000 Federal Home Loan Bank 4.770 10/21/1999 12,000,000 12,000,000 24,000,000 10,000,000 10,000,000 20,000,000 Federal Home Loan Bank 4.770 11/09/1999 9,995,828 9,995,828 19,991,655 12,000,000 12,000,000 24,000,000 Federal Home Loan Bank 4.900 01/14/2000 11,999,258 11,999,258 23,998,516 10,000,000 10,000,000 20,000,000 Federal Home Loan Bank 4.910 02/09/2000 9,999,484 9,999,484 19,998,968 10,000,000 10,000,000 20,000,000 Federal Home Loan Bank 4.950 02/24/2000 9,994,321 19,994,321 19,988,642 12,000,000 8,000,000 20,000,000 Federal Home Loan Bank 5.100 03/03/2000 11,995,745 7,997,163 19,992,908 14,000,000 8,000,000 22,000,000 Federal Home Loan Bank 5.150 03/08/2000 13,988,938 7,993,678 21,982,617 -------------------------------------------- Total Federal Home Loan Bank 190,237,908 352,658,258 542,896,162 Federal Home Loan Mortgage Corporation (FHLMC)- 3.86% 6,000,000 6,000,000 Federal Home Loan Mortgage Corporation 04/09/1999 5,993,520 5,993,520 8,500,000 8,500,000 Federal Home Loan Mortgage Corporation 04/12/1999 8,487,222 8,487,222 5,653,000 5,653,000 Federal Home Loan Mortgage Corporation 04/15/1999 5,642,558 5,642,558 5,300,000 5,300,000 Federal Home Loan Mortgage Corporation 04/16/1999 5,289,510 5,289,510 7,450,000 7,450,000 Federal Home Loan Mortgage Corporation 04/26/1999 7,425,167 7,425,167 10,000,000 10,000,000 Federal Home Loan Mortgage Corporation 05/06/1999 9,953,819 9,953,819 -------------------------------------- Total Federal Home Loan Mortgage Corporation 42,791,796 42,791,796 Federal National Mortgage Association (FNMA)- 3.06% 6,000,000 6,000,000 Federal National Mortgage Association 04/01/1999 6,000,000 6,000,000 3,916,000 3,916,000 Federal National Mortgage Association 04/02/1999 3,915,472 3,915,472 8,000,000 8,000,000 Federal National Mortgage Association 04/07/1999 7,993,533 7,993,533 8,000,000 8,000,000 Federal National Mortgage Association 5.002 04/28/1999 7,999,704 7,999,704 8,000,000 8,000,000 Federal National Mortgage Association 5.630 05/05/1999 7,999,571 7,999,571 ------------------------------------- Total Federal National Mortgage Association 33,908,281 33,908,281 Student Loan Marketing Association (SLMA)- 6.53% 8,000,000 8,000,000 Student Loan Marketing Association 06/30/1999 7,907,000 7,907,000 4,500,000 4,500,000 Student Loan Marketing Association 4.992 04/16/1999 4,499,908 4,499,908 12,000,000 8,000,000 20,000,000 Student Loan Marketing Association 5.202 05/20/1999 12,000,000 8,000,000 20,000,000 12,000,000 8,000,000 20,000,000 Student Loan Marketing Association 4.720 09/15/1999 11,995,679 7,997,119 19,992,798 10,000,000 10,000,000 20,000,000 Student Loan Marketing Association 4.930 02/08/2000 9,999,485 9,999,485 19,998,971 ---------------------------------- Total Student Loan Marketing Association 33,995,164 38,403,512 72,398,676 ---------------------------------- Total U.S. Government and Agency Obligations 708,987,658 Repurchase Agreements-34.73% 170,000,000 170,000,000 ABN-AMRO Bank 5.050 04/01/1999 170,000,000 170,000,000 170,000,000 170,000,000 Credit Suisse First Boston Corp. 5.120 04/01/1999 170,000,000 170,000,000 30,000,000 30,000,000 Lehman Brothers, Inc. 5.250 04/01/1999 30,000,000 30,000,000 15,000,000 15,000,000 Societe Generale 5.200 04/01/1999 15,000,000 15,000,000 --------------------------------- Total Repurchase Agreements 385,000,000 385,000,000 Investment Companies- 1.30% 6,851,000 6,851,000 DREYFUS TREASURY CASH 4.631 6,851,000 6,851,000 7,554,300 7,554,300 DREYFUS TREASURY PRIME 4.479 7,554,300 7,554,300 ---------------------------------- Total Investment Companies 6,851,000 7,554,300 14,405,300 Total Investments- 100% 1,108,392,958 NATIONS GOVERNMENT RESERVES/NATIONS GOVERNMENT MONEY MARKET FUND Pro Forma Combining Statement of Net Assets (Unaudited) March 31, 1999 Government Government Adjustments to Pro Forma Pro Forma Money Market Reserves Combined (in 000's) (in 000's) (in 000's) (in 000's) -------------------------------------- -------------- TOTAL INVESTMENTS $ 409,609 $ 698,784 $ - 1,108,393 OTHER ASSETS AND LIABILITIES: Receivable for investments sold - - - - Payable for investments purchased - - - - Other assets and liabilities, net 6,842 13,164 - 20,006 -------------------------------------- -------------- Total Other Assets and Liabilities 6,842 13,164 - 20,006 -------------------------------------- -------------- ====================================== ============== NET ASSETS 416,451 711,948 - 1,128,399 ====================================== ============== NET ASSETS BY CLASS: Daily\Daily 43,430 - 43,430 Primary B\Investor B\Investor C\Investor 83,420 - 83,420 Primary A\Trust 275,677 - 275,677 Service - - Capital 229,561 - 229,561 Liquidity 59,551 - 59,551 Advisor - 88,836 - 88,836 Investor A\Market 13,924 334,000 - 347,924 -------------------------------------- -------------- 416,451 711,948 - 1,128,399 -------------------------------------- -------------- SHARES OUTSTANDING BY CLASS: Daily\Daily 43,433 - 43,433 Primary B\Investor B\Investor C\Investor 83,436 - 83,436 Primary A\Trust 275,717 - 275,717 Service - - Capital 229,561 - 229,561 Liquidity 59,551 - 59,551 Advisor - 88,836 - 88,836 Investor A\Market 13,926 334,000 - 347,926 -------------------------------------- -------------- 416,512 711,948 - 1,128,460 -------------------------------------- -------------- NET ASSET VALUE PER SHARE BY CLASS: Daily\Daily $1.00 n/a $ - $1.00 Primary B\Investor B\Investor C/Investor $1.00 n/a $ - $1.00 Primary A\Trust $1.00 n/a $ - $1.00 Service n/a n/a $ - n/a Capital n/a $1.00 $ - $1.00 Liquidity n/a $1.00 $ - $1.00 Advisor n/a $1.00 $ - $1.00 Investor A\Market $1.00 $ 1.00 $ - $1.00 SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS NATIONS GOVERNMENT RESERVES/NATIONS GOVERNMENT MONEY MARKET FUND Pro Forma Combining Statement of Operations (Unaudited) For the Twelve Month Period Ending March 31, 1999 INVESTMENT INCOME: Interest 21,119 32,621 $ - 53,739 Dividends (14) 598 - 583 -------------------------------------- -------------- Total Investment Income 21,104 33,218 - 54,323 -------------------------------------- -------------- EXPENSES: Investment Advisory 1,631 1,886 (1,962)(a) 1,554 Administration 408 629 - 1,036 Transfer Agent 51 25 - 76 Custodian 34 72 - 105 Legal and Audit Fees 76 54 (30)(b) 101 Registration & Filing 75 83 - 157 Trustees' Fees 15 24 - 39 Interest Expense - - - - Other expenses 56 34 - 91 -------------------------------------- -------------- Subtotal 2,345 2,807 (1,992) 3,160 -------------------------------------- -------------- SHAREHOLDER SERVICING AND DISTRIBUTION FEES Daily\Daily 247 - (35)(a) 212 Primary B\Investor B\Investor C\Investor 354 3 (a) 357 Primary A\Trust - 249 (a) 249 Service - - Capital - - Liquidity - 405 405 Advisor - 243 243 Investor A\Market 74 1,374 21 (a) 1,469 -------------------------------------- -------------- Fees waived and/or reimbursed by investment 675 2,022 238 2,935 -------------------------------------- -------------- advisor, administrator and/or distributor (1,290) (1,982) 2,236 (c) (1,036) -------------------------------------- -------------- TOTAL EXPENSES 1,730 2,846 482 5,058 -------------------------------------- -------------- -------------------------------------- -------------- NET INVESTMENT INCOME 19,374 30,372 (482) 49,265 -------------------------------------- -------------- NET REALIZED GAIN/(LOSS) ON -------------------------------------- -------------- INVESTMENTS: 2 1 - 3 -------------------------------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS ====================================== ============== RESULTING FROM OPERATIONS: 19,376 30,373 (482) 49,267 ====================================== ============== 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 Government Reserves Nations Government Money Market Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves and Nations Funds Trust are registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as open-end investment companies. As of March 31, 1999 the Nations Institutional Reserves offered five separate portfolios and Nations Funds Trust offered thirty-eight portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of March 31, 1999 and the unaudited Pro Forma Combining Statement of Operations assumes the exchange occurred as of April 1,1999. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at March 31, 1999 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Nations Government Money Market 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 Money Market Fund for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 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 Government Reserves, at the time of the Reorganization at the combined level of average net assets for the twelve month period ended March 31, 1999. NATIONS MUNICIPAL RESERVES/NATIONS TAX-EXEMPT FUND Pro Forma Combining Schedule of Investments (unaudited) March 31, 1999 Nations Nations Pro Forma Description Coupon Maturity Nations Nations Pro Forma Municipal Reserves Tax Exempt Combined Rate Date Municipal Reserves Tax Exempt Value Shares/Par Shares/Par Shares/Par Value Value Municipal Bonds and Notes - 99.6% Alabama - 2.3% 4,500,000 4,500,000 ALABAMA HSG FIN 6/15/26 3.000 06/15/26 4,500,000 4,500,000 6,765,000 6,765,000 ALABAMA HSG FIN 6/15/26 3.000 06/15/26 6,765,000 6,765,000 6,000,000 6,000,000 ALABAMA TURTLE 9/01/23 3.150 09/01/23 6,000,000 6,000,000 680,000 680,000 Arab, Alabama,Industrial 3.250 06/01/02 680,000 680,000 Development Board 9,640,000 9,640,000 ASMS PUB EDL BLDG 7/1/22 3.150 07/01/22 9,640,000 9,640,000 1,475,000 1,475,000 BIRMINGHAM AL VAR 6/1/00 3.400 06/01/00 1,475,000 1,475,000 5,000,000 5,000,000 Columbia, AL, Industrial 3.050 10/01/22 5,000,000 5,000,000 Development Board, IDR 2,800,000 2,800,000 COLUMBIA ALA 6/01/28 3.150 06/01/28 2,800,000 2,800,000 1,100,000 1,100,000 Foley, AL, Industrial 3.250 12/01/00 1,100,000 1,100,000 Development Board, IDR 1,150,000 1,150,000 GADSDEN AL VAR 6/1/15 3.100 06/01/15 1,150,000 1,150,000 2,700,000 2,700,000 GADSDEN AL INDL DEV 3.250 05/01/04 2,700,000 2,700,000 5/1/4 560,000 560,000 HOMEWOOD ALA INDL 3.100 11/01/04 560,000 560,000 11/1/04 2,600,000 3,300,000 5,900,000 Northern Alabama, 3.100 12/01/00 2,600,000 3,300,000 5,900,000 Pollution Control Environmental Improvement Authority 2,000,000 2,000,000 OPELIKA ALA INDL 3.100 12/01/99 2,000,000 2,000,000 12/01/99 3,850,000 3,850,000 PHENIX CNTY ALA VRN 3.100 12/01/15 3,850,000 3,850,000 12/1/ 2,470,000 12,930,000 15,400,000 PHENIX CNT DEV 6/1/28 3.150 06/01/28 2,470,000 12,930,000 15,400,000 VR 3,800,000 3,800,000 PHENIX CNTY ALA 3/01/31 3.150 03/01/31 3,800,000 3,800,000 -------------------------------------- Alabama Total 15,700,000 57,620,000 73,320,000 Alaska - 1.5% 16,600,000 16,600,000 ALASKA DEV ATH 5/1/09 3.100 05/01/09 16,600,000 16,600,000 FRN 500,000 500,000 VALDEZ ALASKA 12/1/33 3.100 12/01/33 500,000 500,000 700,000 700,000 VALDEZ AK MARINE 3.100 12/01/33 700,000 700,000 12/1/33 29,550,000 29,550,000 VALDEZ ALASKA MAR 3.050 05/01/31 29,550,000 29,550,000 5/01/31 --------------------------------------- Alaska Total 0 47,350,000 47,350,000 Arizona - 1.4% 17,200,000 17,200,000 APACHE CNTY AZ 12/15/18 3.050 12/15/18 17,200,000 17,200,000 7,700,000 7,000,000 14,700,000 APACHE CNTY VRN 3.050 12/15/18 7,700,000 7,000,000 14,700,000 12/15/18 5,100,000 5,100,000 CASA GRANDE AZ 7/1/15 2.950 07/01/15 5,100,000 5,100,000 4,200,000 4,200,000 GOODYEAR AZ INDL 5/1/15 3.250 05/01/15 4,200,000 4,200,000 2,200,000 2,200,000 MARICOPA CO AZ 5/1/29 3.150 05/01/29 2,200,000 2,200,000 1,000,000 1,000,000 PINAL CNTY ARIZ VRN 3.000 12/01/11 1,000,000 1,000,000 12/1 ---------------------------------------- Arizona Total 10,900,000 33,500,000 44,400,000 Arkansas - 0.7% 6,500,000 5,000,000 11,500,000 CROSSETT AR PCR 8/1/04 3.100 08/01/04 6,500,000 5,000,000 11,500,000 6,300,000 6,300,000 LITTLE ROCK ARK 3.150 12/01/25 6,300,000 6,300,000 12/01/25 3,250,000 3,250,000 LOWELL AR IDR VAR 3.100 06/01/31 3,250,000 3,250,000 6/1/31 ----------------------------------------- Arkansas Total 6,500,000 14,550,000 21,050,000 California - 2.7% 2,500,000 7,500,000 10,000,000 CA HIGHER ED LN 4/1/00 3.650 04/01/00 2,500,000 7,500,000 10,000,000 19,000,000 19,000,000 CA HIGHER ED LN 4/1/00 3.800 04/01/00 19,000,000 19,000,000 1,400,000 1,400,000 LA REGL ARPT VRN 3.100 12/01/24 1,400,000 1,400,000 12/1/24 1,800,000 1,800,000 LA CA APTS D-VAR 3.100 12/01/24 1,800,000 1,800,000 12/1/24 1,850,000 44,750,000 46,600,000 LA REGION AIRPORT 3.100 12/01/25 1,850,000 44,750,000 46,600,000 12/1/25 1,500,000 3,500,000 5,000,000 REG ARPT IMPR FRN (AMT) 3.150 12/01/25 1,500,000 3,500,000 5,000,000 ------------------------------------------ California Total 7,650,000 76,150,000 83,800,000 Colorado - 2.8% 5,440,000 5,440,000 ARAPAHOE CNTY CO 5/1/23 3.150 05/01/23 5,440,000 5,440,000 1,300,000 1,300,000 COLORADO HLTH FACS 3.100 12/01/04 1,300,000 1,300,000 12/1/4 13,000,000 13,000,000 COLORADO HSG FIN 3.125 11/01/09 13,000,000 13,000,000 11/01/09 3,070,000 3,070,000 CO POSTSEC EDL 6/1/11 3.100 06/01/11 3,070,000 3,070,000 2,000,000 2,000,000 CO STUDENT OBLIG 7/1/20 3.100 07/01/20 2,000,000 2,000,000 3,600,000 3,600,000 COL STUDENT VAR 8/1/00 3.000 08/01/00 3,600,000 3,600,000 3,500,000 3,500,000 DENVER COLO VAR 3.100 11/15/25 3,500,000 3,500,000 11/15/25 5,000,000 5,000,000 DENVER CO VAR 11/15/25 3.100 11/15/25 5,000,000 5,000,000 5,305,000 5,305,000 EL PASO CNTY CO 12/1/24 3.050 12/01/24 5,305,000 5,305,000 1,035,000 1,035,000 LARIMER CNTY COL 3.100 06/01/10 1,035,000 1,035,000 6/01/10 3,000,000 39,300,000 42,300,000 MOFFAT CNTY COLO 3.050 07/01/10 3,000,000 39,300,000 42,300,000 7/01/10 3,000,000 3,000,000 PITKIN CNTY COLO 3.250 04/01/14 3,000,000 3,000,000 4/01/14 ---------------------------------------- Colorado Total 14,005,000 74,545,000 88,550,000 Delaware - 2.7% 12,000,000 12,000,000 DELAWARE ST VAR 8/1/29 3.150 08/01/29 12,000,000 12,000,000 10,000,000 10,000,000 DELAWARE ST ECON 8/1/29 3.000 08/01/29 10,000,000 10,000,000 17,300,000 17,300,000 DELAWARE ST ECON 8/1/29 3.050 08/01/29 17,300,000 17,300,000 10,550,000 10,550,000 DELWARE ST ECON 3.100 12/01/15 10,550,000 10,550,000 12/01/15 28,100,000 28,100,000 DELAWARE ST VRN 3.100 12/01/15 28,100,000 28,100,000 12/01/15 5,700,000 5,700,000 DELAWARE ST VAR 12/1/15 3.100 12/01/15 5,700,000 5,700,000 --------------------------------------- Delaware Total 0 83,650,000 83,650,000 District of Columbia - 0.3% 10,000,000 10,000,000 D C TAX 3.75% 9/30/99 3.750 09/30/99 10,031,547 10,031,547 ---------------------------------------- District of Columbia Total 0 10,031,547 10,031,547 Florida - 4.2% 2,775,000 2,775,000 BREVARD CNTY FL 12/1/10 3.200 12/01/10 2,775,000 2,775,000 12,810,000 12,810,000 BROWARD CNTY FLA 3.050 11/01/07 12,810,000 12,810,000 11/1/07 6,500,000 6,500,000 DADE CNTY FL SPL 3.100 08/01/15 6,500,000 6,500,000 8/01/15 4,365,000 4,365,000 DADE CNTY FL INDL 3.200 11/01/14 4,365,000 4,365,000 11/1/14 14,800,000 14,800,000 FLORIDA HSG FIN 12/1/09 3.050 12/01/09 14,800,000 14,800,000 4,800,000 4,800,000 FLORIDA HSG FIN VAR 3.050 06/01/07 4,800,000 4,800,000 6/1/7 5,000,000 5,000,000 FLORIDA HSG VAR 8/1/06 3.125 08/01/06 5,000,000 5,000,000 14,998,500 14,998,500 FL ST BRD ED 6/1/21 3.200 06/01/21 14,998,500 14,998,500 1,845,000 1,845,000 FORT WALTON BEACH 3.300 10/01/11 1,845,000 1,845,000 10/1/11 7,000,000 7,500,000 14,500,000 INDIAN RIVER CNTY 3.000 10/01/15 7,000,000 7,500,000 14,500,000 10/1/15 3,645,000 3,645,000 MANATEE CNTY FL 6/1/07 3.050 06/01/07 3,645,000 3,645,000 12,500,000 12,500,000 MIAMI HLTH FACS 3.100 12/01/16 12,500,000 12,500,000 12/01/16 700,000 700,000 ORANGE CNTY FL VAR 3.100 03/01/18 700,000 700,000 3/1/18 3,000,000 3,000,000 PALM BEACH ECO 1/22/99 3.100 01/01/24 3,000,000 3,000,000 5,500,000 1,500,000 7,000,000 PALM BEACH CNTY 2.900 05/01/25 5,500,000 1,500,000 7,000,000 05/01/25 3,000,000 6,000,000 9,000,000 POLK CO FL 2/1/29 AMT"" 3.100 02/01/29 3,000,000 6,000,000 9,000,000 2,950,000 2,950,000 ST LUCIE CNTY FLA 3.050 01/01/11 2,950,000 2,950,000 1/01/11 1,900,000 1,900,000 UNIV ATHL ASSC VRN 3.150 02/01/20 1,900,000 1,900,000 2/1/20 9,500,000 9,500,000 UNIVERSITY N. FLA 3.050 11/01/27 9,500,000 9,500,000 11/1/27 ---------------------------------------- Florida Total 38,120,000 94,468,500 132,588,500 Georgia - 10.9% 10,000,000 10,000,000 ALBANY DOUGH. GA 10/01/05 3.100 10/01/05 10,000,000 10,000,000 2,040,000 2,040,000 BARTOW CNTY GA 03/01/24 3.100 03/01/24 2,040,000 2,040,000 17,500,000 17,500,000 BURKE CTNY GA 07/01/24 3.050 07/01/24 17,500,000 17,500,000 585,000 7,900,000 8,485,000 BURKE CO PCR VRN 9/1/25 3.100 09/01/25 585,000 7,900,000 8,485,000 5,800,000 5,800,000 BURKE CO GA VRN 9/1/26 3.100 09/01/26 5,800,000 5,800,000 7,750,000 7,750,000 CLAYTON CNTY GA 8/1/19 3.100 08/01/19 7,750,000 7,750,000 1,140,000 6,385,000 7,525,000 CLAYTON CNTY GA 1/1/21 3.000 01/01/21 1,140,000 6,385,000 7,525,000 3,945,000 3,945,000 CLAYTON CNTY GA 1/1/21 3.000 01/01/21 3,945,000 3,945,000 3,380,000 3,380,000 CLAYTON CNTY GA 1/1/21 3.000 01/01/21 3,380,000 3,380,000 17,330,000 17,330,000 COBB MARIETTA GA 10/1/26 3.000 10/01/26 17,330,000 17,330,000 2,215,000 2,215,000 COBB CNTY GA DEV 05/01/05 3.350 05/01/05 2,215,000 2,215,000 2,000,000 2,000,000 COBB CNTY GA DEV 8/1/08 3.100 08/01/08 2,000,000 2,000,000 3,600,000 3,600,000 COBB CNTY GA 8/1/18 3.100 08/01/18 3,600,000 3,600,000 1,900,000 1,900,000 COBB CNTY GA VAR 8/1/15 3.100 08/01/15 1,900,000 1,900,000 3,260,000 3,260,000 COLLEGE PARK GA 6/1/14 3.000 06/01/14 3,260,000 3,260,000 3,585,000 12,415,000 16,000,000 COLUMBIA CNTY GA 1/1/21 3.100 01/01/21 3,585,000 12,415,000 16,000,000 2,250,000 2,250,000 COLUMBUS GA VAR 2/1/05 3.375 02/01/05 2,250,000 2,250,000 3,330,000 3,330,000 COLUMBUS GA INDL 04/01/07 3.400 04/01/07 3,330,000 3,330,000 7,600,000 7,600,000 DADE CNTY GA DEV 12/01/12 3.000 12/01/12 7,600,000 7,600,000 5,400,000 5,400,000 DE KALB CNTY GA 3/01/21 3.100 03/01/21 5,400,000 5,400,000 4,280,000 4,280,000 DEKALB CO 4/1/24 3.050 04/01/24 4,280,000 4,280,000 7,430,000 7,430,000 DEKALB CNTY DEV 5/01/13 3.100 05/01/13 7,430,000 7,430,000 3,000,000 3,000,000 DE KALB CNTY GA 3/01/24 3.100 03/01/24 3,000,000 3,000,000 4,800,000 4,800,000 DE KALB CNTY GA 12/1/07 3.150 12/01/07 4,800,000 4,800,000 2,800,000 2,800,000 DE KALB CNTY GA 6/15/25 3.050 06/15/25 2,800,000 2,800,000 6,875,000 6,875,000 DE KALB CNTY GA 8/01/27 3.200 08/01/27 6,875,000 6,875,000 1,400,000 1,400,000 DEKALB CNTY GA 12/1/20 3.200 12/01/20 1,400,000 1,400,000 5,430,000 5,430,000 DE KALB CNTY GA 12/1/20 3.200 12/01/20 5,430,000 5,430,000 14,935,000 14,935,000 DEKALB CNTY GA 12/15/15 3.000 12/15/15 14,935,000 14,935,000 5,250,000 5,250,000 DEKALB CNTY GA 3/1/05 3.000 03/01/05 5,250,000 5,250,000 3,460,000 3,460,000 DEKALB CNTY GA 9/1/09 3.100 09/01/09 3,460,000 3,460,000 5,000,000 5,000,000 FLOYD CNTY GA VAR 3/1/24 3.100 03/01/24 5,000,000 5,000,000 5,300,000 5,300,000 FULCO GA HOSP VAR 2/1/07 3.100 02/01/07 5,300,000 5,300,000 12,500,000 12,500,000 FULTON CNTY VAR 8/1/18 3.150 08/01/18 12,500,000 12,500,000 3,500,000 3,500,000 FULTON CNTY GA VRN 7/1/14 3.100 07/01/14 3,500,000 3,500,000 3,500,000 3,500,000 FULTON CNTY GA 12/01/10 3.100 12/01/10 3,500,000 3,500,000 3,000,000 3,000,000 FULTON CNTY GA VAR 6/1/16 3.100 06/01/16 3,000,000 3,000,000 3,000,000 3,000,000 FULTON CNTY GA 4/01/2017 3.100 04/01/17 3,000,000 3,000,000 4,500,000 4,500,000 FULTON CNTY GA 10/1/18 3.100 10/01/18 4,500,000 4,500,000 2,400,000 2,400,000 GREENE CNTY GA DEV 3/1/05 3.200 03/01/05 2,400,000 2,400,000 5,800,000 5,800,000 GWINNET CNTY-GA. 08/01/06 3.200 08/01/06 5,800,000 5,800,000 7,500,000 7,500,000 GWINNETT CNTY GA 12/31/02 3.150 12/31/02 7,500,000 7,500,000 3,000,000 3,000,000 HENRY CNTY GA VAR 5/1/04 3.100 05/01/04 3,000,000 3,000,000 1,150,000 1,150,000 MUNI ELEC GA 01/01/22 3.050 01/01/22 1,150,000 1,150,000 35,000,000 35,000,000 MUNICIPAL ELEC 1/01/26 2.850 01/01/26 35,000,000 35,000,000 1,000,000 1,000,000 NEWTON GA INDL VAR 12/1/4 3.150 12/01/04 1,000,000 1,000,000 9,400,000 9,400,000 PUTNAM CNTY GA 9/01/29 3.100 09/01/29 9,400,000 9,400,000 7,000,000 7,000,000 SMYRNA GA HSG 6/01/25 3.000 06/01/25 7,000,000 7,000,000 1,000,000 16,300,000 17,300,000 SMYRNA GA HSG 06/01/25 3.000 06/01/25 1,000,000 16,300,000 17,300,000 7,900,000 7,900,000 SMYRNA GA HSG 6/01/25 3.000 06/01/25 7,900,000 7,900,000 4,000,000 4,000,000 TALLAPOOSA GA DEV 2/01/15 2.950 02/01/15 4,000,000 4,000,000 5,000,000 5,000,000 THOMASTON VAR 4/1/00 3.100 04/01/00 5,000,000 5,000,000 5,550,000 5,550,000 WORTH CNTY GA 8/1/23 3.100 08/01/23 5,550,000 5,550,000 ---------------------------------------- Georgia Total 41,505,000 301,765,000 343,270,000 Hawaii - 0.3% 8,500,000 8,500,000 HAWAII ST HSG FIN 7/1/24 3.125 07/01/24 8,500,000 8,500,000 ------------------------------------------ Hawaii Total 0 8,500,000 8,500,000 Idaho - 0.7% 22,275,000 22,275,000 IDAHO HSG FLT 7/1/29 3.120 07/01/29 22,275,000 22,275,000 ------------------------------------------ Idaho Total 0 22,275,000 22,275,000 Illinois - 15.8% 2,600,000 2,600,000 CHICAGO ILL VAR 9/1/32 3.050 09/01/32 2,600,000 2,600,000 5,855,000 5,855,000 CHICAGO ILL IDR 11/1/26 3.250 11/01/26 5,855,000 5,855,000 2,900,000 3,100,000 6,000,000 CHICAGO OHARE VRN 12/1/17 3.100 12/01/17 2,900,000 3,100,000 6,000,000 2,700,000 2,700,000 CHICAGO ILL O HARE 3.100 12/01/17 2,700,000 2,700,000 2,700,000 1,300,000 4,000,000 CHICAGO ILL ARPT 12/1/17 3.100 12/01/17 2,700,000 1,300,000 4,000,000 13,400,000 13,400,000 CHICAGO O HARE 1/01/15 3.050 01/01/15 13,400,000 13,400,000 6,170,000 6,170,000 CHICAGO O HARE 1/01/15 3.050 01/01/15 6,170,000 6,170,000 7,200,000 7,200,000 CHICAGO O HARE 1/01/18 3.000 01/01/18 7,200,000 7,200,000 2,500,000 2,500,000 ILLINOIS DEV FIN 5/01/09 3.200 05/01/09 2,500,000 2,500,000 870,000 3,830,000 4,700,000 ILLINOIS DEV FIN 6/01/12 3.200 06/01/12 870,000 3,830,000 4,700,000 2,315,000 2,315,000 IL DEV FIN VAR 10/1/12 3.000 10/01/12 2,315,000 2,315,000 1,700,000 1,700,000 ILLINOIS DEV FIN 5/01/15 3.200 05/01/15 1,700,000 1,700,000 2,000,000 28,000,000 30,000,000 ILLINOIS DEV FIN 10/15/14 2.900 10/15/14 2,000,000 28,000,000 30,000,000 9,100,000 9,100,000 IL DEV FIN VAR 3/1/09 3.050 03/01/09 9,100,000 9,100,000 1,800,000 1,800,000 IL DEV FIN VAR 12/1/09 3.100 12/01/09 1,800,000 1,800,000 2,000,000 2,000,000 ILLINOIS DEV FIN 9/01/18 3.100 09/01/18 2,000,000 2,000,000 5,000,000 5,000,000 IL DEV FIN VAR 9/1/31 3.000 09/01/31 5,000,000 5,000,000 4,320,000 4,320,000 IL DEV FIN FIN 1/1/31 3.000 01/01/31 4,320,000 4,320,000 30,300,000 30,300,000 IL DEV FIN VAR 12/1/28 2.900 12/01/28 30,300,000 30,300,000 2,000,000 26,100,000 28,100,000 ILLINOIS DEV FIN 12/01/28 2.950 12/01/28 2,000,000 26,100,000 28,100,000 9,000,000 9,000,000 IL DEV FIN VAR 4/1/25 3.000 04/01/25 9,000,000 9,000,000 9,000,000 9,000,000 IL DEV FIN ADJ 6/1/26 2.950 06/01/26 9,000,000 9,000,000 14,500,000 14,500,000 IL EDL FACS VAR 9/1/25 3.000 09/01/25 14,500,000 14,500,000 4,000,000 4,000,000 ILL EDCL FACS VRN 4/1/26 2.950 04/01/26 4,000,000 4,000,000 6,000,000 6,000,000 IL EDL FACS VAR 10/1/26 2.950 10/01/26 6,000,000 6,000,000 1,400,000 1,400,000 ILLINOIS EDL FAC 12/01/25 3.000 12/01/25 1,400,000 1,400,000 11,090,000 11,090,000 ILL EDL FACS VAR 12/1/05 2.950 12/01/05 11,090,000 11,090,000 8,900,000 8,900,000 ILLINOIS EDL FACS 1/01/26 2.950 01/01/26 8,900,000 8,900,000 5,600,000 700,000 6,300,000 ILLINOIS EDL 12/01/25 2.950 12/01/25 5,600,000 700,000 6,300,000 29,000,000 29,000,000 ILLINOIS EDL 11/01/32 2.950 11/01/32 29,000,000 29,000,000 1,200,000 1,200,000 IL HLTH FACS VAR 10/1/15 3.150 10/01/15 1,200,000 1,200,000 7,000,000 7,000,000 ILLINOIS HEALTH 8/15/15 3.550 08/15/15 7,000,000 7,000,000 8,000,000 8,000,000 ILLINOIS HEALTH 8/01/15 2.950 08/01/15 8,000,000 8,000,000 5,300,000 5,300,000 ILLINOIS HEALTH 11/01/15 2.950 11/01/15 5,300,000 5,300,000 7,100,000 7,100,000 ILLINOIS HEALTH 8/15/24 2.950 08/15/24 7,100,000 7,100,000 5,000,000 5,000,000 ILLINOIS HEALTH 11/15/24 2.950 11/15/24 5,000,000 5,000,000 11,000,000 11,000,000 IL HEALTH VAR 8/15/30 3.700 08/15/30 11,000,000 11,000,000 10,050,000 10,050,000 IL HLTH FACS VAR 9/15/20 2.950 09/15/20 10,050,000 10,050,000 45,400,000 45,400,000 IL HSG DEV VAR 1/1/08 3.200 01/01/08 45,400,000 45,400,000 7,000,000 7,000,000 JACKSON UNION CNTY 4/1/24 3.125 04/01/24 7,000,000 7,000,000 13,700,000 13,700,000 KANE CNTY IL REV 2/1/28 2.950 02/01/28 13,700,000 13,700,000 15,000,000 15,000,000 LISLE IL MFR VRN 12/15/25 3.100 12/15/25 15,000,000 15,000,000 1,500,000 1,500,000 LOMBARD ILL 10/01/13 3.350 10/01/13 1,500,000 1,500,000 8,000,000 8,000,000 LOMBARD IL 3.55%12/15/06 3.550 12/15/06 8,000,000 8,000,000 44,535,000 44,535,000 METROPOLITAN VAR 6/15/27 3.070 06/15/27 44,535,000 44,535,000 9,200,000 9,200,000 ORLAND PARK ILL 4/01/31 3.050 04/01/31 9,200,000 9,200,000 3,700,000 3,700,000 PALOS HILLS ILL 8/01/29 3.090 08/01/29 3,700,000 3,700,000 7,000,000 7,000,000 QUINCY ILL REV 6/01/22 3.100 06/01/22 7,000,000 7,000,000 7,195,000 7,195,000 RICHTON PK ILL 04/01/16 3.200 04/01/16 7,195,000 7,195,000 7,600,000 7,600,000 SAUGET ILL V/R 02/01/16 2.950 02/01/16 7,600,000 7,600,000 1,400,000 1,400,000 SWESTERN ILL DEV 12/01/06 3.100 12/01/06 1,400,000 1,400,000 5,000,000 5,000,000 WOODFORD IL VAR 3/1/13 3.200 03/01/13 5,000,000 5,000,000 ----------------------------------------- Illinois Total 36,870,000 462,960,000 499,830,000 Indiana - 2.6% 760,000 760,000 Auburn, IN, Economic 3.150 09/01/00 760,000 760,000 Development Revenue 505,000 505,000 EVANSVILLE IND 6/1/04 3.100 06/01/04 505,000 505,000 5,000,000 5,000,000 FORT WAYNE IN 12/1/15 3.000 12/01/15 5,000,000 5,000,000 3,495,000 3,495,000 HENDRICKS CNTY IND 1/1/22 3.100 01/01/22 3,495,000 3,495,000 1,995,000 1,995,000 INDIANA HEALTH 12/01/16 3.000 12/01/16 1,995,000 1,995,000 1,050,000 1,050,000 INDIANA HLTH VRN 01/01/12 2.950 01/01/12 1,050,000 1,050,000 8,500,000 8,500,000 IND HOSP REV VRN 12/1/15 2.950 12/01/15 8,500,000 8,500,000 9,700,000 9,700,000 IN ST DEV FIN VAR 8/1/18 3.100 08/01/18 9,700,000 9,700,000 1,300,000 1,300,000 IN ST DEV FIN 11/1/01 3.250 11/01/01 1,300,000 1,300,000 2,000,000 2,000,000 IN ST DEV FIN VAR 1/1/09 3.400 01/01/09 2,000,000 2,000,000 3,000,000 3,000,000 IN ST DEV FIN VAR 9/1/30 3.100 09/01/30 3,000,000 3,000,000 14,900,000 14,900,000 IN ST DEV FIN VAR 8/1/31 2.950 08/01/31 14,900,000 14,900,000 2,700,000 4,900,000 7,600,000 INDIANAPOLIS IND 12/01/08 2.950 12/01/08 2,700,000 4,900,000 7,600,000 3,000,000 3,000,000 INDIANAPOLIS IN 3/1/21 3.100 03/01/21 3,000,000 3,000,000 665,000 665,000 KENDALLVILLE IND 1/01/04 3.000 01/01/04 665,000 665,000 3,800,000 3,800,000 PRINCETON IND PCR 3/1/19 3.150 03/01/19 3,800,000 3,800,000 2,900,000 2,900,000 ROCKPORT IND POLL 8/01/14 3.050 08/01/14 2,900,000 2,900,000 265,000 265,000 ROCKPRT IN PCR VRN 7/1/25 3.150 07/01/25 265,000 265,000 5,380,000 5,380,000 ST JOSEPH CTY ECO 9/01/17 3.000 09/01/17 5,380,000 5,380,000 6,600,000 6,600,000 TERRE HAUTE IND 12/01/15 2.950 12/01/15 6,600,000 6,600,000 ------------------------------------------ Indiana Total 10,185,000 72,230,000 82,415,000 Iowa - 0.2% 5,000,000 5,000,000 DAVENPORT IA SCH 07/01/99 3.950 07/01/99 5,001,920 5,001,920 2,000,000 2,000,000 IOWA FIN AUTH VAR 5/1/26 3.000 05/01/26 2,000,000 2,000,000 ------------------------------------------ Iowa Total 0 7,001,920 7,001,920 Kansas - 1.6% 1,900,000 1,900,000 KANSAS CITY VRN 8/01/15 3.150 08/01/15 1,900,000 1,900,000 9,600,000 9,600,000 KANSAS ST DEV 12/01/25 3.200 12/01/25 9,600,000 9,600,000 5,523,500 5,523,500 MANHATTAN KS 3.5% 6/15/99 3.500 06/15/99 5,527,415 5,527,415 32,350,000 32,350,000 OLATHE KANS EDL 7/01/24 2.950 07/01/24 32,350,000 32,350,000 ------------------------------------------ Kansas Total 0 49,377,415 49,377,415 Kentucky - 2.1% 11,015,000 11,015,000 GEORGETOWN KY 12/1/17 3.100 12/01/17 11,015,000 11,015,000 1,300,000 1,300,000 HOPKINSVILLE KY 6/1/04 3.200 06/01/04 1,300,000 1,300,000 1,092,000 1,092,000 JEFFERSON CNTY KY 12/1/14 2.950 12/01/14 1,092,000 1,092,000 1,440,000 1,440,000 JEFFERSON CNTY 6/01/11 3.000 06/01/11 1,440,000 1,440,000 1,700,000 1,700,000 JEFFERSONTOWN KY 4/01/20 3.250 04/01/20 1,700,000 1,700,000 2,550,000 2,550,000 KENTUCKY HSG 3.2% 7/1/00 3.200 07/01/00 2,550,000 2,550,000 3,500,000 3,500,000 LEBANON KY INDL 06/01/19 3.050 06/01/19 3,500,000 3,500,000 3,200,000 5,600,000 8,800,000 LEXINGTON URBAN 04/01/24 3.200 04/01/24 3,200,000 5,600,000 8,800,000 2,900,000 2,900,000 LEX FAYETTE CNTY 04/01/24 3.200 04/01/24 2,900,000 2,900,000 6,250,000 6,250,000 LOUISVL&JFRSN VRN 6/30/02 3.200 06/30/02 6,250,000 6,250,000 4,880,000 4,880,000 LOUISVILLE FLT 7/1/24 3.070 07/01/24 4,880,000 4,880,000 5,600,000 5,600,000 MASON CNTY KY 10/15/14 3.050 10/15/14 5,600,000 5,600,000 8,750,000 8,750,000 MASON CNTY KY 10/15/14 3.050 10/15/14 8,750,000 8,750,000 6,000,000 6,000,000 MIDDLETOWN KY REV 7/1/22 3.100 07/01/22 6,000,000 6,000,000 ------------------------------------------ Kentucky Total 9,982,000 55,795,000 65,777,000 Louisiana - 3.6% 8,000,000 8,000,000 Ascension Parish, LA, PCR Refunding 3.050 12/01/09 8,000,000 8,000,000 6,550,000 6,550,000 CADDO PARISH LA 1/1/03 3.000 01/01/03 6,550,000 6,550,000 23,300,000 23,300,000 JEFFERSON LA HOSP 1/01/26 3.000 01/01/26 23,300,000 23,300,000 2,300,000 2,300,000 LAKE CHARLES LA 8/01/07 3.050 08/01/07 2,300,000 2,300,000 25,000,000 25,000,000 LA PBLC FACS VRN 09/01/27 3.100 09/01/27 25,000,000 25,000,000 21,225,000 21,225,000 LA PUB FACS PCR 12/1/04 3.000 12/01/04 21,225,000 21,225,000 1,000,000 1,000,000 LOUISIANA ST OFSHR 9/1/08 3.150 09/01/08 1,000,000 1,000,000 1,200,000 5,800,000 7,000,000 ST CHRLS PCR VRN 10/1/25 3.100 10/01/25 1,200,000 5,800,000 7,000,000 4,500,000 4,500,000 SOUTH LA PORT 7/01/21 3.000 07/01/21 4,500,000 4,500,000 9,000,000 9,000,000 SOUTH LA PORT 01/01/27 3.100 01/01/27 9,000,000 9,000,000 5,200,000 5,200,000 UPPER PONTALBA 12/01/16 3.100 12/01/16 5,200,000 5,200,000 ------------------------------------------ Louisiana Total 16,000,000 97,075,000 113,075,000 Maryland - 3.1% 3,300,000 3,300,000 BALTIMORE MD 10/14/11 3.000 10/14/11 3,300,000 3,300,000 15,000,000 70,700,000 85,700,000 BALTIMORE MD 8/01/16 2.950 08/01/16 15,000,000 70,700,000 85,700,000 2,300,000 2,300,000 MARYLAND ST INDL 5/01/06 3.200 05/01/06 2,300,000 2,300,000 6,900,000 6,900,000 MARYLAND ECO VRN 3/1/26 3.050 03/01/26 6,900,000 6,900,000 ------------------------------------------ Maryland Total 15,000,000 83,200,000 98,200,000 Massachusetts - 0.1% 4,000,000 4,000,000 MASSACHUSETTS ST 5/01/27 3.100 05/01/27 4,000,000 4,000,000 ------------------------------------------- Massachusetts Total 0 4,000,000 4,000,000 Michigan - 1.6% 7,500,000 7,500,000 GRAND RAPIDS MI 6/1/12 3.050 06/01/12 7,500,000 7,500,000 14,800,000 14,800,000 GREEN LAKE TWP 6/1/27 2.950 06/01/27 14,800,000 14,800,000 3,055,000 3,055,000 JACKSON CTY MICH 10/01/14 3.100 10/01/14 3,055,000 3,055,000 3,500,000 3,500,000 MI ST HSG DEV VAR 10/1/07 3.042 10/01/07 3,500,000 3,500,000 7,800,000 7,800,000 MICH ST HOSP VRN 7/1/17 3.000 07/01/17 7,800,000 7,800,000 1,000,000 1,000,000 MI ST JOB DEV VAR 8/1/15 3.000 08/01/15 1,000,000 1,000,000 2,400,000 1,800,000 4,200,000 UNIVERSITY MICH 12/01/19 3.150 12/01/19 2,400,000 1,800,000 4,200,000 3,200,000 900,000 4,100,000 UNIVERSITY MI 12/1/27 3.150 12/01/27 3,200,000 900,000 4,100,000 800,000 1,425,000 2,225,000 UNIV MICH 12/01/27 3.150 12/01/27 800,000 1,425,000 2,225,000 1,000,000 1,000,000 UNIVERSITY MI VAR 12/1/21 3.150 12/01/21 1,000,000 1,000,000 ------------------------------------------- Michigan Total 9,900,000 39,280,000 49,180,000 Minnesota - 0.5% 2,410,000 2,410,000 MINN MIN REV 11/01/16 3.100 11/01/16 2,410,000 2,410,000 6,160,000 6,160,000 MINNEAPOLIS MN 12/1/14 3.000 12/01/14 6,160,000 6,160,000 5,780,000 5,780,000 MINNEAPOLIS MN 10/1/24 3.050 10/01/24 5,780,000 5,780,000 ------------------------------------------- Minnesota Total 2,410,000 11,940,000 14,350,000 Mississippi - 1.8% 2,500,000 2,500,000 FLOWOOD MISS INDL 11/1/01 3.250 11/01/01 2,500,000 2,500,000 2,200,000 2,200,000 MI BUS FIN VAR 3/1/10 3.200 03/01/10 2,200,000 2,200,000 2,100,000 2,100,000 MI BUS FIN VAR 6/1/05 3.300 06/01/05 2,100,000 2,100,000 39,180,000 39,180,000 MS STATE VAR 11/1/11 3.100 11/01/11 39,180,000 39,180,000 11,300,000 11,300,000 PERRY CNTY MISS 10/01/12 3.100 10/01/12 11,300,000 11,300,000 ------------------------------------------- Mississippi Total 2,500,000 54,780,000 57,280,000 Missouri - 5.6% 5,000,000 5,000,000 BERKELEY MO 7/01/08 3.050 07/01/08 5,000,000 5,000,000 5,000,000 5,000,000 BERKELEY MO INDL 9/01/04 3.050 09/01/04 5,000,000 5,000,000 4,100,000 4,100,000 CITY OF COLUMBIA 6/1/08 2.950 06/01/08 4,100,000 4,100,000 10,800,000 10,800,000 COLUMBIA MO VRN 12/01/15 2.950 12/01/15 10,800,000 10,800,000 18,400,000 18,400,000 KANSAS CITY MO 06/01/27 3.110 06/01/27 18,400,000 18,400,000 6,700,000 6,700,000 MISSOURI ST HLTH 06/01/14 3.000 06/01/14 6,700,000 6,700,000 15,400,000 15,400,000 MO ST HLTH & EDL 6/1/19 3.000 06/01/19 15,400,000 15,400,000 6,100,000 6,100,000 MISS ST HLTH 06/01/19 3.000 06/01/19 6,100,000 6,100,000 11,590,000 11,590,000 MISSOURI ST VRN 12/1/15 3.000 12/01/15 11,590,000 11,590,000 2,700,000 2,700,000 MO ST HEALTH VAR 12/1/05 3.150 12/01/05 2,700,000 2,700,000 1,800,000 1,800,000 MISSOURI ST HLTH 09/01/10 3.000 09/01/10 1,800,000 1,800,000 7,400,000 7,400,000 MISSOURI ST HLTH 11/01/25 3.200 11/01/25 7,400,000 7,400,000 20,845,000 20,845,000 MISSOURI ST CP 06/01/15 3.000 06/01/15 20,845,000 20,845,000 12,000,000 12,000,000 MISSOURI ST ENVIRON IMPT 3.000 06/01/15 12,000,000 12,000,000 5,000,000 5,000,000 MISSOURI ST HLT 09/13/99 4.250 09/13/99 5,013,031 5,013,031 4,700,000 4,700,000 MISSOURI ST HLTH 09/13/99 4.250 09/13/99 4,712,248 4,712,248 9,380,000 9,380,000 PLATTE CNTY MO 4/01/28 3.100 04/01/28 9,380,000 9,380,000 3,070,000 3,070,000 ST CHARLES CNTY 09/01/25 3.050 09/01/25 3,070,000 3,070,000 8,000,000 8,000,000 ST LOUIS MO DEV 12/01/03 3.050 12/01/03 8,000,000 8,000,000 5,000,000 5,000,000 ST LOUIS MO DEV 05/01/09 3.050 05/01/09 5,000,000 5,000,000 5,505,000 5,505,000 ST LOUIS MO 12/01/05 3.150 12/01/05 5,505,000 5,505,000 7,000,000 7,000,000 MISS ENVIRON IMP 3.200 05/06/99 7,000,000 7,000,000 ------------------------------------------- Missouri Total 8,500,000 167,015,279 175,515,279 Montana - 0.5% 8,500,000 8,500,000 FORSYTH MONT MT 12/1/16 3.200 12/01/16 8,500,000 8,500,000 1,400,000 1,400,000 MONTANA HLTH FACS 12/1/15 3.100 12/01/15 1,400,000 1,400,000 4,925,000 4,925,000 MONTANA ST BRD 7/01/31 3.250 07/01/31 4,925,000 4,925,000 ------------------------------------------ Montana Total 0 14,825,000 14,825,000 Nebraska - 0.4% 5,195,000 4,500,000 9,695,000 NEBHELP INC VAR 12/1/16 3.200 12/01/16 5,195,000 4,500,000 9,695,000 4,000,000 4,000,000 YORK NE IDR VAR 8/1/17 3.100 08/01/17 4,000,000 4,000,000 ------------------------------------------ Nebraska Total 5,195,000 8,500,000 13,695,000 Nevada - 0.1% 2,800,000 2,800,000 CLARK CNTY NV VAR 11/1/21 3.300 11/01/21 2,800,000 2,800,000 ------------------------------------------ Nevada Total 2,800,000 0 2,800,000 New Hampshire - 0.2% 7,000,000 7,000,000 MERRIMACK NH 12/30/99 3.130 12/30/99 7,001,528 7,001,528 ------------------------------------------ New Hampshire Total 0 7,001,528 7,001,528 New Mexico - 0.3% 3,100,000 3,100,000 ALBUQUERQUE NM 3/01/14 3.000 03/01/14 3,100,000 3,100,000 5,900,000 5,900,000 DONA ANA CNTY NM 11/1/13 3.000 11/01/13 5,900,000 5,900,000 ------------------------------------------ New Mexico Total 5,900,000 3,100,000 9,000,000 New York - 2.0% 2,855,000 2,855,000 ERIE CNTY NY 11/01/16 3.000 11/01/16 2,855,000 2,855,000 6,845,000 6,845,000 MONROE CNTY NY 3.000 08/01/18 6,845,000 6,845,000 38,990,000 38,990,000 NEW YORK ST DORM 7/1/23 3.050 07/01/23 38,990,000 38,990,000 3,505,000 3,505,000 NIAGARA NY INDL 11/15/24 2.850 11/15/24 3,505,000 3,505,000 9,300,000 9,300,000 NORTHPORT-EAST 6/4/99 3.873 06/04/99 9,300,310 9,300,310 ------------------------------------------ New York Total 0 61,495,310 61,495,310 North Carolina - 1.9% 600,000 600,000 CABBARUS NC VAR 1/1/00 3.100 01/01/00 600,000 600,000 5,000,000 5,000,000 CABARRUS CNTY NC 4/1/01 3.200 04/01/01 5,000,000 5,000,000 2,575,000 2,575,000 IREDELL CNTY NC 1/1/11 3.200 01/01/11 2,575,000 2,575,000 10,000,000 10,000,000 LENOIR CNTY NC 10/01/12 3.000 10/01/12 10,000,000 10,000,000 1,325,000 1,325,000 MECKLENBURG NC VAR 12/1/4 3.200 12/01/04 1,325,000 1,325,000 1,900,000 1,900,000 MECKLENBURG NC VAR 3/1/16 3.200 03/01/16 1,900,000 1,900,000 7,700,000 7,700,000 NEW HANOVER NC VAR 5/1/10 3.000 05/01/10 7,700,000 7,700,000 4,670,000 4,670,000 NC MED CARE VAR 3/1/18 3.000 03/01/18 4,670,000 4,670,000 7,700,000 7,700,000 NC MED CARE COMMN 10/1/18 3.000 10/01/18 7,700,000 7,700,000 3,900,000 3,900,000 RANDOLPH CNTY NC 09/01/05 3.200 09/01/05 3,900,000 3,900,000 7,500,000 7,500,000 WAKE CNTY NC INDL VRN 3/1 3.150 03/01/17 7,500,000 7,500,000 6,760,000 6,760,000 WINSTON SALEM 7/01/09 3.050 07/01/09 6,760,000 6,760,000 ----------------------------------------- North Carolina Total 7,500,000 52,130,000 59,630,000 North Dakota - 0.4% 12,025,000 12,025,000 GRAND FORKS, ND 12/1/16 3.100 12/01/16 12,025,000 12,025,000 900,000 500,000 1,400,000 GRAND FRKS ND VRN 12/1/25 3.100 12/01/25 900,000 500,000 1,400,000 ------------------------------------------ North Dakota Total 900,000 12,525,000 13,425,000 Ohio - 2.7% 940,000 940,000 CENTERVILLE OH 11/1/13 3.050 11/01/13 940,000 940,000 5,000,000 5,000,000 CLINTON CNTY VAR 6/1/11 3.050 06/01/11 5,000,000 5,000,000 1,100,000 1,100,000 CUYAHOGA OH VAR 1/1/16 3.050 01/01/16 1,100,000 1,100,000 875,000 875,000 CUYAHOGA CNTY VAR 5/4/11 3.000 05/04/11 875,000 875,000 2,070,000 2,070,000 DEFIANCE CNTY OH 7/1/00 3.000 07/01/00 2,070,000 2,070,000 965,000 965,000 GREENE CNTY OHIO 9/01/16 3.100 09/01/16 965,000 965,000 2,020,000 2,020,000 LUCAS CNTY OHIO 07/01/09 3.250 07/01/09 2,020,000 2,020,000 10,000,000 3,000,000 13,000,000 LUCAS CNTY OHIO 10/01/05 2.950 10/01/05 10,000,000 3,000,000 13,000,000 8,000,000 8,000,000 MONTGOMERY CNTY 5/01/26 3.000 05/01/26 8,000,000 8,000,000 2,279,000 2,279,000 OHIO HSG FIN 12/01/15 3.000 12/01/15 2,279,000 2,279,000 10,000,000 10,000,000 OHIO ST. AIR QUAL.10/1/27 3.650 10/01/27 10,000,000 10,000,000 2,000,000 2,000,000 OHIO ST PCR VRN 5/1/22 3.100 05/01/22 2,000,000 2,000,000 7,675,000 7,675,000 OH ST WTR VAR 7/1/00 3.100 07/01/00 7,675,000 7,675,000 5,000,000 5,000,000 OTTAWA CNTY OHIO 08/06/99 4.000 08/06/99 5,005,358 5,005,358 995,000 995,000 SUMMIT CNTY OHIO 3/01/05 3.100 03/01/05 995,000 995,000 1,200,000 1,200,000 SUMMIT CNTY OH 02/01/07 3.200 02/01/07 1,200,000 1,200,000 20,000,000 20,000,000 TOLEDO LUCAS OH 1/1/18 3.150 01/01/18 20,000,000 20,000,000 1,055,000 1,055,000 TOLEDO-LUCAS CNTY 12/1/21 3.200 12/01/21 1,055,000 1,055,000 ------------------------------------------ Ohio Total 30,439,358 53,740,000 84,179,358 Oklahoma - 0.3% 6,000,000 6,000,000 MUSKOGEE OK VAR 5/1/23 3.200 05/01/23 6,000,000 6,000,000 5,000,000 5,000,000 OK DEV FIN VAR 3/1/27 3.100 03/01/27 5,000,000 5,000,000 ------------------------------------------ Oklahoma Total 0 11,000,000 11,000,000 Oregon - 0.9% 15,600,000 15,600,000 OR ST VAR 12/1/18 3.000 12/01/18 15,600,000 15,600,000 2,000,000 2,000,000 PORT PORTLAND ORE 11/1/07 3.000 11/01/07 2,000,000 2,000,000 4,300,000 4,300,000 PORTLD OR PCR VRN 12/1/09 3.100 12/01/09 4,300,000 4,300,000 2,100,000 2,000,000 4,100,000 PT PORTLAND ORE 06/15/27 3.150 06/15/27 2,100,000 2,000,000 4,100,000 2,000,000 2,000,000 WASHINGTON OR VAR 9/1/25 3.050 09/01/25 2,000,000 2,000,000 ------------------------------------------- Oregon Total 4,100,000 23,900,000 28,000,000 Pennsylvania - 2.8% 8,800,000 8,800,000 ALLEGHENY CNTY PA 9/01/11 2.900 09/01/11 8,800,000 8,800,000 5,000,000 5,000,000 ALLEGHANY CO. PA 9/1/11 2.900 09/01/11 5,000,000 5,000,000 8,865,000 8,865,000 ALLEGHENY CNTY 10/01/25 3.150 10/01/25 8,865,000 8,865,000 7,700,000 7,700,000 DELAWARE CNTY VRN 12/1/09 3.100 12/01/09 7,700,000 7,700,000 1,000,000 1,000,000 DELAW CNTY PA VRN 10/1/19 3.100 10/01/19 1,000,000 1,000,000 3,100,000 3,100,000 ELK CNTY PA VAR 3/1/09 3.250 03/01/09 3,100,000 3,100,000 5,000,000 5,000,000 MONTGOMERY CNTY 9/01/06 3.150 09/01/06 5,000,000 5,000,000 1,100,000 1,100,000 PENNSYLVANIA ECO 4/01/15 3.150 04/01/15 1,100,000 1,100,000 2,200,000 2,200,000 PHIL PA AUTH 07/01/25 3.100 07/01/25 2,200,000 2,200,000 16,300,000 16,300,000 PHILADELPHIA PA 12/01/03 3.150 12/01/03 16,300,000 16,300,000 5,900,000 5,900,000 PHILADELPHIA PA 7/01/28 3.150 07/01/28 5,900,000 5,900,000 4,500,000 4,500,000 QUAKERTOWN PA VRN 7/1/26 3.100 07/01/26 4,500,000 4,500,000 1,240,000 1,240,000 SCHUYLILL CNTY PA 2/1/12 3.150 02/01/12 1,240,000 1,240,000 1,760,000 1,760,000 SCHUYLKILL CNTY 2/01/12 3.250 02/01/12 1,760,000 1,760,000 4,710,000 4,710,000 UNION CNTY PA VAR 10/1/23 3.050 10/01/23 4,710,000 4,710,000 4,310,000 4,310,000 WMORELAND CNTY PA 4/1/17 3.150 04/01/17 4,310,000 4,310,000 5,000,000 5,000,000 WMORELAND CNTY 2/01/18 3.250 02/01/18 5,000,000 5,000,000 ------------------------------------------- Pennsylvania Total 8,300,000 78,185,000 86,485,000 Rhode Island - 0.4% 7,925,000 7,925,000 RHODE ISLAND PORT 9/1/11 3.000 09/01/11 7,925,000 7,925,000 4,000,000 4,000,000 RI ST INDL FACS 04/01/04` 3.100 04/01/04 4,000,000 4,000,000 ------------------------------------------- Rhode Island Total 0 11,925,000 11,925,000 South Carolina - 1.4% 4,000,000 4,000,000 Anderson County, SC, IDR 3.200 11/01/12 4,000,000 4,000,000 1,000,000 1,000,000 CHEROKEE CNTY SC 11/1/04 3.500 11/01/04 1,000,000 1,000,000 5,945,000 5,945,000 KERSHAW CNTY SC 12/01/07 3.200 12/01/07 5,945,000 5,945,000 5,000,000 5,000,000 NEWBERRY SC 3.75% 4/1/99 3.750 04/01/99 5,000,000 5,000,000 1,740,000 1,740,000 SC JOBS ECO DEV 6/01/18 3.100 06/01/18 1,740,000 1,740,000 9,000,000 9,000,000 SC JOBS ECO DEV 4/01/12 3.150 04/01/12 9,000,000 9,000,000 5,660,000 5,660,000 SC JOBS ECO DEV 04/01/19 3.050 04/01/19 5,660,000 5,660,000 3,100,000 3,100,000 SC JOBS ECO DEV 10/01/19 3.050 10/01/19 3,100,000 3,100,000 1,000,000 1,000,000 SC JOBS ECO DEV 12/01/01 3.200 12/01/01 1,000,000 1,000,000 4,465,000 4,465,000 S C JOBS VAR 3/1/12 3.200 03/01/12 4,465,000 4,465,000 1,950,000 1,950,000 YORK CNTY SC VAR 9/15/14 3.050 09/15/14 1,950,000 1,950,000 700,000 700,000 YORK CNTY S C 9/15/14 3.050 09/15/14 700,000 700,000 ------------------------------------------- South Carolina Total 11,540,000 32,020,000 43,560,000 South Dakota - 1.2% 730,000 730,000 SOUTH DAKOTA ECO 8/01/08 3.350 08/01/08 730,000 730,000 3,410,000 3,410,000 SOUTH DAKOTA 7.65% 5/1/99 7.650 05/01/99 3,421,923 3,421,923 32,430,000 32,430,000 S DAKOTA HSG DEV 05/01/27 3.120 05/01/27 32,430,000 32,430,000 ------------------------------------------- South Dakota Total 4,151,923 32,430,000 36,581,923 Tennessee - 3.8% 1,100,000 3,600,000 4,700,000 CHATTANOOGA-HAM 10/1/17 F 3.100 10/01/17 1,100,000 3,600,000 4,700,000 5,250,000 5,250,000 CHATTANOOGA TENN 12/15/12 3.000 12/15/12 5,250,000 5,250,000 3,000,000 3,000,000 CHATTANOOGA TENN 6/01/04 3.100 06/01/04 3,000,000 3,000,000 6,969,000 6,969,000 CUMBERLAND CNTY 01/01/00 2.950 01/01/00 6,969,000 6,969,000 2,000,000 2,000,000 DICKSON CNTY TN 11/1/12 3.100 11/01/12 2,000,000 2,000,000 6,685,000 6,685,000 FRANKLIN CNTY TENN 9/1/18 3.050 09/01/18 6,685,000 6,685,000 1,265,000 1,265,000 JEFFERSON CITY 11/01/24 3.050 11/01/24 1,265,000 1,265,000 7,500,000 7,500,000 KNOX-TENN 144A VAR 3/1/19 3.100 03/01/19 7,500,000 7,500,000 3,575,000 3,575,000 LOUDON TN WTR & SWR 9/1/6 3.050 09/01/06 3,575,000 3,575,000 5,155,000 5,155,000 MET GOVT NASHVILLE 9/1/15 3.100 09/01/15 5,155,000 5,155,000 400,000 11,700,000 12,100,000 METRO NASH ARPT 10/1/12 3.100 10/01/12 400,000 11,700,000 12,100,000 15,600,000 15,600,000 METRO NASH ARPT 10/01/12 3.100 10/01/12 15,600,000 15,600,000 3,700,000 3,700,000 MONROE CNTY TENN VAR8/1/6 3.200 08/01/06 3,700,000 3,700,000 3,245,000 3,245,000 SHELBY CNTY TENN 01/01/23 3.150 01/01/23 3,245,000 3,245,000 1,600,000 1,600,000 SPRINGFIELD TENN 11/01/09 3.200 11/01/09 1,600,000 1,600,000 5,000,000 5,000,000 SULLIVAN TN FRN 7/1/10 3.150 07/01/10 5,000,000 5,000,000 10,000,000 10,000,000 TN HSG DEV 3.75% 1/1/30 3.750 01/01/30 10,000,000 10,000,000 23,500,000 23,500,000 TN HSG DEV 3.1% 1/1/31 3.100 01/01/31 23,500,000 23,500,000 ------------------------------------------- Tennessee Total 16,750,000 104,094,000 120,844,000 Texas - 6.4% 28,030,000 28,030,000 ALLIANCE ARPT VAR 4/1/21 3.170 04/01/21 28,030,000 28,030,000 3,460,000 3,460,000 BEXAR CNTY TEX 7/01/11 3.000 07/01/11 3,460,000 3,460,000 10,190,000 10,190,000 BEXAR CNTY TX HSG 6/01/35 3.260 06/01/35 10,190,000 10,190,000 1,000,000 1,000,000 BRAZOS RIV TEX HBR 4/1/02 3.225 04/01/02 1,000,000 1,000,000 8,185,000 8,185,000 EL PASO TEX HSG 09/01/23 3.250 09/01/23 8,185,000 8,185,000 1,000,000 1,600,000 2,600,000 GRAPEVINE TEX 12/01/24 3.100 12/01/24 1,000,000 1,600,000 2,600,000 1,000,000 2,300,000 3,300,000 GRAPEVINE TEX 12/01/24 3.100 12/01/24 1,000,000 2,300,000 3,300,000 2,000,000 2,000,000 GRAPEVINE TX IDR 12/1/24 3.100 12/01/24 2,000,000 2,000,000 2,700,000 2,700,000 GRAPEVINE TEX VRN 12/1/24 3.100 12/01/24 2,700,000 2,700,000 400,000 400,000 GRAPEVINE TX IDR 12/1/24 3.100 12/01/24 400,000 400,000 3,000,000 3,000,000 GRAPEVINE TEX 12/01/24 3.100 12/01/24 3,000,000 3,000,000 3,300,000 3,300,000 GRAPEVINE TX IDR 12/1/24 3.100 12/01/24 3,300,000 3,300,000 500,000 500,000 GRAPEVINE TEX 12/01/24 3.100 12/01/24 500,000 500,000 1,000,000 3,390,000 4,390,000 GUADALUPE TX VRN 11/1/15 3.150 11/01/15 1,000,000 3,390,000 4,390,000 2,000,000 2,000,000 GULF CST WST VRN 10/1/17 3.100 10/01/17 2,000,000 2,000,000 2,000,000 5,700,000 7,700,000 HARRIS CO TX VRN 12/01/25 3.100 12/01/25 2,000,000 5,700,000 7,700,000 3,100,000 3,050,000 6,150,000 HARRIS CO TEX VRN 12/1/26 3.100 12/01/26 3,100,000 3,050,000 6,150,000 3,340,000 3,340,000 HARRIS CNTY TEX 5/1/03 3.200 05/01/03 3,340,000 3,340,000 2,000,000 2,000,000 HARRIS CO PCR 3/1/24 3.050 03/01/24 2,000,000 2,000,000 2,200,000 2,200,000 HARRIS CO TX VRN 3/1/24 3.050 03/01/24 2,200,000 2,200,000 3,000,000 3,000,000 HILLSBORO TEX INDL 7/1/13 3.300 07/01/13 3,000,000 3,000,000 600,000 600,000 LONE STAR TEX 12/01/14 3.100 12/01/14 600,000 600,000 700,000 1,200,000 1,900,000 LONE STAR TEX 12/01/14 3.100 12/01/14 700,000 1,200,000 1,900,000 300,000 1,200,000 1,500,000 LONE STAR TEX 12/01/14 3.100 12/01/14 300,000 1,200,000 1,500,000 930,000 930,000 LONE STAR TEX 12/01/14 3.100 12/01/14 930,000 930,000 900,000 1,200,000 2,100,000 LONE STAR TEX 12/01/14 3.100 12/01/14 900,000 1,200,000 2,100,000 700,000 700,000 LONE STAR TEX 12/01/14 3.100 12/01/14 700,000 700,000 1,100,000 1,100,000 LONE STAR TEX 12/01/14 3.100 12/01/14 1,100,000 1,100,000 500,000 2,200,000 2,700,000 LONE STAR, TX VRN 12/1/14 3.100 12/01/14 500,000 2,200,000 2,700,000 600,000 600,000 LONE STAR TEX 12/01/14 3.100 12/01/14 600,000 600,000 4,300,000 4,300,000 MC ALLEN TEX 12/01/24 3.150 12/01/24 4,300,000 4,300,000 7,300,000 7,300,000 MONTGOMERY CNTY 12/01/15 3.100 12/01/15 7,300,000 7,300,000 1,200,000 1,200,000 NUECES CNTY TEX 07/01/15 3.050 07/01/15 1,200,000 1,200,000 10,200,000 10,200,000 PORT DEV CORP 12/01/04 3.250 12/01/04 10,200,000 10,200,000 1,200,000 1,200,000 PORT ATHR TEX VRN 10/1/24 3.200 10/01/24 1,200,000 1,200,000 4,700,000 11,300,000 16,000,000 SABINE RIVER AUTH 4/1/30 3.300 04/01/30 4,700,000 11,300,000 16,000,000 8,000,000 8,000,000 SULPHUR SPRG TX VRN 12/1 3.150 12/01/13 8,000,000 8,000,000 5,000,000 25,000,000 30,000,000 TEXAS MUN GAS 1/15/23 3.000 01/15/23 5,000,000 25,000,000 30,000,000 3,300,000 3,300,000 TRINITY RIVER TX 7/1/22 3.100 07/01/22 3,300,000 3,300,000 1,000,000 1,000,000 TRINITY RIVER 11/01/14 3.125 11/01/14 1,000,000 1,000,000 5,100,000 3,200,000 8,300,000 W. SIDE CALHOUN VRN 12/1 3.100 12/01/15 5,100,000 3,200,000 8,300,000 ------------------------------------------- Texas Total 39,330,000 163,045,000 202,375,000 Utah - 1.1% 3,200,000 3,200,000 MURRAY CITY UT 9/1/14 3.200 09/01/14 3,200,000 3,200,000 1,900,000 1,900,000 MURRAY UT VAR 10/1/16 3.200 10/01/16 1,900,000 1,900,000 17,300,000 17,300,000 SALT LK CTY UT VRN 1/1/20 3.050 01/01/20 17,300,000 17,300,000 1,200,000 10,110,000 11,310,000 SALT LK CO PCR VRN 8/1/07 3.100 08/01/07 1,200,000 10,110,000 11,310,000 ------------------------------------------- Utah Total 1,200,000 32,510,000 33,710,000 Virginia - 1.4% 5,800,000 5,800,000 Albermarle County, VA, 3.050 02/01/26 5,800,000 5,800,000 Industrial Development Authority 2,500,000 2,500,000 COLONIAL HGTS VA 03/01/05 3.050 03/01/05 2,500,000 2,500,000 2,000,000 2,000,000 FLUVANNA CNTY VA 12/1/09 3.000 12/01/09 2,000,000 2,000,000 3,900,000 3,900,000 GREENSVILLE VA 10/1/06 3.200 10/01/06 3,900,000 3,900,000 7,125,000 7,125,000 MADISON CNTY VA 06/01/13 3.150 06/01/13 7,125,000 7,125,000 5,200,000 5,200,000 NEWPORT NEWS VA 11/1/11 2.950 11/01/11 5,200,000 5,200,000 4,600,000 4,600,000 PENINSULA PORT FRN 7/1/16 3.100 07/01/16 4,600,000 4,600,000 3,595,000 3,595,000 RICHMOND VA 4.25% 5/15/99 4.250 05/15/99 3,596,884 3,596,884 2,000,000 2,000,000 SPOTSYLVANIA VA 06/01/08 3.100 06/01/08 2,000,000 2,000,000 5,500,000 5,500,000 VA COLLEGE BLDG 11/1/26 3.050 11/01/26 5,500,000 5,500,000 1,575,000 1,575,000 WINCHESTER VA 8/01/07 3.350 08/01/07 1,575,000 1,575,000 ------------------------------------------- Virginia Total 18,096,884 25,700,000 43,796,884 Washington - 0.1% 800,000 800,000 PORT SKAGIT WASH 12/01/20 3.100 12/01/20 800,000 800,000 ------------------------------------------ Washington Total 800,000 0 800,000 West Virginia - 0.8% 1,500,000 1,500,000 MARSHALL CO VRN 12/1/20 3.100 12/01/20 1,500,000 1,500,000 1,200,000 1,200,000 OHIO CNTY W VA 12/01/01 3.150 12/01/01 1,200,000 1,200,000 22,650,000 22,650,000 W VIRGINIA ST 10/01/12 3.100 10/01/12 22,650,000 22,650,000 ------------------------------------------ West Virginia Total 1,200,000 24,150,000 25,350,000 Wisconsin - 1.3% 3,000,000 3,000,000 MENASHA WIS JT 9/30/99 3.150 09/30/99 3,000,717 3,000,717 4,000,000 4,000,000 MENOMONEE FALLS WI 9/1/14 3.200 09/01/14 4,000,000 4,000,000 940,000 940,000 MILWAUKEE WIS INDL 4/1/07 3.350 04/01/07 940,000 940,000 4,600,000 4,600,000 PLEASANT PRAIRIE 2/01/22 3.050 02/01/22 4,600,000 4,600,000 3,000,000 3,000,000 WATERTOWN WIS 10/28/99 3.100 10/28/99 3,000,828 3,000,828 2,700,000 2,700,000 WI HLTH & EDL 1/1/19 3.125 01/01/19 2,700,000 2,700,000 12,000,000 12,000,000 WI ST HLTH VAR 8/15/16 3.050 08/15/16 12,000,000 12,000,000 11,400,000 11,400,000 WI ST HEALTH VAR 12/1/17 2.950 12/01/17 11,400,000 11,400,000 ------------------------------------------ Wisconsin Total 6,941,546 34,700,000 41,641,546 Wyoming - 0.1% 500,000 500,000 SUBLETTE CNTY 07/01/17 3.200 07/01/17 500,000 500,000 3,700,000 3,700,000 SWEETWATER CNTY 7/01/15 2.900 07/01/15 3,700,000 3,700,000 ------------------------------------------ Wyoming Total 0 4,200,000 4,200,000 Total Municipal Bonds & Notes 410,871,711 2,720,235,499 3,131,107,210 Investment Companies - 0.4% 2,050,000 4,450,000 6,500,000 AIM TAX EXEMPT 2.876 2,050,000 4,450,000 6,500,000 4,125,000 2,725,000 6,850,000 FEDERATED TAX FREE FUND 2.929 4,125,000 2,725,000 6,850,000 ------------------------------------------- Investment Companies Total 6,175,000 7,175,000 13,350,000 Total Investments - 100.0% 3,144,457,210 NATIONS MUNICIPAL RESERVES/NATIONS TAX-EXEMPT FUND Pro Forma Combining Statement of Net Assets (Unaudited) March 31,1999 Nations Tax-Exempt Municipal Resreves Adjustments to Pro Forma Pro Forma Combined (in 000's) (in 000's) (in 000's) (in 000's) ----------------------------------------------------------------- ------------------ TOTAL INVESTMENTS $ 2,727,410 $ 417,047 $ - $ 3,144,457 OTHER ASSETS AND LIABILITIES: Receivable for investments sold - - - - Payable for investments purchased - - - - Other assets and liabilities, net 61,564 (11,952) - 49,612 ----------------------------------------------------------------- ------------------ Total Other Assets and Liabilities 61,564 (11,952) - 49,612 ----------------------------------------------------------------- ------------------ ================================================================= ================== NET ASSETS 2,788,974 405,095 - 3,194,069 ================================================================= ================== NET ASSETS BY CLASS: Daily\Daily 333,210 - 333,210 Primary B\Investor B\Investor C\Investor 269,923 - 269,923 Primary A\Trust 2,132,148 - 2,132,148 Service - - Capital 134,268 - 134,268 Liquidity 68,393 - 68,393 Advisor - 55,435 - 55,435 Investor A\Market 53,693 146,999 - 200,692 ----------------------------------------------------------------- ------------------ 2,788,974 405,095 - 3,194,069 ----------------------------------------------------------------- ------------------ SHARES OUTSTANDING BY CLASS: Daily\Daily 333,043 - 333,043 Primary B\Investor B\Investor C\Investor 269,779 - 269,779 Primary A\Trust 2,132,715 - 2,132,715 Service - - Capital 134,269 - 134,269 Liquidity 68,393 - 68,393 Advisor - 55,435 - 55,435 Investor A\Market 53,658 147,000 - 200,658 ----------------------------------------------------------------- ------------------ 2,789,195 405,097 - 3,194,292 ----------------------------------------------------------------- ------------------ NET ASSET VALUE PER SHARE BY CLASS: Daily\Daily $ 1.00 n/a $ - $ 1.00 Primary B\Investor B\Investor C\Investor $ 1.00 n/a $ - $ 1.00 Primary A\Trust $ 1.00 n/a $ - $ 1.00 Service n/a n/a $ - n/a Capital n/a $ 1.00 $ - $ 1.00 Liquidity n/a $ 1.00 $ - $ 1.00 Advisor n/a $ 1.00 $ - $ 1.00 Investor A\Market $ 1.00 $ 1.00 $ - $ 1.00 SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS NATIONS MUNICIPAL RESERVES/NATIONS TAX-EXEMPT FUND Pro Forma Combining Statement of Operations (Unaudited) For the Twelve Month Period Ending March 31, 1999 INVESTMENT INCOME: Interest $92,437 $11,258 $ - $103,696 Dividends (4) 175 - 171 --------------------------------------------------- --------------- Total Investment Income 92,434 11,433 - 103,867 --------------------------------------------------- --------------- EXPENSES: Investment Advisory 10,886 1,028 (7,318)(a) 4,596 Administration 2,721 343 - 3,065 Transfer Agent 433 22 - 455 Custodian 170 36 - 206 Legal and Audit Fees 169 60 (30)(b) 199 Registration & Filing 192 109 - 300 Trustees' Fees 15 25 - 40 Interest Expense - - - - Other expenses 242 10 - 252 --------------------------------------------------- --------------- Subtotal 14,827 1,633 (7,348) 9,112 --------------------------------------------------- --------------- SHAREHOLDER SERVICING AND DISTRIBUTION FEES Daily\Daily 1,278 - (183)(a) 1,095 Primary B\Investor B\Investor C\Investor 1,000 41(a) 1,041 Primary A\Trust - 2,115(a) 2,115 Service - - Capital - - - Liquidity 483 - 483 Advisor - 134 - 134 Investor A\Market 443 572 127(a) 1,142 --------------------------------------------------- --------------- 2,721 1,189 2,100 6,010 --------------------------------------------------- --------------- Fees waived and/or reimbursed by investment - advisor, administrator and/or distributor (7,488) (1,386) 5,810(c) (3,064 --------------------------------------------------- --------------- TOTAL EXPENSES 10,061 1,436 562 12,059 --------------------------------------------------- --------------- --------------------------------------------------- --------------- NET INVESTMENT INCOME 82,373 9,997 (562) 91,808 --------------------------------------------------- --------------- NET REALIZED GAIN/(LOSS) ON --------------------------------------------------- --------------- INVESTMENTS: 165 (1) - 165 --------------------------------------------------- --------------- NET INCREASE/(DECREASE) IN NET ASSETS =================================================== =============== RESULTING FROM OPERATIONS: $82,538 $9,996 $ (562) $91,973 =================================================== =============== 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 Municipal Reserves Nations Tax-Exempt Money Market Fund Notes to Pro Forma Combining Financial Statements (unaudited) 1. Basis of Combination Nations Institutional Reserves and Nations Funds Trust are registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as open-end investment companies. As of March 31, 1999 the Nations Institutional Reserves offered five separate portfolios and Nations Funds Trust offered thirty-eight portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes the exchange described in the next paragraph occurred as of March 31, 1999 and the unaudited Pro Forma Combining Statement of Operations assumes the exchange occurred as of April 1,1999. These statements have been derived from books and records utilized in calculating daily net asset value of each fund at March 31, 1999 and for the twelve month period then ended. The pro forma statements give effect to the proposed transfer of the assets and stated liabilities of the Nations Tax-Exempt Money Market 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 Tax-Exempt Money Market Fund for pre-combination periods will not be restated. The pro forma statements do not reflect the expenses of either fund in carrying out its obligations under the proposed Agreement and Plan of Reorganization. The unaudited Pro Forma combining Financial Statements should be read in conjunction with the historical financial statements of the funds incorporated by reference in the Statement of Additional Information. 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 Municipal Reserves, at the time of the Reorganization at the combined level of average net assets for the twelve month period ended March 31, 1999. NATIONS INSTITUTIONAL RESERVES ONE BANK OF AMERICA PLAZA 33RD FLOOR CHARLOTTE, NC 28255 1-800-626-2275 FORM N-14 PART C OTHER INFORMATION Item 15. Indemnification. Article VIII of the Agreement and Declaration of Trust filed as Exhibit 1 to the Registration Statement is incorporated by reference. Indemnification of Registrant's administrators, principal underwriter, custodian and transfer agent is provided for, respectively, in the: 1. Co-Administration Agreement with Stephens Inc. and NationsBank Advisors, Inc.; 2. Distribution Agreement with Stephens Inc.; 3. Custody Agreement with The Bank of New York; and 4. Transfer Agency Agreement with First Data Investor Services Group, Inc. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant by the Registrant pursuant to the Agreement and Declaration of Trust or otherwise, the Registrant is aware that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and, therefore, is unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by trustees, directors, officers or controlling persons of the Registrant in connection with the successful defense of any act, suit or proceeding) is asserted by such trustees, officers or controlling persons in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issues. C-1 Item 16. Exhibits. All references to the "Registration Statement" in the following list of Exhibits refer to the Registrant's Registration Statement on Form N-1A (File Nos. 33-33144;811-6030). All references to the "Pacific Horizon Registration Statement" in the following list of Exhibits refer to the Pacific Horizon Funds' Registration Statement on Form N-1A (File Nos. ). EXHIBIT NUMBER DESCRIPTION (1) Declaration of Trust date January 22, 1990, is incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (2) By-Laws dated January 22, 1990, are incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (3) Not Applicable. (4) Form of Agreement and Plan of Reorganization, filed herewith as Appendix II to the Combined Prospectus/Proxy Statement. (5) Not Applicable. (6)(a) Investment Advisory Agreement with NationsBanc Advisors, Inc. incorporated by reference to Post-Effective Amendment No. 17. (6)(b) Sub-Advisory Agreement with TradeStreet Investment Associates, Inc. incorporated by reference to Post-Effective Amendment No. 17. (7) Distribution Agreement with Stephens, Inc. incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (8) Not Applicable. (9) Custody Agreement with The Bank of New York incorporated by reference to Post-Effective Amendment No. 20. (10)(a) Shareholder Servicing Plan for Adviser Class Shares incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (10)(b) Form of Shareholder Servicing Agreement for Adviser Class Shares incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (10)(c) Form of Shareholder Servicing Plan for Market Class Shares incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. C-2 (10)(d) Shareholder Servicing Agreement for Market Class Shares incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (10)(e) Shareholder Servicing Plan for Liquidity Class Shares incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (10)(f) Distribution Plan for Liquidity Class Shares incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (10)(g) Distribution Plan for Market Class Shares incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (10)(h) Form of Brokerage Agreement, dated November 18, 1994, is incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (10)(i) Transfer Agency and Registrar Agreement with First Data Investor Services Group, Inc., is incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (11) Opinion and Consent of Morrison & Foerster LLP, filed herewith. (12) See Item 17(3) of this Part C. (13)(a) Administration Agreement with Stephens Inc., dated May 1, 1994, is incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (13)(b) Co-Administration Agreement with The Boston Company Advisors, Inc., dated May 1, 1994, is incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (14) Consent of Independent Accountants- PricewaterhouseCoopers LLP, to be filed in definitive Rule 497 version. (15) Not Applicable. (16) Powers of Attorney, filed herewith. C-3 (17)(a) Plan entered into by Registrant pursuant to Rule 18f-3 under the Investment Company Act of 1940, dated April 12, 1995, is incorporated by reference to Post-Effective Amendment No. 22, filed on August 27, 1998. (17)(b) Form of Proxy Ballot, filed herewith. 17(c)(i) Prospectuses and Statements of Additional Information for Primary A, Primary B, Investor A, Investor B, Investor C, Daily and Marsico Shares of Nations Prime Fund and Primary A, Primary B, Investor A, Investor B, Investor C, and Daily Shares of Nations Treasury Fund, dated August 1, 1998, as supplemented, are incorporated by reference to Post-Effective Amendment No. 37 to the Registration Statement, as filed on July 31, 1998. 17(c)(iii) Prospectuses and Statements of Additional Information for the Trust, Investor, Market, Daily and Marsico Shares of Nations Cash Reserves and Trust, Investor, Market, and Daily Shares of Nations Treasury Reserves dated September 1, 1998, as supplemented, filed as part of Post-Effective Amendment No. 22 to Reserves' Registration Statement on Form N-1A filed on August 27, 1998. 17(c)(iv) Annual Reports for Nations Prime Fund and Nations Treasury Fund, dated March 31, 1999. 17(c)(v) Annual Reports for Nations Cash Reserves and Nations Treasury Reserves, dated March 31, 1999. 17(c)(vi) Prospectuses for the Primary A, Primary B, Investor A, Investor B, Investor C, and Daily Shares of the Nations Government Fund and Nations Tax-Exempt Fund, dated August 1, 1998, as supplemented, filed as part of Post-Effective Amendment No. 57 to Nations' Registration Statement on Form N-1A filed on July 31, 1998. 17(c)(vii) Statement of Additional Information for the Primary A, Primary B, Investor A, Investor B, Investor C, and Daily Shares of the Nations Government Fund and Nations Tax-Exempt Fund, dated August 1, 1998, as supplemented, filed as part of Post-Effective Amendment No. 57 to Nations' Registration Statement on Form N-1A filed on July 31, 1998. C-4 17(c)(viii) Prospectuses for the Trust, Investor, Market, and Daily Shares of the Nations Government Reserves and Nations Municipal Reserves, dated September 1, 1998, as supplemented, filed as part of Post-Effective Amendment No. 22 to Reserves' Registration Statement on Form N-1A filed on August 27, 1998. 17(c)(ix) Statement of Additional Information for the Trust, Investor, Market, and Daily Shares of the Nations Government Reserves and Nations Municipal Reserves, dated September 1, 1998, as supplemented, filed as part of Post-Effective Amendment No. 22 to Reserves' Registration Statement on Form N-1A filed on August 27, 1998. 17(c)(x) Annual Report for Nations Government Fund and Nations Tax-Exempt Fund, dated March 31, 1999. 17(c)(xi) Annual Report for the Nations Government Reserves and Nations Municipal Reserves, dated March 31, 1999. Item 17. Undertakings. (1) Registrant agrees that, prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the reoffering prospectus will contain the information called for by the applicable registration form for the reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The undersigned registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. (3) The undersigned Registrant agrees to file, by post-effective amendment, an opinion of counsel or a copy of an IRS ruling supporting the tax consequences of the Reorganization within a reasonable time after receipt of such opinion or ruling. C-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement on Form N-14 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Little Rock, State of Arkansas on the 28th day of April, 1999. NATIONS INSTITUTIONAL RESERVES By: * ------------------------------- A. Max Walker President and Chairman of the Board of Trustees By: /s/ Richard H. Blank, Jr. ------------------------------- Richard H. Blank, Jr. *Attorney-in-Fact Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form N-14 has been signed below by the following persons in the capacities and on the date indicated: SIGNATURES TITLE DATE ---------- ----- ---- * President and Chairman April 28, 1999 - ------------------------------- of the Board of Trustees (A. Max Walker) (Principal Executive Officer) /s/ Richard H. Blank, Jr. Treasurer and Secretary April 28, 1999 - ------------------------------- (Principal Financial and (Richard H. Blank, Jr.) Accounting Officer) * Trustee April 28, 1999 - ------------------------------- (Edmund L. Benson, III) * Trustee April 28, 1999 - ------------------------------- (James Ermer) * Trustee April 28, 1999 - ------------------------------- (William H. Grigg) * Trustee April 28, 1999 - ------------------------------- (Thomas F. Keller) * Trustee April 28, 1999 - ------------------------------- (Carl E. Mundy, Jr.) * Trustee April 28, 1999 - ------------------------------- (Charles B. Walker) * Trustee April 28, 1999 - ------------------------------- (Thomas S. Word) * Trustee April 28, 1999 - ------------------------------- (James B. Sommers) /s/ Richard H. Blank, Jr. - ------------------------------- Richard H. Blank, Jr. *Attorney-in-Fact NATIONS INSTITUTIONAL RESERVES FILE NOS. 33-33144; 811-6030 Exhibit Number Description - -------------- ----------- Ex-99.11 Opinion and Consent of Morrison & Foerster LLP Ex-99.16 Powers of Attorney Ex-99.17 Form of Proxy Ballot