-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FGtc4mdKzF7PsVScsPmG+Slkxi74l8TNrUK4tA6ZwwMhcFs25W6mazanaNeAI/oG TdoO+ozw1l7Q9cbJB1Xj0A== 0000950109-02-000321.txt : 20020413 0000950109-02-000321.hdr.sgml : 20020413 ACCESSION NUMBER: 0000950109-02-000321 CONFORMED SUBMISSION TYPE: DEFS14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020116 FILED AS OF DATE: 20020118 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONS INSTITUTIONAL RESERVES CENTRAL INDEX KEY: 0000859750 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: DEFS14A SEC ACT: 1934 Act SEC FILE NUMBER: 811-06030 FILM NUMBER: 2512740 BUSINESS ADDRESS: STREET 1: ONE NATIONSBANK PLZ CITY: CHARLOTTE STATE: NC ZIP: 28255 BUSINESS PHONE: 8003425734 MAIL ADDRESS: STREET 1: ONE NATIONSBANK PLAZA CITY: CHARLOTTE STATE: NC ZIP: 28255 FORMER COMPANY: FORMER CONFORMED NAME: CAPITOL MUTUAL FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SEI CAPITOL FUNDS DATE OF NAME CHANGE: 19900318 DEFS14A 1 ddefs14a.txt NATIONS RESERVES UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] Confidential, For Use by the Commission [X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Additional Materials [_] Soliciting Material Under Rule 14a-12 The Capitol Mutual Funds d/b/a Nations Reserves ------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) ------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: N/A --- - ------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: N/A --- - ------------------------------------------------------------------------ (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): N/A --- - ------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: N/A --- - ------------------------------------------------------------------------- (5) Total fee paid: N/A - ------------------------------------------------------------------------- [_] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: N/A --- - ------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: N/A --- - ------------------------------------------------------------------------- (3) Filing Party: N/A --- - ------------------------------------------------------------------------- (4) Date Filed: N/A --- - ------------------------------------------------------------------------- Notes: [LOGO] 2002 Shareholder Proxy Your Investment . Your Right . Your Vote Questions and answers for Nations Funds shareholders [LOGO] Nations Funds Your vote matters It's your right -- and your responsibility as a shareholder Nations Funds is asking shareholders to vote on the 2002 proxy. You, along with more than one million other account owners, representing over $125 billion in assets as of December 31, 2001, are receiving proxy packages. The Nations Funds 2002 proxy is an important initiative that can only succeed with your participation. Please fulfill your responsibility to your fellow shareholders by exercising your right to vote. Questions and answers about your proxy vote: - -------------------------------------------------------------------------------- 1. Who is asking for my vote? The Boards of Directors/Trustees of the Nations Funds family are asking for your vote on proposals that will be decided on at the funds' shareholder meetings on March 27, 2002. Approval of these proposals requires a shareholder vote. 2. Do the Boards of Directors/Trustees recommend that I vote a certain way? The Boards of Directors/Trustees unanimously recommend that you vote FOR all of the proposals, which they believe are in the best interests of the funds and the funds' shareholders. 3. Who is eligible to vote? Any shareholder of record as of December 27, 2001 is eligible to vote at the shareholder meetings, or at any adjournment of the meetings. For each proposal that affects your fund(s), you have the right to cast one vote for each share you own. 4. What am I voting on? Each fund's proxy will contain different proposals. In general, the proposals are designed to streamline the funds' operations by taking advantage of enhanced processes and/or economies of scale. For details about the specific issues related to the enclosed proxy, please refer to the back page of this document. 5. If I own shares of more than one fund, will I receive a proxy card for each fund? Yes, you will receive a proxy card for each fund you own. If you own more than one fund, Nations Funds, to the extent possible, has tried to send all of your proxies in one package to help minimize mailing costs. Because of staggered mailing schedules, however, you may receive more than one package. In any event, it's vital that you vote every proxy card you receive. 6. How do I vote? For your convenience, you have three choices, as explained in the enclosed proxy materials. You can vote: . On the Internet . By making a toll-free telephone call . By completing and signing your proxy card and mailing it back in the postage-paid envelope provided Complete voting instructions are included in this package. You may also attend the shareholder meetings in person. - -------------------------------------------------------------------------------- 7. How will votes be recorded? If you vote online or by phone, your votes will be confirmed and posted immediately. If you return your proxy card by mail, your votes will be recorded as specified for each proposal, as long as your votes are received before the fund's shareholder meeting. Please note: If you sign and date the proxy card without indicating your vote, your shares will be voted FOR all of the proposals. 8. What happens if I don't vote? It's vital that you do vote. If there aren't enough votes to conduct a shareholder meeting for a fund, the meeting will have to be adjourned to a later date, and shareholders who failed to vote the first time will need to be solicited again. This process may have to be repeated if not enough votes are received the second time around (i.e., it's possible for a fund to adjourn its meeting more than once, a costly undertaking). Remember, proxy mailings are generally a fund expense, and so are follow-up mailings and solicitations. By voting -- and voting promptly -- you may help keep your fund's expenses down. 9. How can I find out more about the funds? If you would like copies of any Nations Funds mutual fund prospectus, annual or semiannual report, simply contact your investment professional or call toll free 1.800.653.9427. You may also visit Nations Funds online at www.nations-funds.com. 10. Is there a phone number I can call if I have questions about the proxy? You may call Nations Funds toll free at 1.800.653.9427. Your vote counts! Please join your fellow shareholders in voting your proxies now. Thank you for your business and continued support. Proxy overview The proposals you are voting on: Authorizing the funds' adviser to hire and replace investment sub-advisers or to modify investment sub-advisory agreements without shareholder approval This proposal affects the following funds: . Nations High Yield Bond Fund . Nations Intermediate Bond Fund . Nations International Equity Fund . Nations International Value Fund . Nations Kansas Municipal Income Fund . Nations MidCap Index Fund Nations Funds and Banc of America Advisors, LLC (BA Advisors), the investment adviser to the funds, have applied for an exemptive order from the Securities and Exchange Commission (SEC) that would give BA Advisors, with the approval of the Board of Trustees, permission to make sub-advisory changes to a fund without submitting the changes to a vote of the fund's shareholders, subject to certain SEC conditions. By eliminating shareholder approval, BA Advisors will have greater flexibility in overseeing sub-advisers, and Nations Funds and its shareholders would be spared the time and expense of holding shareholder meetings, and soliciting and submitting proxies for this purpose. Reorganization and establishment of Nations Funds mutual funds as a Delaware business trust This proposal affects the following funds: . Nations Intermediate Bond Fund . Nations International Value Fund . Nations International Equity Fund The Declaration of Trust is the charter document that describes how a fund conducts business and how it is governed. Currently, these Nations Funds mutual funds are registered as a Massachusetts business trust. By reorganizing the funds under a Delaware business trust structure, the funds generally should be able to provide greater flexibility and efficiency in certain corporate and organizational matters. These efficiencies and benefits to shareholders include potential cost savings from the reduction of accounting, legal, filing and registration costs. How are shareholders affected by this proposal? Potential for long-term efficiencies Although there is little or no immediate, direct impact on Nations Funds shareholders, the goal of the initiative is to gain more flexibility in fund operations and potentially achieve additional economies of scale and other benefits that come with greater asset size. No disruption to existing investment choices or service levels Most of the changes resulting from the proxy vote will be transparent to shareholders. Registration as a Delaware business trust will not alter the current investment alternatives available to investors, because the investment objectives and strategies of the funds being combined are substantially the same or identical. Furthermore, total fund expenses, fund managers and service providers will also remain the same. Approval of a new investment sub-advisory agreement for Nations International Equity Fund, Nations Asset Allocation Fund and Nations Asset Allocation Portfolio In January 2002, interim investment sub-advisory agreements for each fund and portfolio mentioned above took effect. The Board of Trustees of each fund and portfolio, acting on a recommendation from BA Advisors, approved the replacement of one of the co-investment sub-advisers at Board meetings held in October and November 2001. Shareholders must approve new investment sub-advisory agreements for each fund and portfolio, which are substantially identical to the interim agreements, prior to the expiration of the interim period in June 2002. How will the funds and portfolio be managed? Nations International Equity Fund Commensurate with the change in sub-adviser from Gartmore Global Partners to Marsico Capital Management, LLC, the investment style of approximately one-third of the fund's assets will combine "top-down" analysis among sectors and regions around the world with a "bottom-up" analysis that focuses on investing in securities with earnings growth potential that may not be realized by other investors. Nations Asset Allocation Fund and Nations Asset Allocation Portfolio Commensurate with the change in sub-adviser from Chicago Equity Partners, LLC to Banc of America Capital Management, LLC, the investment strategies of the equity portion of Nations Asset Allocation Fund and Nations Asset Allocation Portfolio will change from a quantitative, model-driven strategy to a fundamental strategy incorporating both "bottom-up" stock selection and "top-down" macroeconomic analysis. Nations Funds distributor: Stephens Inc., which is not affiliated with Bank of America Corporation, is not a bank and securities offered by it are not guaranteed by any bank or insured by the FDIC. Stephens Inc., member NYSE, SIPC. Banc of America Advisors, LLC, an affiliate of Bank of America Corporation, performs investment advisory and other services for Nations Funds, and receives fees for such services. Member NASD, SIPC. PROXYQA4 211907 (O1/02) Voting instructions Three easy ways to cast your vote Now that you've read through the proxy materials, it's time to vote. For speed and convenience, we're offering a choice of three voting methods: Internet, phone or mail. Votes cast online or by telephone are confirmed and tallied immediately, and there's no need to mail back your proxy card(s). [LOGO] 2002 Shareholder Proxy Your Investment . Your Right . Your Vote On the Internet 1. Go to www.proxyvote.com. 2. Enter the 12-digit control number that appears on your proxy card. 3. Follow the instructions on the Web site to complete your vote. By phone 1. Call the toll-free number shown on your proxy ballot. 2. Enter the 12-digit control number that appears on your proxy card. 3. Follow the recorded instructions. By mail 1. Complete and sign the proxy card. 2. Mail it in the postage-paid return envelope provided. Remember, your vote is important. Please vote now. It's your investment -- and your right. Nations Funds distributor: Stephens Inc., which is not affiliated with Bank of America Corporation, is not a bank and securities offered by it are not guaranteed by any bank or insured by the FDIC. Stephens Inc., member NYSE, SIPC. Banc of America Advisors, LLC, an affiliate of Bank of America Corporation, performs investment advisory and other services for Nations Funds, and receives fees for such services. Member NASD, SIPC. [LOGO] Nations Funds VOTECARD_BEN 211912 (01/02) NATIONS RESERVES NATIONS FUNDS TRUST One Bank of America Plaza 101 South Tryon Street Charlotte, North Carolina 28255 Telephone: (800) 653-9427 January 16, 2002 Dear Shareholder: We are pleased to invite you to special meetings of shareholders of Nations High Yield Bond Fund, Nations Intermediate Bond Fund, Nations International Equity Fund, Nations International Value Fund, Nations Kansas Municipal Income Fund and Nations MidCap Index Fund (the "Funds"). The meetings will be held jointly at 10:00 a.m., Eastern time, on March 27, 2002, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina (the "Meetings"). THE BOARDS OF TRUSTEES OF NATIONS RESERVES AND NATIONS FUNDS TRUST UNANIMOUSLY RECOMMEND THAT YOU VOTE TO APPROVE EACH PROPOSAL RELATING TO YOUR FUND. At the Meetings, you will be asked to authorize the implementation of a "manager of managers" structure pursuant to Securities and Exchange Commission exemptive relief. If the exemptive relief is obtained, this structure would permit Banc of America Advisors, LLC (your Fund's investment adviser) to enter into new or amended investment sub-advisory agreements with one or more sub-advisers without obtaining shareholder approval. This item is being proposed primarily to allow the investment adviser more flexibility in managing your Fund, without incurring the additional expense of soliciting shareholders any time a change is sought. Additionally, shareholders of Nations Intermediate Bond Fund, Nations International Equity Fund and Nations International Value Fund are being asked to approve the reorganization (the "Reorganization") of their Fund into a successor mutual fund (each a "Successor Fund") in Nations Funds Trust, another registered investment company within the Nations Funds family. Each Successor Fund will have the same name, investment objective, principal investment strategies and investment risks as those of your current Fund and the Reorganization will not result in any change to the total operating expense ratios that currently apply to your Fund (both before and after waivers and/or expense reimbursements). The Reorganization will not cause a change to the investment adviser or sub-adviser who manage your Fund. In addition, the features and services that are available to you today as a shareholder will continue to be available to you as a Successor Fund shareholder after the Reorganization. The Reorganization offers several potential benefits. First, the Reorganization is part of a broader initiative to streamline the operations of the Nations Funds family, which currently consists of several registered investment companies. As part of the broader initiative, management expects to reduce the number of registered investment companies in the Nations Funds family without necessarily impacting investment alternatives. Streamlining the Nations Funds family in this fashion may lead to additional cost savings by reducing accounting, legal and securities registration costs. Also, the Successor Funds will be part of a Delaware business trust, which generally is viewed as having more flexibility in its operations than a Massachusetts business trust (like Nations Reserves). Additionally, each Successor Fund will have more flexibility in its investment policies than your current Fund. If shareholder approval is obtained and the other conditions to the Reorganization are satisfied, it is anticipated that each Fund will be reorganized into its corresponding Successor Fund on or about May 10, 2002 when Fund shares will be exchanged for shares of the same class of shares of the corresponding Successor Fund of equal dollar value. The exchange of shares in the Reorganization is expected to be tax-free under federal income tax law, and shareholders (except those of Nations International Equity Fund and Nations International Value Fund) are not expected to bear any of the customary expenses of the Reorganization because of existing expense arrangements. Finally, shareholders of Nations International Equity Fund will also be asked to approve a new investment sub-advisory agreement with Marsico Capital Management, LLC ("Marsico Capital") on behalf of Nations International Equity Master Portfolio, the master portfolio in which Nations International Equity Fund invests all of its net investable assets. The Board of Trustees of Nations Master Investment Trust recently approved a change to the investment sub-adviser who manages approximately one-third of Nations International Equity Master Portfolio's assets. In particular, Gartmore Global Partners ("Gartmore") was recently replaced with Marsico Capital. Prior to January 15, 2002, Gartmore served as one of three investment sub-advisers to Nations International Equity Master Portfolio. Marsico Capital currently provides investment sub-advisory services to approximately one-third of the Master Portfolio's assets under interim arrangements. The general array of sub-advisory services provided under the new agreement and the aggregate fees payable by the Master Portfolio for sub-advisory services will remain unchanged from the previous sub-advisory agreement. Marsico Capital's investment management style, which differs from Gartmore's, is described in the following Proxy Statement. The formal Notice of Special Meetings, Proxy Statement and Proxy Ballot(s) are enclosed. The Reorganization and the reasons for the unanimous recommendation of the Boards with respect to all proposals are discussed in more detail in the enclosed materials, which you should read carefully. If you have any questions, please do not hesitate to contact us at the toll-free number set forth above. We look forward to your attendance at the Meetings or to receiving your Proxy Ballot(s) so that your shares may be voted at the Meetings. Sincerely, A. MAX WALKER President and Chairman of the Boards of Nations Reserves and Nations Funds Trust YOUR VOTE IS IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN. PLEASE VOTE BY SUBMITTING YOUR PROXY BALLOT(S) TODAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY ALSO SUBMIT YOUR PROXY BY A TOLL-FREE PHONE CALL OR BY VOTING ON-LINE, AS INDICATED BELOW. Two Quick And Easy Ways To Submit Your Proxy As a valued Fund shareholder, your proxy vote is important to us. That's why we've made it faster and easier to submit your proxy at your convenience, 24 hours a day. After reviewing the enclosed Proxy Statement ("Proxy Statement ") select one of the following quick and easy methods to submit your proxy--accurately and quickly. Vote On-Line Vote By Toll-Free Phone Call 1. Read the enclosed Proxy Statement and have your 1. Read the enclosed Proxy Statement and have your Proxy Ballot(s)* at hand. Proxy Ballot(s) * at hand. 2. Go to Web site www.proxyvote.com 2. Call the toll-free number on your Proxy Ballot(s). 3. Enter the 12-digit Control Number found on your 3. Enter the 12-digit Control Number found on your Proxy Ballot(s). Proxy Ballot(s). 4. Submit your proxy using the easy-to-follow 4. Submit your proxy using the easy-to-follow instructions. instructions.
* Do not mail the Proxy Ballot(s) if submitting your proxy by Internet or telephone. 2 NATIONS RESERVES NATIONS FUNDS TRUST One Bank of America Plaza 101 South Tryon Street Charlotte, North Carolina 28255 Telephone: (800) 653-9427 NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS To Be Held on March 27, 2002 To Nations High Yield Bond Fund Shareholders: PLEASE TAKE NOTE THAT a special meeting of shareholders of Nations High Yield Bond Fund of Nations Funds Trust will be held at 10:00 a.m., Eastern time, on March 27, 2002, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina, for the purpose of considering and voting upon: Item 1. An authorization for Banc of America Advisors, LLC to hire and replace investment sub-advisers or to modify investment sub-advisory agreements for your fund without shareholder approval. Item 2. An authorization for Banc of America Advisors, LLC to hire and replace investment sub-advisers or to modify investment sub-advisory agreements for Nations High Yield Bond Master Portfolio, in which your fund invests all of its net investable assets, without shareholder approval. Item 3. Such other business as may properly come before the meeting or any adjournment(s). To Nations Intermediate Bond Fund Shareholders: PLEASE TAKE NOTE THAT a special meeting of shareholders of Nations Intermediate Bond Fund of Nations Reserves will be held at 10:00 a.m., Eastern time, on March 27, 2002, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina, for the purpose of considering and voting upon: Item 1. A proposed agreement and plan of reorganization dated as of January 1, 2002 that provides for the reorganization of your fund into a corresponding successor fund. Item 2. An authorization for Banc of America Advisors, LLC to hire and replace investment sub-advisers or to modify investment sub-advisory agreements for Nations Intermediate Bond Master Portfolio, in which your fund invests all of its net investable assets, without shareholder approval. Item 3. Such other business as may properly come before the meeting or any adjournment(s). To Nations International Equity Fund Shareholders: PLEASE TAKE NOTE THAT a special meeting of shareholders of Nations International Equity Fund of Nations Reserves will be held at 10:00 a.m., Eastern time, on March 27, 2002, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina, for the purpose of considering and voting upon: Item 1. A proposed agreement and plan of reorganization dated as of January 1, 2002 that provides for the reorganization of your fund into a corresponding successor fund. Item 2. An authorization for Banc of America Advisors, LLC to hire and replace investment sub-advisers or to modify investment sub-advisory agreements for Nations International Equity Master Portfolio, in which your fund invests all of its net investable assets, without shareholder approval. Item 3. A new investment sub-advisory agreement with Marsico Capital Management, LLC for Nations International Equity Master Portfolio, in which your fund invests all of its net investable assets. Item 4. Such other business as may properly come before the meeting or any adjournment(s). To Nations International Value Fund Shareholders: PLEASE TAKE NOTE THAT a special meeting of shareholders of Nations International Value Fund of Nations Reserves will be held at 10:00 a.m., Eastern time, on March 27, 2002, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina, for the purpose of considering and voting upon: Item 1. A proposed agreement and plan of reorganization dated as of January 1, 2002 that provides for the reorganization of your fund into a corresponding successor fund. Item 2. An authorization for Banc of America Advisors, LLC to hire and replace investment sub-advisers or to modify investment sub-advisory agreements for Nations International Value Master Portfolio, in which your fund invests all of its net investable assets, without shareholder approval. Item 3. Such other business as may properly come before the meeting or any adjournment(s). To Nations Kansas Municipal Income Fund Shareholders: PLEASE TAKE NOTE THAT a special meeting of shareholders of Nations Kansas Municipal Income Fund of Nations Funds Trust will be held at 10:00 a.m., Eastern time, on March 27, 2002, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina, for the purpose of considering and voting upon: Item 1. An authorization for Banc of America Advisors, LLC to hire and replace investment sub-advisers or to modify investment sub-advisory agreements for your fund without shareholder approval. Item 2. Such other business as may properly come before the meeting or any adjournment(s). To Nations MidCap Index Fund Shareholders: PLEASE TAKE NOTE THAT a special meeting of shareholders of Nations MidCap Index Fund of Nations Funds Trust will be held at 10:00 a.m., Eastern time, on March 27, 2002, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina, for the purpose of considering and voting upon: Item 1. An authorization for Banc of America Advisors, LLC to hire and replace investment sub-advisers or to modify investment sub-advisory agreements for your fund without shareholder approval. Item 2. Such other business as may properly come before the meeting or any adjournment(s). THE BOARDS OF TRUSTEES OF NATIONS RESERVES AND NATIONS FUNDS TRUST UNANIMOUSLY RECOMMEND THAT YOU VOTE TO APPROVE EACH PROPOSAL FOR YOUR FUND. ii Shareholders of record as of the close of business on December 27, 2001 are entitled to notice of, and to vote at, the meetings or any adjournment(s) thereof. SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE THE ACCOMPANYING PROXY BALLOT(S), WHICH IS BEING SOLICITED BY THE BOARDS OF TRUSTEES OF NATIONS RESERVES AND NATIONS FUNDS TRUST. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETINGS. SHAREHOLDERS ALSO MAY SUBMIT THEIR PROXIES: 1) BY TELEPHONE AT THE TOLL-FREE NUMBER ON THEIR PROXY BALLOT(S); OR 2) ON-LINE AT THE WEBSITE WWW.PROXYVOTE.COM. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO NATIONS FUNDS A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE MEETINGS AND VOTING IN PERSON. By Order of the Boards of Trustees, RICHARD H. BLANK, JR. Secretary of Nations Reserves and Nations Funds Trust January 16, 2002 iii PROXY STATEMENT Dated January 16, 2002 NATIONS RESERVES NATIONS FUNDS TRUST One Bank of America Plaza 101 South Tryon Street Charlotte, North Carolina 28255 Telephone: (800) 653-9427 For ease of reading, certain terms or names that are used in this Proxy Statement have been shortened or abbreviated. A list of these terms and their corresponding full names or definitions can be found at the end of this Proxy Statement in Appendix A. A shareholder may find it helpful to review the terms and names in Appendix A before reading the Proxy Statement. This Proxy Statement is furnished in connection with the solicitation of proxies by the Boards of Reserves and Funds Trust at the Meetings of the Funds. The Meetings have been called to consider the following proposals as indicated in the chart below:
- ------------------------------------------------------------------------------------------------------------------- Kansas High Yield Intermediate International International Municipal MidCap Item: Bond Fund Bond Fund Equity Fund Value Fund Income Fund Index Fund --------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- Reorganization into a Successor Fund X X X - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- Authorization for "manager of managers" authority X X X X X X - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- New investment sub-advisory agreement with Marsico Capital X - -------------------------------------------------------------------------------------------------------------------
Additional information about the Funds is available in their prospectuses, statements of additional information (or SAIs) and annual and semi-annual reports to shareholders. All of this information is in documents filed with the SEC. The Funds' annual reports to shareholders for the fiscal year ended March 31, 2001 and semi-annual reports to shareholders for the fiscal period ended September 30, 2001 previously have been mailed to shareholders. Additional copies of any of these documents are available without charge by writing the address given above or by calling (800) 653-9427. These documents also are available on the SEC website at www.sec.gov. Shareholders may, after the Reorganization, obtain copies of the prospectuses and SAIs relating to the Successor Funds without charge by calling (800) 653-9427 or by writing Nations Funds at the address set forth above. It is expected that this Proxy Statement will be mailed to shareholders on or about January 16, 2002. 1 Special Note for Shareholders of High Yield Bond Fund, Intermediate Bond Fund, International Equity Fund and International Value Fund Shareholders may recall that these Funds are each a "feeder" fund in a master/feeder structure where corresponding Master Portfolios of Nations Master Investment Trust serve as the investment company in which each feeder Fund invests all of its net investable assets. Investment advisory, sub-advisory and certain other services are provided at the Master Portfolio level. Therefore, the new investment sub-advisory agreement for the Funds is not a contract with the Funds directly but rather with their Master Portfolios. In addition, the proposal relating to the authorization to implement a "manager of mangers" structure may apply to the Fund and/or its Master Portfolio. As an interestholder in a corresponding Master Portfolio, each Fund is "passing-through" the vote to Fund shareholders for any proposals relating to the Master Portfolios via this proxy solicitation, and will vote its interests in its Master Portfolio in the same proportion as Fund shareholders vote. Other feeder funds also own interests in the Master Portfolios, although in each case these interests amount to less than 5% of the total assets held by a Master Portfolio. In addition, in order to avoid confusion of terms throughout this Proxy Statement, the terms Fund and Master Portfolio are sometimes used interchangeably. Also, any approvals made by the Boards, on behalf of High Yield Bond Fund, Intermediate Bond Fund, International Equity Fund and International Value Fund, that are discussed in this Proxy Statement, also were made by the Board of Nations Master Investment Trust, on behalf of each Master Portfolio. THE REORGANIZATION (For Intermediate Bond Fund, International Equity Fund and International Value Fund Shareholders Only) Description of the Proposal At the Meetings, the shareholders of each of the Funds referenced above will be asked to approve the Reorganization. If shareholder approval is obtained, and the other conditions to the Closing are met, shareholders will receive shares of the same class of the corresponding Successor Fund equal in value to their holdings of Fund shares immediately before the Reorganization. Each Fund will then be liquidated and, if shareholders of all Funds approve the Reorganization of their Funds (and shareholders of all other funds of Reserves also approve separate reorganizations of their funds), Reserves will be de-registered under the 1940 Act and dissolved under Massachusetts state law. Each Successor Fund is referred to as a "successor" because each was created to receive the assets and liabilities and to continue the operations of its corresponding Fund. While there are some differences between the Funds and their corresponding Successor Funds, which are discussed below, an investment in a Successor Fund will be considered substantially the same as an investment in its corresponding Fund. Each Successor Fund will have the same name, investment objective, investment adviser, investment sub-adviser, principal investment strategies and investment risks as its corresponding Fund. In addition, the Reorganization will not result in any change to the total operating expense ratios (before or after waivers and/or expense reimbursements) of the various classes of shares. Similarly, the features and services that are available to Fund shareholders today will continue to be available to Successor Fund shareholders after the Reorganization. However, the Successor Funds differ in some respects from the Funds, and these differences are described in more detail below. Description of the Reorganization Agreement The Reorganization Agreement is the governing document of the Reorganization. Among other things, it provides for: (i) the transfer of all of the assets and liabilities of a Fund to its corresponding Successor Fund in 2 exchange for shares of equal value of the designated classes of the corresponding Successor Fund; and (ii) the distribution of Successor Fund shares to Fund shareholders in liquidation of their Fund. The Reorganization Agreement also sets forth representations and warranties of the parties, describes the mechanics of the transaction and includes a number of conditions to the completion of the Reorganization, such as the requirement that a good standing certificate be obtained by each party and that no regulatory barriers have been issued by the SEC. The completion of the Reorganization also is conditioned upon Reserves and Funds Trust receiving an opinion from Morrison & Foerster LLP that the exchange of shares contemplated under the Reorganization will be tax-free under federal income tax law. The Reorganization Agreement provides that the Reorganization may be abandoned at any time before Closing by either party if any condition is not satisfied or otherwise by mutual consent of the parties. At any time before or (to the extent permitted by law) after approval of the Reorganization Agreement by Fund shareholders: (i) the parties may, by written agreement authorized by the Board of Reserves or Funds Trust, as applicable, and with or without the approval of their shareholders, amend any of the provisions of the Reorganization Agreement; and (ii) either party may waive any default by the other party for the failure to satisfy any of the conditions to its obligations (the waiver to be in writing and authorized by the respective Board with or without the approval of shareholders). Additionally, the Reorganization Agreement provides that the Reorganization of one Fund is not conditioned upon the Reorganization of any other Fund. Upon completion of the Reorganization, all outstanding shares of each Fund will be canceled. Exchange or redemption requests received thereafter will be deemed to be exchange or redemption requests for shares of the corresponding Successor Fund. The Reorganization Agreement provides that a Fund will bear customary expenses of the Reorganization unless a Fund's total operating expenses have exceeded, or the costs of the Reorganization would cause it to exceed, certain total operating expense "caps" that have been put in place. As a result, it is expected that only International Equity Fund and International Value Fund shareholders will bear the customary expenses associated with the Reorganization of their Funds, including proxy solicitation costs. International Equity Fund shareholders are expected to pay approximately $155,000 and International Value Fund shareholders are expected to pay approximately $269,000 in customary expenses related to the Reorganization. A copy of the Reorganization Agreement is available at no charge by calling (800) 653-9427 or writing Nations Funds at the address listed on the first page of the Proxy Statement. A copy of the Reorganization Agreement is also available at the SEC's website (www.sec.gov). Reasons for the Reorganization and Other Considerations . The Nations Funds Family Reorganization. The Reorganization is the final phase of a broader initiative begun two years ago to streamline the operations of the Nations Funds Family. A primary goal of the initiative is to reduce the number of registered investment companies in the Nations Funds Family without necessarily impacting investment alternatives. This final phase would reorganize all of the remaining Funds of Reserves and the funds of the other fund companies in the Nations Funds Family into series of Funds Trust. Management and the Board believe that operating fewer registered investment companies offers potential efficiencies and benefits to shareholders over the long-term. These efficiencies and benefits include potential cost savings from the reduction of accounting, legal, filing and securities registration costs. If shareholders of the Funds approve the Reorganization (and shareholders of all of the other funds of Reserves approve similar reorganizations), management will de-register and dissolve Reserves. The Successor Funds will be part of a Delaware business trust, which generally is viewed as having more flexibility in its operations than a Massachusetts business trust (like Reserves). Also, as part of Funds Trust, the Successor Funds will be governed under a more flexible charter document which can be amended by Funds Trust's Board without the necessity of soliciting shareholders, thereby saving costs relating to proxy solicitations on certain routine matters. 3 Specifically, the Successor Funds will have greater flexibility in their investment policies, including policies that, for example, will permit them to: . participate in interfund lending among the Nations Funds Family. Management expects to file an exemptive application with the SEC that would permit funds in the Nations Funds Family to lend to and borrow money from each other for temporary purposes. At any particular time, the Funds may need to borrow money for temporary purposes to satisfy redemption requests, to cover unanticipated cash shortfalls such as a trade "fail" in which cash payment for a security sold by a Fund has been delayed, or for other temporary purposes. The Funds currently have a line of credit with their custodian, which is designed to cover these borrowing needs. The interfund lending arrangements are expected to reduce the Successor Funds' potential borrowing costs and provide the lending Successor Funds with the ability to earn interest on short-term lendings to other Nations Funds. Certain of the Funds' fundamental investment policies currently prohibit the Funds from participating in the proposed interfund lending arrangements. The Successor Funds, however, have adopted fundamental investment policies that will allow them to take advantage of these arrangements, assuming that the SEC issues an exemptive order. Board Consideration The Board of Reserves unanimously voted to approve the Reorganization Agreement at a special meeting held on October 10, 2001. During deliberations, the Board (with the advice and assistance of independent counsel) reviewed and considered, among other things: (1) the Reorganization as part of a broader initiative to streamline the operations of the Nations Funds Family; (2) the various aspects of the Reorganization and the Reorganization Agreement, including the fact that the Successor Funds will be part of a Delaware business trust that will allow the Successor Funds to be operated with greater flexibility; (3) that total operating expense ratios (before and after waivers and/or reimbursements) that would be charged to each Successor Fund class after the Reorganization would not change from those of the corresponding Fund class prior to the Reorganization; (4) that the investment objectives, principal investment strategies and investment risks of the Funds and their corresponding Successor Funds are identical; (5) that shareholders will experience no change in shareholder services; (6) that the Successor Funds as part of Funds Trust will have greater flexibility in their investment policies and will be governed under a more flexible charter document which could be amended by the Board of Funds Trust without the necessity of soliciting shareholders, thereby potentially saving future costs relating to proxy solicitations on certain routine matters; (7) the anticipated tax-free nature of the exchange of shares in the Reorganization; (8) that, to the extent the Funds and their shareholders will bear the customary expenses of the Reorganization, the Board considered that such expenses were justified by the potential benefits of the Reorganization. In this regard, the Board also considered that BA Advisors and other service providers currently waive fees and/or reimburse expenses for many of the Funds; and (9) potential benefits of the Reorganization, if any, to other persons, including BA Advisors and its affiliates (e.g., the benefit of consolidating resources within BA Advisors and its affiliates). Based upon its evaluation of the information presented to it, and in light of the fiduciary duties under federal and state law, the Board of Reserves including all of the non-interested Trustees, determined that participation in the Reorganization, as contemplated by the Reorganization Agreement, was in the best interests of each Fund, and that the shares of each Fund will not be diluted as a result of the Reorganization. Similarly, the Board of Trustees of Funds Trust, including all of the non-interested Trustees, also evaluated the Reorganization and based upon its evaluation of the information presented to it, and in light of its fiduciary duties under federal and state law, determined that participation in the Reorganization, as contemplated by the Reorganization Agreement, was in the best interests of the Successor Funds and that the shares of the Successor Funds will not be diluted as a result of the Reorganization. THE BOARD OF RESERVES UNANIMOUSLY RECOMMENDS THAT FUND SHAREHOLDERS VOTE TO APPROVE THE REORGANIZATION AGREEMENT. 4 Comparison of the Funds and Successor Funds As noted above, there are some differences between the Funds and their corresponding Successor Funds, which are summarized below: . After the Reorganization, Fund shareholders will hold shares in series of Funds Trust, a registered investment company in the Nations Funds Family. Unlike Reserves, which is a Massachusetts business trust, Funds Trust is a Delaware business trust. . The Funds and the Successor Funds will have somewhat different fundamental investment policies. As part of Funds Trust, the Successor Funds will have greater flexibility in their investment policies. Comparison of Forms of Business Organization Federal securities laws largely govern the way that mutual funds operate, but they do not cover every aspect of a fund's existence and operation. State law and a fund's governing documents fill in most of these gaps and typically create additional operational rules and restrictions that funds must follow. All of the Funds are series of a Massachusetts business trust. The Successor Funds are series of a Delaware business trust. While the differences between these two forms of organization are not extensive, one advantage of a Delaware business trust is its potential for greater flexibility. Generally, under Delaware business trust law, a mutual fund's governing instrument, called a declaration of trust, may establish the way it will operate with few state law requirements or prohibitions. Thus, mutual funds organized in Delaware generally have more flexibility in their operations and greater certainty about any operational restrictions than mutual funds organized elsewhere. The following discussion outlines some of the differences between Reserves (which is a Massachusetts business trust) and Funds Trust (which is a Delaware business trust). . The Board of Trustees. The Board of Funds Trust has eleven Trustees, ten of whom currently serve as Board members of Reserves, with the eleventh currently serving in an advisory capacity to the Board of Reserves. . Governing Law. Unlike Massachusetts business trust law, the Delaware Business Trust Act has been specifically drafted to accommodate the unique governance needs of investment companies and provides that its policy is to give maximum freedom of contract to the trust instrument (discussed below) of a Delaware business trust. For example, Delaware law provides that, should a Delaware trust issue multiple series of shares, each series will not be liable for the debts of another series. Although remote, this is a potential risk in the case of a Massachusetts business trust, where state law does not clearly provide that one series is not liable for the debts of another. In addition, Delaware has obtained a favorable national reputation for its business laws and business environment. The Delaware courts, which may be called upon to interpret the Delaware Business Trust Act, are among the nation's most highly respected and have particular expertise in corporate matters. Accordingly, there is a well-established body of precedent which may be relevant in deciding issues pertaining to a Delaware business trust, which is not the case in Massachusetts. . Governing Documents. Massachusetts and Delaware business trusts are governed by similar sets of documents, typically called declarations of trust and by-laws. These governing documents are generally similar, although the Declaration of Trust of Funds Trust (the Delaware business trust) generally is the clearer and more flexible document. For example, it provides that Funds Trust, or any series of Funds Trust, may be dissolved at any time by the Board of Funds Trust upon written notice to shareholders. In addition, Funds Trust's Declaration of Trust, as permitted by Delaware law, provides that shareholders of series of Funds Trust would be entitled to vote on mergers, acquisitions and consolidations involving such 5 series, only to the extent required by federal securities law. Thus, by operating under Funds Trust's Declaration of Trust, the Successor Funds will limit shareholder votes to those matters expressly required under the federal securities laws, and could save costs by not having to schedule special shareholder meetings and solicit shareholder proxies. Although shareholders of a Successor Fund of Funds Trust may no longer have certain voting rights, it is anticipated that the Successor Funds would benefit from a reduction in expenses associated with potential proxy solicitations on these matters. In general, the attributes of a share of beneficial interest in the case of a Massachusetts business trust are comparable to those of a share of beneficial interest of a Delaware business trust such as Funds Trust, i.e., shares are entitled to one vote per share held and fractional votes for fractional shares held. . Shareholder Liability. Under Massachusetts law, shareholders may, in certain circumstances, be held personally liable for the debts and obligations of a Massachusetts business trust. In contrast, under Delaware law, shareholders of a Delaware business trust like Funds Trust are not personally liable for the debts and obligations of such trust. Comparison of Investment Policies and Restrictions The Successor Funds also will have a more streamlined set of fundamental investment policies than the Funds. Some of the Funds' current fundamental investment policies may limit their portfolio management team(s) from investing in a security or engaging in investment techniques even though consistent with a Fund's investment objective and believed to be a good investment. One reason for the Reorganization is to remove these restrictions that unnecessarily hamper the portfolio management team's investment discretion. Some of these restrictions were originally put in place by the Funds as a result of the directives of various state securities commissions. Changes to federal securities laws have superseded these directives and are, accordingly, no longer necessary. In addition, as discussed above, the Funds currently have fundamental investment policies that prohibit them from participating in interfund lending arrangements. The Successor Funds, however, have fundamental investment policies that will permit them to take part in these arrangements. Another reason for the Reorganization is management's desire to have uniform investment policies for all funds in the Nations Funds Family. Uniform policies should lead to efficiencies in administering the Funds' activities, including ensuring compliance with law and internal procedures. The Funds and Successor Funds have identical non-fundamental investment policies. For a detailed comparison of the fundamental investment policies of the Funds and the Successor Funds, see Appendix B to this Proxy Statement. Comparison of Advisory and Other Service Arrangements and Fees The Funds and the Successor Funds have the same service providers and the same fee arrangements. Immediately after the Reorganization, these service providers are expected to continue to serve the Successor Funds in the capacities indicated below and the fee arrangements with them will remain unchanged. 6
Service Providers for the Funds and the Successor Funds - ----------------------------- Investment Adviser........... BA Advisors Investment Sub-Adviser....... BACAP (for Intermediate Bond Master Portfolio); INVESCO, Putnam and Marsico Capital (for International Equity Master Portfolio); and Brandes (for International Value Master Portfolio); Distributor.................. Stephens Inc. Co-Administrator............. BA Advisors Co-Administrator............. Stephens Inc. Sub-Administrator............ The Bank of New York Custodian.................... The Bank of New York Transfer Agent............... PFPC Inc. Sub-Transfer Agent........... Bank of America (for Primary A shares only) Independent Accountants...... PricewaterhouseCoopers LLP
BA Advisors and the Successor Funds are seeking an exemptive order from the SEC that would permit BA Advisors to engage a different or additional sub-adviser for a Successor Fund, to continue the engagement of a sub-adviser who has experienced a change in its ownership or corporate structure or under an agreement that has materially changed, with the approval of the Board of Funds Trust, but without submitting the sub-advisory change to a vote of the Successor Fund's shareholders, under certain circumstances. If this exemptive order is granted and the Reorganization is approved, BA Advisors or the Successor Funds will inform shareholders of any such sub-advisory change, which may include: (i) engaging new or additional sub-advisers, (ii) terminating or replacing one or more sub-advisers, or (iii) materially amending an existing sub-advisory agreement. Unless and until this exemptive order is granted and the proposed Reorganization is approved, consistent with applicable law, the Funds and Successor Funds will continue to submit any sub-advisory change to shareholders for approval. In addition to approving the Reorganization, Intermediate Bond Fund, International Equity Fund and International Value Fund are also being asked to specifically approve, on behalf of their corresponding Master Portfolios, a proposal relating to the Order. Information relating to this proposal is discussed below under "Authorization for the Funds' Adviser, BA Advisors, to Hire and Replace Investment Sub-Advisers or to Modify Investment Sub-Advisory Agreements Without Shareholder Approval." Comparison of Fees and Expenses The Reorganization will not result in any change to the total operating expense ratios (before or after waivers and/or expense reimbursements) of the various classes. Comparison of Purchase, Redemption, Distribution and Exchange Policies and Other Shareholder Transactions and Services After the Reorganization, Fund shareholders will hold shares of the same class of the Successor Fund that they held in each Fund. For example, a Fund shareholder who owns Investor A shares will, immediately after the Reorganization, hold Investor A shares in the corresponding Successor Fund. Accordingly, all of the purchase, redemption, distribution and exchange policies as well as other shareholder transactions and services applicable to a shareholder's share class will remain unaffected and unchanged by the Reorganization. No sales charges or sales loads will be imposed in connection with the exchange of shares in the Reorganization. Material Federal Income Tax Consequences As noted, the exchange of shares in the Reorganization is expected to be tax free under federal income tax law. 7 The following discussion summarizes the material federal income tax consequences of the Reorganization that are applicable to Fund shareholders. It is based on the Code, applicable Treasury Regulations, judicial authority, and administrative rulings and practice, all as of the date of this Proxy Statement and all of which are subject to change, including changes with retroactive effect. The discussion below does not address any state, local or foreign tax consequences of the Reorganization. A Fund shareholder's tax treatment may vary depending upon his or her particular situation. A Fund shareholder also may be subject to special rules not discussed below if they are a certain kind of shareholder, including: an insurance company; a tax-exempt organization; a financial institution or broker-dealer; a person who is neither a citizen nor a resident of the United States or is an entity that is not organized under the laws of the United States or political subdivision thereof; a holder of Fund shares as part of a hedge, straddle or conversion transaction; or a person that does not hold Fund shares as a capital asset at the time of the Reorganization. Neither Reserves nor Funds Trust has requested or will request an advance ruling from the Internal Revenue Service as to the federal income tax consequences of the Reorganization or any related transaction. The Internal Revenue Service may adopt positions contrary to that discussed below and such positions could be sustained. A Fund shareholder is urged to consult with his or her own tax advisors and financial planners as to the particular tax consequences of the Reorganization to the Fund shareholder, including the applicability and effect of any state, local or foreign laws, and the effect of possible changes in applicable tax laws. The Reorganization, with respect to each Fund and its corresponding Successor Fund, is intended to qualify as a "reorganization" for federal income tax purposes. In this regard, the obligation of the Funds and the Successor Funds to consummate the Reorganization is conditioned upon the receipt by Reserves and Funds Trust of an opinion of Morrison & Foerster LLP reasonably acceptable to Reserves and Funds Trust substantially to the effect that the Reorganization, with respect to each Fund and its corresponding Successor Fund, will be treated for federal income tax purposes as a tax-free reorganization under Section 368(a) of the Code and, in such connection, that the Fund and its corresponding Successor Fund will each be a party to a reorganization within the meaning of Section 368(b) of the Code. Provided that the Reorganization so qualifies, the opinion will state that: . Neither the Funds, the Successor Funds nor their respective shareholders will recognize any gain or loss pursuant to the Reorganization. . A Fund shareholder's aggregate tax basis for the Successor Fund shares received pursuant to the Reorganization will equal such shareholder's aggregate tax basis in Fund shares held immediately before the Reorganization. . A Fund shareholder's holding period for the Successor Fund shares received pursuant to the Reorganization will include the period during which the Fund shares are held. The tax opinion of Morrison & Foerster LLP described above will be based upon facts, representations and assumptions to be set forth or referred to in the opinion and the continued accuracy and completeness of representations made by Reserves, on behalf of the Funds, and Funds Trust, on behalf of the Successor Funds, which if incorrect in any material respect would jeopardize the conclusions reached by Morrison & Foerster LLP in the opinion. In addition, in the event that Reserves and/or Funds Trust are unable to obtain the tax opinion, they are permitted under the Reorganization Agreement to waive the receipt of such tax opinion as a condition to their obligation to consummate the Reorganization. Regardless of whether the acquisition of the assets and liabilities of each Fund by the corresponding Successor Fund qualifies as a tax-free reorganization as described above, the sale of securities by the Fund prior to the Reorganization, whether in the ordinary course of business or in anticipation of the Reorganization, could result in a taxable distribution to Fund shareholders. 8 Since its formation, each Fund and Successor Fund believes it has qualified as a separate "regulated investment company" under the Code. Accordingly, each Fund and Successor Fund believes it has been, and expects to continue to be, relieved of federal income tax liability on its taxable income distributions to its shareholders. AUTHORIZATION FOR THE FUNDS' ADVISER, BA ADVISORS, TO HIRE AND REPLACE INVESTMENT SUB-ADVISERS OR TO MODIFY INVESTMENT SUB- ADVISORY AGREEMENTS WITHOUT SHAREHOLDER APPROVAL (For all Fund Shareholders) Overview With respect to each Fund, management is proposing that shareholders authorize BA Advisors to enter into new or amended investment sub-advisory agreements with a sub-adviser(s) with respect to each Fund without obtaining shareholder approval of such investment sub-advisory agreements, and to permit such sub-adviser(s) to manage the assets of each Fund pursuant to such agreements. If shareholders approve the proposal, BA Advisors would be able to take these actions only to the extent permitted by any exemption or exemptions granted by the SEC or by any applicable SEC rule. Many mutual fund complexes have obtained similar exemptive relief. As discussed in the note to shareholders on page 2, High Yield Bond Fund, Intermediate Bond Fund, International Equity Fund and International Value Fund are feeder funds that invest all of their net investable assets in corresponding Master Portfolios. Investment advisory and sub-advisory services for the Funds are provided at the Master Portfolio level. Accordingly, certain Funds are being asked to approve this proposal with respect to their Master Portfolio. Intermediate Bond Fund, International Equity Fund and International Value Fund are being asked to approve this proposal on behalf of their Master Portfolio only; High Yield Bond Fund is being asked to approve this proposal on behalf of its Fund and Master Portfolio; and Kansas Municipal Income Fund and MidCap Index Fund are being asked to approve this proposal on behalf of their Fund only. This proposal is being submitted to the shareholders of each Fund for approval as required by the terms of an exemptive order requested by the Nations Funds Family and BA Advisors from the SEC and will not become effective with respect to a Fund or Master Portfolio unless and until this proposal has been approved by the shareholders of that Fund or Master Portfolio and the Order is received from the SEC. The 1940 Act generally provides that an investment adviser or sub-adviser to a mutual fund may act as such only pursuant to a written agreement which has been approved by a vote of a majority of the outstanding voting securities of the fund as well as by a vote of a majority of the trustees of the fund who are not parties to such agreement or interested persons of any party to such agreement. Pursuant to the Order, BA Advisors will be permitted, with the approval of the respective Board, to hire new sub-advisers, terminate sub-advisers, and modify investment sub-advisory agreements with sub-advisers, including if there is an "assignment," as defined in the 1940 Act, or other event causing termination of the existing investment sub-advisory agreement, without the prior approval of Fund shareholders under certain conditions. By eliminating shareholder approval in these matters, BA Advisors will have greater flexibility in overseeing sub-advisers, and Nations Funds and its shareholders would be spared the time and expense of holding shareholder meetings and soliciting and submitting proxies. The Order is expected to be subject to several conditions, including the following: 1. Nations Funds will disclose in the prospectuses for the Funds the existence, substance and effect of the Order. In addition, each Fund will hold itself out to the public as employing the management structure described in the Order. The prospectuses for the Funds will prominently disclose that BA Advisors has the ultimate responsibility (subject to oversight by the Boards) to oversee the sub-advisers and recommend their hiring, termination and replacement. 9 2. Within 90 days of the hiring of any new or additional sub-adviser that is either unaffiliated with or wholly-owned by BA Advisors, shareholders will be furnished all relevant information about such new sub-advisers that would be included in a proxy statement, except as modified by the Order. Each Fund will meet this condition by providing shareholders with an information statement which meets the applicable requirements of Regulation 14C, Schedule 14C, and Item 22 of Schedule 14A under the 1934 Act except, if applicable, as modified by the Order, within 90 days of the hiring of any new or additional wholly-owned or unaffiliated sub-advisers. 3. Neither Nations Funds nor BA Advisors will enter into an investment sub-advisory agreement for a Fund with any sub-adviser that is an "affiliated person," as defined by Section 2(a)(3) of the 1940 Act, without such agreement, including the compensation to be paid thereunder, being approved by the shareholders of the applicable Fund as and to the extent required by Section 15(a) of the 1940 Act, and the applicable rules thereunder, as interpreted or qualified by any no-action position or interpretation taken by the SEC staff. 4. Before a Fund may rely on the Order, its ability to operate in the manner described in the exemptive application will be approved by a majority of each Fund's outstanding voting securities, as defined in the 1940 Act, unless the substance and effect of the requested relief has been disclosed in its initial prospectus. In accordance with condition 4, shareholder approval of this proposed new arrangement is being sought. Even if Fund shareholders approve this proposal, any new sub-adviser engaged or terminated or any change in an investment sub-advisory agreement will still require approval by the respective Board. In order to approve a new sub-adviser, the Board will analyze the factors it deems relevant, including the nature, quality and scope of services provided by the sub-adviser to investment companies comparable to the Fund. The Board also will review the ability of the sub-adviser to provide its services to the Fund, as well as its personnel, operations, financial condition or any other factor which would affect the sub-adviser with respect to compliance and regulatory matters. In addition, the Board will consider other factors deemed relevant to the sub-adviser's performance as an investment adviser. Nations Funds believes that this review provides adequate shareholder protection in the selection of sub-advisers. Finally, shareholder approval would still be required to amend the investment advisory agreement with BA Advisors with respect to each Fund (including any amendment to raise the advisory fee rate payable under such agreement) or to enter into a new investment advisory agreement with BA Advisors or any other adviser. Reasons for the Proposal Reserves and Funds Trust are requesting shareholder approval of this proposal for several reasons. The investment advisory agreement with BA Advisors on behalf of each Fund permits each Fund to utilize an adviser/sub-adviser management structure whereby BA Advisors, acting as each Fund's investment adviser, delegates day-to-day portfolio management responsibilities to one or more sub-advisers. All Funds currently utilize this structure. Under this structure, the Fund's sub-adviser(s) acts in a capacity similar to a manager of a mutual fund who is employed by the mutual fund's investment adviser and who manages the portfolio under the oversight and supervision of the investment adviser. If BA Advisors were to change a sub-adviser for a Fund or retain an additional sub-adviser for a Fund, BA Advisors would continue in its role as investment adviser and would continue to exercise oversight and supervision of the Fund's investment affairs (subject to Board oversight) as conducted by the new sub-adviser. Management of Reserves and Funds Trust believes that these situations are analogous to a situation where an investment adviser of a mutual fund replaces an individual who manages the fund's investment portfolio with a different individual, which does not require shareholder approval under the 1940 Act. In addition, the shareholder approval requirement under the 1940 Act may cause each Fund's shareholders to incur unnecessary expenses, such as the expenses involved in holding, and soliciting proxies for, a shareholder meeting, and could hinder the prompt implementation of sub-advisory changes that are in the best interest of the shareholders, such as prompt engagement or replacement of a sub-adviser if circumstances so warrant. Without 10 the ability to promptly retain a new sub-adviser and/or replace an existing sub-adviser, or to reapprove existing investment sub-advisory agreements, as the case may be, investors' expectations may be frustrated. For instance, a Fund and its shareholders could be disadvantaged under the following circumstances: (i) where BA Advisors determines to terminate a Fund's sub-adviser due to unsatisfactory performance or another appropriate reason; (ii) where BA Advisors wishes to retain an additional sub-adviser for a Fund that does not, at present, utilize a multi-sub-adviser structure; (iii) where a Fund's sub-adviser resigns, ceases operations or is otherwise incapable of providing portfolio management services on behalf of the Fund; or (iv) where there has been an assignment of an investment sub-advisory agreement with a current sub-adviser (for instance, due to a change in control of the sub-adviser) or some other event causing the termination of the investment sub-advisory agreement. In many cases, these events are beyond the control of Reserves, Funds Trust, BA Advisors and the applicable Fund. In such circumstances, BA Advisors may deem it in the best interests of the Fund to retain a new sub-adviser or to reinstate a terminated investment sub-advisory agreement with a current sub-adviser promptly. For these reasons, management and the Boards believe that approval of the proposal would benefit shareholders. Board Consideration At in-person meetings held on October 10, 2001, the Boards considered, among other matters, that the proposal would be beneficial to the Funds by reducing or eliminating the costs of shareholder meetings and the possible negative impact caused by a delay in replacing or hiring a new sub-adviser, or reapproving existing investment sub-advisory arrangements. They also considered that the Funds would forego any benefits associated with shareholder scrutiny of proposed investment sub-advisory agreements. To this end, the Boards considered that, even in the absence of shareholder scrutiny and approval, any proposal to add or replace a sub-adviser, or to materially amend an investment sub-advisory agreement with an existing sub-adviser, would receive careful review. First, BA Advisors would assess each Fund's needs and, if it believed that the Fund would benefit from a different sub-adviser, BA Advisors would review available investment managers and make a recommendation with respect to a proposed sub-adviser. Second, any recommendation made by BA Advisors would have to be approved by a majority of the Board of Trustees, including a majority of such Board's non-interested Trustees. Finally, in the absence of shareholder approval, any retention of a new or replacement sub-adviser or any amendment of an existing investment sub-advisory agreement would have to comply with all conditions contained in the Order. THE BOARDS OF RESERVES AND FUNDS TRUST UNANIMOUSLY RECOMMEND THAT YOU VOTE TO APPROVE THE PROPOSED AUTHORITY TO PERMIT BA ADVISORS TO ENTER INTO NEW OR AMENDED INVESTMENT SUB-ADVISORY AGREEMENTS WITH SUB-ADVISERS WITH RESPECT TO YOUR FUND WITHOUT OBTAINING SHAREHOLDER APPROVAL OF SUCH AGREEMENTS. 11 APPROVAL OF A NEW INVESTMENT SUB-ADVISORY AGREEMENT (For International Equity Fund Shareholders Only) Overview Reserves and BA Advisors engage three co-investment sub-advisers to make the day-to-day investment decisions for the Master Portfolio. BA Advisors retains ultimate responsibility (subject to Board oversight) for overseeing the sub-advisers and evaluates the Master Portfolio's needs and available sub-advisers' skills and abilities on an ongoing basis. Currently, BA Advisors and the Master Portfolio have engaged three different co-investment sub-advisers--INVESCO, Putnam and Marsico Capital--each of whom is responsible for managing approximately one-third of the Master Portfolio's assets. Prior to January 15, 2002, Gartmore served as co-investment sub-adviser to that portion of the Master Portfolio's assets currently sub-advised by Marsico Capital pursuant to a previous investment sub-advisory agreement. The Previous Agreement, in accordance with the provisions the 1940 Act, was terminable at any time, without payment of penalty, by the Board or by a majority of the shareholders, upon 60 days' written notice. Effective January 15, 2002, the Board approved the termination of the Previous Agreement and replaced Gartmore with Marsico Capital. In a situation such as this, where a change in sub-adviser has occurred before shareholders have had the opportunity to approve a new investment sub-advisory agreement, Rule 15a-4 under the 1940 Act allows a mutual fund's board of trustees to approve and put into place an interim investment sub-advisory agreement, subject to certain conditions. Shareholders must then approve the new agreement within a specified period of time in order for the fund to continue to receive contractual sub-advisory services from that investment sub-adviser. In connection with the termination of the Previous Agreement and to ensure continuity of sub-advisory services to the Master Portfolio, the Board approved both an interim investment sub-advisory agreement and a new investment sub-advisory agreement with Marsico Capital. Marsico Capital currently serves as co-investment sub-adviser under the Interim Agreement. Rule 15a-4 under the 1940 Act permits Marsico Capital to continue to so serve until June 14, 2002 (which is 150 days from January 15, 2002), by which time Fund shareholders will have to approve the New Agreement. Description of the Interim Agreement and the New Agreement The term of the Interim Agreement is from January 15, 2002 through the date that Fund shareholders approve the new investment sub-advisory agreement, but in no case longer than 150 days from January 15, 2002 --or June 14, 2002. Under the Interim Agreement, Marsico Capital is entitled to receive a sub-advisory fee at the annual rate of the percentage of the average daily net assets of the Master Portfolio under Marsico Capital's management as follows: 0.65% of the first $60,000,000 of average daily net assets; plus, 0.55% of the next $130,000,000 of average daily net assets; plus 0.45% of the next $200,000,000 of average daily net assets; plus 0.40% of average daily net assets in excess of $390,000,000. The New Agreement, on which shareholders are voting, is substantially identical to the Interim Agreement. It also is substantially similar to the Previous Agreement with Gartmore. There are, however, certain differences. For example, under the Previous Agreement, Gartmore agreed to indemnify the Master Portfolio, under certain circumstances, in the event that a party charges the Master Portfolio with liability. On the other hand, under the Interim Agreement and New Agreement, Marsico Capital has not agreed to indemnify the Master Portfolio under any circumstances. In this regard, the Interim Agreement and the New Agreement are different and could be viewed as being less favorable to shareholders than the Pervious Agreement. Under the New Agreement, Marsico Capital has agreed to perform the management services necessary for the investment operations of approximately one-third of the Master Portfolio's assets, including, determining 12 from time to time what securities and other investments will be purchased, retained or sold by the Master Portfolio, and will place the daily orders for the purchase or sale of securities. In addition, the New Agreement provides that Marsico Capital also will provide additional services related to the continuous investment program; provide certain recordkeeping services; comply with all applicable rules and regulations of the SEC; use the same skill and care in providing such services as it uses in providing services to fiduciary accounts for which it has investment responsibilities; use its best efforts to seek on behalf of the Master Portfolio the best overall terms available when executing portfolio transactions, and in evaluating the best overall terms available, may consider the brokerage and research services provided to the Master Portfolio and/or other accounts over which Marsico Capital exercises investment discretion. Under New Agreement, BA Advisors, the investment adviser to the Master Portfolio, retains authority over the management of the Master Portfolio and the investment and disposition of the Master Portfolio's assets. If approved by shareholders at the Meeting, the New Agreement will remain in effect for a two-year period following the date of such approval. Thereafter, the New Agreement will continue in effect for successive periods not to exceed one year, provided that such continuance is specifically approved at least annually by the Board, or by a vote of a majority of the outstanding shares of the Fund, and in either case by a majority of the Trustees who are not "interested persons" of the Fund, BA Advisors or Marsico Capital, as that term is defined in the 1940 Act. The investment sub-advisory fee rates payable to Marsico Capital under the New Agreement are the same as those shown above for the Interim Agreement. Copies of the New Agreement are available upon request by writing or calling Nations Funds at (800) 653-9427. Comparison of Management Style The approval of the Interim Agreement and New Agreement involves a change in the way that this portion of the Master Portfolio is managed, including a change in the investment sub-adviser that manages such portion of the Master Portfolio. As described in a supplement to the Fund's prospectus dated December 11, 2001, effective January 15, 2002, Marsico Capital's James G. Gendelman began managing approximately one-third of the average daily net assets of the Master Portfolio. INVESCO and Putnam each continue to manage approximately one-third of the Master Portfolio's assets. In managing its portion of the Master Portfolio, Gartmore combined "top-down" allocation among regions around the world with a stock selection process that focused on investing in securities when growth was likely to be higher, or sustained longer, than other investors expected. By comparison, Marsico Capital combines "top-down" analysis among sectors and regions around the world with a "bottom-up" analysis that focuses on investing in securities with earnings growth potential that may not be realized by other investors. Mr. Gendelman is the portfolio manager of Nations Marsico International Opportunities Master Portfolio and Marsico Capital's portion of Nations International Equity Master Portfolio. Prior to joining Marsico Capital in May 2000, Mr. Gendelman spent thirteen years as a Vice President of International Sales for Goldman, Sachs & Co. He holds a Bachelor's degree in Accounting from Michigan State University and an MBA in Finance from the University of Chicago. Mr. Gendelman was an accountant for Ernst & Young from 1983 to 1985. If the New Agreement is not approved by shareholders of the Fund, approximately two-thirds of the average daily net assets of the Master Portfolio will continue to be managed by INVESCO and Putnam, and the Board will consider what further action is appropriate with respect to the remaining portion of the Master Portfolio's assets. 13 Board Consideration At a November 28-29, 2001 in-person meeting, the Board of Nations Master Investment Trust approved the termination of Gartmore and the Previous Agreement. The Board was provided with information concerning the Interim Agreement and New Agreement and was informed of the standards that the Board should apply in determining whether to approve the Interim Agreement and New Agreement. The information provided by BA Advisors to the Board included the rationale for terminating Gartmore, investment sub-advisory comparative fee information and a discussion of how the change in sub-adviser from Gartmore to Marsico Capital would affect the Master Portfolio. At the November 28-29 meeting, the Board, including the non-interested Trustees, unanimously approved the Interim Agreement and New Agreement. Specifically, the Board determined that the compensation payable under the Interim Agreement and New Agreement was fair and reasonable and did not reflect an increase in compensation from the Previous Agreement. The Board also determined that the scope and quality of services to be provided to the Master Portfolio under the Interim Agreement and New Agreement would be at least equivalent, and in some respects superior to, the scope and quality of services provided under the Previous Agreement. The Board based their decision to recommend the approval of the Interim Agreement and New Agreement on the following material factors: (1) the anticipated level and type of services to be provided under the Interim Agreement and New Agreement; (2) that the sub-advisory fees under the Interim and New Agreement will be no higher than under the Previous Agreement, and, in any event, would not impact the total investment advisory fees paid by the Master Portfolio; (3) the depth of management experience of Marsico Capital, including those persons who would be involved in the daily management of the Master Portfolio; (4) the investment record of Marsico Capital in managing other mutual funds; (5) the reasons that a three sub-adviser structure is more desirable than a two sub-adviser structure and specifically the potential for greater diversification and higher risk adjusted returns; (6) that there is little overlap between the Marsico Capital-managed portion of the Master Portfolio's assets and the INVESCO and Putnam-managed portions of the Master Portfolio's assets; (7) that the Master Portfolio and its shareholders will bear the expenses of the proxy solicitation. In this regard, the Board considered that such expenses were justified by the potential benefits of the new sub-advisory arrangements; (8) potential benefits of the new arrangements, if any, to other persons, including BA Advisors and its affiliates (e.g., the benefit of consolidating resources within BA Advisors and its affiliates, and the additional sub-advisory fees that Marsico Capital would receive). In this regard, the Board also considered that Marsico Capital is a wholly-owned subsidiary of Bank of America. The Board based its determinations on discussions with representatives of Bank of America, BA Advisors and Marsico Capital at the meeting and a review of materials presented by BA Advisors and Marsico Capital. These materials included a form of the Interim Agreement and New Agreement. Information Regarding Marsico Capital Marsico Capital is a full service investment advisory firm founded by Thomas F. Marsico in September 1997. Marsico Capital is a Delaware limited liability company. The principal source of Marsico Capital's income is professional fees received from providing continuing investment advice. Marsico Capital provides investment advice to registered mutual funds that are distributed to retail investors as well as to mutual funds that serve as funding vehicles for variable life insurance policies and variable annuity contracts. Marsico Capital also provides investment advice to institutions, individuals and to private funds. Prior to forming Marsico Capital, Mr. Marsico served as the portfolio manager of the Janus Twenty Fund from January 31, 1988 through August 11, 1997, and served in the same capacity for the Janus Growth and Income Fund from May 31, 1991 though August 11, 1997. Marsico Capital serves as the investment sub-adviser to certain other funds of Nations Separate Account Trust and Nations Master Investment Trust, each a registered investment company that is part of the Nations Funds Family. In addition, Marsico Capital also provides investment advisory services to funds which are not part of the Nations Funds Family. Appendix C sets forth the fees and other information regarding certain other investment companies advised by Marsico Capital. 14 Marsico Capital is a registered investment adviser and a wholly-owned subsidiary of Bank of America, which in turn is a wholly owned banking subsidiary of Bank of America Corporation, a bank holding company organized as a Delaware corporation. The principal office of Marsico Capital is located at 1200 17th Street, Suite 1300, Denver, Colorado 80202. The address of Bank of America is 101 South Tryon Street, Charlotte, North Carolina 28255. The directors and principal executive officers of Marsico Capital are listed in the following table. The address for each is: c/o of Marsico Capital Management, LLC, 1200 17th Street, Suite 1300, Denver, Colorado 80202.
Name Position at Marsico Capital Principal Occupation(s) - ---- --------------------------- ----------------------- Thomas F. Marsico............ Chairman and Chief Executive same Officer Barbara M. Japha............. President and General Counsel same Christopher J. Marsico....... Vice-President and Chief same Operating Officer Christie L. Austin........... Vice President and Chief same Financial Officer Robert H. Gordon............. Director Chief Marketing Officer; Co- Chairman; Manager, BACAP; President and Manager, BA Advisors; Senior Vice President, Bank of America
Marsico Capital (or its predecessor) was not entitled to receive any fees with respect to the Master Portfolio for the period April 1, 2000 through March 31, 2001. The aggregate amount paid to Marsico Capital (or its predecessor) for all of the mutual funds in the Nations Funds Family (or their predecessors) for the period April 1, 2000 through March 31, 2001 was $14,611,259. The aggregate amount paid to BA Advisors (or its predecessor) for the Master Portfolio (or its predecessor) for the period April 1, 2000 through March 31, 2001 was $2,681,992. Had BA Advisors not waived advisory fees and/or reimbursed expenses, the aggregate amount that would have been paid to BA Advisors for the Master Portfolio for this same period would have been $2,684,141. James B. Sommers, a Trustee of Reserves, owns shares of Bank of America Corporation. No other officer or Trustee of Reserves is an officer, employee, director, general partner or shareholder of BA Advisors, Marsico Capital or any of their affiliates. Other Information BA Advisors also serves as the Fund's co-administrator. Its address is 101 South Tryon Street, Charlotte, North Carolina 28255. Stephens Inc. serves as the Funds' distributor and co-administrator. Its address is 111 Center Street, Little Rock, Arkansas 72201. The Master Portfolio paid $1,041,916 in co-administration fees to BA Advisors for the fiscal year ended March 31, 2001. 15 VOTING MATTERS General Information This Proxy Statement is being furnished in connection with the solicitation of proxies for the Meetings by the Boards. It is expected that the solicitation of proxies will be primarily by mail. Officers and service contractors of Reserves and Funds Trust also may solicit proxies by telephone or otherwise. Shareholders may submit their proxy: (1) by mail, by marking, signing, dating and returning the enclosed proxy ballot(s) in the enclosed postage-paid envelope; (2) by phone at the toll-free number on the proxy ballot(s); or (3) by on-line voting at www.proxyvote.com. Any shareholder submitting a proxy may revoke it at any time before it is exercised at the Meetings by submitting a written notice of revocation addressed to Nations Funds at the address shown on the cover page of this Proxy Statement, or a subsequently executed proxy or by attending the Meetings and voting in person. Only shareholders of record at the close of business on December 27, 2001 will be entitled to vote at the Meetings. On that date the following were the number shares outstanding and entitled to vote for each Fund. Each whole and fractional share of a Fund is entitled to a whole or fractional vote. High Yield Bond Fund.............. 24,389,299.550 shares Intermediate Bond Fund............ 15,804,816.790 shares International Equity Fund......... 53,239,730.441 shares International Value Fund.......... 155,963,412.941 shares Kansas Municipal Income Fund...... 10,212,768.135 shares MidCap Index Fund................. 65,087,263.050 shares
If the accompanying proxy ballot(s) is executed and returned in time for the Meetings, the shares covered thereby will be voted in accordance with the proxy on all matters that may properly come before the Meetings. Quorum A quorum is constituted with respect to Intermediate Bond Fund, International Equity Fund and International Value Fund by the presence in person or by proxy of the holders of more than one-half of the outstanding shares of the Fund entitled to vote at the Meetings. A quorum is constituted with respect to High Yield Bond Fund, Kansas Municipal Index Fund and MidCap Index Fund by the presence in person or by proxy of the holders of one-third of the outstanding shares of the Fund entitled to vote at the Meetings. For purposes of determining the presence of a quorum for transacting business at the Meetings, abstentions will be treated as shares that are present at the Meetings but which have not been voted. Accordingly, abstentions will have the effect of a "no" vote for purposes of obtaining the requisite approvals of a proposal. Broker "non-votes" (that is, proxies from brokers or nominees indicating that such persons have not received instructions from the beneficial owners or other persons entitled to vote shares on a particular matter with respect to which the brokers or nominees do not have discretionary power) will be treated the same as abstentions. In certain circumstances, brokers or nominees that are members of the New York Stock Exchange may vote the shares of beneficial owners who do not otherwise submit voting instructions to their broker or nominee. In the event that a quorum is not present at the Meetings, or in the event that a quorum is present at the Meetings but sufficient votes to approve any proposed item are not received by a Fund, one or more adjournment(s) may be proposed to permit further solicitation of proxies for a reasonable period in order to obtain a requisite vote. Any such adjournment(s) will require the affirmative vote of a majority of those shares affected by the adjournment(s) that are represented at the Meetings in person or by proxy. If a quorum is present, the persons named as proxies will vote those proxies which they are entitled to vote FOR the particular proposal for which a quorum exists in favor of such adjournment(s), and will vote those proxies required to be voted AGAINST such proposal against any adjournment(s). 16 Shareholder Approval The Reorganization Agreement must be approved by the affirmative vote of at least a majority of the shares of a Fund present in person or by proxy. The Reorganization of any Fund is not conditioned upon the Reorganization of any other Fund. Accordingly, it is possible that one or more Fund(s)' shareholders will not approve the Reorganization and such Fund(s) will not be reorganized. In this event, the Board(s) will consider what further action is appropriate. A vote of the shareholders of the Successor Funds is not being solicited, since their approval or consent is not necessary for the Reorganization. The authorization for BA Advisors to hire and replace investment sub-advisers or to modify investment sub-advisory agreements without shareholder approval must be approved by a "majority of the outstanding shares" of a Fund. The 1940 Act defines the term "majority of the outstanding shares" to mean the lesser of: (i) 67% or more of the shares of the Fund present at the Meeting if the holders of more than 50% of the outstanding shares of the Fund are present; or (ii) more than 50% of the outstanding shares of the Fund. The New Agreement for Marsico Capital must be approved by a "majority of the outstanding shares" of a Fund as described above. Principal Shareholders The table below shows the name, address and share ownership of each person known to Reserves and Funds Trust to have ownership with respect to 5% or more of a class of a Fund as of December 4, 2001. Each shareholder is known to own as of record the shares indicated below. Any shareholder known to Reserves or Funds Trust to own such shares beneficially is designated by an asterisk.
Percentage of Percentage of Total Shares/ Percentage of Fund (All Fund Post Fund Name and Address Class Class Classes) Closing High Yield Bond Fund MERRILL LYNCH, PIERCE, FENNER 135,567.20 6.08% 1.17% 1.17% & SMITH INC FOR THE SOLE BENEFIT Investor A OF ITS CUSTOMERS ATTENTION SERVICE TEAM 4800 DEER LAKE DRIVE EAST 3RD FLOOR JACKSONVILLE FL 32246 NFSC FEBO # W76-007692 605,547 27.18% 2.69% 2.69% LARRY A SHEHADEY Investor A 1451 W ROBINWOOD LANE FRESNO CA 93711 NFSC FEBO # W74-755850 293,373.20 13.17% 1.31% 1.31% ROLF F ILLSLEY TTEE Investor A OF THE ROLF F ILLSLEY 1995 REV TR, U/A 11/16/95 P O BOX 2804 SANTA ROSA CA 95405 NFSC FEBO # W74-112690 130,384 5.85% 0.58% 0.58% ROLF F ILLSLEY Investor A HELEN BAMBER ILLSLEY 1814 HAPPY VALLEY RD SANTA ROSA CA 95409 NFSC FEBO # W76-055786 115,074.80 5.16% 0.51% 0.51% CE NEV LLC Investor A PO BOX 523 GLENBROOK NV 89413
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Percentage of Percentage of Total Shares/ Percentage of Fund (All Fund Post Fund Name and Address Class Class Classes) Closing MERRILL LYNCH, PIERCE, FENNER 127,300.60 15.21% 1.17% 1.17% & SMITH INC FOR THE SOLE BENEFIT Investor C OF ITS CUSTOMERS ATTENTION SERVICE TEAM 4800 DEER LAKE DRIVE EAST 3RD FLOOR JACKSONVILLE FL 32246 NFSC FEBO # W79-156469 59,729.98 7.13% 0.27% 0.27% STEPHEN LEHMAN Investor C SUZIE LEHMAN 25742 SIMPSON PL CALABASAS CA 91302 BANK OF AMERICA NA 12,830,211.53 89.76% 57.10% 57.10% ATTN TONY FARRER Primary A TX1-945-08-18 411 NORTH AKARD ST DALLAS TX 75201-3307 NATIONS FUNDS TRUST 1,240,107.20 8.67% 5.52% 5.52% FOR NATIONS LIFEGOAL BALANCED Primary A GROWTH PORTFOLIO ATTN BRIAN SMITH NC1-002-33-31 101 SOUTH TRYON ST CHARLOTTE NC 28255 Intermediate Bond UNION BANK TRUST NOMINEE 327,551.27 5.19% 2.11% 2.11% Fund FBO ANGELUS SANITARY Investor A CAN MACHINE CO EMP WELFARE BP 610001305-00 PO BOX 85484 SAN DIEGO CA 92186-5484 BANK OF AMERICA, NA (FORMERLY 2,754,024.17 43.69% 17.75% 17.75% SEAFIRST BANK) Investor A FBO RETIREMENT SVCS PO BOX 84248 SEATTLE WA 98124-5548 BANK OF AMERICA NA 2,256,208.84 35.79% 69.05% 69.05% ATTN TONY FARRER Investor A TX1-945-08-18 411 NORTH AKARD ST DALLAS TX 75201-3307 MERRILL LYNCH, PIERCE, FENNER 30,313.40 6.37% 0.63% 0.63% & SMITH INC FOR THE SOLE BENEFIT Investor B OF ITS CUSTOMERS ATTENTION SERVICE TEAM 4800 DEER LAKE DRIVE EAST 3RD FLOOR JACKSONVILLE FL 32246 NFSC FEBO # W14-103101 26,934.140 5.66% 0.17% 0.17% NFS/FMTC ROLLOVER IRA Investor B FBO JOHN E KRUEGER 621 EAST SHORE DR CANTON GA 30114 MERRILL LYNCH, PIERCE, FENNER 66,548.22 38.71% 0.63% 0.63% & SMITH INC FOR THE SOLE BENEFIT Investor C OF ITS CUSTOMERS ATTENTION SERVICE TEAM 4800 DEER LAKE DRIVE EAST 3RD FLOOR JACKSONVILLE FL 32246
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Percentage of Percentage of Total Shares/ Percentage of Fund Fund Post Fund Name and Address Class Class (All Classes) Closing NFSC FEBO # W25-059382 13,420.98 7.80% 0.09% 0.09% JOHN L MANNING III P/ADM Investor C ORGAIN READY MIX PFT SHRING PL 240 KRAFT ST CLARKSVILLE TN 37040 NFSC FEBO # W77-712183 15,441.14 8.98% 0.10% 0.10% DOROTHY I BROTHERSON Investor C ROBERT E BROTHERSON SR 613 S RACE RD COUPVILLE WA 98239 BANK OF AMERICA NA 8,456,814.72 99.91% 69.05% 69.05% ATTN TONY FARRER Primary A TX1-945-08-18 411 NORTH AKARD ST DALLAS TX 75201-3307 International Equity BANK OF AMERICA NA 289,626.94 7.67% 73.79% 73.79% Fund ATTN TONY FARRER Investor A TX1-945-08-18 411 NORTH AKARD ST DALLAS TX 75201-3307 TATSUSHI T KUBO, MAX W DAHLGREN, 6,958.62 5.41% 0.01% 0.01% & JOHN DAHLGREN TTEES FBO Investor C EPIC PRODUCTS INTERNATIONAL CORPORATION 401(K) PLAN PO BOX 5808 ARLINGTON TX 76005-5808 E LARRY FONTS TTEE FBO 7,030.15 5.47% 0.01% 0.01% CENTRAL DALLAS ASSOCIATION Investor C PROFIT SHARING PLAN 1201 ELM STREET SUITE 5310 DALLAS TX 75270 H GRAYSON MITCHELL JR AND 10,898.83 8.48% 0.02% 0.02% JOHN RAWLS TTEE FBO Investor C GRAYSON MITCHELL INC 401K PLAN P O BOX 128 EMPORIA VA 23847 JAMES HIGHTOWER ART HIGHTOWER 7,340.25 5.71% 0.01% 0.01% AND Investor C WILLIAM HIGHTOWER TTEES FBO HIGHTOWER CONSTRUCTION CO INC 401K PROFIT SHARING PLAN P O BOX 1369 GOOSE CREEK SC 29445 MERRILL LYNCH, PIERCE, FENNER 28,960.10 22.55% 0.05% 0.05% & SMITH INC FOR THE SOLE BENEFIT Investor C OF ITS CUSTOMERS ATTENTION SERVICE TEAM 4800 DEER LAKE DRIVE EAST 3RD FLOOR JACKSONVILLE FL 32246 PAINEWEBBER FOR THE BENEFIT OF 11,578.81 9.01% 0.02% 0.02% UBS PAINEWEBBER CDN FBO Investor C QUINTEN MELAND P.O. BOX 3321 WEEHAWKEN NJ 07087-8154
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Percentage of Percentage of Total Shares/ Percentage of Fund Fund Post Fund Name and Address Class Class (All Classes) Closing BANK OF AMERICA NA 38,930,273.17 77.83% 73.79% 73.79% ATTN TONY FARRER Primary A TX1-945-08-18 411 NORTH AKARD ST DALLAS TX 75201-3307 BANK OF AMERICA NA TTEE 8,691,231.95 17.37% 16.35% 16.35% NB 401K PLAN Primary A U/A DTD 01/01/1983 P O BOX 2518/TX4-213-06-14 HOUSTON TX 77252-2518 STEPHENS INC 1.74 55.44% 0.00% 0.00% NATIONS RESERVES Primary B 111 CENTER STREET LITTLE ROCK AR 72201 STEPHENS INC 1.39 44.55% 0.00% 0.00% ATTN: CINDY COLE Primary B 111 CENTER STREET LITTLE ROCK AR 72201 International Value CHARLES SCHWAB & CO INC 6,106,821.29 17.73% 11.40% 11.40% Fund SPECIAL CUSTODY ACCOUNT Investor A FOR BENEFIT OF CUSTOMERS ATTN MUTUAL FUNDS 101 MONTGOMERY STREET SAN FRANCISCO CA 94104 MERRILL LYNCH, PIERCE, FENNER 6,938,704.71 20.14% 6.55% 6.55% & SMITH INC FOR THE SOLE BENEFIT Investor A OF ITS CUSTOMERS ATTENTION SERVICE TEAM 4800 DEER LAKE DRIVE EAST 3RD FLOOR JACKSONVILLE FL 32246 MERRILL LYNCH, PIERCE, FENNER 867,584.71 13.99% 6.55% 6.55% & SMITH INC FOR THE SOLE BENEFIT Investor B OF ITS CUSTOMERS ATTENTION SERVICE TEAM 4800 DEER LAKE DRIVE EAST 3RD FLOOR JACKSONVILLE FL 32246 MERRILL LYNCH, PIERCE, FENNER 1,786,617.84 28.21% 6.55% 6.55% & SMITH INC FOR THE SOLE BENEFIT Investor C OF ITS CUSTOMERS ATTENTION SERVICE TEAM 4800 DEER LAKE DRIVE EAST 3RD FLOOR JACKSONVILLE FL 32246 BANK OF AMERICA NA 70,326,833.62 69.67% 48.06% 48.06% ATTN TONY FARRER Primary A TX1-945-08-18 411 NORTH AKARD ST DALLAS TX 75201-3307 CHARLES SCHWAB & CO INC 10,574,269.50 10.47% 11.40% 11.40% SPECIAL CUSTODY ACCOUNT Primary A FOR BENEFIT OF CUSTOMERS ATTN MUTUAL FUNDS 101 MONTGOMERY STREET SAN FRANCISCO CA 94104
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Percentage of Percentage of Total Shares/ Percentage of Fund Fund Post Fund Name and Address Class Class (All Classes) Closing STEPHENS INC 1.50 100.00% 0.00% 0.00% NATIONS RESERVES Primary B 111 CENTER STREET LITTLE ROCK AR 72201 Kansas Municipal GTRUST 15,425.36 5.21% 0.15% 0.15% Income Fund PO BOX 2127 Investor A TOPEKA KS 66601-2127 NFSC FEBO # W52-003573 24,799.02 8.39% 0.24% 0.24% V. KATHERYN COPELAND REVOCABLE T Investor A V KATHERYN COPELAND U/A 11/30/90 14431 SIEFKES CT WICHITA KS 67230 JARNAT 30,872.16 10.44% 0.30% 0.30% C/O FIRST NATIONAL BANK Investor A PO BOX 545 WINFIELD KS 67156 NFSC FEBO # W52-044652 161,358.19 54.60% 1.57% 1.57% DOUGLAS J TERNES Investor A 12011 HICKORY LN WICHITA KS 67235 NFSC FEBO # STL-741647 16,714.98 5.65% 0.16% 0.16% VIRGINIA FALCONE LANG TTEE Investor A VIRGINIA FALCONE LANG REV TRT 8813 W 142ND PLACE OVERLAND PARK KS 66221 NFSC FEBO # W52-007030 2,414.33 8.53% 0.02% 0.02% JOAN BERNS TTEE Investor B JOAN BERNS REVOCABLE TRUST U/A 9/23/96 412 N VINE PEABODY KS 66866 ARLENE E BEHRING TTEE 25,860.53 91.45% 0.25% 0.25% FBO ARLENE E BEHRING REV. TR Investor B U/A/D 07/09/91 11908 TIPPERARY STEPHENS INC 1.00 100.00% 0.00% 0.00% ATTN: CINDY COLE Investor C 111 CENTER STREET LITTLE ROCK AR 72201 BANK OF AMERICA NA 9,942,312.42 99.99% 96.85% 96.85% ATTN TONY FARRER Primary A TX1-945-08-18 411 NORTH AKARD ST DALLAS TX 75201-3307 MidCap Index LA ROBINSON & JOHN D ROBINSON 18,185.16 21.94% 0.03% 0.03% Fund TTEES Investor A MARY K ROBINSON TRUST U/A DTD 10/13/00 2301 ST CLAIR AVE BRENTWOOD MO 63144
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Percentage of Percentage of Total Shares/ Percentage of Fund Fund Post Fund Name and Address Class Class (All Classes) Closing PRUDENTIAL SECURITIES INC. FBO 5,199.77 6.27% 0.01% 0.01% MS ANNE-MARIE MONACO Investor A 22 BOULEVARD DES MOULINS MC 98000 MONACO NFSC FEBO # W65-138940 5,890.84 7.11% 0.01% 0.01% NFS/FMTC IRA Investor A FBO JOHNNIE C BREED 9766 GREEN ISLAND COVE WINDERMERE FL 34786 NFSC FEBO # W38-068063 13,233.33 15.97% 0.02% 0.02% ABBY ALT GODDARD TTEE Investor A ABBY LYNN ALT 1997 CRUT U/A 4/16/97 16000 GREENWOOD RD MONTE SERENO CA 95030 BANK OF AMERICA NA 32,278,000.74 55.25% 55.18% 55.18% ATTN TONY FARRER Primary A TX1-945-08-18 411 NORTH AKARD ST DALLAS TX 75201-3307 BANK OF AMERICA NA TTEE 25,922,892.32 44.37% 44.32% 44.32% NB 401K PLAN Primary A U/A DTD 01/01/1983 P O BOX 2518/TX4-213-06-14 HOUSTON TX 77252-2518
For purposes of the 1940 Act, any person who owns directly or through one or more controlled companies more than 25% of the voting securities of a company is presumed to "control" such company. Accordingly, to the extent that a shareholder identified in the foregoing table is identified as the beneficial holder of more than 25% of a class, or is identified as the holder of record of more than 25% of a class and has voting and/or investment power, it may be presumed to control such class. As of December 27, 2001, Bank of America had voting control of 55.71% of the outstanding shares of High Yield Bond Fund; 69.60% of the outstanding shares of Intermediate Bond Fund; 44.71% of the outstanding shares of International Equity Fund; 42.08% of the outstanding shares of International Value Fund; 95.15% of the outstanding shares of Kansas Municipal Income Fund; and 75.71% of the outstanding shares of MidCap Index Fund. Accordingly, Bank of America may be considered to "control" such Funds. The address of Bank of America is: 411 N. Akard Street, TX1-945-0818, Dallas, TX 75201. Bank of America's control is likely to increase the chance that the Funds' shareholders will approve the proposed items. As of December 27, 2001, the officers and Board members of Reserves and Funds Trust as a group did not own more than 1% of any class of any Fund. Annual Meetings and Shareholder Meetings Neither Reserves nor Funds Trust presently holds annual meetings of shareholders for the election of Trustees and other business unless otherwise required by the 1940 Act. OTHER BUSINESS The Boards know of no other business to be brought before the Meetings. However, if any other matters properly come before the Meetings, 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. 22 SHAREHOLDER INQUIRIES Shareholder inquiries may be addressed to Nations Funds in writing at the address, or by phone at the phone number, on the cover page of this Proxy Statement. * * * SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETINGS ARE REQUESTED TO MARK, SIGN AND DATE THE ENCLOSED PROXY BALLOT(S) AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS ALSO MAY SUBMIT PROXIES BY TELEPHONE OR ON-LINE. NATIONS FUNDS WILL FURNISH, WITHOUT CHARGE, COPIES OF MARCH 31, 2001 ANNUAL REPORT AND SEPTEMBER 30, 2001 SEMI-ANNUAL REPORT FOR THE FUNDS TO ANY SHAREHOLDER UPON REQUEST ADDRESSED TO: NATIONS FUNDS, ONE BANK OF AMERICA PLAZA, 101 SOUTH TRYON STREET, CHARLOTTE, N.C. 28255 OR BY TELEPHONE AT (800) 653-9427. 23 APPENDIX A Glossary
Term Used in Proxy Statement Definition - ---------------------------- ---------- 1933 Act............................. Securities Act of 1933, as amended 1934 Act............................. Securities Exchange Act of 1934, as amended 1940 Act............................. Investment Company Act of 1940, as amended BA Advisors.......................... Banc of America Advisors, LLC BACAP................................ Banc of America Capital Management, LLC Bank of America...................... Bank of America, N.A. Board................................ Any one of the Boards of Trustees Reserves, Funds Trust or Nations Master Investment Trust Boards............................... More than one of the Boards of Trustees of Reserves, Funds Trust or Nations Master Investment Trust Brandes.............................. Brandes Investment Partners, L.P. Closing.............................. Closing of the Reorganization, expected to occur on May 10, 2002 Code................................. Internal Revenue Code of 1986, as amended Fund(s).............................. Nations High Yield Bond Fund, Nations Intermediate Bond Fund, Nations International Equity Fund, Nations International Value Fund, Nations Kansas Municipal Income Fund and Nations MidCap Index Fund Funds Trust.......................... Nations Funds Trust Gartmore............................. Gartmore Global Partners High Yield Bond Fund................. Nations High Yield Bond Fund High Yield Bond Master Portfolio..... Nations High Yield Bond Master Portfolio Interim Agreement.................... The interim investment sub-advisory agreement among BA Advisors, Marsico Capital and Nations Master Investment Trust, on behalf of Nations International Equity Master Portfolio, which became effective on January 15, 2002 Intermediate Bond Fund............... Nations Intermediate Bond Fund Intermediate Bond Master Portfolio... Nations Intermediate Bond Master Portfolio International Equity Fund............ Nations International Equity Fund International Equity Master Portfolio Nations International Equity Master Portfolio International Value Fund............. Nations International Value Fund International Value Master Portfolio. Nations International Value Master Portfolio INVESCO.............................. INVESCO Global Asset Management (N.A.), Inc. Kansas Municipal Income Fund......... Nations Kansas Municipal Income Fund Marsico Capital...................... Marsico Capital Management, LLC Master Portfolio(s).................. Nations High Yield Bond Master Portfolio, Nations Intermediate Bond Master Portfolio, Nations International Equity Master Portfolio and Nations International Value Master Portfolio Meeting(s)........................... The shareholder meeting(s) of the Funds that will be held jointly at 10:00 a.m., Eastern time, on March 27, 2002, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina MidCap Index Fund.................... Nations MidCap Index Fund Nations Funds or Nations Funds Family The fund complex that includes Reserves and Funds Trust
A-1
Term Used in Proxy Statement Definition - ---------------------------- ---------- New Agreement............. The new investment sub-advisory agreement among BA Advisors, Marsico Capital and Nations Master Investment Trust, on behalf of Nations International Equity Master Portfolio, which would become effective, if approved, on March 27, 2002 or a later date Order..................... An exemptive order from the SEC requested by the Nations Funds Family and BA Advisors pertaining to the "manager of managers" structure Previous Agreement........ The previous investment sub-advisory agreement among BA Advisors, Gartmore and Nations Master Investment Trust, on behalf of Nations International Equity Master Portfolio, which terminated on January 14, 2002 Proxy Statement........... This proxy statement Putnam.................... Putnam Investment Management LLC Reorganization............ The reorganization of Intermediate Bond Fund, International Equity Fund and/or International Value Fund into their corresponding Successor Fund(s) Reorganization Agreement.. The Agreement and Plan of Reorganization dated January 1, 2002 by and between Nations Reserves, on behalf of its Funds, and Nations Funds Trust, on behalf of the Successor Funds Reserves.................. The Capitol Mutual Funds d/b/a Nations Reserves SEC....................... United States Securities and Exchange Commission Successor Fund(s)......... Nations Intermediate Bond Fund (successor), Nations International Equity Fund (successor) and Nations International Value Fund (successor)
A-2 APPENDIX B Comparison of Fundamental Policies and Limitations of the Funds and the Successor Funds Fundamental Investment Policies and Limitations
Intermediate Bond Fund may not: The Successor Fund may not: - ------------------------------- --------------------------- 1. Underwrite any issue of securities within the 1. Underwrite any issue of securities within the meaning of the 1933 Act except when it might meaning of the 1933 Act except when it might technically be deemed to be an underwriter either (a) technically be deemed to be an underwriter either in connection with the disposition of a portfolio (a) in connection with the disposition of a portfolio security, or (b) in connection with the purchase of security, or (b) in connection with the purchase of securities directly from the issuer thereof in securities directly from the issuer thereof in accordance with its investment objective. accordance with its investment objective. This restriction shall not limit the Fund's ability to invest in securities issued by other registered investment companies. 2. Purchase or sell real estate, except a Fund may 2. Purchase or sell real estate, except a Fund may purchase securities of issuers which deal or invest in purchase securities of issuers which deal or invest real estate and may purchase securities which are in real estate and may purchase securities which are secured by real estate or interests in real estate. secured by real estate or interests in real estate. 3. Purchase or sell commodities, except that a Fund 3. Purchase or sell commodities, except that a Fund may to the extent consistent with its investment may to the extent consistent with its investment objective, invest in securities of companies that objective, invest in securities of companies that purchase or sell commodities or which invest in such purchase or sell commodities or which invest in programs, and purchase and sell options, forward such programs, and purchase and sell options, contracts, futures contracts, and options on futures forward contracts, futures contracts, and options on contracts. This limitation does not apply to foreign futures contracts. This limitation does not apply to currency transactions including without limitation foreign currency transactions including without forward currency contracts. limitation forward currency contracts. 4. Make loans, except to the extent permitted by the 4. Make loans, except to the extent permitted by the 1940 Act. 1940 Act, the rules and regulations thereunder and any exemptive relief obtained by the Funds. 5. Borrow money, issue senior securities or mortgage, 5. Borrow money or issue senior securities except to pledge or hypothecate its assets except to the extent the extent permitted by the 1940 Act, the rules and permitted under the 1940 Act. regulations thereunder and any exemptive relief obtained by the Funds.
B-1
Intermediate Bond Fund may not: The Successor Fund may not: - ------------------------------- --------------------------- 6. Purchase any securities which would cause 25% or 6. Purchase any securities which would cause 25% or more of the value of its total assets at the time of more of the value of its total assets at the time of purchase to be invested in the securities of one or purchase to be invested in the securities of one or more issuers conducting their principal business more issuers conducting their principal business activities in the same industry, provided that: (a) activities in the same industry, provided that: (a) there is no limitation with respect to obligations there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, any issued or guaranteed by the U.S. Government, any state or territory of the United States, or any of their state or territory of the United States, or any of agencies, instrumentalities or political subdivisions, their agencies, instrumentalities or political and (b) notwithstanding this limitation or any other subdivisions, and (b) notwithstanding this fundamental investment limitation, assets may be limitation or any other fundamental investment invested in the securities of one or more diversified limitation, assets may be invested in the securities management investment companies to the extent of one or more management investment copies to permitted by the 1940 Act and the rules and the extent permitted by the 1940 Act, the rules and regulations thereunder. regulations thereunder and any exemptive relief obtained by the Funds. 7. Purchase securities (except securities issued or 7. Purchase securities (except securities issued or guaranteed by the U.S. Government, its agencies or guaranteed by the U.S. Government, its agencies or instrumentalities) of any one issuer if, as a result, instrumentalities) of any one issuer if, as a result, more than 5% of its total assets will be invested in more than 5% of its total assets will be invested in the securities of such issuer or it would own more the securities of such issuer or it would own more than 10% of the voting securities of such issuer, than 10% of the voting securities of such issuer, except that (a) up to 25% of its total assets may be except that (a) up to 25% of its total assets may be invested without regard to these limitations and (b) a invested without regard to these limitations and (b) Fund's assets may be invested in the securities of a Fund's assets may be invested in the securities of one or more diversified management investment one or more management investment companies to companies to the extent permitted by the 1940 Act. the extent permitted by the 1940 Act, the rules and regulations thereunder and any exemptive relief obtained by the Funds.
B-2
International Equity Fund and International Value Fund may not: Their Successor Funds may not: - --------------------------------- ------------------------------ 1. Underwrite any issue of securities within the 1. Underwrite any issue of securities within the meaning of the 1933 Act except when it might meaning of the 1933 Act except when it might technically be deemed to be an underwriter either (a) technically be deemed to be an underwriter either in connection with the disposition of a portfolio (a) in connection with the disposition of a portfolio security, or (b) in connection with the purchase of security, or (b) in connection with the purchase of securities directly from the issuer thereof in securities directly from the issuer thereof in accordance with its investment objective. This accordance with its investment objective. This restriction shall not limit the Fund's ability to invest restriction shall not limit the Fund's ability to in securities issued by other registered investment invest in securities issued by other registered companies. investment companies. 2. Purchase or sell real estate, except a Fund may 2. Purchase or sell real estate, except a Fund may purchase securities of issuers which deal or invest in purchase securities of issuers which deal or invest real estate and may purchase securities which are in real estate and may purchase securities which are secured by real estate or interests in real estate. secured by real estate or interests in real estate. 3. Purchase or sell commodities, except that a Fund 3. Purchase or sell commodities, except that a Fund may to the extent consistent with its investment may to the extent consistent with its investment objective, invest in securities of companies that objective, invest in securities of companies that purchase or sell commodities or which invest in such purchase or sell commodities or which invest in programs, and purchase and sell options, forward such programs, and purchase and sell options, contracts, futures contracts, and options on futures forward contracts, futures contracts, and options on contracts. This limitation does not apply to foreign futures contracts. This limitation does not apply to currency transactions including without limitation foreign currency transactions including without forward currency contracts. limitation forward currency contracts. 4. Make loans, except to the extent permitted by the 4. Make loans, except to the extent permitted by the 1940 Act, the rules and regulations thereunder and 1940 Act, the rules and regulations thereunder and any exemptive relief obtained by the Funds. any exemptive relief obtained by the Funds. 5. Borrow money, issue senior securities or mortgage, 5. Borrow money or issue senior securities except to pledge or hypothecate its assets except to the extent the extent permitted by the 1940 Act, the rules and permitted by the 1940 Act, the rules and regulations regulations thereunder and any exemptive relief thereunder and any exemptive relief obtained by the obtained by the Funds. Funds. 6. Purchase any securities which would cause 25% or 6. Purchase any securities which would cause 25% or more of the value of its total assets at the time of more of the value of its total assets at the time of purchase to be invested in the securities of one or purchase to be invested in the securities of one or more issuers conducting their principal business more issuers conducting their principal business activities in the same industry, provided that: (a) activities in the same industry, provided that: (a) there is no limitation with respect to obligations there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, any issued or guaranteed by the U.S. Government, any state or territory of the United States, or any of their state or territory of the United States, or any of agencies, instrumentalities or political subdivisions, their agencies, instrumentalities or political and (b) notwithstanding this limitation or any other subdivisions, and (b) notwithstanding this fundamental investment limitation, assets may be limitation or any other fundamental investment invested in the securities of one or more limitation, assets may be invested in the securities management investment companies to the extent of one or more management investment copies to permitted by the 1940 Act, the rules and regulations the extent permitted by the 1940 Act, the rules and thereunder and any exemptive relief obtained by the regulations thereunder and any exemptive relief Funds. obtained by the Funds.
B-3
International Equity Fund and International Value Fund may not: Their Successor Funds may not: - --------------------------------- ------------------------------ 7. Purchase securities (except securities issued or 7. Purchase securities (except securities issued or guaranteed by the U.S. Government, its agencies or guaranteed by the U.S. Government, its agencies or instrumentalities) of any one issuer if, as a result, instrumentalities) of any one issuer if, as a result, more than 5% of its total assets will be invested in more than 5% of its total assets will be invested in the securities of such issuer or it would own more the securities of such issuer or it would own more than 10% of the voting securities of such issuer, than 10% of the voting securities of such issuer, except that (a) up to 25% of its total assets may be except that (a) up to 25% of its total assets may be invested without regard to these limitations and (b) a invested without regard to these limitations and (b) Fund's assets may be invested in the securities of a Fund's assets may be invested in the securities of one or more management investment companies to one or more management investment companies to the extent permitted by the 1940 Act. the extent permitted by the 1940 Act, the rules and regulations thereunder and any exemptive relief obtained by the Funds.
B-4 APPENDIX C Additional Funds Sub-Advised by Marsico Capital
Maximum Annual Advisory Assets in Millions or Sub-Advisory Fee Paid (as of November 30, 2001) to Marsico Capital ------------------------- ------------------------ Marsico International Opportunities Fund.................... $19,221,600 0.85% (advisory) Nations Marsico International Opportunities Master Portfolio $ 6,600,000 0.45% (sub-advisory) Nations Marsico International Opportunities Portfolio....... $10,960,000 0.45% (sub-advisory)
C-1 APPENDIX D FORM OF PROXY BALLOTS Nations Funds NATIONS INTERMEDIATE BOND FUND 101 South Tryon Street 33rd Floor One Bank of America Plaza Special Meeting of Shareholders Charlotte, North Carolina 28255 to be held on March 27, 2002 The undersigned hereby appoints Richard H. Blank, Jr., Michael Simons and Carolyn Wyse (the "Proxies"), and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of the fund to be held at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina 28255, at 10:00 a.m. (Eastern time) on March 27, 2002, and at any adjournment(s) thereof. The Proxies shall cast votes according to the number of shares of the fund which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and shall have all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said Proxies, or any of them, may lawfully do by virtue hereof or thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF THE FUND AND THE PROXY STATEMENT, DATED JANUARY 16, 2002. THIS PROXY IS SOLICITED ON BEHALF OF THE FUND'S BOARD. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, EITHER BY THE ENCLOSED POSTAGE PAID ENVELOPE, OR BY TELEPHONE OR BY INTERNET. To vote by Telephone: 1) Read the Proxy Statement and have the Proxy Ballot below at hand. 2) Call toll-free 1-800-690-6903. 3) Enter the 12-digit control number set forth on the Proxy Ballot and follow the simple instructions. To vote by Internet: 1) Read the Proxy Statement and have the Proxy Ballot below at hand. 2) Go to the website www.proxyvote.com. 3) Enter the 12-digit control number set forth on the Proxy Ballot and follow the simple instructions. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D-1 THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED - -------------------------------------------------------------------------------- NATIONS INTERMEDIATE BOND FUND THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE PROPOSALS BELOW. IN THE ABSENCE OF ANY SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS. -------- Vote on Proposals 1. A proposed agreement and plan of reorganization dated as of January 1, 2002 that provides for the reorganization of your fund into a corresponding successor fund. FOR AGAINST ABSTAIN |_| |_| |_| 2. An authorization for Banc of America Advisors, LLC to hire and replace investment sub-advisers or to modify investment sub-advisory agreements for Nations Intermediate Bond Master Portfolio, in which your fund invests all of its assets, without shareholder approval. FOR AGAINST ABSTAIN |_| |_| |_| In their discretion, the Proxies, and each of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. ----------------------- -------- Signature Date ----------------------- -------- Signature (Joint Owners) Date - -------------------------------------------------------------------------------- D-2 Nations Funds NATIONS INTERNATIONAL EQUITY FUND 101 South Tryon Street 33rd Floor Special Meeting of Shareholders One Bank of America Plaza to be held on March 27, 2002 Charlotte, North Carolina 28255 The undersigned hereby appoints Richard H. Blank, Jr., Michael Simons and Carolyn Wyse (the "Proxies"), and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of the fund to be held at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina 28255, at 10:00 a.m. (Eastern time) on March 27, 2002, and at any adjournment(s) thereof. The Proxies shall cast votes according to the number of shares of the fund which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and shall have all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said Proxies, or any of them, may lawfully do by virtue hereof or thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF THE FUND AND THE PROXY STATEMENT, DATED JANUARY 16, 2002. THIS PROXY IS SOLICITED ON BEHALF OF THE FUND'S BOARD. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, EITHER BY THE ENCLOSED POSTAGE PAID ENVELOPE, OR BY TELEPHONE OR BY INTERNET. To vote by Telephone: 1) Read the Proxy Statement and have the Proxy Ballot below at hand. 2) Call toll-free 1-800-690-6903. 3) Enter the 12-digit control number set forth on the Proxy Ballot and follow the simple instructions. To vote by Internet: 1) Read the Proxy Statement and have the Proxy Ballot below at hand. 2) Go to the website www.proxyvote.com. 3) Enter the 12-digit control number set forth on the Proxy Ballot and follow the simple instructions. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D-3 THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED - -------------------------------------------------------------------------------- NATIONS INTERNATIONAL EQUITY FUND THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE PROPOSALS BELOW. IN THE ABSENCE OF ANY SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS. -------- Vote on Proposals 1. A proposed agreement and plan of reorganization dated as of January 1, 2002 that provides for the reorganization of your fund into a corresponding successor fund. FOR AGAINST ABSTAIN |_| |_| |_| 2. An authorization for Banc of America Advisors, LLC to hire and replace investment sub-advisers or to modify investment sub-advisory agreements for Nations International Equity Master Portfolio, in which your fund invests all of its assets, without shareholder approval. FOR AGAINST ABSTAIN |_| |_| |_| 3. A new investment sub-advisory agreement with Marsico Capital Management, LLC for Nations International Equity Master Portfolio, in which your fund invests all of its assets. FOR AGAINST ABSTAIN |_| |_| |_| In their discretion, the Proxies, and each of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. ----------------------- -------- Signature Date ----------------------- -------- Signature (Joint Owners) Date - -------------------------------------------------------------------------------- D-4 Nations Funds NATIONS INTERNATIONAL VALUE FUND 101 South Tryon Street 33rd Floor Special Meeting of Shareholders One Bank of America Plaza to be held on March 27, 2002 Charlotte, North Carolina 28255 The undersigned hereby appoints Richard H. Blank, Jr., Michael Simons and Carolyn Wyse (the "Proxies"), and each of them, attorneys and proxies of the undersigned, each with power of substitution and resubstitution, to attend, vote and act for the undersigned at the Special Meeting of Shareholders of the fund to be held at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina 28255, at 10:00 a.m. (Eastern time) on March 27, 2002, and at any adjournment(s) thereof. The Proxies shall cast votes according to the number of shares of the fund which the undersigned may be entitled to vote with respect to the proposals set forth below, in accordance with the specification indicated, if any, and shall have all the powers which the undersigned would possess if personally present. The undersigned hereby revokes any prior proxy to vote at such meeting, and hereby ratifies and confirms all that said Proxies, or any of them, may lawfully do by virtue hereof or thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF THE FUND AND THE PROXY STATEMENT, DATED JANUARY 16, 2002. THIS PROXY IS SOLICITED ON BEHALF OF THE FUND'S BOARD. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, EITHER BY THE ENCLOSED POSTAGE PAID ENVELOPE, OR BY TELEPHONE OR BY INTERNET. To vote by Telephone: 1) Read the Proxy Statement and have the Proxy Ballot below at hand. 2) Call toll-free 1-800-690-6903. 3) Enter the 12-digit control number set forth on the Proxy Ballot and follow the simple instructions. To vote by Internet: 1) Read the Proxy Statement and have the Proxy Ballot below at hand. 2) Go to the website www.proxyvote.com. 3) Enter the 12-digit control number set forth on the Proxy Ballot and follow the simple instructions. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D-5 THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED - -------------------------------------------------------------------------------- NATIONS INTERNATIONAL VALUE FUND THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN ON THE PROPOSALS BELOW. IN THE ABSENCE OF ANY SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS. -------- Vote on Proposals 1. A proposed agreement and plan of reorganization dated as of January 1, 2002 that provides for the reorganization of your fund into a corresponding successor fund. FOR AGAINST ABSTAIN |_| |_| |_| 2. An authorization for Banc of America Advisors, LLC to hire and replace investment sub-advisers or to modify investment sub-advisory agreements for Nations International Value Master Portfolio, in which your fund invests all of its assets, without shareholder approval. FOR AGAINST ABSTAIN |_| |_| |_| In their discretion, the Proxies, and each of them, are authorized to vote upon any other business that may properly come before the meeting, or any adjournment(s) thereof, including any adjournment(s) necessary to obtain requisite quorums and/or approvals. Please sign below exactly as your name(s) appear(s) hereon. Corporate proxies should be signed in full corporate name by an authorized officer. Each joint owner should sign personally. Fiduciaries should give full titles as such. ----------------------- -------- Signature Date ----------------------- -------- Signature (Joint Owners) Date - -------------------------------------------------------------------------------- D-6 PRX-5 -----END PRIVACY-ENHANCED MESSAGE-----