As filed with the Securities and Exchange Commission
on May 30, 1997
Registration No. 333-09703; 811-07745
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Post-Effective Amendment No. 2 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 3 [X]
(Check appropriate box or boxes)
-----------------------
NATIONS LIFEGOAL FUNDS, INC.
(Exact Name of Registrant as specified in Charter)
One NationsBank Plaza
33rd Floor
Charlotte, North Carolina 28255
(Address of Principal Executive Offices, including Zip Code)
--------------------------
Registrant's Telephone Number, including Area Code: (800) 626-2275
c/o The Corporation Trust Company
32 South Street
Baltimore, Maryland 21202
(Name and Address of Agent for Service)
With copies to:
Robert M. Kurucza, Esq. Carl Frischling, Esq.
Marco E. Adelfio, Esq. Kramer, Levin, Naftalis & Frankel
Morrison & Foerster LLP 919 3rd Avenue
2000 Pennsylvania Ave., N.W. New York, New York 10022
Suite 5500
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
( ) Immediately upon filing pursuant ( ) on (date), pursuant
to Rule 485(b), or to Rule 485(b), or
[X] 60 days after filing pursuant ( ) on (date) pursuant
to Rule 485(a), or to Rule 485(a).
( ) 75 days after filing pursuant to ( ) on (date) pursuant to
paragraph (a)(2) paragraph (a)(2) of rule 485
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
No filing fee is required under the Securities Act of 1933 because an indefinite
number of shares of beneficial interest in the Registrant, without par value,
has previously been registered pursuant to
<PAGE>
Rule 24f-2 under the Investment
Company Act of 1940, as amended. The Registrant filed on May 21, 1997, the
notice required by Rule 24f-2 for its fiscal period ended March 31, 1997.
<PAGE>
EXPLANATORY NOTE
This Post-Effective Amendment No. 2 to the Registration Statement of
Nations LifeGoal Funds, Inc. (the "Company") is being filed in order to add a
new class of shares, the Investor B Shares, to LifeGoal Growth Portfolio,
LifeGoal Balanced Growth Portfolio and LifeGoal Income and Growth Portfolio
(collectively, the "LifeGoal Portfolios"). This Post-Effective Amendment does
not affect the Prospectuses for the existing classes of shares of the LifeGoal
Portfolios.
<PAGE>
NATIONS LIFEGOAL FUNDS, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
PART A PART A
<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Prospectus Summary
Item 3. Condensed Financial Information Not Applicable
Item 4. General Description of Registrant Objectives; How Objectives Are
Pursued; Description of Underlying
Nations Funds
Item 5. Management of the Fund How the LifeGoal Funds Are Managed;
Shareholder Servicing and Distribution
Plans (for Investor A, Investor B and
Investor C Shares); Shareholder
Administration Arrangements (for
Primary B Shares)
Item 6. Capital Stock and Other Securities How Dividends and Distributions Are
Made; Tax Information; Organization
and History
Item 7. Purchase of Securities Being Expenses Summary; How Performance
Offered Is Shown; How to Buy Shares; How The
LifeGoal Funds Value Their Shares
Item 8. Redemption or Repurchase How to Redeem Shares;
How to Exchange Shares
Item 9. Pending Legal Proceedings Not Applicable
PART B PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Introduction
Item 13. Investment Objectives and Policies Additional Information on the LifeGoal
<PAGE>
Fund Investments; Additional
Information on Underlying Nations Funds Investments
Item 14. Management of the Fund Directors and Officers of the LifeGoal
Funds; Investment Advisory,
Administration, Custody, Transfer
Agency, Shareholder Servicing and
Distribution Agreements
Item 15. Control Persons and Principal Miscellaneous
Holders of Securities
Item 16. Investment Advisory and Other Investment Advisory, Administration,
Services Custody, Transfer Agency, Shareholder
Servicing, Shareholder Administration
and Distribution Agreements; Counsel
Item 17. Brokerage Allocation and Other Not Applicable
Practices
Item 18. Capital Stock and Other Securities Description of Shares
Item 19. Purchase, Redemption and Pricing Purchases and Redemptions, Net Asset
of Securities Being Offered Value Determination
Item 20. Tax Status Additional Information Concerning
Taxes
Item 21. Underwriters Distributor, Distribution Plans and
Shareholder Servicing Plans for Investor Shares, Expenses
Item 22. Calculation of Performance Data Additional Information on Performance
Item 23. Financial Statements Independent Accountant and Reports
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS
DATED JUNE , 1997
Prospectus
INVESTOR B SHARES
JULY 31, 1997
This Prospectus describes three diversified
investment portfolios, LIFEGOAL GROWTH PORTFOLIO,
LIFEGOAL BALANCED GROWTH PORTFOLIO and LIFEGOAL
INCOME AND GROWTH PORTFOLIO (each a "LifeGoal
Portfolio" and, collectively, the "LifeGoal
Portfolios"), of LifeGoal Funds, Inc. (the
"Company"), an open-end management investment
company in the Nations Funds Family. The LifeGoal
Portfolios invest substantially all of their assets
in certain other funds within the Nations Funds
Family. These underlying funds are referred to in
this Prospectus as "Nations Funds". This Prospectus
describes one class of shares of each LifeGoal
Portfolio -- Investor B Shares.
This Prospectus sets forth concisely the
information about each LifeGoal Portfolio that a
prospective purchaser of Investor B Shares should
consider before investing. Investors should read
this Prospectus and retain it for future reference.
Additional information about the LifeGoal
Portfolios is contained in a separate Statement of
Additional Information (the "SAI") that has been
filed with the Securities and Exchange Commission
(the "SEC") and is available upon request without
charge by writing or calling the Nations Funds
Family at its address or telephone number shown
below. The SAI for the LifeGoal Portfolios, dated
the same date as this Prospectus, is incorporated
by reference in its entirety into this Prospectus.
NationsBanc Advisors, Inc. ("NBAI") is the
investment adviser to the LifeGoal Portfolios.
TradeStreet Investment Associates, Inc.
("TradeStreet") is the investment sub-adviser to
the LifeGoal Portfolios. As used in this
Prospectus, the term "Adviser" refers to NBAI
and/or TradeStreet as the context may require.
SHARES OF THE NATIONS FUNDS FAMILY ARE NOT DEPOSITS
OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, NATIONSBANK, N.A. ("NATIONSBANK") OR
ANY OF ITS AFFILIATES. SUCH SHARES ARE NOT INSURED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
LIFEGOAL PORTFOLIOS INVOLVES CERTAIN RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
NATIONSBANK AND CERTAIN OF ITS AFFILIATES PROVIDE
CERTAIN ADVISORY AND OTHER SERVICES TO THE NATIONS
FUND FAMILY, FOR WHICH THEY ARE COMPENSATED.
STEPHENS INC., WHICH IS NOT AFFILIATED WITH
NATIONSBANK, IS THE SPONSOR AND ADMINISTRATOR AND
SERVES AS THE DISTRIBUTOR FOR THE LIFEGOAL
PORTFOLIOS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
LIFEGOAL PORTFOLIOS:
LifeGoal Growth Portfolio
LifeGoal Balanced
Growth Portfolio
LifeGoal Income
and Growth Portfolio
For purchase, redemption
and performance information
call:
1-800-321-7854
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
(Nations Fund Logo appears here)
<PAGE>
Table Of Contents
About The
LifeGoal Prospectus Summary 3
Portfolios Expenses Summary 4
Objectives 7
How Objectives Are Pursued 8
Description Of Underlying Nations Funds
-- Investment Objectives, Policies And
Practices 11
How Performance Is Shown 17
How The LifeGoal Portfolios Are Managed 18
Organization And History 21
How To Buy Shares 22
How To Redeem Shares 24
About Your How To Exchange Shares 26
Investment Shareholder Servicing and Distribution Plans 27
How The LifeGoal Portfolios Value Their Shares 28
How Dividends And Distributions Are Made;
Tax Information 29
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE LIFEGOAL
PORTFOLIOS' SAI INCORPORATED HEREIN BY REFERENCE,
IN CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE LIFEGOAL PORTFOLIOS
OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY LIFEGOAL PORTFOLIOS OR BY
THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About The LifeGoal Portfolios
Prospectus Summary
(Bullet) TYPE OF COMPANY: Open-end management investment company.
(Bullet) INVESTMENT OBJECTIVES AND POLICIES:
(Bullet) LifeGoal Growth Portfolio's investment objective is to seek capital
appreciation through exposure to a variety of equity market segments.
(Bullet) LifeGoal Balanced Growth Portfolio's investment objective is
to seek total return through a balanced portfolio of equity
and fixed income securities.
(Bullet) LifeGoal Income and Growth Portfolio's investment objective is to
seek current income and modest growth to protect against inflation
and to preserve purchasing power.
The LifeGoal Portfolios are designed for long-term investors seeking
the benefits of asset allocation and diversification. Unlike
traditional mutual funds, which invest directly in individual
securities, the LifeGoal Portfolios pursue their investment
objectives by allocating their assets among various Nations Funds.
(Bullet) INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as the investment
adviser to the LifeGoal Portfolios. NBAI also advises more than 51
other funds in the Nations Funds Family. TradeStreet Investment
Associates, Inc. provides sub-advisory services to the LifeGoal
Portfolios and to more than 45 other funds in the Nations Fund Family.
(Bullet) DIVIDENDS AND DISTRIBUTIONS: Each LifeGoal Portfolio declares and pays
dividends from net investment income quarterly. Each LifeGoal
Portfolio's net realized capital gains, including net short-term
capital gains, are distributed at least annually.
(Bullet) RISK FACTORS: Although the Adviser seeks to achieve the investment
objective of each LifeGoal Portfolio, there is no assurance that it
will be able to do so. Investments in a LifeGoal Portfolio are not
insured against loss of principal. Investments by a LifeGoal Portfolio
in shares of a Nations Fund that holds stocks are subject to stock
market risk, which is the risk that the value of the stocks held by
Nations Funds may decline over short or even extended periods.
Investments by a LifeGoal Portfolio in shares of a Nations Fund that
holds debt securities are subject to interest rate risk, which is the
risk that the value of the debt securities, including securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities
("U.S. Government Obligations"), held by Nations Funds may be adversely
affected by changes in market interest rates. The value of Nations
Funds' investments in debt securities will tend to decrease when
interest rates rise and increase when interest rates fall. In addition,
debt securities which are not backed by the U.S. Government are subject
to credit risk, which is the risk that the issuer may not be able to
pay principal and/or interest when due. Certain of the Nations Funds
may invest portions, and in some cases substantially all, of their
assets in foreign securities. Foreign securities present unique
investment risks, including risks associated with currency
fluctuations, markets that tend to be less developed and more volatile
than U.S. markets and markets that are characterized by less
governmental supervision and lower disclosure standards. Certain of
Nations Funds' investments constitute derivative securities. Certain
types of derivative securities can, under certain circumstances,
significantly increase an investor's exposure to market or other risks.
For a discussion of these and other factors, see "How Objectives Are
Pur-
3
<PAGE>
sued -- General Characteristics and Risk Factors of the Major Asset
Classes" and "Description of Underlying Nations Funds -- Principal Risk
Considerations."
(Bullet) MINIMUM PURCHASE: $1,000 minimum initial investment per record holder
except that the minimum initial investment is: $500 for Individual
Retirement Account ("IRA") investors; $250 for non-working spousal
IRAs; and $100 for investors participating on a monthly basis in the
Systematic Investment Plan. There is no minimum investment amount for
investments by certain 401(k) and employee pension plans or salary
reduction-Individual Retirement Accounts. Minimum subsequent investment
is $100, except for investments pursuant to the Systematic Investment
Plan. See "How To Buy Shares."
Expenses Summary
Expenses are one of several factors to consider when investing in a LifeGoal
Portfolio. The following tables summarize estimated shareholder transaction and
operating expenses as a percentage of net assets for Investor B Shares of each
LifeGoal Portfolio. The Examples show the cumulative expenses attributable to a
hypothetical $1,000 investment in each LifeGoal Portfolio over specified
periods.
LIFEGOAL PORTFOLIOS INVESTOR B SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LifeGoal LifeGoal
LifeGoal Balanced Income and
Growth Growth Growth
Portfolio Portfolio Portfolio
Maximum Sales Load Imposed on Purchases None None None
Maximum Deferred Sales Load (as a percentage of the lower of the original
purchase price or redemption proceeds) (1) 5.25% 5.25% 5.25%
</TABLE>
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C> <C> <C>
Management Fees .25% .25% .25%
Rule 12b-1 Fees .75% .75% .75%
Shareholder Servicing Fees .25% .25% .25%
Other Expenses .0% .0% .0%
Total Operating Expenses 1.25% 1.25% 1.25%
</TABLE>
(1) 5.25% in the first year after purchase, declining to 1.00% in the sixth year
after purchase and eliminated thereafter.
4
<PAGE>
EXAMPLES:
You would pay the following expenses on a $1,000 investment in Investor B Shares
of the indicated LifeGoal Portfolio, assuming indirect expenses (the LifeGoal
Portfolios' share of the expenses incurred by the underlying Nations Funds) at
the midpoint of the after waiver ranges shown below, and further assuming: (1) a
5% annual return and (2) redemption at the end of each time period.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LifeGoal LifeGoal
LifeGoal Balanced Income and
Growth Growth Growth
Portfolio Portfolio Portfolio
1 Year $75 $74 $72
3 Years $108 $108 $100
</TABLE>
You would pay the following expenses on a $1,000 investment in Investor B Shares
of the indicated LifeGoal Portfolio, assuming indirect expenses (the LifeGoal
Portfolios' share of the expenses incurred by the underlying Nations Funds) at
the midpoint of the after waiver ranges shown below and further assuming: a 5%
annual return but no redemption.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LifeGoal LifeGoal
LifeGoal Balanced Income and
Growth Growth Growth
Portfolio Portfolio Portfolio
1 Year $22 $22 $19
3 Years $68 $68 $60
</TABLE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor B Shares of a LifeGoal Portfolio can expect. The figures in the above
tables show the basis on which payments will be made, except that Other Expenses
are estimated for the LifeGoal Portfolios' current fiscal year and the Examples
include indirect expenses for the underlying Nations Funds' most recent fiscal
year (or estimates thereof for new funds). For more complete descriptions of the
LifeGoal Portfolios' operating expenses, see "How The LifeGoal Portfolios Are
Managed." For a more complete description of the Rule 12b-1 and shareholder
servicing fees payable by the LifeGoal Portfolios, see "Shareholder Servicing
And Distribution Plans."
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE GREATER OR LESS
THAN THOSE SHOWN.
5
<PAGE>
EXPENSE RATIOS FOR UNDERLYING NATIONS FUNDS (PRIMARY A SHARES)
The following table provides the annualized expense ratios for the Primary A
Shares of each of the selected underlying Nations Fund's investments for its
fiscal period ended March 31, 1996.
<TABLE>
<CAPTION>
<S> <C> <C>
(after fee (before fee
waivers and/or waivers and/or
expense expense
reimbursements) reimbursements)
Nations Disciplined Equity Fund 1.02% 1.02%
Nations Capital Growth Fund .96% .96%
Nations Value Fund .96% .96%
Nations Equity Income Fund .90% .90%
Nations Managed Index Fund* .50% 1.09%
Nations Emerging Growth Fund .99% .99%
Nations Managed SmallCap Index Fund** .50% 1.55%
Nations International Equity Fund 1.17% 1.18%
Nations Pacific Growth Fund 1.76% 1.78%
Nations Emerging Markets Fund 2.13% 2.13%
Nations Prime Fund .30% .37%
Nations Strategic Fixed Income Fund .72% .83%
Nations Diversified Income Fund .77% .87%
Nations Short-Intermediate Government Fund .63% .86%
Nations Short-Term Income Fund .55% .88%
Nations Global Government Income Fund 1.32% 1.32%
* Annualized. This Nations Fund commenced operations on August 1, 1996. The
expense ratios are based on unaudited data for the period of commencement to
January 31, 1997.
** Annualized. This Nations Fund commenced operations on October 15, 1996. The
expense ratios are based on unaudited data for the period of commencement to
January 31, 1997.
</TABLE>
LIFEGOAL PORTFOLIOS' INDIRECT EXPENSES
Based on the foregoing figures and the expected percentage investment ranges in
the underlying Nations Funds, the range of the weighted average indirect expense
ratio for each LifeGoal Portfolio is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
(after fee (before fee
waivers and/or waivers and/or
expense expense
reimbursements) reimbursements)
LifeGoal Growth Portfolio .86% to 1.01% .92% to 1.05%
LifeGoal Balanced Growth Portfolio .89% to .94% .97% to 1.04%
LifeGoal Income and Growth Portfolio .56% to .73% .77% to .91%
</TABLE>
The indirect expense ratios fluctuate within these ranges depending upon how
assets are allocated among the Nations Funds. The LifeGoal Portfolios will be
invested in the Primary A Shares of the underlying Nations Funds and, under
normal market conditions, will be allocated among the various fund categories in
the percentages shown below. Under extraordinary circumstances, a LifeGoal
Portfolio's investment in one or more Nations Funds might exceed these ranges.
For temporary defensive purposes, any LifeGoal Portfolio may invest up to 100%
of its assets in Nations Prime Fund.
6
<PAGE>
Objectives
(Bullet) LIFEGOAL GROWTH PORTFOLIO -- LifeGoal Growth Portfolio's investment
objective is to seek capital appreciation through exposure to a variety
of equity market segments.
<TABLE>
<CAPTION>
<S> <C> <C>
FUND CATEGORY RANGE FUNDS
Large-Capitalization Domestic Equity Funds 35-75% Nations Capital Growth Fund
Nations Disciplined Equity Fund
Nations Equity Income Fund
Nations Managed Index Fund
Nations Value Fund
Small/Mid-Capitalization Domestic Equity Funds 20-35% Nations Emerging Growth Fund
Nations Managed SmallCap Index Fund
Core International Equity Funds 10-20% Nations International Equity Fund
Non-Core International Equity Funds 0-10% Nations Emerging Markets Fund
Nations Pacific Growth Fund
</TABLE>
(Bullet) LIFEGOAL BALANCED GROWTH PORTFOLIO -- LifeGoal Balanced Growth
Portfolio's investment objective is to seek total return through a
balanced portfolio of equity and fixed income securities.
<TABLE>
<CAPTION>
<S> <C> <C>
FUND CATEGORY RANGE FUNDS
Large-Capitalization Domestic Equity Funds 15-35% Nations Capital Growth Fund
Nations Disciplined Equity Fund
Nations Equity Income Fund
Nations Managed Index Fund
Nations Value Fund
Small/Mid-Capitalization Domestic Equity Funds 10-20% Nations Emerging Growth Fund
Nations Managed SmallCap Index Fund
Core International Equity Funds 5-15% Nations International Equity Fund
Core Bond Funds 40-60% Nations Diversified Income Fund
Nations Strategic Fixed Income Fund
Nations Global Government Income Fund
</TABLE>
(Bullet) LIFEGOAL INCOME AND GROWTH PORTFOLIO -- LifeGoal Income and Growth
Portfolio's investment objective is to seek current income and modest
growth to protect against inflation and to preserve purchasing power.
<TABLE>
<CAPTION>
<S> <C> <C>
FUND CATEGORY RANGE FUNDS
Large-Capitalization Domestic Equity Funds 10-30% Nations Capital Growth Fund
Nations Disciplined Equity Fund
Nations Equity Income Fund
Nations Managed Index Fund
Nations Value Fund
Core International Equity Funds 0-10% Nations International Equity Fund
Short Duration Bond Funds 50-90% Nations Short-Term Income Fund
Nations Short-Intermediate Government
Fund
Money Market Funds 0-20% Nations Prime Fund
</TABLE>
7
<PAGE>
The LifeGoal Portfolios are intended primarily for long-term investors. The
LifeGoal Portfolios are structured as "funds of funds" that allocate
substantially all of their assets to investments in Primary A Shares of various
Nations Funds. The performance of the LifeGoal Portfolios will, therefore,
correspond to the performance of the various underlying Nations Funds.
Additional information about the underlying Nations Funds, including their
investment objectives, investment policies and practices, is set forth below
under "Descriptions of Underlying Nations Funds." The Adviser allocates and
reallocates each LifeGoal Portfolio's assets among the underlying Nations Funds
identified above, and potentially other Nations Funds, based on the percentage
ranges shown above for the various fund categories. As discussed below under
"The Asset Allocation Process," a LifeGoal Portfolio's actual investment
allocation may deviate from the percentage ranges shown above, over the short or
long term.
How Objectives Are Pursued
BENEFITS OF ASSET ALLOCATION
For most investors, choosing the mix of asset classes is the most important
investment decision they can make. Asset allocation is the single greatest
determinant of an investor's return and risk. It is the process of developing a
diversified portfolio by mixing different asset classes in varying portions to
gain exposure to the different return/risk characteristics of each asset class.
Market segments (i.e. -- international stocks, domestic stocks, bonds) tend to
react in different ways to changes in economic conditions. Therefore, an
investment approach that combines various market segments and asset classes may
reduce overall portfolio volatility.
The assets of each LifeGoal Portfolio are allocated among various asset classes
through their investment in different fund categories. Each LifeGoal Portfolio
has its own asset allocation strategy which gives it a distinctive risk profile
and offers different return potential. Investors should select the LifeGoal
Portfolio (or Portfolios) which best matches their investment goals, risk
tolerance and investment horizon.
In general, the greater the LifeGoal Portfolio's allocation to equity funds, the
greater the potential return and risk of price decline. Because of equity funds'
greater risks, investors in the LifeGoal Portfolios that have a higher
allocation to equity funds should have a longer investment horizon.
Although the Adviser will seek to achieve the investment objective of each
LifeGoal Portfolio, there is no assurance that it will be able to do so. No
single LifeGoal Portfolio should be considered, by itself, to provide a complete
investment program for any investor. The net asset value of the shares of a
LifeGoal Portfolio fluctuates based on fluctuations in the values of the
underlying Nations Funds' shares, which, in turn, fluctuate based on market
conditions and other factors. Therefore, investors should not rely upon LifeGoal
Portfolios for short-term financial needs. The LifeGoal Portfolios are not
intended to provide a vehicle for participating in short-term swings in the
stock market and their shares are not insured against loss of principal.
THE ASSET ALLOCATION PROCESS
Subject to the general supervision of the Company's Board of Directors, the
Adviser is responsible for allocating and reallocating each LifeGoal Portfolio's
assets among the Nations Funds in which it invests, and for rebalancing such
portfolio allocations. In this context, allocation is the process of setting or
changing the weightings of the different fund categories and Nations Funds
within a particular LifeGoal Portfolio's portfolio. The "weightings" of the
different fund categories and Nations Funds within a particular LifeGoal
Portfolio's portfolio are the percentage targets that the Adviser sets for
investment in a particular fund category or Nations Fund. All fund category
weightings will be within the overall percentage ranges shown
8
<PAGE>
above. Rebalancing is the process of bringing portfolio allocations back into
alignment with the applicable weightings. A LifeGoal Portfolio's investments are
continuously monitored and are reallocated as often as the Adviser deems
appropriate. In addition, portfolio allocations and performance are reviewed at
least quarterly for rebalancing at the discretion of the Adviser.
Although the Adviser may rebalance each LifeGoal Portfolio's holdings quarterly,
it expects to rebalance less often. Thus, over time, it is likely that the
percentage of a particular LifeGoal Portfolio's assets actually invested in a
particular Nations Fund or fund category will not correspond precisely with the
applicable weightings. Also, depending on the frequency of rebalancings, the
percentage of a particular LifeGoal Portfolio's assets actually invested in a
particular fund category at any given time may deviate from the percentage
ranges shown above, and such deviation may continue for some time.
The Adviser has adopted certain policies designed to reduce the extent of such
deviations. For example, if any fund category percentage ranges are exceeded,
the Adviser will allocate new investment dollars to the other fund categories.
Likewise, the Adviser will allocate new investment dollars to fund categories
whose minimum percentages have not been met. Redemption requests, however, will
generally be met by redeeming shares of underlying Nations Funds according to
the applicable weightings.
Determining the asset allocation applicable to each LifeGoal Portfolio is a two
step process. The first step is determining the broad asset classes for each
LifeGoal Portfolio -- large and small capitalization domestic stocks, foreign
stocks, bonds and money market securities. In making this determination, the
Adviser will consult the relevant historical data for the returns of each asset
class in various economic scenarios. Those returns will be reviewed in the
context of the Adviser's outlook for the economy and markets and adjusted for
reasonableness. The second step in the process is to determine the particular
Nations Funds in which each LifeGoal Portfolio will invest. The Adviser looks at
historic returns and valuations to determine which Nations Funds are most
appropriate. Determining how the individual Nations Funds may interact with one
another within a portfolio is a critical part of this second step.
Although it is expected that the LifeGoal Portfolios will invest in the Nations
Funds identified in "Description of Underlying Nations Funds," the Adviser has
the discretion to change the particular Nations Funds used as underlying
investments for the LifeGoal Portfolios. Among other things, the Adviser may
substitute or include other funds from the Nations Fund Family, including any
introduced subsequent to this Prospectus, as permissible investments for the
LifeGoal Portfolios.
GENERAL CHARACTERISTICS AND RISK FACTORS OF THE MAJOR ASSET CLASSES
The underlying Nations Funds invest in various stocks, bonds and money market
securities. This section provides a brief summary of the general characteristics
and overall risk factors associated with these asset classes. Additional
information is provided under "Description of Underlying Nations Funds" below
and in the prospectuses of the underlying Nations Funds.
Common stocks represent ownership in a company. Stock prices move with changes
in a company's current earnings and its prospects for the future, and with
overall stock market conditions. Stocks offer the potential for price
appreciation and rising dividends. While smaller companies usually reinvest
their earnings back into the company and therefore pay minimal, if any,
dividends, they offer the possibility of greater appreciation.
Historically, stocks have provided higher returns than bonds or money market
securities. Therefore, they have also provided the greatest protection against
inflation and the resulting erosion of purchasing power. However, the additional
return has been accompanied by additional volatility. Equity investors should
have a long-term investment horizon and be willing to accept the inevitable
periods of market declines.
Bonds are a contract. The issuer has an obligation to pay a specified rate of
interest (which
9
<PAGE>
may be fixed or variable) at specified times and to repay the bond's principal
value upon maturity. Bonds are subject to credit risk and to interest rate risk.
Credit risk refers to the possibility that a bond's price may fall due to a
credit downgrade or a principal or interest payment default. Interest rate risk
refers to a bond's price movement in response to changes in market interest
rates. As a general rule, when market interest rates rise, bond prices fall.
Typically, the longer the maturity of a bond, the greater the potential price
fluctuation.
Money market securities are short term debt obligations issued primarily by the
U.S. Government, government agencies or corporations. High quality money market
securities are very low risk investments; their low risk, however, is
accompanied by lower potential returns relative to other investments.
INVESTMENT COMPANY SECURITIES: Each of the LifeGoal Portfolios intends, as a
fundamental policy, to concentrate investments by investing 25% or more of its
total assets in the mutual fund industry.
Although some of the Nations Funds in which the LifeGoal Portfolios invest do
not necessarily share the same investment objective as the investing LifeGoal
Portfolio, those Nations Funds will be selected by the Adviser based on the
asset allocation process described above.
Although each LifeGoal Portfolio intends to invest substantially all of its
assets in some or all of the underlying Nations Funds, each LifeGoal Portfolio
reserves the right to invest in obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, repurchase agreements, and money
market instruments with respect to any assets not so invested in Nations Funds.
It is not expected that any LifeGoal Portfolio will invest more than 5% of its
assets in any of these direct investments.
INVESTMENT LIMITATIONS: Each LifeGoal Portfolio is subject to a number of
investment limitations, which are described in the SAI. Among other things, the
LifeGoal Portfolios' fundamental policies permit them to borrow money from banks
for temporary or emergency purposes, subject to percentage and other
limitations, and to enter into forward purchase commitments and issue multiple
classes of shares. The investment objective, policies and limitations of each
LifeGoal Portfolio, unless otherwise specified, may be changed without a vote of
the LifeGoal Portfolio's shareholders. If the investment objective, policies or
limitations of a LifeGoal Portfolio change, shareholders should consider whether
the LifeGoal Portfolio remains an appropriate investment in light of their
current position and needs.
The Nations Funds also have adopted certain investment restrictions which may be
more or less restrictive than those applicable to the LifeGoal Portfolios,
thereby allowing a LifeGoal Portfolio to participate in certain investment
strategies indirectly that are prohibited under the investment restrictions
described in the LifeGoal Portfolios' SAI. The investment restrictions of the
underlying Nations Funds are set forth in their respective prospectuses and
statements of additional information.
PORTFOLIO TURNOVER: Generally, LifeGoal Portfolios will purchase portfolio
securities for capital appreciation or investment income, or both, and not for
short-term trading profits. The LifeGoal Portfolios' portfolio turnover rates
are not expected to exceed 50%.
10
<PAGE>
Description of Underlying Nations Funds --
Investment Objectives, Policies and Practices
The LifeGoal Portfolios seek to achieve their investment objectives by investing
in certain Nations Funds (each, a "Fund"). The following section provides
summaries of the Nations Funds' investment objectives, policies and practices.
These summaries are intended to help investors understand some of the more
significant aspects of the underlying Nations Funds, but are not intended to be
comprehensive disclosures of all policies, practices and risks associated with
investments by the LifeGoal Portfolios in the Nations Funds. To receive a
prospectus for any underlying Nations Fund, which contains more complete
information, please call Nations Fund at 1-800-982-2271.
EQUITY FUNDS
NATIONS CAPITAL GROWTH FUND: The Fund's investment objective is to seek growth
of capital by investing in companies that are believed to have superior earnings
growth potential. The Fund invests in larger capitalization, high-quality
companies which possess above average earnings growth potential. While the
Fund's investments will generally be made in companies which share some of the
following characteristics:
(Bullet) above-average earnings growth relative to the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index")1;
(Bullet) established operating histories, strong balance sheets and favorable
financial characteristics; and
(Bullet) above-average return on equity relative to the S&P 500 Index,
the Fund has a flexible charter which allows it to take advantage of other
opportunities. Under normal market conditions, the Fund invests at least 65% of
its total assets in common stocks. In addition to common stocks, the Fund may
also invest in preferred stocks, securities convertible into common stocks and
other types of securities having common stock characteristics such as rights and
warrants. The Fund may invest a portion of its assets in foreign securities.
NATIONS DISCIPLINED EQUITY FUND: The Fund's investment objective is to seek
growth of capital by investing in companies that are expected to produce
significant increases in earnings per share. The Adviser believes that companies
experiencing positive earnings trends have the potential to generate significant
increases in share price. The Adviser identifies securities for inclusion in the
portfolio through a combination of quantitative and qualitative methods. Using a
computer modeling program, the portfolio manager identifies securities that have
experienced positive earnings trends. Fundamental research is used to support
the model's analysis. Under normal market conditions, the Fund invests at least
65% of its total assets in common stocks of domestic issuers. The Fund also may
invest in preferred stocks, securities convertible into common stock, warrants
and rights to purchase common stock, options, and U.S. Government and corporate
debt securities, and foreign securities.
NATIONS EMERGING GROWTH FUND: The Fund's investment objective is to seek capital
appreciation by investing in emerging growth companies that are believed to have
superior long-term earnings growth prospects. The Fund invests primarily in
emerging growth companies with revenues between $50 million and $1.5 billion.
The Fund focuses on companies with above average earnings growth rates and
profit margins, yet the portfolio may also include positions
1 "Standard & Poor's 500" is a registered service marks of Standard & Poor's
Corporation ("S&P"), which does not sponsor, and is not affiliated with,
LifeGoal Portfolios or any of the Nations Funds.
11
<PAGE>
in special situation companies whose growth is expected to accelerate. In
selecting companies for investment, the Adviser considers overall growth
prospects, financial condition, competitive position, technology, research and
development, productivity, innovation and management strength among other
factors. Under normal market conditions, the Fund invests at least 65% of its
total assets in common stocks. The Fund also may invest in securities
convertible into common stocks and may invest a portion of its assets in foreign
securities. The volatility of emerging growth stocks is higher than that of
larger companies so, while they may have greater potential for gains, they also
carry greater downside risk.
NATIONS EQUITY INCOME FUND: The Fund's investment objective is to seek current
income and growth of capital by investing primarily in companies with above
average dividend yields. The investment program of the Fund is based on several
premises. First, dividends are normally a more stable and predictable source of
return than capital appreciation. Second, diversifying equity holdings in a
manner that includes every major economic sector contributes to reduced
volatility, without a commensurate reduction in expected investment return.
Finally, investing in dividend paying stocks in all the economic sectors can
provide greater income than the S&P 500 Index with less volatility.
Collectively, these traits may be combined in such a fashion as to produce
returns in excess of the market, as measured by the S&P 500 Index, on a
comparable risk basis.
Under normal circumstances, the Fund will invest at least 65% of its assets in
income-producing common stocks, including securities convertible into or
ultimately exchangeable for common stock (i.e., convertible bonds or convertible
preferred stock), whose prospects for dividend growth and capital appreciation
are considered favorable by the Adviser. The Fund also may invest its assets in
fixed-income securities (corporate and government bonds of various maturities),
preferred stocks and warrants and other debt securities, including up to 5% of
its assets in debt securities that are rated below investment grade (e.g. rated
"BB" by S&P) or if not rated, are of equivalent investment quality as determined
by the Adviser. The Fund may invest a portion of its assets in foreign
securities.
NATIONS MANAGED INDEX FUND: The Fund's investment objective is to seek, over the
long-term, to provide a total return which (gross of fees and expenses) exceeds
the total return of the S&P 500 Index. The Fund will invest in selected equity
securities that are included in the S&P 500 Index. The S&P 500 Index is a
capitalization weighted index consisting of 500 common stocks chosen for market
size, liquidity and industry group representation.
Unlike traditional index funds, the Fund has a "managed" aspect. The Adviser
believes that a managed equity index portfolio can provide investors with
positive incremental performance relative to the S&P 500 Index while minimizing
the downside risk of underperforming the index over time. The Adviser ranks the
attractiveness of each security in the S&P 500 Index according to a multifactor
valuation model. The Adviser then screens out the lower ranked stocks resulting
in a portfolio of 350 to 400 holdings that capture the investment
characteristics of the S&P 500 Index. Under normal conditions, the Adviser will
attempt to invest as much of the Fund's assets as is practical and, in any event
at least 65% of its total assets, in common stocks which are included in the S&P
500 Index. The Fund is expected, however, to maintain a position in high-quality
short-term debt securities and money market instruments to meet redemption
requests.
NATIONS MANAGED SMALLCAP INDEX FUND: The Fund's investment objective is to seek,
over the long-term, to provide total return which (gross of fees and expenses)
exceeds that of the Standard & Poor's SmallCap 600 Index (the "S&P 600 Index").2
The Fund will invest in selected equity securities that are included in the S&P
600 Index. The S&P 600 Index is a capitalization weighted index consisting of
600 domestic
2 "Standard & Poor's 600" is a registered service mark of S&P.
12
<PAGE>
stocks which captures the economic and industry characteristics of small stock
performance.
Unlike traditional index funds, the Fund has a "managed" aspect. The Adviser
believes that a managed equity index portfolio can provide investors with
positive incremental performance relative to the S&P 600 Index while minimizing
the downside risk of underperforming the index over time. From the initial S&P
600 Index stock universe, the Adviser ranks the attractiveness of each security
according to a multifactor valuation model. The Adviser then screens out the
lower ranked stocks resulting in a portfolio of approximately 450 to 500
holdings that capture the investment characteristics of the S&P 600 Index. Under
normal conditions, substantially all of the Fund's assets, and, in any event at
least 65% of its total assets, will be invested in common stocks which are
included in the S&P 600 Index. The Fund is expected, however, to maintain a
position in high-quality short-term debt securities and money market instruments
to meet redemption requests.
NATIONS VALUE FUND: The Fund's investment objective is to seek growth of capital
by investing in companies believed to be undervalued. The Fund invests in high
quality, large capitalization stocks which are believed to be undervalued
relative to the overall stock market or other stocks within the same industry.
The principal factor considered by the Adviser in making this determination is
the ratio of a stock's price to earnings. The Adviser believes that companies
with lower price to earnings ratios are more likely to provide better
opportunities for capital appreciation. This "value" approach generally produces
a dividend yield greater than the market average. Through a combination of the
"value" approach and broad diversification among economic sectors and
industries, the Fund pursues above-average returns while seeking to avoid above-
average risk.
Under normal market conditions, at least 65% of the Fund's total assets are
invested in domestic stocks. The Fund may invest a portion of its assets in
foreign securities as well as U.S. Government Obligations and investment grade
debt securities of domestic companies.
INTERNATIONAL FUNDS
NATIONS EMERGING MARKETS FUND: The Fund's investment objective is to seek
long-term capital growth by investing primarily in equity securities of
companies in emerging market countries such as those in Latin America, Eastern
Europe, the Pacific Basin, the Far East, Africa and India. Under normal market
conditions, the Fund will invest at least 65% of its total assets in equity
securities of companies in emerging markets. The Fund also may invest in other
types of instruments, including debt securities. The Fund intends to invest in
at least three different countries, although it may, from time to time, invest
all of its assets in a single country. In such cases, events occurring in such
country are more likely to affect the Fund's investments.
NATIONS INTERNATIONAL EQUITY FUND: The Fund's investment objective is to seek
long-term capital growth by investing primarily in equity securities of
non-United States companies in Europe, Australia, the Far East and other areas,
including developing countries. The Fund invests in both established and
developing markets around the world. While emphasizing established markets, the
Fund typically has some exposure to the more rapidly growing markets of the
Pacific Basin, Latin America and Eastern Europe.
Under normal market conditions, the Fund will invest at least 65% of its assets
in common stocks of non-United States companies and may invest up to 35% of its
assets in any other type of security, including convertible securities,
preferred stocks, and various debt securities. Under normal circumstances, the
Fund invests in at least three different countries. Under unusual circumstances,
however, the Fund may invest all of its assets in one or two countries. In such
cases, events occuring in those countries are more likely to affect the Fund's
investments.
NATIONS PACIFIC GROWTH FUND: The Fund's investment objective is to seek
long-term capital growth by investing primarily in equity securities of
companies in the Pacific Basin and the Far East (excluding Japan). Under normal
market conditions, the Fund will invest at least 65% of
13
<PAGE>
its total assets in securities of issuers that conduct their principal business
activities in countries of the Pacific Basin and Far East, except for Japan. The
Fund intends to invest in at least three different countries, although it may,
from time to time, invest all or a significant portion of its assets in a single
country. In such cases, events occurring in that country are more likely to
affect the Fund's investments. The Fund will focus on equity securities, but may
also invest in investment grade debt obligations.
NATIONS GLOBAL GOVERNMENT INCOME FUND: Nations Global Government Income Fund's
investment objective is to seek total return by investing primarily in high
quality debt securities issued by governments, banks and supranational entities
located throughout the world.
In seeking to achieve its investment objective, the Fund will invest under
normal market conditions at least 65% of its total assets in debt securities
issued or guaranteed by U.S. or foreign governments (including states, provinces
and municipalities) or their agencies, instrumentalities or subdivisions
("Government Securities"). Except for temporary defensive purposes, the Fund
will concentrate its investments in foreign Government Securities. Concentration
in this context means the investment of more than 25% of the Fund's total assets
in such securities. The Fund may invest in the debt securities of any type of
issuer, including corporations, banks and supranational entities.
The Fund, under normal market conditions, will invest in at least three
different countries. These countries may include the U.S., the countries of
Western Europe, Japan, Australia, New Zealand and Canada. If the Fund invests a
significant portion of its assets at any time in a single country, events
occurring in such country are more likely to affect the Fund's investments. The
Fund may invest in securities of issuers located in any region or country and
that are denominated in any currency. For defensive purposes, the Fund may
temporarily invest substantially all of its assets in U.S. financial markets or
in U.S. dollar-denominated instruments.
Supranational entities are international organizations jointly operated by
multiple sovereign governments including, for example, the World Bank, the
European Coal and Steel Community, the Asian Development Bank, the European
Investment Bank and the Inter-American Development Bank. Supranational entities
generally have no taxing authority and are dependent upon their members for the
funds necessary to pay principal and interest on their debt obligations.
Nations Global Government Income Fund's yield and share price will change based
on changes in domestic or foreign interest rates and in an issuer's
creditworthiness.
BOND FUNDS
NATIONS DIVERSIFIED INCOME FUND: The Fund's investment objective is to seek
total return with an emphasis on current income by investing in a diversified
portfolio of fixed income securities. The Fund actively seeks opportunities
within various bond market sectors, balancing credit and interest rate risk.
Under normal market conditions, the Fund will invest at least 65% of the total
value of its assets in investment grade debt obligations, including fixed income
securities such as government, government agency and corporate bonds. Up to 35%
of the Fund's total assets may be invested in securities rated lower than
investment grade. Non-investment-grade debt securities are sometimes referred to
as "high yield bonds" or "junk bonds," and tend to have speculative
characteristics, generally involve more risk of principal and income than higher
rated securities, and have yields and market values that tend to fluctuate more
than higher quality securities. Under normal market conditions, it is expected
that the average weighted maturity of the Fund's portfolio will be greater than
five years. Although the Fund invests primarily in securities of U.S. issuers,
the Fund may invest a portion of its assets in foreign securities.
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND: The Fund's investment objective is
to seek high current income consistent with modest fluctuation of principal. The
Fund invests primarily in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentali-
14
<PAGE>
ties. The Fund invests substantially all of its assets in U.S. Government
Obligations and repurchase agreements relating to such obligations. Under normal
market conditions, it is expected that the average weighted maturity of the
Fund's portfolio will be three to five years and the duration will not exceed
five years.
NATIONS SHORT-TERM INCOME FUND: The Fund's investment objective is to seek high
current income consistent with minimal fluctuation of principal. The Fund
invests in a broad range of investment grade debt obligations. Under normal
market conditions, it is expected that the average weighted maturity and the
duration of the Fund's portfolio will not exceed three years. The Fund may
invest a portion of its assets in foreign securities.
NATIONS STRATEGIC FIXED INCOME FUND: The Fund's investment objective is to seek
total return by investing in investment grade fixed income securities. The Fund
invests in a broad range of investment grade debt securities. Under normal
market conditions, it is expected that the average weighted maturity of the
Fund's portfolio will be 10 years or less and under no circumstances exceed 15
years. Under normal market conditions, the Fund will invest at least 65% of the
total value of its assets in government, corporate and mortgage-backed
securities. Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. The Fund may invest a
portion of its assets in foreign securities.
MONEY MARKET FUND
NATIONS PRIME FUND: The Fund's investment objective is to seek the maximization
of current income to the extent consistent with the preservation of capital and
the maintenance of liquidity. The Fund invests in a diversified portfolio of
high quality money market instruments with maturities of 397 days or less from
the date of purchase. Securities subject to repurchase agreements may bear
longer maturities. The Fund may invest in U.S. Treasury bills, notes and bonds
and other instruments issued directly by the U.S. Government. The Fund may also
invest in bank and commercial instruments that may be available in the money
markets, high quality short-term taxable obligations issued by state and local
governments, and repurchase agreements relating to U.S. Government Obligations.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Fund can maintain a stable net
asset value of $1.00 per share.
GENERAL
OTHER INVESTMENT PRACTICES: Each of the Nations Funds may invest in certain
specified derivative securities, including some or all of the following:
interest rate swaps, caps and floors for hedging purposes; exchange-traded
options; over-the-counter options executed with primary dealers, including long
calls and puts and covered calls to enhance return; and Commodity Futures
Trading Commission-approved U.S. and foreign exchange-traded financial futures
and options thereon for market exposure and/or risk-management. Certain Nations
Funds may lend their portfolio securities to qualified institutional investors,
invest in restricted, private placement and other illiquid securities and engage
in reverse repurchase agreements and dollar roll transactions. Certain
securities that have variable or floating interest rates or demand or put
features may be deemed to have remaining maturities shorter than their nominal
maturities for purposes of determining the average weighted maturity and
duration of the Nations Funds. Certain Nations Funds also may invest in
instruments issued by trusts, partnerships or other issuers, including
pass-through certificates representing participations in, or debt instruments
backed by, the securities owned by such issuers.
In addition to the foregoing investment practices, some of the underlying
Nations Funds may invest in securities issued by other investment companies,
preferred stock, securities convertible into common stock and other types of
securities having common stock characteristics (such as rights and warrants),
guaranteed investment contracts, money market instruments, below-investment
grade debt ("junk bonds"), debt obligations of foreign issuers and stocks of
foreign corporations, obligations of domestic or foreign
15
<PAGE>
governments and their political subdivisions, American Depository Receipts
("ADRs", also called American Depository Shares), European Depository Receipts
("EDRs"), Global Depository Receipts ("GDRs"), securities of foreign investment
funds or trusts, real estate investment trust securities, convertible
debentures, mortgage-backed securities, mortgage pass-through certificates,
collateralized mortgage obligations ("CMOs"), mortgage-backed bonds, other
asset-backed securities and obligations of foreign banks and foreign branches of
U.S. banks.
PRINCIPAL RISK CONSIDERATIONS: Investments by a Nations Fund in common stocks
and other equity securities are subject to stock market risks. The value of the
stocks that a Nations Fund holds, like the broader stock market, may decline
over short or even extended periods. The value of a Nations Fund's investments
in debt securities, including U.S. Government Obligations, will tend to decrease
when interest rates rise and increase when interest rates fall. In general,
longer-term debt instruments tend to fluctuate in value more than shorter-term
debt instruments in response to interest rate movements. In addition, debt
securities that are not backed by the U.S. Government are subject to credit
risk, which is the risk that the issuer may not be able to pay principal and/or
interest when due.
Investments by a Nations Fund in foreign securities present additional risks.
These risks include restrictions on foreign investment and repatriation of
capital; fluctuations in currency exchange rates; costs of converting foreign
currency into U.S. dollars and U.S. dollars into foreign currencies; greater
price volatility and less liquidity; settlement practices, including delays,
which may differ from those customary in United States markets; exposure to
political and economic risks, including the risk of nationalization,
expropriation of assets and war; possible imposition of foreign taxes and
exchange control and currency restrictions; lack of uniform accounting, auditing
and financial reporting standards; less governmental supervision of securities
markets, brokers and issuers of securities; less financial information available
to investors; and difficulty in enforcing legal rights outside the United
States. These risks often are heightened for investments in emerging or
developing countries.
Certain of the U.S. Government Obligations that may be purchased by a Nations
Fund (or, under certain circumstances, directly by a LifeGoal Portfolio) are not
backed by the U.S. Treasury. For example, some U.S. Government Obligations are
supported only by the credit of the issuer/guarantor or by the right of the
issuer/guarantor to borrow from the U.S. Government. In addition, the market
value of U.S. Government Obligations may fluctuate due to fluctuations in market
interest rates. Certain types of U.S. Government Obligations are subject to
fluctuations in maturity, yield or value due to their structure or contract
terms.
Certain of the underlying Nations Funds may invest in derivative securities
("derivatives"). A derivative is a financial instrument whose value is based, at
least partly, on the value of an underlying stock, stock index, future or other
security. Examples of such derivatives include futures contracts, options,
interest rate and currency swap transactions. Certain types of derivatives can,
under certain circumstances, significantly increase an investor's exposure to
market or other risks.
Please consult the SAI and the prospectus of the particular Nations Fund for
more information about investment practices and risks.
16
<PAGE>
How Performance Is Shown
From time to time the LifeGoal Portfolios may advertise the total return and
yield of a class of shares. In addition, the LifeGoal Portfolios may advertise
the total return and yield of the Primary A Shares of certain underlying Nations
Funds. TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL DATA AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a class of shares
of a LifeGoal Portfolio or Nations Fund may be calculated on an average annual
total return basis or an aggregate total return basis. Average annual total
return refers to the average annual compounded rates of return over one-, five-,
and ten-year periods or the life of a LifeGoal Portfolio or Nations Fund (as
stated in the advertisement) that would equate an initial amount invested at the
beginning of a stated period to the ending redeemable value of the investment
(reflecting the deduction of any applicable contingent deferred sales charge
("CDSC")), assuming the reinvestment of all dividend and capital gains
distributions. Aggregate total return reflects the total percentage change in
the value of the investment over the measuring period again assuming the
reinvestment of all dividends and capital gain distributions. Total return may
also be presented for other periods or may not reflect a deduction of the CDSC.
"Yield" of a class of shares of a non-money market fund is calculated by
dividing the annualized net investment income per share during a recent 30-day
(or one month) period of the class by the maximum public offering price per
share on the last day of that period. "Yield" of a class of shares of a money
market fund, such as the Nations Prime Fund, is calculated by annualizing the
income generated by an investment in such class over a seven-day period, and
showing it as a percentage of that investment. "Effective yield" assumes
reinvestment of income. The yield on a class of shares does not reflect the
deduction of any applicable CDSC.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a LifeGoal Portfolio's or Nations Fund's
portfolio and operating expenses. Investment performance also often reflects the
risks associated with a LifeGoal Portfolio's or Nations Fund's investment
objective and policies. These factors should be considered when comparing a
LifeGoal Portfolio's or Nations Fund's investment results to those of other
mutual funds and other investment vehicles. Since net asset value and yields
fluctuate, yield data cannot necessarily be used to compare an investment in the
LifeGoal Portfolios or Nations Fund with bank deposits, savings accounts, and
similar investment alternatives which often provide an agreed-upon or guaranteed
fixed yield for a stated period of time.
In addition to Investor B Shares, the LifeGoal Portfolios offer Primary A,
Primary B, Investor A and Investor C Shares. Each class of shares may bear
different sales charges, shareholder servicing fees and other expenses, which
may cause the performance of a class to differ from the performance of the other
classes. Performance quotations will be computed separately for each class of a
LifeGoal Portfolio's shares. Any quotation of total return or yield not
reflecting CDSCs would be reduced if such sales charges were reflected. Any fees
charged by an institution directly to its customers' accounts in connection with
investments in the LifeGoal Portfolios will not be included in calculations of
total return or yield. The Company's annual report will contain additional
performance information and will be available upon request without charge from
the LifeGoal Portfolios' distributor or an investor's Institution, as defined
below.
The following information shows the average annual returns of the underlying
Nations Funds in which the LifeGoal Portfolios may invest. The performance of
the underlying Nations Funds is shown for illustrative purposes only and is not
intended to show LifeGoal Portfolio performance.
17
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NATIONS FUNDS
AVERAGE ANNUAL RETURNS -- PRIMARY A SHARES (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Inception
12 Months 3-Year Period 5-Year Period through
FUND NAME (DATE OF COMMENCEMENT OF OPERATIONS) Ended 9/30/96 Ended 9/30/96 Ended 9/30/96 9/30/96
Nations Capital Growth Fund (9/30/92) 13.28% 14.04% N/A 13.65%
Nations Disciplined Equity Fund (10/1/92)* 13.36% 8.89% N/A 23.35%
Nations Diversified Income Fund (10/30/92) 3.99% 5.58% N/A 8.59%
Nations Emerging Growth Fund (12/4/92) 22.38% 17.40% N/A 16.67%
Nations Emerging Markets Fund (6/30/95) 5.67% N/A N/A 3.50%
Nations Equity Income Fund (4/11/91) 17.67% 13.42% 13.70% 13.79%
Nations International Equity Fund (12/2/91) 10.64% 8.35% N/A 7.88%
Nations Managed Index Fund (8/1/96)** N/A N/A N/A 7.44%
Nations Managed SmallCap Index Fund (10/15/96)*** N/A N/A N/A N/A
Nations Pacific Growth Fund (6/30/95) 5.89% N/A N/A 2.25%
Nations Short-Intermediate Government Fund (8/1/91) 3.90% 3.54% 5.82% 6.49%
Nations Short-Term Income Fund (9/30/92) 5.56% 4.74% N/A 5.12%
Nations Strategic Fixed Income Fund (10/30/92) 3.43% 3.91% N/A 6.17%
Nations Value Fund (9/19/89) 17.13% 15.32% 14.41% 13.40%
Nations Global Government Income Fund (6/30/95) 8.83% N/A N/A 8.45%
</TABLE>
* Date shown reflects commencement of operations of the predecessor fund.
** Based on unaudited data for the period of commencement to January 31, 1997,
this Fund had aggregate total return of 24.15%.
*** Based on unaudited data for the period of commencement to January 31, 1997,
this Fund had aggregate total return of 4.47%.
How The LifeGoal Portfolios Are
Managed
The business and affairs of the Company are managed under the supervision and
direction of its Board of Directors. The LifeGoal Portfolios' SAI contains the
names of and general background information concerning each Director of the
Company.
The Company and the Adviser have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially comply in all
material respects with the recommendations set forth in the May 9, 1994 Report
of the Advisory Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as investment adviser to
the LifeGoal Portfolios and the Nations Funds. NBAI is a wholly owned subsidiary
of NationsBank, which in turn is a wholly owned banking subsidiary of
NationsBank Corporation, a bank holding company organized as a North Carolina
corporation. NBAI has its principal offices at One NationsBank Plaza, Charlotte,
North Carolina 28255.
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TradeStreet Investment Associates, Inc., with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as investment
sub-adviser to the LifeGoal Portfolios and the Nations Funds. TradeStreet is a
wholly owned subsidiary of NationsBank. TradeStreet provides investment
management services to individuals, corporations and institutions.
Gartmore Global Partners, with principal offices at One NationsBank Plaza,
Charlotte, North Carolina, 28255, serves as the investment sub-adviser to four
of the underlying Nations Funds. Gartmore is a joint venture structured as a
general partnership between NB Partner Corp., a wholly owned subsidiary of
NationsBank, and Gartmore U.S. Limited, an indirect, wholly owned subsidiary of
Gartmore Investment Management plc, a UK company which is the holding company
for a leading UK based international fund management group of companies.
National Westminster Bank plc and affiliated entities own 100% of the equity of
Gartmore Investment Management plc.
Subject to the general supervision of the Company's Board of Directors, and in
accordance with each LifeGoal Portfolio's investment policies, the Adviser is
responsible for allocating and reallocating each LifeGoal Portfolio's assets
among the Nations Funds in which it invests, and for rebalancing such portfolio
allocations. A LifeGoal Portfolio's investments are continuously monitored and
are reallocated as often as the Adviser deems appropriate. In addition,
portfolio allocations and performance are reviewed quarterly for rebalancing at
the discretion of the Adviser.
The Adviser has the ability to change the particular Nations Funds used as
underlying investments for the LifeGoal Portfolios. Among other things, the
Adviser may substitute or include other funds from the Nations Fund Family,
including any introduced subsequent to this Prospectus, as permissible
investments for the LifeGoal Portfolios. In the event the Adviser seeks to
invest the assets of a LifeGoal Portfolio in a Nations Fund not identified in
this Prospectus, the Company will amend or supplement the Prospectus to include
all pertinent information.
Both the LifeGoal Portfolios and Nations Funds have investment advisory
arrangements with NBAI. NBAI is entitled to receive advisory fees at an annual
rate of 0.25% of the average daily net assets of each LifeGoal Portfolio. NBAI
also has agreed to absorb all other expenses of the LifeGoal Portfolios (except
taxes, brokerage fees and commissions, extraordinary expenses, and any
applicable Rule 12b-1 fees, shareholder servicing fees and/or shareholder
administration fees). NBAI, in turn, compensates TradeStreet for sub-advisory
services at an annual rate of 0.05% of the average daily net assets of each
LifeGoal Portfolio. NBAI also receives advisory fees at varying rates from the
underlying Nations Funds, and pays TradeStreet or Gartmore Global Partners
sub-advisory fees for their services to the underlying Nations Funds. From time
to time, the Adviser may waive or reimburse (either voluntarily or pursuant to
applicable state expense limitations) advisory fees and/or expenses payable by a
LifeGoal Portfolio. Once commenced, waiver and reimbursement arrangements may be
discontinued at any time. In addition, the Adviser may from time to time
compensate Agents, as defined below, for providing certain services to
Customers. LifeGoal Portfolio's shareholders will indirectly pay their
proportionate share of the advisory fees and other expenses of any Nations Fund
in which the LifeGoal Portfolios are invested.
NBAI, TradeStreet and certain of their affiliates provide advisory and other
services to Nations Funds for which they receive compensation. The level of
compensation received and services provided by them differs among the various
Nations Funds. These differences subject the Adviser to conflicts of interest,
in that the Adviser could increase its fee income or that of its affiliates, or
attain other direct or indirect benefits, by allocating LifeGoal Portfolio
assets to underlying Nations Funds that pay higher fees or provide other
benefits.
Andrew M. Silton has managed the LifeGoal Portfolios since their inception. Mr.
Silton has been President, Chief Investment Officer and Managing Director of
TradeStreet since 1995. Prior to assuming his position with TradeStreet, he was
Director of Investment Strategy and
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Product Development for the Investment Management Group of NationsBank and head
of the Equity Group. Mr. Silton has worked in the investment community since
1979. His past experience includes Senior Vice President, Director of Equity
Strategy and Portfolio Management for Shields Asset Management. Mr. Silton was
also Senior Vice President and Director of Research for First Albany
Corporation, a regional brokerage firm. Prior to joining NationsBank, he
operated his own management consulting firm which advised financial institutions
and local government agencies. Mr. Silton received a B.A. in History from the
State University of New York at Binghamton, a J.D. from the School of Law at the
University of North Carolina at Chapel Hill and a M.A. from the Public Policy
Institute of Duke University.
Morrison & Foerster LLP, counsel to the Company and Nations Funds, and special
counsel to NBAI and certain of its affiliates, has advised the Company and
Nations Funds that NBAI and its affiliates may perform the services contemplated
by the various Investment Advisory Agreements and this Prospectus without
violation of the Glass-Steagall Act. Such counsel has pointed out, however, that
there are no controlling judicial or administrative interpretations or decisions
and that future judicial or administrative interpretations of, or decisions
relating to, present federal or state statutes, including the Glass-Steagall
Act, and regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as future changes in such federal or state
statutes, regulations and judicial or administrative decisions or
interpretations, could prevent such entities from continuing to perform, in
whole or in part, such services. If any such entity were prohibited from
performing any of such services, it is expected that new agreements would be
proposed or entered into with another entity or entities qualified to perform
such services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), a registered broker-dealer
with principal offices at 111 Center Street, Little Rock, Arkansas 72201, serves
as the administrator of the LifeGoal Portfolios pursuant to an Administration
Agreement. Pursuant to the terms of the Administration Agreement, Stephens
provides various administrative and corporate secretarial services to the
LifeGoal Portfolios, including providing general oversight of other service
providers, office space, utilities and various legal and administrative services
in connection with the satisfaction of various regulatory requirements
applicable to the LifeGoal Portfolios. Stephens will not receive any fees from
the LifeGoal Portfolios for these services.
First Data Investor Services Group, Inc. ("First Data"), a wholly owned
subsidiary of First Data Corporation, with principal offices at One Exchange
Place, Boston, Massachusetts 02109, serves as the co-administrator of the
LifeGoal Portfolios. Under the Co-Administration Agreement, First Data provides
various administrative and accounting services to the LifeGoal Portfolios
including performing the calculations necessary to determine net asset value per
share and dividends, preparing tax returns and financial statements and
maintaining the portfolio records and certain of the general accounting records
for the LifeGoal Portfolios. For the services rendered pursuant to the
Co-Administration Agreement, First Data is entitled to receive a fee of $10,000
per year per LifeGoal Portfolio, which will be absorbed by NBAI.
Shares of the LifeGoal Portfolios are sold on a continuous basis by Stephens, as
the LifeGoal Portfolios' sponsor and distributor. The LifeGoal Portfolios have
entered into distribution agreements with Stephens which provide that Stephens
has the exclusive right to distribute shares of the LifeGoal Portfolios.
Stephens may pay service fees or commissions to Institutions that assist
customers in purchasing Investor B Shares of LifeGoal Portfolios.
First Data serves as the Transfer Agent for each of LifeGoal Portfolio's
Investor B Shares. NationsBank of Texas, N.A. ("NationsBank of Texas") serves as
custodian for the assets of each LifeGoal Portfolio.
Stephens, First Data, and NationsBank of Texas all provide services at the
underlying Nations Fund level and are compensated directly by such Nations Funds
for those services.
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<PAGE>
Price Waterhouse LLP serves as independent accountant to the Company. Its
address is 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES: Certain administrative and other fees and expenses will be charged at
the LifeGoal Portfolios and Nations Funds levels. However, redundancies of fees
and expenses between the LifeGoal Portfolios and Nations Funds will be minimal,
because distinct services are being provided at each fund level. For example,
the LifeGoal Portfolios pay advisory fees to the Adviser for its services in
allocating LifeGoal Portfolio assets among the underlying Nations Funds. These
services are distinct from the services provided by the Adviser to the Nations
Funds in managing the Nations Funds' individual portfolio securities.
NBAI, under its investment advisory agreement with the LifeGoal Portfolios, has
agreed to absorb all expenses of the LifeGoal Portfolios, except taxes,
brokerage fees and commissions, extraordinary expenses and any applicable Rule
12b-1 fees, shareholder servicing fees and/or shareholder administration fees.
The LifeGoal Portfolios' expenses that will be absorbed by NBAI include, but are
not limited to: fees paid to service providers other than the Adviser; interest;
directors' fees; federal and state securities registration and qualification
fees; costs of preparing and printing prospectuses for regulatory purposes and
for distribution to existing shareholders; certain insurance premiums; outside
auditing and legal expenses; and costs of shareholder reports and shareholder
meetings. Investor B Shares also bear certain class specific expenses, which are
described under "Shareholder Servicing and Distribution Plans," below.
The LifeGoal Portfolios do not pay any front-end sales loads or contingent
deferred sales charges in connection with the purchase or redemption of shares
of the Nations Funds. By investing in Primary A Shares of the Nations Funds, the
LifeGoal Portfolios also will not be subject to any asset-based sales charges or
service fees. The sales charges or service fees associated with purchase of
shares of the LifeGoal Portfolios will not exceed the limits set forth in Rule
2830 of the Conduct Rules of the NASD when aggregated with sales charges or
service fees, if any, that the LifeGoal Portfolios pay relating to Nations Funds
shares.
The LifeGoal Portfolios' share of the Nations Funds' expenses may include
expenses that the LifeGoal Portfolios would not have incurred if it had not been
structured as a "fund of funds." For example, if a portfolio manager of one
Nations Fund purchases the same securities that the portfolio manager of another
Nations Fund is selling, there may be transaction charges and commissions that
achieve little or no benefit for the LifeGoal Portfolios. Such transactions will
be rare because the Nations Funds pursue a broad range of investment strategies,
and therefore invest in different types of securities.
Organization And History
The LifeGoal Portfolios are members of the Nations Fund Family, which consists
of the Company, Nations Fund Trust, Nations Fund, Inc., Nations Fund Portfolios,
Inc. and Nations Institutional Reserves. The Nations Fund Family currently has
more than 51 distinct investment portfolios and total assets in excess of $21
billion.
LIFEGOAL FUNDS, INC.: The Company was incorporated in Maryland on July 3, 1996
and commenced operations on October 2, 1996 and shares were offered to the
public on October 15, 1996. The Company's fiscal year end is March 31. As of the
date of this Prospectus, the authorized capital stock of LifeGoal Funds, Inc.
consists of 1,500,000,000 shares of common stock, par value of $.001 per share,
which are divided into series or portfolios, each of which includes several
classes of shares. This Prospectus relates to the Investor B Shares of the
following three portfolios of the Company: LifeGoal Growth Portfolio, LifeGoal
Balanced Growth Portfolio and LifeGoal Income and Growth Portfolio. To obtain
additional information regarding the
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LifeGoal Portfolios' other classes of shares which may be available to you,
contact your Agent, (as defined below) or Nations Fund at 1-800-982-2271.
Shares of each Portfolio and class have equal rights with respect to voting,
except that the holders of shares of a particular Portfolio or class will have
the exclusive right to vote on matters affecting only the rights of the holders
of such Portfolio or class. In the event of dissolution or liquidation, holders
of each class will receive pro rata, subject to the rights of creditors, (a) the
proceeds of the sale of that portion of the assets allocated to that class held
in the respective Portfolio of the Company, less (b) the liabilities of the
Company attributable to the respective Portfolio or class or allocated among the
Portfolios or classes based on the respective liquidation value of each
Portfolio or class.
Shareholders of the Company do not have cumulative voting rights, and therefore
the holders of more than 50% of the outstanding shares of all Portfolios voting
together for election of directors may elect all of the members of the Board of
Directors of the Company. Meetings of shareholders may be called upon the
request of 10% or more of the outstanding shares of the Company. There are no
preemptive rights applicable to any of the Company's shares. The Company's
shares, when issued, will be fully paid and non-assessable.
As of the date of this Prospectus, Stephens owned all of the outstanding
Investor B Shares of the Company and, therefore, would be considered a
controlling person of the Company and each of the LifeGoal Portfolios. As sales
of the LifeGoal Portfolios' Investor B Shares commence, it is expected that
Stephens' percentage ownership will be reduced. It is anticipated that the
Company will not hold annual shareholder meetings on a regular basis unless
required by the Investment Company Act of 1940, as amended, (the "1940 Act") or
Maryland law.
About Your Investment
How To Buy Shares
The LifeGoal Portfolios have established various procedures for purchasing
Investor B Shares in order to accommodate different investors. Purchase orders
for Investor B Shares may be placed through banks, broker/dealers or other
financial institutions (including certain affiliates of NationsBank) that have
entered into a shareholder servicing agreement ("Servicing Agreement") with
Nations Fund ("Servicing Agents") and/or a sales support agreement ("Sales
Support Agreement") with Stephens ("Selling Agents").
There is a minimum initial investment of $1,000, except that the minimum initial
investment is:
(Bullet) $500 for "IRA" investors;
(Bullet) $250 for non-working spousal IRAs; and
(Bullet) $100 for investors participating on a monthly basis in the Systematic
Investment Plan described below.
There is no minimum investment amount for investments by 401(k) plans,
simplified employee pension plans ("SEPs"), salary reduction-simplified employee
pension plans ("SAR-SEPs") or salary reduction-Individual Retirement Accounts
("SAR-IRAs"). However, the assets of such plans must reach an asset value of
$1,000 ($500 for SEPs, SAR-SEPs and SAR-IRAs) within one year of the account
open date. If the assets of such plans do not reach the minimum asset size
within one year, the Company reserves the right to redeem the shares held by
such plans on 60 days' written notice. The minimum subsequent investment is
$100, except for
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investments pursuant to the Systematic Investment Plan described below.
Investor B Shares are purchased at net asset value per share. Purchases may be
effected on days on which the New York Stock Exchange (the "Exchange") is open
for business (a "Business Day").
The Servicing Agents will provide various shareholder services for, and the
Selling Agents will provide sales support assistance to, their respective
customers ("Customers") who own Investor B Shares. Servicing Agents and Selling
Agents are sometimes referred to hereafter as "Agents." From time to time the
Agents, Stephens and Nations Fund may agree to voluntarily reduce the maximum
fees payable for sales support or shareholder services.
The Company reserves the right to reject any purchase order. The issuance of
Investor B Shares is recorded on the books of the LifeGoal Portfolios, and share
certificates are not issued unless expressly requested in writing. Certificates
are not issued for fractional shares.
EFFECTIVE TIME OF PURCHASES: Purchase orders for Investor B Shares of the
LifeGoal Portfolios which are received by Stephens or by the Transfer Agent
before the close of regular trading hours on the Exchange (currently 4:00 p.m.,
Eastern time) on any Business Day are priced according to the net asset value
determined on that day but are not executed until 4:00 p.m., Eastern time, on
the Business Day on which immediately available funds in payment of the purchase
price are received by the LifeGoal Portfolios' Custodian. Such payment must be
received no later than 4:00 p.m., Eastern time, by the third Business Day
following receipt of the order. If funds are not received by such date, the
order will not be accepted and notice thereof will be given to the Agent placing
the order. Payment for orders which are not received or accepted will be
returned after prompt inquiry to the sending Agent.
The Agents are responsible for transmitting orders for purchases of Investor B
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to the Company.
SYSTEMATIC INVESTMENT PLAN: Under the LifeGoal Portfolios' Systematic Investment
Plan ("SIP") a shareholder may automatically purchase Investor B Shares. On a
bi-monthly, monthly or quarterly basis, a shareholder may direct cash to be
transferred automatically from his/her checking or savings account at any bank
to his/her LifeGoal Portfolio account. Transfers will occur on or about the 15th
and/or 30th day of the applicable month. The systematic investment amount may be
in any amount from $25 to $100,000. For more information concerning the SIP,
contact your Agent.
TELEPHONE TRANSACTIONS: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How To Redeem Shares" and "How To
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. Shareholders should be aware that by using the telephone transaction
feature, such shareholders may be giving up a measure of security that they may
have if they were to authorize written requests only. A shareholder may bear the
risk of any resulting losses from a telephone transaction. The Company will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if the Company and its service providers fail to
employ such measures, they may be liable for any losses due to unauthorized or
fraudulent instructions. The Company requires a form of personal identification
prior to acting upon instructions received by telephone and provides written
confirmation to shareholders of each telephone share transaction. In addition,
the Company reserves the right to record all telephone conversations.
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How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders are
effected at the net asset value per share next determined after receipt of the
order by Stephens or by the Transfer Agent, less any applicable Contingent
Deferred Sales Charge ("CDSC"). The Agents are responsible for transmitting
redemption orders to Stephens or to the Transfer Agent and for crediting their
Customers' accounts with the redemption proceeds on a timely basis. No charge
for wiring redemption payments is imposed by the Company. Except for any CDSC
which may be applicable upon redemption of Investor B Shares, as described
below, there is no redemption charge.
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens or by the Transfer Agent.
However, redemption proceeds for shares purchased by check may not be remitted
until at least 15 days after the date of purchase to ensure that the check has
cleared; a certified check, however, is deemed to be cleared immediately.
The Company may redeem a shareholder's Investor B Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of an Agent
pursuant to arrangements between the Agent and its Customers. The Company also
may redeem shares of the LifeGoal Portfolios involuntarily or make payment for
redemption in readily marketable securities or other property under certain
circumstances in accordance with the 1940 Act.
Prior to effecting a redemption of Investor B Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to the Company have previously been made.
The Company may require any additional information reasonably necessary to
evidence that a redemption has been duly authorized.
CONTINGENT DEFERRED SALES CHARGE: Investor B Shares of a LifeGoal Portfolio are
sold without an initial sales charge, but a CDSC will be imposed if such shares
are redeemed within seven years of the date of purchase. No CDSC is imposed on
increases in net asset value above the initial purchase price, including shares
acquired by reinvestment of distributions. Subject to the exclusions described
below, the amount of the CDSC is determined as a percentage of the lesser of the
net asset value or the purchase price of the shares being redeemed. The amount
of the CDSC will depend on the number of years since the initial investment,
according to the following table:
<TABLE>
<CAPTION>
CDSC as a
Percentage of
Dollar
Amount Subject to
Year Since Purchase Made Charge
<S> <C>
First 5.25%
Second 5.00%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter None
</TABLE>
Solely for purposes of determining the period of time that has elapsed from the
purchase of any Investor B Shares, all purchases are deemed to have been made on
the trade date of the transaction. In determining whether a CDSC is applicable
to a redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares held for the longest period of time or shares
acquired pursuant to reinvestment of dividends or distributions. The charge will
not be applied to dollar amounts representing an increase in the net asset value
since the time of purchase.
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The CDSC will be waived on redemptions of Investor B Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as amended
(the "Code")) of a shareholder (including a registered joint owner), (ii) in
connection with the following retirement plan distributions: (a) by qualified
plans, (except in cases of plan level terminations); (b) distributions from an
IRA following attainment of age 59 1/2; (c) a tax-free return of an excess
contribution to an IRA, and (d) distributions from a qualified retirement plan
that are not subject to the 10% additional federal withdrawal tax pursuant to
Section 72(t)(2) of the Code, (iii) effected pursuant to the Company's right to
liquidate a shareholder's account, including instances where the aggregate net
asset value of the Investor B shares held in the account is less than the
minimum account size, (iv) in connection with the combination of the Company
with any other registered investment company by merger, acquisition of assets or
by any other transaction, and (v) effected pursuant to the Automatic Withdrawal
Plan discussed below, provided that such redemptions do not exceed, on an annual
basis, 12% of the net asset value of the Investor B Shares in the account.
Shareholders are responsible for providing evidence sufficient to establish that
they are eligible for any waiver of the CDSC. The Company may terminate any
waiver of the CDSC by providing notice in the LifeGoal Portfolios' Prospectus,
but any such termination would affect only shares purchased after such
termination.
REINSTATEMENT PRIVILEGE: Within 120 days after a redemption of Investor B Shares
of a LifeGoal Portfolio, a shareholder may reinvest any portion of the proceeds
of such redemption in Investor B Shares of the same LifeGoal Portfolio. The
amount which may be so reinvested is limited to an amount up to, but not
exceeding, the redemption proceeds (or to the nearest full share if fractional
shares are not purchased). A shareholder exercising this privilege would receive
a pro rata credit for any CDSC paid in connection with the prior redemption. A
shareholder may not exercise this privilege with the proceeds of a redemption of
shares previously purchased through the reinvestment privilege. In order to
exercise this privilege, a written order for the purchase of Investor B Shares,
together with the proceeds, must be received by the Transfer Agent or by
Stephens within 120 days after the redemption.
AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of the LifeGoal Portfolios if the
value of the Investor B Shares in his/her accounts within the Nations Fund
Family (valued at the net asset value at the time of the establishment of the
AWP) equals $10,000 or more. Investor B Shares redeemed under the AWP will not
be subject to a CDSC, provided that the shares so redeemed do not exceed, on an
annual basis, 12% of the net asset value of the Investor B Shares in the
account. Otherwise, any applicable CDSC will be imposed on shares redeemed under
the AWP. Shareholders who elect to establish an AWP may receive a monthly,
quarterly or annual check or automatic transfer to a checking or savings account
in a stated amount of not less than $25 on or about the 10th or 25th day of the
applicable month of withdrawal. Investor B Shares will be redeemed (net of any
applicable CDSC) as necessary to meet withdrawal payments. Withdrawals will
reduce principal and may eventually deplete the shareholder's account. If a
shareholder desires to establish an AWP after opening an account, a signature
guarantee will be required. An AWP may be terminated by a shareholder on 30
days' written notice to his/her Agent or by the Company at any time.
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How To Exchange Shares
The exchange feature enables a shareholder of Investor B Shares of a LifeGoal
Portfolio to acquire Investor B Shares of another fund in the Nations Fund
Family (which includes both LifeGoal Portfolios and Nations Funds) when that
shareholder believes that a shift between funds is an appropriate investment
decision. A qualifying exchange is based on the next calculated net asset value
per share of each fund after the exchange order is received.
No CDSC will be imposed in connection with an exchange of Investor B Shares that
meets the requirements discussed in this section.
If a shareholder acquired Investor B Shares of a Nations Fund non-money market
fund or Investor D Shares of a Nations Fund money market fund through an
exchange, the CDSC applicable to the original shares purchased will be applied
to any redemption of the acquired shares. Additionally, when an investor
exchanges Investor B Shares of a Nations Fund non-money market fund for shares
of the same class or Investor C Shares of another non-money market fund or
Investor D Shares of any money market fund of Nations Fund, the remaining period
of time (if any) that the CDSC is in effect will be computed from the time of
the initial purchase of the previously held Investor B Shares.
A redemption of shares acquired through an exchange of Investor B Shares will,
in all events, be subject to the highest CDSC schedule applicable to any shares
that were exchanged within the 30 days prior to the redemption.
Furthermore, the holding period (for purposes of determining the applicable rate
of the CDSC) does not accrue while the shares owned are Investor C Shares of a
money market fund or Investor A Shares of Nations Short-Term Income Fund or
Nations Short-Term Municipal Income Fund. As a result, the CDSC that is
ultimately charged upon redemption is based upon the total holding period of
Investor B Shares of a non-money market fund that charges a CDSC.
AUTOMATIC EXCHANGE FEATURE: Under the LifeGoal Portfolios' Automatic Exchange
Feature ("AEF") a shareholder may automatically exchange at least $25 on a
monthly or quarterly basis. A shareholder may direct proceeds to be exchanged
from one Nations Fund to another as allowed by the applicable exchange rules
within the prospectus. Exchanges will occur on or about the 15th or 30th day of
the applicable month. The shareholder must have an existing position in both
funds in order to establish the AEF. This feature may be established by
directing a request to the Transfer Agent by telephone or in writing. For
additional information, an investor should contact his/her Selling Agent.
GENERAL: The LifeGoal Portfolios and each of the other funds of the Nations
Funds Family may limit the number of times this exchange feature may be
exercised by a shareholder within a specified period of time. Also, the exchange
feature may be terminated or revised at any time by the Company upon such notice
as may be required by applicable regulatory agencies (presently 60 days for
termination or material revision), absent unusual circumstances.
The current prospectus for each fund of Nations Funds describes its investment
objective and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.
The Investor B Shares exchanged must have a current value of at least $1,000
(except for
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exchange through the AEF). The Company reserves the right to reject any exchange
request. Only shares that may legally be sold in the state of the investor's
residence may be acquired in an exchange. Only shares of a class that is
accepting investments generally may be acquired in an exchange. An investor may
telephone an exchange request by calling his/her Agent which is responsible for
transmitting such request to Stephens or to the Transfer Agent.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. In such event, shares may be exchanged by mailing the
request directly to the Agent through which the original shares were purchased.
An investor should consult his/her Agent or Stephens for further information
regarding exchanges.
Shareholder Servicing And Distribution
Plans
SHAREHOLDER SERVICING PLAN: The LifeGoal Portfolios' servicing plan ("Servicing
Plan") permits the LifeGoal Portfolios to compensate Servicing Agents for
services provided to their Customers that own Investor B Shares. Payments under
the LifeGoal Portfolios' Servicing Plan are calculated daily and paid monthly at
a rate or rates set from time to time by the Directors, provided that the annual
rate may not exceed 0.25% of the average daily net asset value of the Investor B
Shares.
The fees payable under the Servicing Plan are used primarily to compensate or
reimburse Servicing Agents for shareholder services provided, and related
expenses incurred, by such Servicing Agents. The shareholder services provided
by Servicing Agents may include: (i) aggregating and processing purchase and
redemption requests for Investor B Shares from Customers and transmitting net
purchase and redemption orders to Stephens or the Transfer Agent; (ii) providing
Customers with a service that invests the assets of their accounts in Investor B
Shares pursuant to specific or preauthorized instructions; (iii) processing
dividend and distribution payments from the LifeGoal Portfolios on behalf of
Customers; (iv) providing information periodically to Customers showing their
positions in Investor B Shares; (v) arranging for bank wires; and (vi) providing
general shareholder liaison services.
The Company may suspend or reduce payments under the Servicing Plan at any time,
and payments are subject to the continuation of the LifeGoal Portfolios'
Servicing Plan described above and the terms of the Servicing Agreements. See
the SAI for more details on the Servicing Plan.
DISTRIBUTION PLAN: Pursuant to Rule 12b-1 under the 1940 Act, the Directors of
the Company have approved a Distribution Plan with respect to Investor B Shares
of the LifeGoal Portfolios. Pursuant to the Distribution Plan, the LifeGoal
Portfolios may compensate or reimburse Stephens for any activities or expenses
primarily intended to result in the sale of the LifeGoal Portfolios' Investor B
Shares. Payments under the LifeGoal Portfolios' Distribution Plan will be
calculated daily and paid monthly at a rate or rates set from time to time by
the Directors provided that the annual rate may not exceed 0.75% of the average
daily net asset value of the LifeGoal Portfolios' Investor B Shares.
The fees payable under the Distribution Plan are used primarily to compensate or
reimburse Stephens for distribution services provided by it, and related
expenses incurred, including payments by Stephens to compensate or reimburse
Selling Agents for sales support services provided, and related expenses
incurred, by such Selling Agents. Payments under the Distribution Plan may be
made with respect to the following
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expenses: the cost of preparing, printing and distributing prospectuses, sales
literature and advertising materials, commissions, incentive compensation or
other compensation to, and expenses of, account executives or other employees of
Stephens or the Selling Agents; overhead and other office expenses; opportunity
costs relating to the foregoing; and any other costs and expenses relating to
distribution or sales support activities. The overhead and other office expenses
referenced above may include, without limitation, (i) the expenses of operating
Stephens' or the Selling Agents' offices in connection with the sale of LifeGoal
Portfolios' shares, including rent, the salaries and employee benefit costs of
administrative, operations and support personnel, utility costs, communications
costs and the costs of stationery and supplies, (ii) the costs of client sales
seminars and travel related to distribution and sales support activities, and
(iii) other expenses relating to distribution and sales support activities.
The Company and Stephens may suspend or reduce payments under the Distribution
Plan at any time, and payments are subject to the continuation of the LifeGoal
Portfolios' Distribution Plan described above and the terms of the Sales Support
Agreement between Selling Agents and Stephens. See the SAI for more details on
the Distribution Plan.
The Company understands that Agents may charge fees to their Customers who are
the owners of Investor B Shares for various services provided in connection with
a Customer's account. These fees would be in addition to any amounts received by
a Selling Agent under its Sales Support Agreement with Stephens or by a
Servicing Agent under its Servicing Agreement with the Company. The Sales
Support Agreements and Servicing Agreements require Agents to disclose to their
Customers any compensation payable to the Agent by Stephens or the Company and
any other compensation payable by the Customers for various services provided in
connection with their accounts. Customers should read this Prospectus in light
of the terms governing their accounts with their Agents.
Stephens may, from time to time, at its expense or as an expense for which it
may be reimbursed under the Distribution Plan, pay a bonus or other
consideration or incentive to Agents who sell a minimum dollar amount of shares
of the LifeGoal Portfolios during a specified period of time. Stephens also may,
from time to time, pay additional consideration to Agents not to exceed 5.25% of
the offering price per share on all sales of Investor B Shares as an expense of
Stephens or for which Stephens may be reimbursed under the Distribution Plan or
upon receipt of a CDSC. Any such additional consideration or incentive program
may be terminated at any time by Stephens.
In addition, Stephens has established a non-cash compensation program, pursuant
to which broker/dealers or financial institutions that sell shares of the
LifeGoal Portfolios may earn additional compensation in the form of trips to
sales seminars or vacation destinations, tickets to sporting events, theater or
other entertainment, opportunities to participate in golf or other outings and
gift certificates for meals or merchandise. This non-cash compensation program
may be amended or terminated at any time by Stephens.
How The LifeGoal Portfolios Value Their
Shares
The net asset value of a share of each class is calculated by dividing the total
value of its assets, less liabilities, by the number of shares in the class
outstanding. Shares of each of the LifeGoal Portfolios are valued as of the
close of regular trading on the Exchange (currently 4:00 p.m., Eastern time) on
each Business Day. Currently, the days on which the Exchange is closed (other
than weekends) are: New Year's Day, Presidents' Day, Good Friday, Memorial Day
(observed),
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Independence Day, Labor Day, Thanksgiving and Christmas.
The Nations Funds determine their net asset value per share on a daily basis.
The net asset value of the LifeGoal Portfolio shares will be determined by
reference to the net asset value of the underlying Nations Fund.
How Dividends And Distributions Are
Made; Tax Information
DIVIDENDS AND DISTRIBUTIONS
Each LifeGoal Portfolio declares and pays dividends from net investment income
quarterly. Each LifeGoal Portfolio's net realized capital gains (including net
short-term capital gains) are distributed at least annually.
Investor B Shares of LifeGoal Portfolios are eligible to receive dividends when
declared, provided, however, that the purchase order for such shares is received
at least one day prior to the dividend declaration and such shares continue to
be eligible for dividends through and including the day before the redemption
order is executed.
The net asset value of Investor B Shares in LifeGoal Portfolios will be reduced
by the amount of any dividend or distribution. Certain Agents may provide for
the reinvestment of dividends in the form of additional Investor B Shares of the
same class in the same LifeGoal Portfolio. Dividends and distributions are paid
in cash within five Business Days of the end of the quarter to which the
dividend relates. Dividends and distributions payable to a shareholder are paid
in cash within five Business Days after a shareholder's complete redemption of
his/her Investor B Shares.
TAX INFORMATION
Each of the LifeGoal Portfolios intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). In
general, such qualification relieves a LifeGoal Portfolio of liability for
federal income tax to the extent all of its annual earnings are distributed in
accordance with the Code. Each LifeGoal Portfolio intends to distribute all of
its earnings each taxable year.
Any distributions by a LifeGoal Portfolio of its net investment income
(including net foreign currency gains) and the excess, if any, of its net
short-term capital gain over its net long-term capital loss will be taxable as
ordinary income to shareholders who are not currently exempt from federal income
tax, whether such income is received in cash or reinvested in additional shares.
(Federal income tax for distributions to an Individual Retirement Account are
generally deferred under the Code.)
Corporate shareholders in the LifeGoal Portfolios may be entitled to the
dividends-received deduction for distributions from those funds investing in the
stock of domestic corporations to the extent of the total qualifying dividends
received by the distributing fund. Corporate shareholders of the LifeGoal
Portfolios may be eligible for the dividends-received deduction on the dividends
paid by the LifeGoal Portfolios to the extent that each LifeGoal Portfolio's
income is derived from dividends (which, if received directly, would qualify for
such deduction) received from domestic corporations. In order to qualify for the
dividends-received deduction, a corporate shareholder must hold the LifeGoal
Portfolio shares paying the dividends upon which the deduction is based for at
least 46 days.
Substantially all of the net realized long-term capital gains of the LifeGoal
Portfolios, if any, will be distributed at least annually to the LifeGoal
Portfolios' shareholders. The LifeGoal Portfolios will generally have no tax
liability with respect to such gains, and the distributions will be taxable to
such shareholders who are not
29
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currently exempt from federal income tax as long-term capital gains, regardless
of how long the shareholders have held such LifeGoal Portfolios' shares and
whether such gains are received in cash or reinvested in additional shares.
Each year, shareholders will be notified as to the amount and federal tax status
of all dividends and capital gain distributions paid during the prior year. Such
dividends and distributions may also be subject to state and local taxes.
Dividends and capital gain distributions declared in October, November or
December of any year payable to shareholders of record on a specified date in
such months will be deemed to have been received by shareholders and paid by a
LifeGoal Portfolio on December 31 of such year in the event such dividends and
distributions are actually paid during January of the following year.
Federal law requires the Company to withhold 31% from any dividends (other than
exempt-interest dividends) and capital gain distributions paid by the Company
and/or redemptions (including exchange redemptions) to individual shareholders
unless the shareholder properly furnishes a certified, correct Taxpayer
Identification Number and certifies that withholding does not apply. Such
withholding is also required if the Internal Revenue Service notifies the
Company that the Taxpayer Identification Number provided by the shareholder is
incorrect or that the shareholder is otherwise subject to such withholding.
Amounts withheld are applied to the shareholder's federal tax liability, and a
refund may be obtained from the Internal Revenue Service if withholding results
in overpayment of tax. Federal law also requires the LifeGoal Portfolios to
withhold 30% or the applicable tax treaty rate from dividends paid to certain
nonresident alien, non-U.S. partnership and non-U.S. corporation shareholder
accounts.
The foregoing discussion is based on tax laws and regulations that were in
effect as of the date of this Prospectus and summarizes only some of the
important tax considerations generally affecting the LifeGoal Portfolios and
their shareholders. It is not intended as a substitute for careful tax planning.
Accordingly, potential investors should consult their tax advisors with specific
reference to their own tax situations. Further tax information is contained in
the SAI.
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LIFEGOAL FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LIFEGOAL GROWTH PORTFOLIO
LIFEGOAL BALANCED GROWTH PORTFOLIO
LIFEGOAL INCOME AND GROWTH PORTFOLIO
INVESTOR A, INVESTOR B AND INVESTOR C SHARES AND PRIMARY A AND PRIMARY B SHARES
OCTOBER 15, 1996
SUPPLEMENTED ON JULY 31, 1997
This Statement of Additional Information ("SAI") provides supplementary
information pertaining to shares representing interests in the above listed
three investment portfolios of LifeGoal Funds, Inc. (individually, a "LifeGoal
Portfolio" and collectively, the "LifeGoal Portfolios"). This SAI is not a
prospectus and should be read only in conjunction with the current prospectuses
for the aforementioned LifeGoal Portfolios related to the class or series of
shares in which one is interested, dated October 15, 1996, as supplemented on
March 24, 1997, for the Investor A and C Shares and Primary A and B Shares, and
dated July 31, 1997 for Investor B Shares (each a "Prospectus"). All terms used
in this SAI that are defined in the Prospectuses will have the same meanings
assigned in the Prospectuses. Copies of these Prospectuses may be obtained by
writing Nations Fund c/o Stephens Inc., One NationsBank Plaza, 33rd Floor,
Charlotte, North Carolina 28255, or by calling Nations Fund at 1-800-982-2271.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION............................................................... 1
ADDITIONAL INFORMATION ON LIFEGOAL PORTFOLIO INVESTMENTS
General......................................................... 1
Fundamental Investment Limitations.............................. 2
ADDITIONAL INFORMATION ON UNDERLYING NATIONS
FUNDS' INVESTMENTS......................................................... 5
General......................................................... 5
When-Issued Securities.......................................... 5
Foreign Currency Transactions................................... 6
Futures, Options and Other Derivative
Instruments................................................... 7
Risk Factors Associated with Futures and
Options Transactions.......................................... 16
Interest Rate Transactions...................................... 19
Asset-Backed Securities......................................... 20
Special Situations.............................................. 23
Equity Swap Contracts........................................... 24
Lower Rated Debt Securities..................................... 25
Repurchase Agreements........................................... 26
Reverse Repurchase Agreements................................... 27
Securities Lending.............................................. 27
Short Sales..................................................... 28
Guaranteed Investment Contracts................................. 28
Illiquid Securities............................................. 28
Commercial Instruments.......................................... 29
Real Estate Investment Trusts................................... 29
NET ASSET VALUE............................................................ 29
Purchases and Redemptions....................................... 29
Investment Strategy............................................. 30
Net Asset Value Determination................................... 30
Exchanges....................................................... 30
DESCRIPTION OF SHARES...................................................... 31
Dividends and Distributions..................................... 31
ADDITIONAL INFORMATION CONCERNING TAXES.................................... 32
Qualification as a Regulated Investment
Company..........................................................32
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Page
Excise Tax on Regulated Investment Companies.....................33
Sale or Redemption of Shares.....................................33
Tax Rates........................................................33
Foreign Shareholders.............................................34
Taxation of Nations Funds........................................34
Effect of Future Legislation; Local Tax
Considerations................................................35
DIRECTORS AND OFFICERS OF LIFEGOAL PORTFOLIOS...............................35
Directors, Trustees and Officers of Underlying Nations Funds.....39
Compensation Table...............................................39
SECURITY HOLDERS............................................................41
INVESTMENT ADVISORY, ADMINISTRATION, CUSTODY,
TRANSFER AGENCY, SHAREHOLDER SERVICING, SHAREHOLDER
ADMINISTRATION AND DISTRIBUTION AGREEMENTS..................................42
The Company and Its Common Stock.................................42
Investment Advisory Arrangements of the LifeGoal Portfolios......42
Investment Advisory Arrangements of the Underlying Nations Funds.44
Investment Styles................................................50
Administrator and Co-Administrator...............................56
Distributor......................................................57
Distribution Plans and Shareholder Servicing
Arrangements for Investor Shares...............................58
Investor A Shares......................................58
Investor B Shares......................................59
Investor C Shares......................................60
Information Applicable to Investor A,
Investor B and Investor C Shares...............................62
Shareholder Administration Plan
(Primary B Shares).............................................63
Expenses.........................................................64
Transfer Agents and Custodians...................................65
INDEPENDENT ACCOUNTANT AND REPORTS..........................................65
COUNSEL.....................................................................66
Pending Legal Proceedings........................................66
ADDITIONAL INFORMATION ON PERFORMANCE.......................................66
Yield Calculations...............................................67
Total Return Calculations........................................67
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Page
SCHEDULE A - Description of Ratings........................................A-1
iii
<PAGE>
INTRODUCTION
LifeGoal Funds, Inc. (the "Company") is a diversified open-end
management investment company. The rules and regulations of the Securities and
Exchange Commission (the "SEC") require all mutual funds to furnish prospective
investors certain information concerning the activities of the mutual fund being
considered for investment. This information about the Company is included in
various Prospectuses. The Prospectuses relate to the shares of LifeGoal Growth
Portfolio, LifeGoal Balanced Growth Portfolio and LifeGoal Income and Growth
Portfolio (each a "LifeGoal Portfolio" and collectively, the "LifeGoal
Portfolios"). The Primary A and Primary B Shares are collectively referred to
herein as "Primary Shares" and the Investor A, Investor B and Investor C Shares
are collectively referred to as "Investor Shares." NationsBanc Advisors, Inc.
("NBAI") is the investment adviser to the LifeGoal Portfolios. TradeStreet
Investment Associates, Inc. ("TradeStreet") is investment sub-adviser. As used
herein the "Adviser" shall mean NBAI and/or TradeStreet as the context may
require.
Each LifeGoal Portfolio may (i) own more than 3% of the total
outstanding stock of a registered investment company which is a member of the
Nations Fund Family, (ii) invest more than 5% of its assets in any one such
investment company, and (iii) invest more than 10% of it assets, collectively,
in registered investment companies which are members of the Nations Fund Family.
Each LifeGoal Portfolio will concentrate more than 25% of its assets in the
mutual fund industry. However, each of the underlying mutual funds in which the
LifeGoal Portfolios will invest will not concentrate 25% or more of its total
assets in any one industry.
This SAI is intended to furnish prospective investors with additional
information concerning the Company and the LifeGoal Portfolios. Some of the
information required to be in this SAI is also included in the LifeGoal
Portfolios current Prospectuses, and, in order to avoid repetition, this SAI
will reference sections of the Prospectuses. Additionally, the Prospectuses and
this SAI omit certain information contained in "Part C" of the registration
statement filed with the SEC. Copies of the registration statement, including
items omitted from the Prospectuses and this SAI, may be obtained from the SEC.
ADDITIONAL INFORMATION ON THE LIFEGOAL PORTFOLIO INVESTMENTS
GENERAL
Information concerning each LifeGoal Portfolio's investment objective
is set forth in each of the Prospectuses under the headings "Prospectus Summary"
and "How Objectives Are Pursued". There can be no assurance that the LifeGoal
Funds will achieve their objectives. The principal features of the LifeGoal
Funds' investment programs and the primary risks associated with those
investment programs are discussed in the Prospectuses under the heading "How
Objectives Are Pursued". The principal features and certain risks of the
underlying Nations Funds are discussed in the Prospectuses under the heading
"Description of Underlying Nations Funds."
Under extraordinary circumstances, the LifeGoal Portfolios may invest
100% of their assets in Nations Prime Fund. Such circumstances that would prompt
a shift in the allocation of
<PAGE>
assets for defensive purposes by the Adviser
include concerns about a precipitous decline in the net asset value of any of
the underlying Nations Funds or similar volatility in the Nasdaq National
Market, New York Stock Exchange or American Stock Exchange. The designation of
circumstances as sufficiently extraordinary to permit this defensive investing
is within the Adviser's discretion.
Although each LifeGoal Portfolio intends to invest substantially all of
its assets in underlying Nations Funds, each LifeGoal Portfolio reserves the
right to invest assets not so invested in government securities, repurchase
agreements and money market instruments.
FUNDAMENTAL INVESTMENT LIMITATIONS
Each LifeGoal Portfolio is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of the LifeGoal Fund's outstanding shares.
Under the Investment Company Act of 1940, as amended ("1940 Act"), such
approval requires the affirmative vote, at a meeting of shareholders of a
LifeGoal Portfolio, of (i) at least 67% of the shares of the LifeGoal Portfolio
present at the meeting, if the holders of more than 50% of the outstanding
shares of the LifeGoal Portfolio are present in person or by represented proxy;
or (ii) more than 50% of the outstanding shares of the LifeGoal Portfolio,
whichever is less.
The LifeGoal Portfolios may not:
1. Borrow money or issue senior securities as defined in the 1940 Act except
that (a) a Portfolio may borrow money from banks for temporary or emergency
purposes in amounts up to one-third of the value of such Portfolio's total
assets at the time of borrowing, provided that borrowings in excess of 5% of
the value of such Portfolio's total assets will be repaid prior to the
purchase of additional portfolio securities by such Portfolio, (b) a
Portfolio may enter into commitments to purchase securities in accordance
with the Portfolio's investment program, including delayed delivery and
when-issued securities, which commitments may be considered the issuance of
senior securities, and (c) a Portfolio may issue multiple classes of shares
in accordance with SEC regulations or exemptions under the 1940 Act. The
purchase or sale of futures contracts and related options shall not be
considered to involve the borrowing of money or issuance of senior
securities.
2. Purchase any securities on margin (except for such short-term credits as
are necessary for the clearance of purchases and sales of portfolio
securities) or sell any securities short (except against the box.) For
purposes of this restriction, the deposit or payment by the Portfolio of
initial or maintenance margin connection with futures contracts and related
options and options on securities is not considered to be the purchase of a
security on margin.
3. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and the later disposition of such securities
in accordance with the Portfolio's
2
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investment program may be deemed an underwriting. This restriction shall not
limit a Fund's ability to invest in securities issued by other registered
investment companies.
4. Invest in real estate or real estate limited partnership interests. (Each
Portfolio may, however, purchase and sell securities secured by real estate
or interests therein or issued by issuers which invest in real estate or
interests therein.) This restriction does not apply to real estate limited
partnerships listed on a national stock exchange (e.g., the New York Stock
Exchange).
5. Purchase or sell commodity contracts except that each Portfolio may, to
the extent appropriate under its investment policies, purchase publicly
traded securities of companies engaging in whole or in part in such
activities, may enter into futures contracts and related options, may engage
in transactions on a when-issued or forward commitment basis, and may enter
into forward currency contracts in accordance with its investment policies.
6. Make loans, except that a Portfolio may purchase and hold debt
instruments (whether such instruments are part of a public offering or
privately placed), may enter into repurchase agreements and may lend
portfolio securities in accordance with its investment policies.
7. The LifeGoal Portfolios will be diversified and each Portfolio may not
purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or
securities of other investment companies) if, immediately after such
purchase, more than 5% of the value of such Portfolio's total assets would
be invested in the securities of such issuer, except that up to 25% of the
value of the Portfolio's total assets may be invested without regard to
these limitations and with respect to 75% of such Portfolio's assets, such
Portfolio will not hold more than 10% of the voting securities of any
issuer.
8. Each LifeGoal Portfolio will concentrate its investments in the
securities of other investment companies.
In addition, certain non-fundamental investment restrictions are also
applicable to the LifeGoal Portfolio, including the following:
1. No Portfolio of the Company will purchase or retain the securities
of any issuer if the officers, or directors of the Company, its
advisers, or managers owning beneficially more than one half of one
percent of the securities of each issuer together own beneficially
more than five percent of such securities.
2. No Portfolio of the Company will purchase securities of unseasoned
issuers, including their predecessors, that have been in operation for
less than three years, if by reason thereof the value of such
Portfolio's investment in such classes of securities would exceed 5%
of such Portfolio's total assets. For purposes of this limitation,
issuers include predecessors, sponsors, controlling persons, general
partners, guarantors and originators of underlying assets which have
less than three years of continuous operation or relevant business
experience.
3
<PAGE>
3. No Portfolio will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total
assets except that: (a) this restriction shall not apply to standby
commitments, (b) this restriction shall not apply to a Portfolio's
transactions in futures contracts and related options, and (c) a
Portfolio may obtain short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities.
4. No Portfolio will invest in warrants, valued at the lower of cost
or market, in excess of 5% of the value of such Portfolio's assets,
and no more than 2% of the value of the Portfolio's net assets may be
invested in warrants that are not listed on principal domestic or
foreign exchanges (for purposes of this undertaking, warrants acquired
by a Portfolio in units or attached to securities will be deemed to
have no value).
5. No Portfolio of the Company will purchase securities of companies
for the purpose of exercising control.
6. No Portfolio of the Company will invest more than 15% of the value
of its net assets in illiquid securities, including repurchase
agreements with remaining maturities in excess of seven days, time
deposits with maturities in excess of seven days, restricted
securities, and other securities which are not readily marketable. For
purposes of this restriction, illiquid securities shall not include
securities which may be resold under Rule 144A under the Securities
Act of 1933 that the Board of Directors, or its delegate, determines
to be liquid, based upon the trading markets for the specific
security.
7. No Portfolio of the Company will mortgage, pledge or hypothecate
any assets except to secure permitted borrowings and then only in an
amount up to one-third of the value of the Portfolio's total assets at
the time of borrowing. For purposes of this limitation, collateral
arrangements with respect to the writing of options, futures
contracts, options on futures contracts, and collateral arrangements
with respect to initial and variation margin are not considered to be
a mortgage, pledge or hypothecation of assets.
8. No Portfolio of the Company will purchase oil, gas or mineral
leases or other interests (a Portfolio may, however, purchase and sell
the securities of companies engaged in the exploration, development,
production, refining, transporting and marketing of oil, gas or
minerals).
Notwithstanding the foregoing restrictions, the underlying mutual funds
in which LifeGoal Portfolios may invest have adopted their own investment
restrictions which may be more or less restrictive than those listed above,
thereby allowing a LifeGoal Portfolio to participate in certain investment
strategies indirectly that are prohibited under the fundamental and
non-fundamental investment restrictions listed above and in a LifeGoal Portfolio
Prospectus. The investment restrictions of these underlying mutual funds are set
forth in their respective statements of additional information.
4
<PAGE>
ADDITIONAL INFORMATION ON UNDERLYING NATIONS FUNDS'
INVESTMENTS
GENERAL
Information concerning the investment objective and policies of each
underlying Nations Fund is set forth in each of their prospectuses under the
headings "Objectives," "How Objectives Are Pursued," and "Appendix A" and their
respective SAIs. As is the case with the LifeGoal Portfolios, there can be no
assurance that the underlying Nations Funds will achieve their objectives. The
principal features of the Nations Funds' investment programs and the primary
risks associated with those investment programs are discussed in their
prospectuses under the heading "How Objectives Are Pursued" and "Appendix A."
WHEN-ISSUED SECURITIES
Certain Nations Funds may purchase securities on a "when-issued" basis,
that is, the date for delivery of the payment for the securities is not fixed at
the date of purchase, but is set after the securities are issued (normally
within 45 days after the date of the transaction). Each Nations Fund may also
purchase or sell securities on a delayed delivery basis. The payment obligation
and the interest rate that will be received on the when-issued securities are
fixed at the time the buyer enters into the commitment. Each Nations Fund will
only make commitments to purchase when-issued or delayed delivery securities
with the intention of actually acquiring such securities, but each Nations Fund
may sell these securities before the settlement date if it is deemed advisable.
If a Nations Fund purchases a when-issued security, the Nations Fund
will direct its custodian bank to segregate cash or high grade securities in an
amount equal to the when-issued commitment. Segregated securities will be valued
at market for the purpose of determining the adequacy of the segregated
securities in the account. If the market value of such segregated securities
declines, additional cash or securities will be segregated on a daily basis so
that the market value of the segregated securities will equal the amount of the
Nations Fund's when-issued commitments. To the extent Nations Funds securities
are segregated, they will not be available for new investment or to meet
redemptions.
Securities purchased on a when-issued basis and the securities held in
the Nations Funds are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and changes in the level of
interest rates (which will generally result in all of those securities changing
in value in the same way, i.e., experiencing appreciation when interest rates
fall). Therefore, if in order to achieve higher interest income a Nations Fund
remains substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there is a possibility that the Nations Fund
will experience greater fluctuation in the market value of its assets.
Furthermore, when the time comes for a Nations Fund to meet its
obligations under when-issued commitments, the Nations Fund will do so by use of
its then available cash, by the sale of segregated securities, by the sale of
other securities or, although it would not normally expect to
5
<PAGE>
do so, by directing the sale of the when-issued securities themselves (which may
have a market value greater or less than the Nations Fund's payment obligation
thereunder). The sale of securities to meet such obligations carries with it a
greater potential for the realization of net short-term capital gains, which are
not exempt from federal income tax. The value of when-issued securities on the
settlement date may be more or less than the purchase price.
In a delayed delivery transaction, certain Nations Funds rely on the
other party to complete the transaction. If the transaction is not completed,
the Nations Fund may miss a price or yield considered to be advantageous.
FOREIGN CURRENCY TRANSACTIONS
As described in their Prospectuses, certain Nations Funds may invest in
foreign currency transactions. Foreign securities involve currency risks. The
U.S. dollar value of a foreign security tends to decrease when the value of the
U.S. dollar rises against the foreign currency in which the security is
denominated, and tends to increase when the value of the U.S. dollar falls
against such currency. A Nations Fund may purchase or sell forward foreign
currency exchange contracts ("forward contracts") to attempt to minimize the
risk to the Nations Fund from adverse changes in the relationship between the
U.S. dollar and foreign currencies. A Nations Fund also may purchase and sell
foreign currency futures contracts and related options (see "Purchase and Sale
of Currency Futures Contracts and Related Options"). A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date that is individually negotiated and privately traded by currency
traders and their customers.
Forward foreign currency exchange contracts establish an exchange rate
at a future date. These contracts are transferable in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward foreign currency exchange contract generally has no
deposit requirement, and is traded at a net price without commission. A Nations
Fund will direct its custodian to segregate high grade liquid assets in an
amount at least equal to its obligations under each forward foreign currency
exchange contract. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of a Nations Fund's
portfolio securities or in foreign exchange rates, or prevent loss if the prices
of these securities should decline.
Certain Nations Funds may enter into a forward contract, for example,
when they enter into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. dollar price of
the security (a "transaction hedge"). In addition, when the Adviser believes
that a foreign currency may suffer a substantial decline against the U.S.
dollar, a Nations Fund may enter into a forward sale contract to sell an amount
of that foreign currency approximating the value of some or all of a Nations
Fund's securities denominated in such foreign currency, or when the adviser
believes that the U.S. dollar may suffer a substantial decline against the
foreign currency, a Nations Fund may enter into a forward purchase contract to
buy that foreign currency for a fixed dollar amount (a "position hedge").
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A Nations Fund may, in the alternative, enter into a forward contract
to sell a different foreign currency for a fixed U.S. dollar amount where the
Adviser believes that the U.S. dollar value of the currency to be sold pursuant
to the forward contract will fall whenever there is a decline in the U.S. dollar
value of the currency in which the fund securities are denominated (a
"cross-hedge").
Foreign currency hedging transactions are an attempt to protect a
Nations Fund against changes in foreign currency exchange rates between the
trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated portfolio position. Although these transactions tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time they tend to limit any potential gain that might be realized
should the value of the hedged currency increase. The precise matching of the
forward contract amount and the value of the securities involved will not
generally be possible because the future value of these securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and date
it matures.
The Nations Funds' custodian will segregate cash, U.S. Government
securities or other high-quality debt securities having a value equal to the
aggregate amount of the Nations Fund's commitments under forward contracts
entered into with respect to position hedges and cross-hedges. If the value of
the segregated securities declines, additional cash or securities will be
segregated on a daily basis so that the value of the segregated securities will
equal the amount of the Nations Fund's commitments with respect to such
contracts. As an alternative to segregating all or part of such securities, the
Nations Fund may purchase a call option permitting the Nations Fund to purchase
the amount of foreign currency being hedged by a forward sale contract at a
price no higher than the forward contract price or the Nations Fund may purchase
a put option permitting the Nations Fund to sell the amount of foreign currency
subject to a forward purchase contract at a price as high or higher than the
forward contract price.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
Futures Contracts in General. A futures contract is an agreement
between two parties for the future delivery of fixed income securities or for
the payment or acceptance of a cash settlement in the case of futures contracts
on an index of fixed income or equity securities. A "sale" of a futures contract
means the contractual obligation to deliver the securities at a specified price
on a specified date, or to make the cash settlement called for by the contract.
Futures contracts have been designed by exchanges which have been designated
"contract markets" by the Commodity Futures Trading Commission ("CFTC") and must
be executed through a brokerage firm, known as a futures commission merchant,
which is a member of the relevant contract market. Futures contracts trade on
these markets, and the exchanges, through their clearing organizations,
guarantee that the contracts will be performed as between the clearing members
of the exchange. Presently, futures contracts are based on such debt securities
as long-term U.S. Treasury Bonds, Treasury Notes, Government National Mortgage
Association ("GNMA") modified pass-through mortgage-backed securities,
three-month U.S. Treasury Bills, bank certificates of deposit, and on indices of
municipal, corporate and government bonds.
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Certain Nations Funds may enter futures contracts, while futures
contracts based on securities do provide for the delivery and acceptance of
securities, such deliveries and acceptances are very seldom made. Generally, a
futures contract is terminated by entering into an offsetting transaction. A
Nations Fund will incur brokerage fees when it purchases and sells futures
contracts. At the time such a purchase or sale is made, a Nations Fund must
provide cash or money market securities as a deposit known as "margin." The
initial deposit required will vary, but may be as low as 2% or less of a
contract's face value. Daily thereafter, the futures contract is valued through
a process known as "marking to market," and a Nations Fund that engages in
futures transactions may receive or be required to pay "variation margin" as the
futures contract becomes more or less valuable. At the time of delivery of
securities pursuant to a futures contract based on securities, adjustments are
made to recognize differences in value arising from the delivery of securities
with a different interest rate than the specific security that provides the
standard for the contract. In some (but not many) cases, securities called for
by a futures contract may not have been issued when the contract was written.
Futures contracts on indices of securities are settled through the
making and acceptance of cash settlements based on changes in value of the
underlying rate or index between the time the contract is entered into and the
time it is liquidated.
Futures Contracts on Fixed Income Securities and Related Indices.
Certain Nations Funds may enter into transactions in futures contracts for the
purpose of hedging a relevant portion of their portfolios. A Nations Fund may
enter into transactions in futures contracts that are based on obligations
issued or guaranteed as to payment of principal and interest by the U.S.
Government, it agencies or instrumentalities ("U.S. Government Obligations"),
including any index of government obligations that may be available for trading.
Such transactions will be entered into where movements in the value of the
securities or index underlying a futures contract can be expected to correlate
closely with movements in the value of securities held in a Nations Fund. For
example, a Nations Fund may sell futures contracts in anticipation of a general
rise in the level of interest rates, which would result in a decline in the
value of its fixed income securities. If the expected rise in interest rates
occurs, the Nations Fund may realize gains on its futures position, which should
offset all or part of the decline in value of fixed income fund securities. A
Nations Fund could protect against such decline by selling fixed income
securities, but such a strategy would involve higher transaction costs than the
sale of futures contracts and, if interest rates again declined, the Nations
Fund would be unable to take advantage of the resulting market advance without
purchases of additional securities.
The purpose of the purchase or sale of a futures contract on government
securities and indices of government securities, in the case of certain Nations
Funds, which hold or intend to acquire long-term debt securities, is to protect
a Nations Fund from fluctuations in interest rates without actually buying or
selling long-term debt securities. For example, if long-term bonds are held by a
Nations Fund, and interest rates were expected to increase, the Nations Fund
might enter into futures contracts for the sale of debt securities. Such a sale
would have much the same effect as selling an equivalent value of the long-term
bonds held by the Nations Fund. If interest rates did increase, the value of the
debt securities in the Nations Fund would decline, but the value
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of the futures contracts to the Nations Fund would increase at approximately the
same rate thereby keeping the net asset value of the Nations Fund from declining
as much as it otherwise would have. When a Nations Fund is not fully invested
and a decline in interest rates is anticipated, which would increase the cost of
fixed income securities that the Nations Fund intends to acquire, it may
purchase futures contracts. In the event that the projected decline in interest
rates occurs, the increased cost of the securities acquired by the Nations Fund
should be offset, in whole or part, by gains on the futures contracts by
entering into offsetting transactions on the contract market on which the
initial purchase was effected. In a substantial majority of transactions
involving futures contracts on fixed income securities, a Nations Fund will
purchase the securities upon termination of the long futures positions, but
under unusual market conditions, a long futures position may be terminated
without a corresponding purchase of securities.
Similarly, when it is expected that interest rates may decline, futures
contracts on fixed income securities and indices of government securities may be
purchased for the purpose of hedging against anticipated purchases of long-term
bonds at higher prices. Since the fluctuations in the value of such futures
contracts should be similar to that of long-term bonds, a Nations Fund could
take advantage of the anticipated rise in the value of long-term bonds without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Nations Fund's cash reserves could then be
used to buy long-term bonds in the cash market. Similar results could be
accomplished by selling bonds with long maturities and investing in bonds with
short maturities when interest rates are expected to increase. However, since
the futures market is more liquid than the cash market, the use of these futures
contracts as an investment technique allows a Nations Fund to act in
anticipation of such an interest rate decline without having to sell its
portfolio securities. To the extent a Nations Fund enters into futures contracts
for this purpose, the segregated assets maintained by a Nations Fund will
consist of cash, cash equivalents or high quality debt securities of the Nations
Fund in an amount equal to the difference between the fluctuating market value
of such futures contracts and the aggregate value of the initial deposit and
variation margin payments made by the Nations Fund with respect to such futures
contracts.
Stock Index Futures Contracts. Certain Nations Funds may sell stock
index futures contracts in order to offset a decrease in market value of its
securities that might otherwise result from a market decline. A Nations Fund may
do so either to hedge the value of its portfolio as a whole, or to protect
against declines, occurring prior to sales of securities, in the value of
securities to be sold. Conversely, a Nations Fund may purchase stock index
futures contracts in order to protect against anticipated increases in the cost
of securities to be acquired.
In addition, a Nations Fund may utilize stock index futures contracts
in anticipation of changes in the composition of its portfolio. For example, in
the event that a Nations Fund expects to narrow the range of industry groups
represented in its portfolio, it may, prior to making purchases of the actual
securities, establish a long futures position based on a more restricted index,
such as an index comprised of securities of a particular industry group. As such
securities are acquired, a Nations Fund's futures positions would be closed out.
A Nations Fund may also sell futures contracts in connection with this strategy,
in order to protect against the possibility
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that the value of the securities to be sold as part of the restructuring of its
portfolio will decline prior to the time of sale.
Options on Futures Contracts. Certain Nations Funds may purchase
options on futures contracts. An option on a futures contract gives the
purchaser (the "holder") the right, but not the obligation, to enter into a
"long" position in the underlying futures contract (i.e., a purchase of such
futures contract) in the case of an option to purchase (a "call" option), or a
"short" position in the underlying futures contract (i.e., a sale of such
futures contract) in the case of an option to sell (a "put" option), at a fixed
price (the "strike price") up to a stated expiration date. The holder pays a
non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchase of the option assumes is equal to the
premium plus related transaction costs, although this entire amount may be lost.
Upon exercise of the option by the holder, the exchange clearing corporation
establishes a corresponding long position in the case of a put option. In the
event that an option is exercised, the parties will be subject to all the risks
associated with the trading of futures contracts, such as payment of variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.
Certain Nations Funds may purchase put options on futures contracts in
which the Nations Funds are permitted to invest for the purpose of hedging a
relevant portion of their portfolios against an anticipated decline in the
values of portfolio securities resulting from increases in interest rates, and
may purchase call options on such futures contracts as a hedge against an
interest rate decline when they are not fully invested. A Nations Fund would
write options on these futures contracts primarily for the purpose of
terminating existing positions.
Options on Stock Index Futures Contracts, Options on Stock Indices and
Options on Equity Securities. Certain Nations Funds may purchase put options on
stock index futures contracts, stock indices or equity securities for the
purpose of hedging the relevant portion of its portfolio securities against an
anticipated market-wide decline or against declines in the values of individual
portfolio securities, and it may purchase call options on such futures contracts
as a hedge against a market advance when it is not fully invested. A Nations
Fund would write options on such futures contracts primarily for the purpose of
termination of existing positions. In general, options on stock indices will be
employed in lieu of options on stock index futures contracts only where they
present an opportunity to hedge at lower cost. With respect to options on equity
securities, a Nations Fund may, under certain circumstances, purchase a
combination of call options on such securities and U.S. Treasury bills. The
adviser believes that such a combination may more closely parallel movements in
the value of the security underlying the call option than would the option
itself.
Further, while a Nations Fund generally would not write options on
individual portfolio securities, it may do so under limited circumstances known
as "targeted sales" and "targeted buys," which involve the writing of call or
put options in an attempt to purchase or sell portfolio securities at specific
desired prices. A Nations Fund would receive a fee, or a "premium," for the
writing of the option. For example, where the Nations Fund seeks to sell
portfolio securities at a "targeted" price, it may write a call option at that
price. In the event that the market rises above
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the exercise price, it would receive its "targeted" price, upon the exercise of
the option, as well as the premium income. Also, where it seeks to buy portfolio
securities at a "targeted" price, it may write a put option at that price for
which it will receive the premium income. In the event that the market declines
below the exercise price, a Nations Fund would pay its "targeted" price upon the
exercise of the option. In the event that the market does not move in the
direction or to the extent anticipated, however, the targeted sale or buy might
not be successful and a Nations Fund could sustain a loss on the transaction
that may not be offset by the premium received. In addition, a Nations Fund may
be required to forego the benefit of an intervening increase or decline in value
of the underlying security.
Options and Futures Strategies. The adviser may seek to increase the
current return of certain Nations Funds by writing covered call or put options.
In addition, through the writing and purchase of options and the purchase and
sale of U.S. and certain foreign stock index futures contracts, interest rate
futures contracts, foreign currency futures contracts and related options on
such futures contracts, the adviser may at times seek to hedge against a decline
in the value of securities included in the Nations Fund or an increase in the
price of securities that it plans to purchase for the Nations Fund. Expenses and
losses incurred as a result of such hedging strategies will reduce the Nations
Fund's current return. A Nations Fund's investment in foreign stock index
futures contracts and foreign interest rate futures contracts, and related
options on such futures contracts, are limited to only those contracts and
related options that have been approved by the CFTC for investment by U.S.
Investors. Additionally, with respect to a Nations Fund's investment in foreign
options, unless such options are specifically authorized for investment by order
of the CFTC or meet the definition of "trade option" as set forth in CFTC Rule
32.4, a Nations Fund will not make these investments.
The ability of a Nations Fund to engage in the options and futures
strategies described below will depend on the availability of liquid markets in
such instruments. Markets in options and futures with respect to stock indices,
foreign government securities and foreign currencies are relatively new and
still developing. It is impossible to predict the amount of trading interest
that may exist in various types of options or futures. Therefore, no assurance
can be given that a Nations Fund will be able to utilize these instruments
effectively for the purposes stated below. Furthermore, a Nations Fund's ability
to engage in options and futures transactions may be limited by tax
considerations. Although a Nations Fund will only engage in options and futures
transactions for limited purposes, these activities will involve certain risks
which are described below under "Risk Factors Associated with Futures and
Options Transactions." A Nations Fund will not engage in options and futures
transactions for leveraging purposes.
Writing Covered Options on Securities. Certain Nations Funds may write
covered call options and covered put options on optionable securities of the
types in which it is permitted to invest from time to time as the adviser
determines is appropriate in seeking to attain its objective. Call options
written by a Nations Fund give the holder the right to buy the underlying
securities from a Nations Fund at a stated exercise price; put options give the
holder the right to sell the underlying security to the Nations Fund at a stated
price.
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A Nations Fund may write only covered options, which means that, so
long as the Nations Fund is obligated as the writer of a call option, it will
own the underlying securities subject to the option (or comparable securities
satisfying the cover requirements of securities exchanges). In the case of put
options, a Nations Fund will maintain in a separate account cash or short-term
U.S. Government securities with a value equal to or greater than the exercise
price of the underlying securities. A Nations Fund may also write combinations
of covered puts and calls on the same underlying security or index or futures
contract.
A Nations Fund will receive a premium from writing a put or call option,
which increases the Nations Fund's return in the event the option expires
unexercised or is closed out at a profit. The amount of the premium will
reflect, among other things, the relationship of the market price of the
underlying security to the exercise price of the option, the term of the option
and the volatility of the market price of the underlying security. By writing a
call option, a Nations Fund limits its opportunity to profit from any increase
in the market value of the underlying security above the exercise price of the
option. By writing a put option, the Nations Fund assumes the risk that it may
be required to purchase the underlying security for an exercise price higher
than its then current market value, resulting in a potential capital loss if the
purchase price exceeds the market value plus the amount of the premium received.
A Nations Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. A Nations Fund will
realize a profit or loss from such transaction if the cost of such transaction
is less or more than the premium received from the writing of the option. In the
case of a put option, any loss so incurred may be partially or entirely offset
by the premium received from a simultaneous or subsequent sale of a different
put option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by unrealized appreciation of the underlying security owned by
a Nations Fund.
Purchasing Put and Call Options on Securities. Certain Nations Funds
may purchase put options to protect its portfolio holdings in an underlying
security against a decline in market value. Such hedge protection is provided
during the life of the put option since a Nations Fund, as holder of the put
option, is able to sell the underlying security at the put exercise price
regardless of any decline in the underlying security's market price. In order
for a put option to be profitable, the market price of the underlying security
must decline sufficiently below the exercise price to cover the premium and
transaction costs. By using put options in this manner, a Nations Fund will
reduce any profit it might otherwise have realized in its underlying security by
the premium paid for the put option and by transaction costs.
Certain Nations Funds may also purchase call options to hedge against
an increase in prices of securities that it wants ultimately to buy. Such hedge
protection is provided during the life of the call option since the Nations
Fund, as holder of the call option, is able to buy the underlying security at
the exercise price regardless of any increase in the underlying security's
market price. In order for a call option to be profitable, the market price of
the underlying security must rise sufficiently above the exercise price to cover
the premium and transaction costs.
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By using call options in this manner, a Nations Fund will reduce any profit it
might have realized had it bought the underlying security at the time it
purchased the call option by the premium paid for the call option and by
transaction costs.
Purchase and Sale of Options and Futures on Stock Indices. Certain
Nations Funds may purchase and sell options on non-U.S. stock indices and stock
index futures as a hedge against movements in the equity markets.
Options on stock indices are similar to options on specific securities
except that, rather than the right to take or make delivery of the specific
security at a specific price, an option on a stock index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of that stock index is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the exercise
price of the option expressed in dollars multiplied by a specified multiple. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Unlike options on specific securities, all settlements
of options on stock indices are in cash and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stocks. A stock index futures contract is an agreement in which one
party agrees to deliver to the other an amount of cash equal to a specific
amount multiplied by the difference between the value of a specific stock index
at the close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of securities is made.
If the Adviser expects general stock market prices to rise, a Nations
Fund might purchase a call option on a stock index or a futures contract on that
index as a hedge against an increase in prices of particular equity securities
it wants ultimately to buy. If in fact the stock index does rise, the price of
the particular equity securities intended to be purchased may also increase, but
that increase would be offset in part by the increase in the value of a Nations
Fund's index option or futures contract resulting from the increase in the
index. If, on the other hand, the adviser expects general stock market prices to
decline, a Nations Fund might purchase a put option or sell a futures contract
on the index. If that index does in fact decline, the value of some or all of
the equity securities in a Nations Fund may also be expected to decline, but
that decrease would be offset in part by the increase in the value of the
Nations Fund's position in such put option or futures contract.
Purchase and Sale of Interest Rate Futures. Certain Nations Funds may
purchase and sell interest rate futures contracts on foreign government
securities for the purpose of hedging fixed income and interest sensitive
securities against the adverse effects of anticipated movements in interest
rates.
A Nations Fund may sell interest rate futures contracts in anticipation
of an increase in the general level of interest rates. Generally, as interest
rates rise, the market value of the fixed income securities held by a Nations
Fund will fall, thus reducing the net asset value of the Nations Fund. This
interest rate risk can be reduced without employing futures as a hedge by
selling long-term fixed income securities and either reinvesting the proceeds in
securities with shorter
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maturities or by holding assets in cash. This strategy, however, entails
increased transaction costs to a Nations Fund in the form of dealer spreads and
brokerage commissions.
The sale of interest rate futures contracts provides an alternative
means of hedging against rising interest rates. As rates increase, the value of
a Nations Fund's short position in the futures contracts will also tend to
increase, thus offsetting all or a portion of the depreciation in the market
value of a Nations Fund's investments that are being hedged. While a Nations
Fund will incur commission expenses in selling and closing out futures positions
(which is done by taking an opposite position which operates to terminate the
position in the futures contract), commissions on futures transactions are lower
than transaction costs incurred in the purchase and sale of portfolio
securities.
Options on Stock Index Futures Contracts and Interest Rate Futures
Contracts. Certain Nations Funds may purchase and write call and put options on
non-U.S. stock index and interest rate futures contracts. A Nations Fund may use
such options on futures contracts in connection with its hedging strategies in
lieu of purchasing and writing options directly on the underlying securities or
stock indices or purchasing and selling the underlying futures. For example, a
Nations Fund may purchase put options or write call options on stock index
futures, or interest rate futures, rather than selling futures contracts, in
anticipation of a decline in general stock market prices or rise in interest
rates, respectively, or purchase call options or write put options on stock
index or interest rate futures, rather than purchasing such futures, to hedge
against possible increases in the price of equity securities or debt securities,
respectively, which the Nations Fund intends to purchase.
Purchase and Sale of Currency Futures Contracts and Related Options. In
order to hedge its portfolio and to protect it against possible variations in
foreign exchange rates pending the settlement of securities transactions,
certain Nations Funds may buy or sell currency futures contracts and related
options. If a fall in exchange rates for a particular currency is anticipated, a
Nations Fund may sell a currency futures contract or a call option thereon or
purchase a put option on such futures contract as a hedge. If it is anticipated
that exchange rates will rise, a Nations Fund may purchase a currency futures
contract or a call option thereon or sell (write) a put option to protect
against an increase in the price of securities denominated in a particular
currency a Nations Fund intends to purchase. These futures contracts and related
options thereon will be used only as a hedge against anticipated currency rate
changes, and all options on currency futures written by a Nations Fund will be
covered.
A currency futures contract sale creates an obligation by a Nations
Fund, as seller, to deliver the amount of currency called for in the contract at
a specified futures time for a special price. A currency futures contract
purchase creates an obligation by a Nations Fund, as purchaser, to take delivery
of an amount of currency at a specified future time at a specified price.
Although the terms of currency futures contracts specify actual delivery or
receipt, in most instances the contracts are closed out before the settlement
date without the making or taking of delivery of the currency. Closing out of a
currency futures contract is effected by entering into an offsetting purchase or
sale transaction. Unlike a currency futures contract, which requires the parties
to buy and sell currency on a set date, an option on a currency futures contract
entitles its
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holder to decide on or before a future date whether to enter into such a
contract. If the holder decides not to enter into the contract, the premium paid
for the option is fixed at the point of sale.
The Nations Funds will write (sell) only covered put and call options
on currency futures. This means that a Nations Fund will provide for its
obligations upon exercise of the option by segregating sufficient cash or
short-term obligations or by holding an offsetting position in the option or
underlying currency future, or a combination of the foregoing. A Nations Fund
will, so long as it is obligated as the writer or a call option on currency
futures, own on a contract-for-contract basis an equal long position in currency
futures with the same delivery date or a call option on stock index futures with
the difference, if any, between the market value of the call written and the
market value of the call or long currency futures purchased maintained by a
Nations Fund in cash, Treasury bills, or other high-grade short-term obligations
in a segregated account with its custodian. If at the close of business on any
day the market value of the call purchased by a Nations Fund falls below 100% of
the market value of the call written by the Nations Fund, a Nations Fund will so
segregate an amount of cash, Treasury bills or other high grade short-term
obligations equal in value to the difference. Alternatively, a Nations Fund may
cover the call option through segregating with the custodian an amount of the
particular foreign currency equal to the amount of foreign currency per futures
contract option times the number of options written by a Nations Fund. In the
case of put options on currency futures written by the Nations Fund, the Nations
Fund will hold the aggregate exercise price in cash, Treasury bills, or other
high grade short-term obligations in a segregated account with its custodian, or
own put options on currency futures or short currency futures, with the
difference, if any, between the market value of the puts written and the market
value of the puts purchased or the currency futures sold maintained by a Nations
Fund in cash, Treasury bills or other high grade short-term obligations in a
segregated account with its custodian. If at the close of business on any day
the market value of the put options purchased or the currency futures by a
Nations Fund falls below 100% of the market value of the put options written by
a Nations Fund, the Nations Fund will so segregate an amount of cash, Treasury
bills or other high grade short-term obligations equal in value to the
difference.
If other methods of providing appropriate cover are developed, a
Nations Fund reserves the right to employ them to the extent consistent with
applicable regulatory and exchange requirements. In connection with transactions
in stock index options, stock index futures, interest rate futures, foreign
currency futures and related options on such futures, a Nations Fund will be
required to deposit as "initial margin" an amount of cash or short-term
government securities equal to from 5% to 8% of the contract amount. Thereafter,
subsequent payments (referred to as "variation margin") are made to and from the
broker to reflect changes in the value of the futures contract.
Limitations on Purchase of Options. The staff of the SEC has taken the
position that purchased over-the-counter options and assets used to cover
written over-the-counter options are illiquid and, therefore, together with
other illiquid securities, cannot exceed 15% of a Nations Fund's assets. The
adviser intends to limit certain Nations Funds' writing of over-the-counter
options in accordance with the following procedure. Each Nations Fund intends to
write over-the-counter options only with primary U.S. Government securities
dealers recognized by the
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Federal Reserve Bank of New York. Also, the contracts which a Nations Fund has
in place with such primary dealers will provide that the Nations Fund has the
absolute right to repurchase an option it writes at any time at a price which
represents the fair market value, as determined in good faith through
negotiation between the parties, but which in no event will exceed a price
determined pursuant to a formula in the contract. Although the specific formula
may vary between contracts with different primary dealers, the formula will
generally be based on a multiple of the premium received by a Nations Fund for
writing the option, plus the amount, if any, of the option's intrinsic value
(i.e., the amount that the option is in-the-money). The formula also may include
a factor to account for the difference between the price of the security and the
strike price of the option if the option is written out-of-the-money. A Nations
Fund will treat all or a part of the formula price as illiquid for purposes of
the 15% test imposed by the SEC staff.
RISK FACTORS ASSOCIATED WITH FUTURES AND OPTIONS TRANSACTIONS
The effective use of options and futures strategies depends on, among
other things, a Nations Fund's ability to terminate options and futures
positions at times when its the Adviser deems it desirable to do so. Although
certain Nations Funds will not enter into an option or futures position unless
the adviser believes that a liquid secondary market exists for such option or
future, there is no assurance that a Nations Fund will be able to effect closing
transactions at any particular time or at an acceptable price or that the
secondary market will exist. A Nations Fund generally expects that its options
and futures transactions will be conducted on recognized U.S. and foreign
securities and commodity exchanges. In certain instances, however, a Nations
Fund may purchase and sell options in the over-the-counter market. A Nations
Fund's ability to terminate option positions established in the over-the-counter
market may be more limited than in the case of exchange-traded options and may
also involve the risk that securities dealers participating in such transactions
would fail to meet their obligations to the Nations Fund.
Options and futures markets can be highly volatile and transactions of
this type carry a high risk of loss. Moreover, a relatively small adverse market
movement with respect to these types of transactions may result not only in loss
of the original investment but also in unquantifiable further loss exceeding any
margin deposited.
The use of options and futures involves the risk of imperfect
correlation between movements in options and futures prices and movements in the
price of securities which are the subject of the hedge. Such correlation,
particularly with respect to options on stock indices and stock index futures,
is imperfect, and such risk increases as the composition of a Nations Fund
diverges from the composition of the relevant index. The successful use of these
strategies also depends on the ability of the adviser to correctly forecast
interest rate movements, currency rate movements and general stock market price
movements.
In addition to certain risk factors described above, the following sets
forth certain information regarding the potential risks associated with certain
Nations Funds' futures and options transactions.
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Risk of Imperfect Correlation. A Nations Fund's ability effectively to
hedge all or a portion of its portfolio through transactions in futures, options
on futures or options on stock indices depends on the degree to which movements
in the value of the securities or index underlying such hedging instrument
correlate with movements in the value of the relevant portion of the Nations
Fund's securities. If the values of the securities being hedged do not move in
the same amount or direction as the underlying security or index, the hedging
strategy for a Nations Fund might not be successful and the Nations Fund could
sustain losses on its hedging transactions which would not be offset by gains on
its portfolio. It is also possible that there may be a negative correlation
between the security or index underlying a futures or option contract and the
portfolio securities being hedged, which could result in losses both on the
hedging transaction and the Nations Fund securities. In such instances, a
Nations Fund's overall return could be less than if the hedging transactions had
not been undertaken. Stock index futures or options based on a narrower index of
securities may present greater risk than options or futures based on a broad
market index, as a narrower index is more susceptible to rapid and extreme
fluctuations resulting from changes in the value of a small number of
securities. A Nations Fund would, however, effect transactions in such futures
or options only for hedging purposes.
The trading of futures and options on indices involves the additional
risk of imperfect correlation between movements in the futures or option price
and the value of the underlying index. The anticipated spread between the prices
may be distorted due to differences in the nature of the markets, such as
differences in margin requirements, the liquidity of such markets and the
participation of speculators in the futures and options market. The purchase of
an option on a futures contract also involves the risk that changes in the value
of underlying futures contract will not be fully reflected in the value of the
option purchased. The risk of imperfect correlation, however, generally tends to
diminish as the maturity date of the futures contract or termination date of the
option approaches. The risk incurred in purchasing an option on a futures
contract is limited to the amount of the premium plus related transaction costs,
although it may be necessary under certain circumstances to exercise the option
and enter into the underlying futures contract in order to realize a profit.
Under certain extreme market conditions, it is possible that a Nations Fund will
not be able to establish hedging positions, or that any hedging strategy adopted
will be insufficient to completely protect the Nations Fund.
Certain Nations Funds will purchase or sell futures contracts or
options only if, in the adviser's judgment, there is expected to be a sufficient
degree of correlation between movements in the value of such instruments and
changes in the value of the relevant portion of the Nations Fund's portfolio for
the hedge to be effective. However, there can be no assurance that the adviser's
judgment will be accurate.
Potential Lack of a Liquid Secondary Market. The ordinary spreads
between prices in the cash and futures markets, due to differences in the
natures of those markets, are subject to distortions. First, all participants in
the futures market are subject to initial deposit and variation margin
requirements. This could require a Nations Fund to post additional cash or cash
equivalents as the value of the position fluctuates. Further, rather than
meeting additional variation margin requirements, investors may close futures
contracts through offsetting transactions which could distort the normal
relationship between the cash and futures markets.
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Second, the liquidity of the futures or options market may be lacking. Prior to
exercise or expiration, a futures or option position may be terminated only by
entering into a closing purchase or sale transaction, which requires a secondary
market on the exchange on which the position was originally established. While
certain Nations Funds will establish a futures or option position only if there
appears to be a liquid secondary market therefor, there can be no assurance that
such a market will exist for any particular futures or option contract at any
specific time. In such event, it may not be possible to close out a position
held by a Nations Fund, which could require the Nations Fund to purchase or sell
the instrument underlying the position, make or receive a cash settlement, or
meet ongoing variation margin requirements. The inability to close out futures
or option positions also could have an adverse impact on a Nations Fund's
ability effectively to hedge its securities, or the relevant portion thereof.
The liquidity of a secondary market in a futures contract or an option
on a futures contract may be adversely affected by "daily price fluctuation
limits" established by the exchanges, which limit the amount of fluctuation in
the price of a contract during a single trading day and prohibit trading beyond
such limits once they have been reached. The trading of futures and options
contracts also is subject to the risk of trading halts, suspensions, exchange or
clearing house equipment failures, government intervention, insolvency of the
brokerage firm or clearing house or other disruptions of normal trading
activity, which could at times make it difficult or impossible to liquidate
existing positions or to recover excess variation margin payments.
Risk of Predicting Interest Rate Movements. Investments in futures
contracts on fixed income securities and related indices involve the risk that
if the adviser's investment judgment concerning the general direction of
interest rates is incorrect, a Nations Fund's overall performance may be poorer
than if it had not entered into any such contract. For example, if a Nations
Fund has been hedged against the possibility of an increase in interest rates
which would adversely affect the price of bonds held in its portfolio and
interest rates decrease instead, the Nations Fund will lose part or all of the
benefit of the increased value of its bonds which have been hedged because it
will have offsetting losses in its futures positions. In addition, in such
situations, if a Nations Fund has insufficient cash, it may have to sell bonds
from its portfolio to meet daily variation margin requirements, possibly at a
time when it may be disadvantageous to do so. Such sale of bonds may be, but
will not necessarily be, at increased prices which reflect the rising market.
Trading and Position Limits. Each contract market on which futures and
option contracts are traded has established a number of limitations governing
the maximum number of positions which may be held by a trader, whether acting
alone or in concert with others. The adviser does not believe that these trading
and position limits will have an adverse impact on the hedging strategies
regarding the Nations Funds' investments.
Regulations on the Use of Futures and Options Contracts. Regulations of
the CFTC require that the Nations Funds enter into transactions in futures
contracts and options thereon for hedging purposes only, in order to assure that
they are not deemed to be a "commodity pool" under such regulations. In
particular, CFTC regulations require that all short futures positions be entered
into for the purpose of hedging the value of investment securities held by a
Nations Fund,
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and that all long futures positions either constitute bona fide hedging
transactions, as defined in such regulations, or have a total value not in
excess of an amount determined by reference to certain cash and securities
positions maintained for the Nations Fund, and accrued profits on such
positions. In addition, a Nations Fund may not purchase or sell such instruments
if, immediately thereafter, the sum of the amount of initial margin deposits on
its existing futures positions and premiums paid for options on futures
contracts would exceed 5% of the market value of the Nations Fund's total
assets.
When a Nations Fund purchases a futures contract, an amount of cash or
cash equivalents or high quality debt securities will be segregated with the
Nations Fund's custodian so that the amount so segregated, plus the initial
deposit and variation margin held in the account of its broker, will at all
times equal the value of the futures contract, thereby insuring that the use of
such futures is unleveraged.
The Nations Funds' ability to engage in the hedging transactions
described herein may be limited by the current federal income tax requirement
that a Nations Fund derive less than 30% of its gross income from the sale or
other disposition of stock or securities held for less than three months. The
Nations Funds may also further limit their ability to engage in such
transactions in response to the policies and concerns of various federal and
state regulatory agencies. Such policies may be changed by vote of the Board of
Directors/Trustees.
INTEREST RATE TRANSACTIONS
Among the strategic transactions into which certain Nations Funds may
enter are interest rate swaps and the purchase or sale of related caps and
floors. The Nations Funds expect to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a duration management
technique or to protect against any increase in the price of securities the
Nations Fund anticipates purchasing at a later date. Each Nations Fund intends
to use these transactions as hedges and not as speculative investments and will
not sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Nations Fund may be obligated to
pay. Interest rate swaps involve the exchange by a Nations Fund with another
party of their respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount.
A Nations Fund will usually enter into swaps on a net basis, i.e., the
two payment streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with the Nations Fund receiving or paying, as
the case may be, only the net amount of the two payments. Inasmuch as these
swaps, caps and floors are entered into for good faith hedging purposes, the
Adviser and the Nations Funds believe such obligations do not constitute senior
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securities under the 1940 Act and, accordingly, will not treat them as being
subject to its borrowing restrictions. A Nations Fund will not enter into any
swap, cap and floor transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the counterparty, combined with any
credit enhancements, is rated at least "A" by Standard & Poor's Corporation or
Moody's Investors Service, Inc. or has an equivalent rating from a nationally
recognized statistical rating organization ("NRSRO") or is determined to be of
equivalent credit quality by the Adviser. If there is a default by the
counterparty, the Nations Fund may have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid. Caps and floors are more
recent innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than swaps.
With respect to swaps, a Nations Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps and floors require
segregation of assets with a value equal to the Nations Fund's net obligation,
if any.
ASSET-BACKED SECURITIES
In General. Certain Nations Funds may invest in asset-backed
securities. Asset-backed securities arise through the grouping by governmental,
government-related, and private organizations of loans, receivables, or other
assets originated by various lenders. Asset-backed securities consist of both
mortgage- and non-mortgage-backed securities. Interests in pools of these assets
may differ from other forms of debt securities, which normally provide for
periodic payment of interest in fixed amounts with principal paid at maturity or
specified call dates. Conversely, asset-backed securities provide periodic
payments which may consist of both interest and principal payments.
The life of an asset-backed security varies depending upon rate of the
prepayment of the underlying debt instruments. The rate of such prepayments will
be a function of current market interest rates, and other economic and
demographic factors. For example, falling interest rates generally result in an
increase in the rate of prepayments of mortgage loans while rising interest
rates generally decrease the rate of prepayments. An acceleration in prepayments
in response to sharply falling interest rates will shorten the security's
average maturity and limit the potential appreciation in the security's value
relative to a conventional debt security. Consequently, asset-backed securities
may not be as effective in locking in high, long-term yields. Conversely, in
periods of sharply rising rates, prepayments are generally slow, increasing the
security's average life and its potential for price depreciation.
Mortgage-Backed Securities. Mortgage-backed securities represent an
ownership interest in a pool of mortgage loans.
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Mortgage pass-through securities may represent participation interests
in pools of residential mortgage loans originated by U.S. governmental or
private lenders and guaranteed, to the extent provided in such securities, by
the U.S. Government or one of its agencies, authorities or instrumentalities.
Such securities, which are ownership interests in the underlying mortgage loans,
differ from conventional debt securities, which provide for periodic payment of
interest in fixed amounts (usually semi-annually) and principal payments at
maturity or on specified call dates. Mortgage pass-through securities provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans.
The guaranteed mortgage pass-through securities in which a Nations Fund
may invest may include those issued or guaranteed by GNMA, the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). Such Certificates are mortgage-backed securities which represent a
partial ownership interest in a pool of mortgage loans issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations. Such
mortgage loans may have fixed or adjustable rates of interest.
The average life of a mortgage-backed security is likely to be
substantially less than the original maturity of the mortgage pools underlying
the securities. Prepayments of principal by mortgagors and mortgage foreclosures
will usually result in the return of the greater part of principal invested far
in advance of the maturity of the mortgages in the pool.
The yield which will be earned on mortgage-backed securities may vary
from their coupon rates for the following reasons: (i) Certificates may be
issued at a premium or discount, rather than at par; (ii) Certificates may trade
in the secondary market at a premium or discount after issuance; (iii) interest
is earned and compounded monthly which has the effect of raising the effective
yield earned on the Certificates; and (iv) the actual yield of each Certificate
is affected by the prepayment of mortgages included in the mortgage pool
underlying the Certificates and the rate at which principal so prepaid is
reinvested. In addition, prepayment of mortgages included in the mortgage pool
underlying a GNMA Certificate purchased at a premium may result in a loss to the
Nations Fund.
Mortgage-backed securities issued by private issuers, whether or not
such obligations are subject to guarantees by the private issuer, may entail
greater risk than obligations directly or indirectly guaranteed by the U.S.
Government.
Collateralized mortgage obligations or "CMOs" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities (collateral
collectively hereinafter referred to as "Mortgage Assets"). Multi-class
pass-through securities are interests in a trust composed of Mortgage Assets and
all references herein to CMOs will include multi-class pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the Nations Funds to pay debt service on
the CMOs or make scheduled distribution on the multi-class pass-through
securities.
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Moreover, principal prepayments on the Mortgage Assets may cause the
CMOs to be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of the premium if any has
been paid. Interest is paid or accrues on all classes of the CMOs on a monthly,
quarterly or semiannual basis.
The principal and interest payments on the Mortgage Assets may be
allocated among the various classes of CMOs in several ways. Typically, payments
of principal, including any prepayments, on the underlying mortgages are applied
to the classes in the order of their respective stated maturities or final
distribution dates, so that no payment of principal is made on CMOs of a class
until all CMOs of other classes having earlier stated maturities or final
distribution dates have been paid in full.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class
mortgage securities. A Fund will only invest in SMBS that are obligation backed
by the full faith and credit of the U.S. Government. SMBS are usually structured
with two classes that receive different proportions of the interest and
principal distributions from a pool of Mortgage Assets. A Fund will only invest
SMBS whose Mortgage Assets are U.S.
Government obligations.
A common type of SMBS will be structured so that one class receives
some of the interest and most of the principal from the Mortgage Assets, while
the other class receives most of the interest and the remainder of the
principal. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, a Nations Fund may fail to fully recoup its initial
investment in these securities. The market value of any class which consists
primarily or entirely of principal payments generally is unusually volatile in
response to changes in interest rates.
The average life of mortgage-backed securities varies with the
maturities of the underlying mortgage instruments. The average life is likely to
be substantially less than the original maturity of the mortgage pools
underlying the securities as the result of mortgage prepayments, mortgage
refinancing, or foreclosures. The rate of mortgage prepayments, and hence the
average life of the certificates, will be a function of the level of interest
rates, general economic conditions, the location and age of the mortgage and
other social and demographic conditions. Such prepayments are passed through to
the registered holder with the regular monthly payments of principal and
interest and have the effect of reducing future payments. Estimated average life
will be determined by the adviser and used for the purpose of determining the
average weighted maturity and duration of the Nations Funds.
Non-Mortgage Asset-Backed Securities. Non-mortgage asset-backed
securities include interests in pools of receivables, such as motor vehicle
installment purchase obligations and credit card receivables. Such securities
are generally issued as pass-through certificates, which represent undivided
fractional ownership interests in the underlying pools of assets. Such
securities also may be debt instruments, which are also known as collateralized
obligations and are generally issued as the debt of a special purpose entity
organized solely for the purpose of owning such assets and issuing such debt.
Such securities also may include instruments issued by certain trusts,
partnerships or other special purpose issuers, including pass-through
certificates representing participations in, or debt instruments backed by, the
securities and other assets owned by such
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issuers. Non-mortgage-backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities.
The purchase of non-mortgage-backed securities raises considerations
peculiar to the financing of the instruments underlying such securities. For
example, most organizations that issue asset-backed securities relating to motor
vehicle installment purchase obligations perfect their interests in their
respective obligations only by filing a financing statement and by having the
servicer of the obligations, which is usually the originator, take custody
thereof. In such circumstances, if the servicer were to sell the same
obligations to another party, in violation of its duty not to do so, there is a
risk that such party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. Also, although most such
obligations grant a security interest in the motor vehicle being financed, in
most states the security interest in a motor vehicle must be noted on the
certificate of title to perfect such security interest against competing claims
of other parties. Due to the larger number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the obligations
underlying the asset-backed securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
the asset-backed securities. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on those securities. In addition, various state and Federal laws give
the motor vehicle owner the right to assert against the holder of the owner's
obligation certain defenses such owner would have against the seller of the
motor vehicle. The assertion of such defenses could reduce payments on the
related asset-backed securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances owed on the credit card,
thereby reducing the amounts paid on such receivables. In addition, unlike most
other Asset-backed Securities, credit card receivables are unsecured obligations
of the card holder.
The development of non-mortgage-backed securities is at an early stage
compared to mortgage-backed securities. While the market for Asset-backed
Securities is becoming increasingly liquid the market for mortgage-backed
securities issued by certain private organizations and non-mortgage-backed
securities is not as well developed. As stated above, the adviser, as adviser to
each Fund, intends to limit its purchases of mortgage-backed securities issued
by certain private organizations and non-mortgage-backed securities to
securities that are readily marketable at the time of purchase.
SPECIAL SITUATIONS
Certain Nations Funds may invest in "special situations." A special
situation arises when, in the opinion of the Adviser, the securities of a
particular company will, within a reasonably estimable period of time, be
accorded market recognition at an appreciated value solely by reason of a
development applicable to that company, and regardless of general business
conditions or
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movements of the market as a whole. Developments creating special situations
might include, among others: liquidations, reorganizations, recapitalizations,
mergers, material litigation, technical breakthroughs and new management or
management policies. Although large and well known companies may be involved,
special situations more often involve comparatively small or unseasoned
companies. Investments in unseasoned companies and special situations often
involve much greater risk than is inherent in ordinary investment securities.
EQUITY SWAP CONTRACTS
Certain Nations Funds may invest in Equity Swap contracts. The
counterparty to an Equity Swap Contract will typically be a bank, investment
banking firm or broker/dealer. For example, the counterparty will generally
agree to pay a Nations Fund the amount, if any, by which the notional amount of
the Equity Swap Contract would have increased in value had it been invested in
the stocks comprising the S&P 500 Index in proportion to the composition of the
Index, plus the dividends that would have been received on those stocks. A
Nations Fund will agree to pay to the counterparty a floating rate of interest
(typically the London Inter Bank Offered Rate) on the notional amount of the
Equity Swap Contract plus the amount, if any, by which that notional amount
would have decreased in value had it been invested in such stocks. Therefore,
the return to a Nations Fund on any Equity Swap Contract should be the gain or
loss on the notional amount plus dividends on the stocks comprising the S&P 500
Index less the interest paid by the Nations Fund on the notional amount. A
Nations Fund will only enter into Equity Swap Contracts on a net basis, i.e.,
the two parties' obligations are netted out, with the Nations Fund paying or
receiving, as the case may be, only the net amount of any payments. Payments
under the Equity Swap Contracts may be made at the conclusion of the contract or
periodically during its term.
If there is a default by the counterparty to an Equity Swap Contract, a
Nations Fund will be limited to contractual remedies pursuant to the agreements
related to the transaction. There is no assurance that Equity Swap Contract
counterparties will be able to meet their obligations pursuant to Equity Swap
Contracts or that, in the event of default, a Nations Fund will succeed in
pursuing contractual remedies. A Nations Fund thus assumes the risk that it may
be delayed in or prevented from obtaining payments owed to it pursuant to Equity
Swap Contracts. A Nations Fund will closely monitor the credit of Equity Swap
Contract counterparties in order to minimize this risk.
Each Nations Fund may from time to time enter into the opposite side of
Equity Swap Contracts (i.e., where a Nations Fund is obligated to pay the
increase (net of interest) or receive the decrease (plus interest) on the
contract to reduce the amount of the Nations Fund's equity market exposure
consistent with the Nations Fund's objective. These positions are sometimes
referred to as Reverse Equity Swap Contracts.
Equity Swap Contracts will not be used to leverage a Nations Fund. A
Nations Fund will not enter into any Equity Swap Contract or Reverse Equity Swap
Contract unless, at the time of entering into such transaction, the unsecured
senior debt of the counterparty is rated at least A by Moody's or S&P. Since the
SEC considers Equity Swap Contracts and Reverse Equity Swap
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Contracts to be illiquid securities, a Nations Fund will not invest in Equity
Swap Contracts or Reverse Equity Swap Contracts if the total value of such
investments together with that of all other illiquid securities which a Nations
Fund owns would exceed a specified percentage of the Nations Fund's total
assets.
The adviser does not believe that a Nations Fund's obligations under
Equity Swap Contracts or Reverse Equity Swap Contracts are senior securities
and, accordingly, the Nations Fund will not treat them as being subject to its
borrowing restrictions. However, the net amount of the excess, if any, of a
Nations Fund's obligations over its respective entitlements with respect to each
Equity Swap Contract and each Reverse Equity Swap Contract will be accrued on a
daily basis and an amount of cash, U.S. Government securities or other liquid
high quality debt securities having an aggregate market value at least equal to
the accrued excess will be maintained in a segregated account by the Nations
Fund's custodian.
LOWER RATED DEBT SECURITIES
The yields on lower rated debt and comparable unrated fixed-income
securities generally are higher than the yields available on higher-rated
securities. However, investments in lower rated debt and comparable unrated
securities generally involve greater volatility of price and risk of loss of
income and principal, including the probability of default by or bankruptcy of
the issuers of such securities. Lower rated debt and comparable unrated
securities (a) will likely have some quality and protective characteristics
that, in the judgment of the rating organization, are outweighed by large
uncertainties or major risk exposures to adverse conditions and (b) are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. Accordingly,
it is possible that these types of factors could, in certain instances, reduce
the value of securities held in a Nation Fund's portfolio, with a commensurate
effect on the value of the Nation Fund's shares.
The market prices of lower rated securities may fluctuate more than
higher rated securities and may decline significantly in periods of general
economic difficulty which may follow periods of rising interest rates. During an
economic downturn or a prolonged period of rising interest rates, the ability of
issuers of lower quality debt to service their payment obligations, meet
projected goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower rated securities, the
adviser will try to minimize the risks inherent in investing in lower rated debt
securities by engaging in credit analysis, diversification, and attention to
current developments and trends affecting interest rates and economic
conditions. The adviser will attempt to identify those issuers of high-yielding
securities whose financial condition is adequate to meet future obligations,
have improved, or are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated
securities, but they may not be attractive to as many buyers. Each Nations
Fund's policies regarding lower rated debt securities is not fundamental and may
not be changed at any time without shareholder approval.
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While the market values of lower rated debt and comparable unrated
securities tend to react less to fluctuations in interest rate levels than the
market values of higher-rated securities, the market values of certain lower
rated debt and comparable unrated securities also tend to be more sensitive to
individual corporate developments and changes in economic conditions than
higher-rated securities. In addition, lower rated debt securities and comparable
unrated securities generally present a higher degree of credit risk. Issuers of
lower rated debt and comparable unrated securities often are highly leveraged
and may not have more traditional methods of financing available to them so that
their ability to service their debt obligations during an economic downturn or
during sustained periods of rising interest rates may be impaired. The risk of
loss due to default by such issuers is significantly greater because lower rated
debt and comparable unrated securities generally are unsecured and frequently
are subordinated to the prior payment of senior indebtedness. A Nations Fund may
incur additional expenses to the extent that it is required to seek recovery
upon a default in the payment of principal or interest on its portfolio
holdings. The existence of limited markets for lower rated debt and comparable
unrated securities may diminish a Nations Fund's ability to (a) obtain accurate
market quotations for purposes of valuing such securities and calculating its
net asset value and (b) sell the securities at fair value either to meet
redemption requests or to respond to changes in the economy or in financial
markets.
Fixed-income securities, including lower rated debt securities and
comparable unrated securities, frequently have call or buy-back features that
permit their issuers to call or repurchase the securities from their holders,
such as a Nations Fund. If an issuer exercises these rights during periods of
declining interest rates, a Nations Fund may have to replace the security with a
lower yielding security, thus resulting in a decreased return to a Nations Fund.
The market for certain lower rated debt and comparable unrated
securities is relatively new and has not weathered a major economic recession.
The effect that such a recession might have on such securities is not known. Any
such recession, however, could disrupt severely the market for such securities
and adversely affect the value of such securities. Any such economic downturn
also could adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon.
REPURCHASE AGREEMENTS
A repurchase agreement involves the purchase of a security by a Nations
Fund and a simultaneous agreement (generally with a bank or broker/dealer) to
repurchase that security from the Nations Fund at a specified price and date or
upon demand. This technique offers a method of earning income on uninvested
cash. A risk associated with repurchase agreements is the failure of the seller
to repurchase the securities as agreed, which may cause a Nations Fund to suffer
a loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the
applicable limit. A Nations Fund may enter into joint repurchase agreements
jointly with other investment portfolios of Nations Fund. The LifeGoal Funds may
engage in repurchase agreement transactions directly.
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REVERSE REPURCHASE AGREEMENTS
Certain Nations Funds may enter reverse repurchase agreements. At the
time a Nations Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government Securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Nations Funds are obligated to repurchase under the agreement may decline
below the repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Nations
Funds' use of proceeds of the agreement may be restricted pending a
determination by the other party, or its trustee or receiver, whether to enforce
the Nations Funds' obligation to repurchase the securities. Reverse repurchase
agreements are speculative techniques involving leverage, and are subject to
asset coverage requirements if the Nations Funds do not establish and maintain a
segregated account (as described above). In addition, some or all of the
proceeds received by a Nations Fund from the sale of a portfolio instrument may
be applied to the purchase of a repurchase agreement. To the extent the proceeds
are used in this fashion and a common broker/dealer is the counterparty on both
the reverse repurchase agreement and the repurchase agreement, the arrangement
might be recharacterized as a swap transaction. Under the requirements of the
1940 Act, the Nations Funds are required to maintain an asset coverage
(including the proceeds of the borrowings) of at least 300% of all borrowings.
Depending on market conditions, the Nations Funds' asset coverage and other
factors at the time of a reverse repurchase, the Nations Funds may not establish
a segregated account when the adviser believes it is not in the best interests
of the Nations Funds to do so. In this case, such reverse repurchase agreements
will be considered borrowings subject to the asset coverage described above.
SECURITIES LENDING
To increase return on portfolio securities, certain of the Nations
Funds may lend their portfolio securities to broker/dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. Collateral for such loans may include
cash, securities of the U.S. Government, its agencies or instrumentalities, an
irrevocable letter of credit issued by (i) a U.S. bank that has total assets
exceeding $1 billion and that is a member of the Federal Deposit Insurance
Corporation, or (ii) a foreign bank that is one of the 75 largest foreign
commercial banks in terms of total assets, or any combination thereof. Such
loans will not be made if, as a result, the aggregate of all outstanding loans
of the Nations Fund involved exceeds 30% of the value of its total assets. There
may be risks of delay in receiving additional collateral or in recovering the
securities loaned or even a loss of rights in the collateral should the borrower
of the securities fail financially. However, loans are made only to borrowers
deemed by the adviser to be of good standing and when, in its judgment, the
income to be earned from the loan justifies the attendant risks. A Nations Fund
that is engaged in lending its portfolio securities has the right to call each
loan, and obtain the return of securities identical to the transferred
securities upon such termination of the loan, upon notice of not more than five
business days.
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SHORT SALES
Certain Nations Funds may from time to time enter into short sales
transactions. A Nations Fund will not make short sales of securities nor
maintain a short position unless at all times when a short position is open,
such Nations Fund owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issue as, and equal in amount to, the securities sold
short. This is a technique known as selling short "against the box." Such short
sales will be used by a Nations Fund for the purpose of deferring recognition of
gain or loss for federal income tax purposes.
GUARANTEED INVESTMENT CONTRACTS
Guaranteed investment contracts, investment contracts or funding
agreements (each referred to as a "GIC") are investment instruments issued by
highly rated insurance companies. Pursuant to such contracts, a Nations Fund
makes cash contributions to a deposit fund of the insurance company's general or
separate accounts. The insurance company then credits interest to the Nations
Fund at a guaranteed rate. The insurance company may assess periodic charges
against a GIC for expense and service costs allocable to it, and the charges
will be deducted from the value of the deposit fund. The purchase price paid for
a GIC generally becomes part of the general assets of the issuer, and the
contract is paid from the general assets of the issuer.
Certain Nations Funds will only purchase GlCs from issuers which, at
the time of purchase, meet quality and credit standards established by the
Adviser. Generally, GlCs are not assignable or transferable without the
permission of the issuing insurance companies, and an active secondary market in
GlCs does not currently exist. Also, a Nations Fund may not receive the
principal amount of a GIC from the insurance company on seven days' notice or
less, at which point the GIC may be considered to be an illiquid investment.
ILLIQUID SECURITIES
Certain Nations Funds may invest a portion of their net assets in
securities that are considered illiquid because of the absence of a readily
available market or due to legal or contractual restrictions. Certain restricted
securities that are not registered for sale to the general public but that can
be resold to institutional investors may not be considered illiquid, provided
that a dealer or institutional trading market exists.
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COMMERCIAL INSTRUMENTS
Commercial Instruments consist of short-term U.S. dollar-denominated
obligations issued by domestic corporations or issued in the U.S. by foreign
corporations and foreign commercial banks. Investments by certain Nations Funds
in commercial paper will consist of issues rated in a manner consistent with
such Nations Fund's investment policies and objective. In addition, the Nations
Funds may acquire unrated commercial paper and corporate bonds that are
determined by the adviser at the time of purchase to be of comparable quality to
rated instruments that may be acquired by the Nations Funds as previously
described.
REAL ESTATE INVESTMENT TRUSTS
A real estate investment trust ("REIT") is a managed portfolio of real
estate investments which may include office buildings, apartment complexes,
hotels and shopping malls. An Equity REIT holds equity positions in real estate,
and it seeks to provide its shareholders with income from the leasing of its
properties, and with capital gains from any sales of properties. A Mortgage REIT
specializes in lending money to developers of properties, and passes any
interest income it may earn to its shareholders. Certain Nations Funds may
invest in REITs.
REITs may be affected by changes in the value of the underlying
property owned or financed by the REIT, while Mortgage REITs also may be
affected by the quality of credit extended. Both Equity and Mortgage REITs are
dependent upon management skill and may not be diversified. REITs also may be
subject to heavy cash flow dependency, defaults by borrowers, self-liquidation,
and the possibility of failing to qualify for tax-free pass-through of income
under the Internal Revenue Code of 1986, as amended (the "Code").
NET ASSET VALUE
PURCHASES AND REDEMPTIONS
See "How To Buy Shares" and "How To Redeem Shares" in the Prospectuses
for a complete description of the manner in which Shares of the various classes
of the LifeGoal Portfolios may be purchased and redeemed.
The LifeGoal Portfolios are available for a variety of retirement
plans, including IRAs, that allow investors to shelter some of their income from
taxes. Investors should contact the LifeGoal Portfolios or their Selling Agents
for details concerning retirement plans.
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange is restricted, as
determined by applicable rules and regulations of the SEC, (b) the New York
Stock Exchange is closed for other than customary weekend and holiday closings,
(c) the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposal of portfolio securities or the
valuation of the net assets of a LifeGoal Portfolio of the Company not
reasonably practicable.
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INVESTMENT STRATEGY
Investing the same dollar amount at regular intervals is an investment
strategy known as Dollar Cost Averaging. Using this strategy, investors purchase
a greater number of shares when a LifeGoal Portfolio's price is low and fewer
shares when the price is high. As a result, the average purchase price for
shares will be less than their average cost. Dollar Cost Averaging does not
provide assurance of making a profit or any guarantee against loss in
continually declining markets. Investors should evaluate whether they are able
to make regular investments through periods of declining price levels before
deciding to use this investment technique.
NET ASSET VALUE DETERMINATION
Shares of the common stock of each class of shares of each LifeGoal
Portfolio that are offered by the Prospectuses are sold at their respective net
asset value next determined after the receipt of the purchase order.
Shareholders may at any time redeem all or a portion of their shares at net
asset value next determined following receipt of a redemption order, less any
contingent deferred sales charge applicable to Investor C Shares.
The net asset value per share of each of the LifeGoal Portfolios is
determined at the times and in the manner described in the Prospectuses.
Portfolio securities of a LifeGoal Portfolio for which market
quotations are not readily available, if any, are valued at fair value as
determined in good faith by or under the supervision of the Company's officers
in a manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost, which approximates market value.
Generally, trading in U.S. Government securities and money market
instruments is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities, if any,
used in computing the net asset value of the shares of a Portfolio are
determined as of such times. Occasionally, events affecting the value of such
securities may occur between the times at which they are determined and the
close of the New York Stock Exchange, which will not be reflected in the
computation of net asset value. If during such periods events occur which
materially affect the value of such securities, the securities will be valued at
their fair market value as determined in good faith by the directors.
EXCHANGES
By use of the exchange privilege, the holder of Investor Shares and/or
Primary Shares authorizes the transfer agent or the shareholder's financial
institution to rely on telephonic instructions from any person representing
himself to be the investor and reasonably believed to be genuine. The transfer
agent's or a financial institution's records of such instructions are binding.
Exchanges are taxable transactions for federal income tax purposes; therefore, a
shareholder will
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realize a capital gain or loss depending on whether the Investor Shares and/or
Primary Shares being exchanged have a value which is more or less than their
adjusted cost basis.
The Company may limit the number of times the exchange privilege may be
exercised by a shareholder within a specified period of time. Also, the exchange
privilege may be terminated or revised at any time by the Company upon such
notice as may be required by applicable regulatory agencies (presently sixty
days for termination or material revision), provided that the exchange privilege
may be terminated or materially revised without notice under certain unusual
circumstances.
The Prospectuses for the Investor Shares and Primary Shares of each
LifeGoal Portfolio describe the exchange privileges available to holders of such
Investor Shares and Primary Shares, respectively.
DESCRIPTION OF SHARES
DIVIDENDS AND DISTRIBUTIONS
Each LifeGoal Portfolio anticipates distributing substantially all of
its investment company taxable income for each taxable year. Such distributions
will be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes.
A LifeGoal Portfolio may either retain or distribute to shareholders
its net capital gain for each taxable year. Each LifeGoal Portfolio currently
intends to distribute any such amounts. If net capital gain is distributed and
designated as a capital gain dividend, it will be taxable to shareholders as
long-term capital gain, regardless of the length of time the shareholder has
held his/her Shares or whether such gain was recognized by the LifeGoal
Portfolio prior to the date on which the shareholder acquired his/her shares.
Conversely, if a LifeGoal Portfolio elects to retain its net capital gain, the
LifeGoal Portfolio will be taxed thereon (except to the extent of any available
capital loss carryovers) at the applicable corporate tax rate. If a Portfolio
elects to retain its net capital gain, it is expected that the LifeGoal
Portfolio also will elect to have shareholders treated as if each received a
distribution of his or her pro rata share of such gain, with the result that
each shareholder will be required to report his or her pro rata share of such
gain on his or her tax return as long-term capital gain, will receive a
refundable tax credit for his or her share of tax paid by the LifeGoal Portfolio
on the gain and will increase the basis for his or her Shares by an amount equal
to the deemed distribution less the tax credit.
Dividends and distributions from net investment income, for each
LifeGoal Portfolio are declared and paid quarterly, and capital gains
distributions are declared and paid annually. The Investor A, Investor B,
Investor C and Primary B Shares of the LifeGoal Portfolios accrue additional
expense, not borne by the Primary A Shares, as a result of the applicable Rule
12b-1 Plan, Shareholder Servicing Plan and/or Shareholder Administration Plan.
Consequently, a separate calculation is made to arrive at the net asset value
per share and dividends of each class of shares of the LifeGoal Portfolios.
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Net investment income for the LifeGoal Portfolios for dividend purposes
consists of (i) interest accrued and original issue discount earned on a
LifeGoal Portfolio's assets, (ii) less accrued expenses directly attributable to
the LifeGoal Portfolio and the general expenses of the Company prorated to a
LifeGoal Portfolio on the basis of its relative net assets, plus dividend or
distribution income on a LifeGoal Portfolio's assets.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional tax
considerations generally affecting the LifeGoal Portfolios and their
shareholders that are not described in the Prospectuses. No attempt is made to
present a detailed explanation of the tax treatment of each Portfolio or its
shareholders, and the discussion here and in the Prospectuses is not intended as
a substitute for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each LifeGoal Portfolio expects to qualify as a regulated investment
company under Subchapter M of the Code. As a regulated investment company, each
LifeGoal Portfolio is not subject to federal income tax on the portion of its
net investment income (i.e., taxable interest, dividends and other taxable
ordinary income, net of expenses) and capital gain net income (i.e., the excess
of capital gains over capital losses) that it distributes to shareholders,
provided that it distributes at least 90% of its investment company taxable
income (i.e., net investment income and the excess of net short-term capital
gain over net long-term capital loss) and at least 90% of its tax-exempt income
(net of expenses allocable thereto) for the taxable year (the "Distribution
Requirement"), and satisfies certain other requirements of the Code that are
described below. Distributions by a LifeGoal Portfolio made during the taxable
year or, under specified circumstances, within twelve months after the close of
the taxable year, will be considered distributions of income and gains of the
taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (i) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (ii) derive less
than 30% of its gross income from gains from the sale or other disposition of
stock, securities or options thereon held for less than three months.
In addition to satisfying the requirements described above, each
LifeGoal Portfolio must satisfy an asset diversification test in order to
qualify as a regulated investment company. Under this test, (i) at least 50% of
the market value of each LifeGoal Portfolio's assets is represented by cash,
U.S. Government obligations, the securities of other regulated investment
companies, and other securities limited in respect of any one issuer to an
amount not greater than 5% of the
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LifeGoal Portfolio's total assets and 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of the LifeGoal
Portfolio's total assets is invested in the securities of any one issuer (other
than U.S. Government of other issuers, or obligations or the securities of other
regulated investment companies), or of two or more issuers which the LifeGoal
Portfolio controls and which are determined to be engaged in the same or similar
trades or businesses or related trades or businesses.
If for any taxable year a LifeGoal Portfolio does not qualify as a
regulated investment company, all of its taxable income (including its net
capital gain) will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions will be
taxable as ordinary dividends to the extent of such Fund's current and
accumulated earnings and profits.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A nondeductible 4% excise tax will be imposed on each LifeGoal
Portfolio (other than to the extent of the LifeGoal Portfolio's tax-exempt
income) to the extent it does not meet certain minimum distribution requirements
by the end of each calendar year. Each LifeGoal Portfolio will either actually
or be deemed to distribute substantially all of its net investment income and
net capital gains by the end of each calendar year and, thus, expects not to be
subject to the excise tax.
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of a LifeGoal Portfolio in an amount equal to the difference between the
proceeds of the sale or redemption and the shareholder's adjusted tax basis in
the shares sold or redeemed. All or a portion of any loss so recognized may be
disallowed if the shareholder purchases other shares of the LifeGoal Portfolio
within 30 days before or after the sale or redemption. In general, any gain or
loss arising from (or treated as arising from) the sale or redemption of shares
of a LifeGoal Portfolio will in most cases be considered capital in nature and
will be long-term capital gain or loss if the shares were held for longer than
one year.
The Company may make payment for redemptions in readily marketable
securities or other property if it is appropriate to do so in light of the
Company's responsibilities under the 1940 Act. Such payments in-kind shall also
result in recognized gain or loss, and most likely be capital in nature, to a
redeeming shareholder on the difference between the fair market value of the
securities received and the shareholder's adjusted tax basis in the LifeGoal
Portfolio shares sold or redeemed.
TAX RATES
As of the printing of this SAI, the maximum individual tax rate
applicable to ordinary income is 39.6% (marginal rates may be higher for some
individuals due to phase out of exemptions and elimination of deductions); the
maximum individual tax rate applicable to net
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capital gains is 28%; and the maximum corporate tax rate applicable to ordinary
income and net capital gains is 35% (however, to eliminate the benefit of lower
marginal corporate income tax rates, corporations which have taxable income in
excess of $100,000 for a taxable year will be required to pay an additional
amount of income tax of up to $11,750 and corporations which have taxable income
in excess of $15,000,000 for a taxable year will be required to pay an
additional amount of tax of up to $100,000).
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
a LifeGoal Portfolio is "effectively connected" with a U.S. trade or business
carried on by such shareholder. If the income from a LifeGoal Fund is not
effectively connected with a U.S. trade or business carried on by a foreign
shareholder, ordinary income dividends will be subject to U.S. withholding tax
at the rate of 30% (or lower applicable treaty rate) upon the gross amount of
the dividend.
If the income from a LifeGoal Portfolio is effectively connected with a
U.S. trade or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain dividends and any gains realized upon the sale of shares
of the LifeGoal Portfolio will be subject to U.S. Federal income tax at the
rates applicable to U.S. citizens, U.S. residents, or domestic corporations.
In the case of foreign non-corporate shareholders, a LifeGoal Fund may
be required to withhold U.S. federal income tax at a rate of 31% on
distributions that are otherwise exempt from withholding tax (or taxable at a
reduced treaty rate) unless such shareholders furnish the Fund with proper
notification of their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in a
LifeGoal Fund, including the applicability of foreign taxes.
TAXATION OF NATIONS FUNDS
Each Nations Fund similarly intends to qualify as a regulated
investment company under Subchapter M of the Code. Accordingly, each Nations
Fund must also meet the requirements set forth above for regulated investment
companies see "Additional Information Concerning Taxes -- Qualification as a
Regulated Investment Company"). In any year that a Nations Fund qualifies as a
regulated investment company and timely distributes all of its taxable and
tax-exempt income, the Nations Fund generally will not pay any federal income
tax or excise tax. Failure of a Nations Fund to qualify could cause a LifeGoal
Fund investing therein to fail to qualify as a regulated investment company.
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EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation for ordinary income dividends, exempt-interest
dividends and capital gain dividends from regulated investment companies often
differ from the rules for U.S. federal income taxation described above.
Distributions of net investment income may be taxable to shareholders as
dividend income under state or local law even though a substantial portion of
such distributions may be derived from interest on U.S. Government Obligations,
which, if realized directly, would be exempt from such taxes. Shareholders are
urged to consult their tax advisors as to the consequences of these and other
state and local tax rules affecting investment in the LifeGoal Portfolios.
DIRECTORS AND OFFICERS OF THE LIFEGOAL PORTFOLIOS
The directors and executive officers of the Company and their principal
occupations during the last five years are set forth below. The address of each,
unless otherwise indicated, is 111 Center Street, Little Rock, Arkansas 72201.
Those Directors who are "interested persons" of the Company (as defined in the
1940 Act) are indicated by an asterisk (*).
NAME, ADDRESS, AND AGE POSITION WITH PRINCIPAL OCCUPATIONS
THE COMPANY DURING PAST 5 YEARS
AND CURRENT DIRECTORSHIPS
Edmund L. Benson, III, 59 Director Director, President and Treasurer,
Saunders & Benson, Inc. Saunders & Benson, Inc. (Insurance);
728 East Main Street Trustee, Nations Institutional
Suite 400 Reserves and Nations Fund Trust;
Richmond, VA 23219 Director, Nations Fund, Inc. and
Nations Fund Portfolios, Inc.
James Ermer, 54 Director
13705 Hickory Nut Point Senior Vice President- Finance, CSX
Midlothian, VA 23112 Corporation (transportation and
natural resources); Director, National
Mine Service; Director, Lawyers Title
Corporation; Trustee, Nations
Institutional Reserves and Nations
Fund Trust; Director, Nations Fund,
Inc. and Nations Portfolios, Inc.
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William H. Grigg, 63 Director Since April 1994, Chairman and Chief
Duke Power Co Executive Officer; November 1991 to
422 South Church Street April 1994, Vice Chairman, Duke Power
PB04G Co.; from April 1988 to November 1991,
Charlotte, NC 28242-001 Executive Vice President Customer
Group, Duke Power Co.; Director,
Hatteras Income Securities, Inc.,
Nations Government Income Term Trust
2003, Inc., Nations Government Income
Term Trust 2004, Inc., Nations
Balanced Target Maturity Fund, Inc.,
Nations Fund, Inc. and Nations Fund
Portfolios, Inc.; Trustee, Nations
Institutional Reserves and Nations
Fund Trust.
Thomas F. Keller, 65 Director R.J. Reynolds Industries Professor of
Fuqua School of Business Business Administration and Dean,
Duke University Fuqua School of Business, Duke
Durham, NC 27706 University; Director, LADD Furniture,
Inc.; Director, Wendy's International
Mentor Growth Fund, and Cambridge
Trust; Director, Hatteras Income
Securities, Inc., Nations Government
Income Term Trust 2003, Inc., Nations
Government Income Term Trust 2004,
Inc., Nations Balanced Target Maturity
Fund, Inc., Nations Fund, Inc. and
Nations Fund Portfolios, Inc.;
Trustee, Nations Institutional
Reserves and Nations Fund Trust.
Carl E. Mundy, Jr., 61 Director Commandant, United States Marine
9308 Ludgate Drive Corps, from July 1991 to July 1995;
Alexandria, VA 23309 Commanding General, Marine Forces
Atlantic, from June 1990 to June 1991;
Director, Nations Fund, Inc. and
Nations Fund Portfolios, Inc.;
Trustee, Nations Institutional
Reserves and Nations Fund Trust.
A. Max Walker, 74* President, Financial consultant; formerly,
4580 Windsor Gate Court Director and President, A. Max Walker, Inc.;
Atlanta, GA 30342 Chairman of Director and Chairman of the Board,
the Board Hatteras Income Securities, Inc.,
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Nations Government Income Term Trust
2003, Inc., Nations Government Income
Term Trust 2004, Inc., Nations
Balanced Target Maturity Fund, Inc.,
Nations Fund, Inc. and Nations Fund
Portfolios, Inc.; President and
Chairman of the Board of Trustees,
Nations Institutional Reserves and
Nations Fund Trust.
Charles B. Walker, 57 Director Since 1989, Director, Executive Vice
P.O Box 2189 Ethyl Corporation President, Chief
330 South Fourth Street Financial Officer and Treasurer, Ethyl
Richmond, VA 23217 Corporation (chemicals, plastics, and
aluminum manufacturing); since 1994,
Vice Chairman, Ethyl Corporation and
Vice Chairman, Chief Financial Officer
and Treasurer, Albemarle Corporation,
Director, Nations Fund, Inc. and
Nations Fund Portfolios, Inc.;
Trustee, Nations Institutional
Reserves and Nations Fund Trust.
Thomas S. Word, Jr., 58* Director Partner, McGuire Woods Battle & Boothe
McGuire, Woods, (law); Director, Vaughan Bassett
Battle & Boothe Furniture Company; Director VB
One James Center Williams Furniture Company, Inc.;
Richmond, VA 23219 Director, Nations Fund, Inc. and
Nations Fund Portfolios, Inc.;
Trustee, Nations Institutional
Reserves and Nations Fund Trust.
Richard H. Blank, Jr., 40 Secretary Since 1994, Vice President of Mutual
Stephens Inc. Fund Services, Stephens Inc.; from
1990 to 1994, Manager, Mutual Fund
Services, Stephens Inc.; from 1983 to
1990, Associate in Corporate Finance
Department, Stephens Inc.; Secretary,
Nations Institutional Reserves,
Nations Fund Trust, Nations Fund, Inc
and Nations Fund Portfolios, Inc.
Michael W. Nolte, 35 Assistant Associate, Financial Services
Stephens Inc. Secretary Group of Stephens Inc.
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Louise P. Newcomb, 44 Assistant Corporate Syndicate Associate,
Stephens Inc. Secretary Stephens Inc.
James E. Banks, 40 Assistant Since 1993, Attorney, Stephens Inc.;
Stephens Inc. Secretary Associate Corporate Counsel, Federated
Investors; from 1991 to 1993, Staff
Attorney, Securities and Exchange
Commission from 1988 to 1991
Richard H. Rose, 41 Treasurer Since 1994, Vice President, Division
First Data Investor Manager, First Data Investor Services
Services Group, Inc. Group Inc.; since 1988, Senior Vice
One Exchange Place President, The Boston Company
Boston, MA 02109 Advisors, Inc.; Treasurer, Nations
Institutional Reserves, Nations Fund
Trust, Nations Fund, Inc. and Nations
Fund Portfolios, Inc.
Joseph C. Viselli, 32 Assistant Since 1994, Director, First Data
First Data Investor Treasurer Investor Services Group, Inc.; since
Services Group, Inc. 1992, Assistant Vice President, The
One Exchange Place Boston Company Advisors, Inc.; since
Boston, MA 02109 1989, Senior Accountant, Price
Waterhouse LLP
Susan Manter, 42 Assistant Since 1996, Vice President, First Data
First Data Investor Treasurer Investor Services Group, Inc.; since
Services Group Inc. 1994, Vice President, Scudder Stevens
One Exchange Place and Clark, Inc.; previously Senior
Boston, MA 02109 Manager, Coopers & Lybrand LLP
Mr. Rose serves as Treasurer to certain other investment companies for
which First Data Investor Services Group, Inc. or its affiliates serve as
sponsor, distributor, administrator and/or investment adviser. Mr. Blank serves
as Secretary, Treasurer, and Chief Operating Officer to other investment
companies for which Stephens Inc. serves as administrator.
Each Director of the Company is also a Director of Nations Fund, Inc.
and Nations Fund Portfolios, Inc. and a Trustee of Nations Fund Trust and
Nations Institutional Reserves, each a registered investment company that is
part of the Nations Fund Family. Richard H. Blank, Jr., Richard H. Rose, Joseph
C. Viselli, Susan Manter, Michael W. Nolte, Louise P. Newcomb and James E.
Banks, Jr. are also officers of Nations Fund, Inc., Nations Fund Trust, Nations
Fund Portfolios, Inc. and Nations Institutional Reserves.
As of the date of this SAI, the directors and officers of the Company
as a group owned less than 1% of the outstanding shares of each of the LifeGoal
Portfolios.
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The Company has adopted a Code of Ethics which, among other things,
prohibits each access person of the Company from purchasing or selling
securities when such person knows or should have known that, at the time of the
transaction, the security (i) was being considered for purchase or sale by a
LifeGoal Portfolio, or (ii) was being purchased or sold by a LifeGoal Portfolio.
For purposes of the Code of Ethics, an access person means (i) a Director or
officer of the Company, (ii) any employee of the Company (or any company in a
control relationship with the Company) who, in the course of his/her regular
duties, obtains information about, or makes recommendations with respect to, the
purchase or sale of securities by the Company, and (iii) any natural person in a
control relationship with the Company who obtains information concerning
recommendations made to the Company regarding the purchase or sale of
securities. Portfolio managers and other persons who assist in the investment
process are subject to additional restrictions, including a requirement that
they disgorge to the Company any profits realized on short-term trading (i.e.,
the purchase/sale or sale/purchase of securities within any 60-day period). The
above restrictions do not apply to purchases or sales of certain types of
securities, including mutual fund shares, money market instruments and certain
U.S. Government securities. To facilitate enforcement, the Code of Ethics
generally requires that the Company's access persons, other than its
"disinterested" Directors, submit reports to the Company's designated compliance
person regarding transactions involving securities which are eligible for
purchase by a Fund.
The Directors and officers of the LifeGoal Portfolios will receive
compensation from the LifeGoal Portfolios as follows: an annual retainer of
$1,000 ($3,000 for the Chairman of the Board), plus $500 per portfolio, and
meeting fees of $1,000 for in-person meetings and $500 for telephone meetings.
The Compensation Table below sets forth their aggregate compensation in such
capacity.
DIRECTORS, TRUSTEES AND OFFICERS OF UNDERLYING NATIONS FUNDS
The directors, trustees and officers of the underlying Nations Funds in
which the LifeGoal Portfolios invest are identical to the persons above-named
under the heading "Directors And Officers of the LifeGoal Portfolios".
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON/ COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX PAID TO
POSITION (1) REGISTRANT (2) FUND EXPENSES (3) RETIREMENT (3) DIRECTORS (4)(5)
- -------------- -------------- ------------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Edmund L. Benson, III $3,250 $19,488 $21,000 $52,369
Director
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<PAGE>
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON/ COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX PAID TO
POSITION (1) REGISTRANT (2) FUND EXPENSES (3) RETIREMENT (3) DIRECTORS (4)(5)
- -------------- -------------- ------------------- ---------------- --------------------
James Ermer $3,250 $19,488 $21,000 $47,500
Director
William H. Grigg $3,250 $19,488 $21,000 $69,647
Director
Thomas F. Keller $3,250 $19,488 $21,000 $71,847
Director
A. Max Walker $4,250 $19,488 $25,000 $79,500
Chairman of the Board
Charles B. Walker $3,250 $19,488 $21,000 $47,000
Director
Thomas S. Word $3,250 $19,488 $21,000 $54,829
Director
Carl E. Mundy, Jr., $3,250 $0 $21,000 $29,125
Director
</TABLE>
(1) All Directors receive reimbursements for expenses related to their
attendance at meetings of the Board of Directors. Officers of the Company
receive no direct remuneration in such capacity from the Company.
(2) For current fiscal year and includes estimated future payments. Each
Director receives (i) an annual retainer of $1,000 ($3,000 for the
Chairman of the Board) plus $500 for each LifeGoal Portfolio, plus (ii) a
fee of $1,000 for attendance at each "in-person" meeting of the Board of
Directors (or committee thereof) and $500 for attendance at each other
meeting of the Board of Directors (or Committee thereof).
(3) The LifeGoal Directors are not eligible for pension or retirement
benefits from the Company.
(4) Messrs. Grigg, Keller and A.M. Walker receive compensation from nine
investment companies, that are deemed to be part of the Nations Fund "fund
complex," as that term is defined under Item 22(a)(1)(v) of Schedule 14A
of the Securities Exchange Act of 1934, as amended. Messrs. Benson, Ermer,
C. Walker, Mundy and Word receive compensation from five investment
companies deemed to be part of the Nations Fund complex.
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(5) Total compensation amounts include deferred compensation (including
interest) from other investment companies in the Nations Fund complex,
payable to or accrued for the following Directors: Edmund L. Benson, III
($28,994.19); William H. Grigg ($54,397.01); Thomas F. Keller
($58,096.19); and Thomas S. Word ($58,078.37). The LifeGoal Directors are
not eligible for deferred compensation from the Company.
SECURITY HOLDERS
The name, address and percentage of ownership of each person who is
known by the Registrant to have owned of record or beneficially five percent or
more of any of the LifeGoal Portfolios as of May 29, 1997 is:
PERCENTAGE OF SHARES
SHAREHOLDER NAME & ADDRESS HELD OF RECORD
LIFEGOAL GROWTH PORTFOLIO
Primary A Shares
NationsBank Trust 89.0794
Steel Inc 401(k)
Attn Jim Minnick
715 Peachtree St., 5th Floor
Atlanta, GA 30308
Nations Bank of Texas as Trustee 6.4843
Attn: Adrian Castillo
1401 Elm Street, 11th Floor
Dallas, TX 75202
Primary B Shares
N/A
Investor A Shares
Sidney C. Adger, Trustee 17.3351
Hawaiian Marine Imports Inc.
Employee Profit Sharing Plan
1234 N. Post Oak Road, Suite 130
Houston, TX 77055
Steinberg Marital Trust 10.1309
5177 Richmond #530
Houston, TX 77056
Harry D. George & 5.4585
Beverly M. George JTTEN
503 Greenpond Road
Fountian Inn, SC 29644
Investor C Shares
Fannie Steinberg Family Trust 71.7280
5177 Richmond #530
Houston, TX 77056
Steinberg Marital Trust 25.1204
5177 Richmond #530
Houston, TX 77056
LIFEGOAL BALANCED GROWTH PORTFOLIO
Primary A Shares
NationsBank Trust 95.9919
Steel Inc 401(k)
Attn: Jim Minnick
715 Peachtree Street, 5th Floor
Atlanta, GA 30308
Primary B Shares
N/A
Investor A Shares
H. Kenneth Armstrong & 17.7788
Larry A. Ceppos, Trustees
Armstrong Donohue & Ceppos
401(k) & Profit Sharing Plan
204 Monroe Street, Suite 101
Rockville, MD 20850
Joan Soilleux 10.2462
2682 Meadowood Ct.
Weston, FL 33332-3433
NFSC FEBO #FL4-036625 7.7994
NFSC/FMTC IRA
FBO Gary Michael Zimmerman
5530 Windover Way
Davie, FL 33331
NFSC FEBO #GA4-078000 6.2514
NFSC/FMTC IRA Rollover
FBO Debra Lightsey
5720 Ash Drive
Cumming, GA 30130
NFSC FEBO #GA4-002046 6.0234
Sandra M. Showah
George O. Showah
3214 Kimberly Woods Court
Lilburn, GA 30247
Investor C Shares
Robert J. Chandler & Paul Cioffi 70.6079
& Steven P. Vizoukis, Trustees FBO
Oak Tree Packaging Corp. Salaried
Palmer Plant Hourly 401(k) Plan
50 Chestnut Ridge Road
Montvale, NJ 07645
Robert J. Chandler & Paul Cioffi 20.2621
& Steven P. Vizoukis, Trustees FBO
Oak Tree Packaging Corp.
Versailles Plant Hourly 401(k) Plan
50 Chestnut Ridge Road
Montvale, NJ 07645
Robert J. Chandler & Paul Cioffi 8.8764
& Steven P. Vizoukis, Trustees FBO
Oak Tree Packaging Corp.
York Plant Hourly 401(k) Plan
50 Chestnut Ridge Road
Montvale, NJ 07645
LIFEGOAL INCOME & GROWTH
Primary A Shares
NationsBank Trust 82.0157
Steel Inc. 401(k)
Attn: Jim Minnick
715 Peachtree Street, 5th Floor
Atlanta, GA 30308
Stephens, Inc. 16.5318
Attn: Cindy Cole
111 Center Street
Little Rock, AK 72201
Primary B Shares
N/A
Investor A Shares
Albern W. Richardson 67.8159
Janice Y. Richardson JTWROS
7334 Overlook Drive
Lake Worth, FL 33467
H. Kenneth Armstrong & 18.4433
Larry A. Ceppos, Trustees
Armstrong Donohue & Ceppos
401(k) & Profit Sharing Plan
204 Monroe Street, Suite 101
Rockville, MD 20850
DWR Cust. for John P. Tellup (Decd) 6.7857
FBO Michael Tellup
946 Cheasapeake Drive
Havre De Grace, MD 21078
Investor C Shares
BSDT Cust. FBO 56.0824
William T. Ledford
SAR/SEP IRA
5519 Dallas High Shoals Road
Dallas, NC 28034
BSDT Cust. FBO 21.0647
Nathan Allen Outen
SAR/SEP IRA
139 Brand Road
Rock Hill, SC 29730
BSDT Cust. FBO 8.2549
Cynthia A. Ledford
SAR/SEP IRA
5519 Dallas High Shoals Road
Dallas, NC 28034
BSDT Cust. FBO 6.6259
David M. Davis
SAR/SEP IRA
2626 Bradford Street
Gastonia, NC 28053
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<PAGE>
INVESTMENT ADVISORY, ADMINISTRATION, CUSTODY,
TRANSFER AGENCY, SHAREHOLDER SERVICING AND
DISTRIBUTION AGREEMENTS
THE COMPANY AND ITS COMMON STOCK
The Company is a diversified open-end management investment company
organized as a corporation under the laws of the State of Maryland on July 3,
1996. The Company offers shares of common stock which represent interests in one
of three separate LifeGoal Portfolios. This SAI relates to the following
LifeGoal Portfolios of the Company: LifeGoal Growth Portfolio, LifeGoal Balanced
Growth Portfolio and LifeGoal Income and Growth Portfolio. Each LifeGoal
Portfolio offers the following separate classes of shares: Primary A Shares,
Primary B Shares, Investor A Shares, Investor B and Investor C Shares. Shares of
each LifeGoal Portfolio of the Company are redeemable at the net asset value
(less, in the case of Investor B and Investor C Shares, any applicable
contingent deferred sales charge ("CDSC")) thereof at the option of the holders
thereof or in certain circumstances at the option of the Company. For
information concerning the methods of redemption and the rights of share
ownership, consult the Prospectuses under the captions "How To Buy Shares," "How
To Redeem Shares" and "Organization And History."
As used in this SAI and in the Prospectuses, the term "majority of the
outstanding shares" of the Company, a particular LifeGoal Portfolio or a
particular class of shares of a LifeGoal Portfolio means, respectively, the vote
of the lesser of (i) 67% or more of the shares of the Company, LifeGoal
Portfolio or class (as appropriate) present at a meeting of shareholders, if the
holders of more than 50% of the outstanding shares entitled to vote, are present
or represented by proxy, or (ii) more than 50% of the outstanding shares of the
Company, LifeGoal Portfolio or class.
The Board of Directors may classify or reclassify any unissued shares
of the Company into shares of any class, classes or LifeGoal Portfolio in
addition to those already authorized by setting or changing in any one or more
respects, from time to time, prior to the issuance of such shares, the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption, of such shares and, pursuant to such classification or
reclassification to increase or decrease the number of authorized shares of any
LifeGoal Portfolio or class. Any such classification or reclassification will
comply with the provisions of the 1940 Act. Fractional shares shall have the
same rights as full shares to the extent of their proportionate interest.
INVESTMENT ADVISORY ARRANGEMENTS OF THE LIFEGOAL PORTFOLIOS
NBAI serves as investment adviser to the LifeGoal Portfolios pursuant
to an Investment Advisory Agreement. NBAI is a wholly owned subsidiary of
NationsBank, N.A. ("NationsBank"), which in turn is a wholly owned banking
subsidiary of NationsBank Corporation, a bank holding company organized as a
North Carolina corporation. NBAI has its principal offices at One NationsBank
Plaza, Charlotte, North Carolina 28255.
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<PAGE>
NBAI also serves as investment adviser to Nations Fund, Inc., Nations
Fund Portfolios, Inc., Nations Fund Trust and Nations Institutional Reserves,
each a registered investment company that is part of the Nations Fund Family. In
addition, NBAI serves as the investment adviser to Hatteras Income Securities,
Inc., Nations Government Income Term Trust 2003, Inc., Nations Government Income
Term Trust 2004, Inc. and Nations Balanced Target Maturity Fund, Inc., each a
closed-end diversified management investment company traded on the New York
Stock Exchange.
The Investment Advisory Agreement was approved by the Company's Board
of Directors at the October 11, 1996 Meeting of the Board of Directors and by
the initial shareholder. It provides that NBAI may delegate its duties to a
sub-adviser. The Investment Advisory Agreement provides that in the absence of
willful misfeasance, bad faith, negligence or reckless disregard of obligations
or duties thereunder on the part of NBAI, or any of its officers, directors,
employees or agents, NBAI shall not be subject to liability to the Company or to
any shareholder of the Company for any act or omission in the course of, or
connected with, rendering services thereunder or for any losses that may be
sustained in the purchase, holding or sale of any security. NBAI will receive
fees for providing advisory services at the annual rate of .25% of the average
daily value of each LifeGoal Portfolio's net assets during the preceding month.
NBAI also has agreed to absorb all other expenses of the LifeGoal Portfolios
(except taxes, brokerage fees and commissions, extraordinary expenses, and any
applicable Rule 12b-1 fees, shareholder servicing fees and/or shareholder
administration fees). NBAI also is compensated for providing advisory services
to the underlying Nations Funds in which the LifeGoal Portfolios invest. The
Investment Advisory Agreement shall become effective with respect to a LifeGoal
Portfolio if and when approved by the Directors of the Company, and if so
approved, shall thereafter continue from year to year, provided that such
continuation of the Agreement is specifically approved at least annually by (a)
(i) the Company's Board of Directors or (ii) the vote of "a majority of the
outstanding voting securities" of a LifeGoal Portfolio (as defined in Section
2(a)(42) of the 1940 Act), and (b) the affirmative vote of a majority of the
Company's Directors who are not parties to such Agreement or "interested
persons" (as defined in the 1940 Act) of a party to such Agreement (other than
as Directors of the Company), by votes cast in person at a meeting specifically
called for such purpose. The Investment Advisory Agreement will terminate
automatically in the event of its assignment, and is terminable with respect to
a LifeGoal Portfolio at any time without penalty by the Company (by vote of the
Board of Directors or by vote of a majority of the outstanding voting securities
of a LifeGoal Portfolio) or by NBAI on 60 days' written notice.
TradeStreet Investment Associates, Inc. ("TradeStreet") with principal
offices at One NationsBank Plaza, Charlotte, North Carolina serves as investment
sub-adviser to the LifeGoal Portfolios. TradeStreet is a wholly owned subsidiary
of NationsBank. TradeStreet provides investment management services to
individuals, corporations and institutions.
The Sub-Advisory Agreement was approved by the Company's Board of
Directors on October 11, 1996 and by the initial shareholder. It provides that
TradeStreet, subject to the supervision of NBAI and the Board of Directors of
the Company, will be primarily responsible for managing the assets of each
LifeGoal Portfolio. TradeStreet will receive fees for providing such
43
<PAGE>
services at the annual rate of .05% of the average daily value of each LifeGoal
Portfolio's net assets during the preceding month. TradeStreet is also
compensated for providing sub-advisory services to most of the underlying
Nations Funds in which the LifeGoal Portfolio invest. The Sub-Advisory Agreement
will continue in effect for an initial term of two years from its effective date
and continues in effect from year to year thereafter only if such continuance is
specifically approved at least annually by the Company's Board of Directors and
the affirmative vote of a majority of the directors who are not parties to the
Sub-Advisory Agreement or "interested persons" of any such party by votes cast
in person at a meeting called for such purpose. The respective LifeGoal
Portfolios, NBAI or TradeStreet may terminate the Sub-Advisory Agreement, on 60
days' written notice without penalty. The Sub-Advisory Agreement terminates
automatically in the event of its "assignment," as defined in the 1940 Act.
Each Adviser has adopted a code of ethics which contain policies on
personal securities transactions by "access persons," including portfolio
managers and investment analysts. These codes comply in all material respects
with the recommendations set forth in the May 9, 1994 Report of the Advisory
Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISORY ARRANGEMENTS OF THE UNDERLYING NATIONS FUNDS
Effective January 1, 1996, NBAI, began serving as investment adviser to
the underlying Nations Funds. Prior to January 1, 1996, NationsBank, through its
Investment Management Division, served as investment adviser to the underlying
Nations Funds. NationsBank is a wholly owned subsidiary of NationsBank
Corporation, a bank holding company organized as a North Carolina corporation.
NationsBank and NationsBank Corporation are located at One NationsBank Plaza,
Charlotte, North Carolina 28255. NationsBank is successor to NationsBank of
North Carolina, N.A., which was merged with and into NationsBank of South
Carolina, N.A. effective January 3, 1995.
Since 1874, NationsBank and its predecessors have been managing money
for foundations, universities, corporations, institutions and individuals.
Today, NationsBank and its affiliates manage over $50 billion, including over
$18 billion in Nations Fund assets. It is a company dedicated to a goal of
providing responsible investment management and superior service. NationsBank is
recognized for its sound investment approaches, which place it among the
nation's foremost financial institutions. NationsBank and its affiliated
organizations make available a wide range of financial services to its over 6
million customers through over 1700 banking and investment centers.
NationsBank restructured its Investment Management Group as of January
1, 1996 by reorganizing the division into two separate, wholly owned advisory
subsidiaries, NBAI and TradeStreet. The restructuring resulted in the transfer
of the Group's investment management and advisory functions to NBAI and
TradeStreet. The investment professionals who formerly performed investment
company management functions as employees of NationsBank continue to perform
such services as employees of NBAI and TradeStreet. The restructuring did not
change the scope and nature of investment advisory services provided to the
LifeGoal Portfolios.
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<PAGE>
Gartmore Global Partners, with principal offices at One NationsBank
Plaza, Charlotte, North Carolina 28255, serves as investment sub-adviser to
Nations Fund Portfolios, Inc. and the International Equity Fund of Nations Fund,
Inc., pursuant to a sub-advisory agreement. Gartmore Global Partners is a joint
venture structured as a Delaware general partnership between NB Partner Corp., a
wholly owned subsidiary of NationsBank, and Gartmore U.S. Limited, an indirect
wholly owned subsidiary of Gartmore Investment Management plc ("Gartmore plc"),
a U.K. company, which is the holding company for a leading UK-based
international fund management group of companies. National Westminster Bank plc
and affiliated entities (collectively, "NatWest") own 100% of the equity of
Gartmore plc.
Pursuant to the terms of certain advisory and sub-advisory agreements,
NBAI and Gartmore Global Partners, subject at all times to the control of the
applicable Boards of Directors and in conformance with the stated policies of
the applicable Nations Fund, select and manage the investments of the Nations
Funds. NBAI obtains and evaluates economic, statistical and financial
information to formulate and implement investment policies for the Nations
Funds. The sub-advisory agreement of these Funds provides that Gartmore Global
Partners shall not be liable to the Company or to its shareholders for any act
or omission by NBAI or Gartmore Global Partners or for any loss sustained by the
Company or by its shareholders except in the case of NBAI's or Gartmore Global
Partners' willful misfeasance, bad faith, gross negligence or reckless disregard
of duty on the part of NBAI or Gartmore Global Partners, as the case may be.
TradeStreet serves as investment sub-adviser to all of the Funds except
those for which Gartmore Global Partners serves as investment sub-adviser. The
terms and provisions of the sub-advisory agreements are substantially similar,
except with respect to fee levels, to the terms and provisions of the
Sub-Advisory Agreement with the Company.
For the services provided and expenses assumed pursuant to various
Investment Advisory Agreements, NBAI is entitled to receive advisory fees,
computed daily and paid monthly, at the annual rates of: 0.25% of the first $250
million of the average daily net assets of Nations Prime Fund, plus 0.20% of the
average daily net assets of such Fund in excess of $250 million; 0.60% of the
average daily net assets of each of the Nations Short-Intermediate Government
Fund, Nations Short-Term Income Fund, Nations Diversified Income Fund and
Nations Strategic Fixed Income Fund; 0.75% of the average daily net assets of
each of Nations Value Fund, Nations Capital Growth Fund, Nations Emerging Growth
Fund and Nations Disciplined Equity Fund; 0.75% of the first $100 million of the
Nations Equity Income Fund's average daily net assets, plus 0.70% of the Nations
Equity Income Fund's average daily net assets in excess of $100 million and up
to $250 million, plus 0.60% of the Nations Equity Income Fund's average daily
net assets in excess of $250 million; 0.90% of the average daily net assets of
Nations International Equity Fund; 1.10% of the average daily net assets of
Nations Emerging Markets Fund; 0.90% of the average daily net assets of Nations
Pacific Growth Fund and 0.70% of the average daily net assets of Nations Global
Government Income Fund.
For the services provided and expenses assumed pursuant to sub-advisory
agreements, TradeStreet is entitled to receive from NBAI sub-advisory fees
computed daily and paid monthly, at the annual rates of 0.055% of Nations Prime
Fund's average daily net assets; 0.20% of Nations
45
<PAGE>
Equity Income Fund's average daily net assets; 0.25% of Nations Value Fund's
Nations Capital Growth Fund's, Nations Emerging Growth Fund's and Nations
Disciplined Equity Fund's average daily net assets; 0.15% of Nations
Short-Intermediate Government Fund's, Nations Short-Term Income Fund's, Nations
Diversified Income Fund's, and Nations Strategic Fixed Income Fund's average
daily net assets.
For services provided and expenses assumed pursuant to a sub-advisory
agreement, Gartmore Global Partners is entitled to receive from NBAI
sub-advisory fees, compute daily and paid monthly at the annual rates of 0.70%
of Nations International Equity Fund's average daily net assets; 0.85% of
Nations Emerging Markets Fund's average daily net assets; 0.70% of Nations
Pacific Growth Fund's average daily net assets and 0.54% of Nations Global
Government Income Fund's average daily net assets. From time to time,
NationsBank (and/or TradeStreet and/or Gartmore Global Partners) may waive or
reimburse (either voluntarily or pursuant to applicable state limitations)
advisory fees or expenses payable by a Fund.
For the fiscal period from December 1, 1995 to December 31, 1995, after
waivers, Nations Fund Trust paid NationsBank under a prior Investment Advisory
Agreement advisory fees at the indicated rates of the following Nations Funds'
average daily net assets: Nations Value Fund -- 0.75%; Nations Capital Growth
Fund -- 0.75%; Nations Emerging Growth Fund -- 0.75%; Nations Disciplined Equity
Fund -- 0.75%; Nations Short-Intermediate Government Fund -- 0.37%; Nations
Short-Term Income Fund -- 0.27%; Nations Diversified Income Fund -- 0.50%; and
Nations Strategic Fixed Income Fund -- 0.50%
For the fiscal period from June 1, 1995 to December 31, 1995, after
waivers, Nations Fund, Inc. paid NationsBank under a prior Investment Advisory
Agreement advisory fees at the indicated rates of the following Funds' average
daily net assets: Nations Prime Fund -- 0.18%; Nations Equity Income Fund --
0.67% and Nations International Equity Fund -- 0.22%.
For the fiscal period from June 30, 1995 to December 31, 1995, after
waivers, Nations Portfolios paid NationsBank under a prior to Investment
Advisory Agreement advisory fees at the indicted rates of the following Funds'
average daily net assets: Nations Emerging Markets Fund -- 0.25% and Nations
Pacific Growth Fund -- 0.20%.
For the fiscal period from January 1, 1996 to March 31, 1996, after
waivers, Nations Fund Trust paid NBAI under the current Investment Advisory
Agreement advisory fees at the indicates rates of the following Funds' average
daily net assets: Nations Value Fund -- 0.75%; Nations Capital Growth Fund --
0.75%; Nations Emerging Growth Fund -- 0.75%; Nations Disciplined Equity Fund --
0.75%; Nations Short-Intermediate Government Fund -- 0.37%; Nations Short-Term
Income Fund -- 0.27%; Nations Diversified Income Fund -- 0.50%; and Nations
Strategic Fixed Income Fund -- 0.50%.
For the fiscal period from January 1, 1996 to March 31, 1996, after
waivers, Nations Fund, Inc. paid NBAI under the current Investment Advisory
Agreement advisory fees at the indicated rates of the following Funds' average
daily net assets: Nations Prime Fund -- 0.18%; Nations Equity Income Fund --
0.67% and Nations International Equity Fund -- 0.22%.
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<PAGE>
For the fiscal period from January 1, 1996 to March 31, 1996, after
waivers, Nations Portfolios paid NBAI under the current Investment Advisory
Agreement advisory fees at the indicated rates of the following Funds' average
daily net assets: Nations Emerging Markets Fund -- 0.25% and Nations Pacific
Growth Fund -- 0.20%.
For the fiscal period from January 1, 1996 to March 31, 1996, after
waivers, NBAI paid TradeStreet under the current Sub-Advisory Agreement
sub-advisory fees at the indicated rates of the following Funds' average daily
net assets: Nations Value Fund -- 0.25%; Nations Capital Growth Fund -- 0.25%;
Nations Emerging Growth Fund -- 0.25%; Nations Short-Intermediate Government
Fund -- 0.15%; Nations Diversified Income Fund -- 0.15%; Nations Strategic Fixed
Income Fund -- 0.15%; Nations Prime Fund -- 0.055%; and Nations Equity Income
Fund -- .20%.
For the fiscal period from June 1, 1995 to March 31, 1996, after
waivers, NBAI or its predecessor NationsBank paid Gartmore Global Partners or
its predecessor sub-advisory fees at the rate of 0.67% of the average daily net
assets of Nations International Equity Fund.
For the fiscal period from January 1, 1996 to March 31, 1996, after
waivers, NBAI paid Gartmore Global Partners or its predecessors sub-advisory
fees at the indicated rates of the following Funds average daily net assets:
Nations Emerging Markets Fund -- 0.85% and Nations Pacific Growth Fund -- 0.70%.
Martha L. Sherman is a Senior Product Manager, Money Market Management
for TradeStreet and is Senior Portfolio Manager for Nations Prime Fund. She has
been Portfolio Manager for Nations Prime Fund since 1988. Prior to assuming her
position with TradeStreet, she was Vice President and Senior Portfolio Manager
for the Investment Management Group at NationsBank. Ms. Sherman has worked in
the investment community since 1981. Her past experience includes investment
research for William Lowry & Associates. Ms. Sherman received a B.S. in Business
Administration from the University of Texas at Dallas.
Sharon M. Herrmann, CFA, is a Director of Equity Management for
TradeStreet and Senior Portfolio Manager for Nations Value Fund. Ms. Herrmann
has been Portfolio Manager for Nations Value Fund since 1989. Prior to assuming
her position with TradeStreet, she was Senior Vice President and Portfolio
Manager for the Investment Management Group at NationsBank. Ms. Herrmann has
worked for the Investment Management Group at NationsBank since 1981 where her
responsibilities included fund management and institutional portfolio
management. She attended Virginia Wesleyan College. Ms. Herrmann holds the
Chartered Financial Analyst designation and is a member of the Association for
Investment Management and Research as well as the North Carolina Society of
Financial Analysts, Inc.
Eric S. Williams, CFA, is a Senior Product Manager, Equity Management
for TradeStreet and Senior Portfolio Manager for Nations Equity Income Fund. Mr.
Williams has been Portfolio Manager for Nations Equity Income Fund since 1991.
Prior to assuming his position with TradeStreet, he was Senior Vice President
and Senior Portfolio Manager for the Investment
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Management Group at NationsBank. He has worked in the investment community since
1980. His past experience includes fund analysis and portfolio management for
National Bank of Detroit. Mr. Williams received a B.S. in Accounting from East
Carolina University, Summa Cum Laude and an M.B.A. from Indiana University. He
holds the Chartered Financial Analyst designation, is on the Advisory Board of
Indiana University's Investment Management Academy, and is a member of the
Association for Investment Management and Research as well as the North Carolina
Society of Financial Analysts, Inc.
Stephen Watson has been Principal Portfolio Manager for Nations
International Equity Fund and has been the Portfolio Manager since February,
1995. He joined the Gartmore Group as a Global Fund Manager in 1993 and
currently holds the position of Head of the International and Global Team.
Previously, Mr. Watson was a director and global fund manager with James Capel
Fund Managers, London, as well as Client Services Manager for international
clients. From 1980 to 1987 he was associated with Capel-Cure Myers in their
Portfolio Management Division. He began his career in 1976 when he joined the
investment division at Samuel Montagu. Mr. Watson is currently a member of the
Securities Institute.
Philip Ehrmann is Principal Portfolio Manager for Nations Emerging
Markets Fund and is the head of the Gartmore Emerging Markets Team. He has been
Portfolio Manager for the Fund since 1995. Prior to joining Gartmore in 1995,
Mr. Ehrmann was the Director of Emerging Markets for Invesco in London. He began
his career in 1981 as an institutional stockbroker with Rowe & Pitmann Inc. and
also spent a brief period with Prudential Bache Securities as an institutional
salesman before joining Invesco in 1984. Mr. Ehrmann graduated from the London
School of Economics with a degree in Economics, Industry and Trade.
Seok Teoh is Principal Portfolio Manager of the Nations Pacific Growth
Fund and has been the Portfolio Manager since the Fund's inception. She has been
associated with Gartmore since 1990 as the London based manager on its Far East
Team. Previously, Ms. Teoh managed Far East equities for Rothschild Asset
Management in Tokyo and in Singapore. She was also responsible for Singaporean
and Malaysian equity sales at Overseas Union Bank in Singapore. Ms. Teoh, who is
a native of Singapore, is fluent in Mandarin and Cantonese and received an
Economics degree from the University of Durham.
Philip J. Sanders, CFA, is a Senior Product Manager, Equity Management
for TradeStreet and Senior Portfolio Manager for Nations Capital Growth Fund.
Mr. Sanders has been Portfolio Manager for Nations Capital Growth Fund since
1995. Prior to assuming his position with TradeStreet, he was Senior Vice
President and Senior Portfolio Manager for the Investment Management Group at
NationsBank. Mr. Sanders has worked in the financial investment community since
1981. His past experience includes portfolio management, equity research and
financial analysis for the Investment Management Group at NationsBank and Duke
Power Company. Mr. Sanders received a B.A. in Economics from the University of
Michigan and an M.B.A. from the University of North Carolina at Charlotte. He
holds the Chartered Financial Analyst designation and is a member of the
Association for Investment Management and Research as well as the North Carolina
Society of Financial Analysts, Inc.
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C. Thomas Clapp, CFA, is Director of the Equity Management Group for
TradeStreet and Portfolio Manager of Nations Emerging Growth Fund. Mr. Clapp has
been Portfolio Manager for Nations Emerging Growth Fund since September, 1996.
Prior to assuming his position with TradeStreet in 1995, he was Senior Vice
President and Director of Research for the Investment Management Group at
NationsBank. Prior to joining NationsBank in 1992, Mr. Clapp was a Senior
Portfolio Manager with Royal Insurance Group. Mr. Clapp has worked in the
investment community since 1984. He received his B.A. in Economics from the
University of North Carolina at Chapel Hill and an M.B.A. from the University of
South Carolina. He also holds the Chartered Financial Analyst designation and is
a member of the Association for Investment Management and Research and the North
Carolina Society of Financial Analysts, Inc.
Jeffrey C. Moser, CFA, is a Senior Product Manager, Equity Management
for TradeStreet and Senior Portfolio Manager for Nations Disciplined Equity
Fund. Mr. Moser has been Portfolio Manager for Nations Disciplined Equity Fund
since 1995. Prior to assuming his position with TradeStreet, he was Senior Vice
President and Senior Portfolio Manager for the Investment Management Group at
NationsBank. Mr. Moser has worked for the Investment Management Group at
NationsBank since 1983 where his responsibilities included institutional
portfolio management and equity analysis. Mr. Moser graduated Phi Beta Kappa
with a B.S. in Mathematics from Wake Forest University. He holds the Chartered
Financial Analyst designation and is a member of the Association for Investment
Management and Research as well as the North Carolina Society of Financial
Analysts, Inc.
Greg W. Golden is a Structured Products Manager, Equity Management for
TradeStreet and is Portfolio Manager for Nations Equity Index Fund. He has been
Portfolio Manager for Nations Equity Index Fund since 1993. Prior to assuming
his position with TradeStreet, he was Vice President and Structured Products
Manager for the Investment Management Group at NationsBank. He has worked in the
investment community since 1990. His past experience includes portfolio
management, derivatives management and quantitative analysis for the Investment
Management Group at NationsBank and Sovran Bank of Tennessee. Mr. Golden
received a B.B.A. in Finance from Belmont University. He is a Chartered
Financial Analyst candidate and a member of the Association for Investment
Management and Research as well as the North Carolina Society of Financial
Analysts, Inc.
Gregory H. Cobb is a Senior Product Manager, Fixed Income Management
for TradeStreet and Senior Portfolio Manager for Nations Strategic Fixed Income
Fund. Mr. Cobb has been Portfolio Manager for Nations Strategic Fixed Income
Fund since 1995. Prior to assuming his position with TradeStreet, he was Vice
President and Senior Portfolio Manager for the Investment Management Group at
NationsBank. Mr. Cobb has worked in the investment community since 1987. His
past experience includes portfolio management of intermediate duration and
insurance products for Trust Company Bank and Barnett Bank Trust Company Inc.
Mr. Cobb received a B.A. in Economics from the University of North Carolina at
Chapel Hill.
Mark S. Ahnrud, CFA, is a Director of Fixed Income Management for
TradeStreet and the Senior Portfolio Manager for Nations Diversified Income
Fund. Mr. Ahnrud has been the Portfolio Manager for the Nations Diversified
Income Fund since 1992. Prior to assuming his
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position with TradeStreet, he was Senior Vice President and Senior Portfolio
Manager for the Investment Management Group at NationsBank. Mr. Ahnrud has
worked for the Investment Management Group at NationsBank since 1985 where his
responsibilities initially included institutional investment management sales
and later involved high yield credit analysis. Mr. Ahnrud received a dual B.S.
in Finance and Investments from Babson College and an M.B.A. from Duke
University, Fuqua School of Business. He holds the Chartered Financial Analyst
designation and is a member of the Association for Investment Management and
Research as well as the North Carolina Society of Financial Analysts, Inc.
John S. Swaim is a Senior Product Manager, Fixed Income Management for
TradeStreet and Senior Portfolio Manager for Nations Short-Intermediate
Government Fund. Mr. Swaim has been Portfolio Manager for the Fund since 1995.
Prior to assuming his position with TradeStreet, he was Vice President and
Senior Portfolio Manager for the Investment Management Group at NationsBank. Mr.
Swaim has worked in the investment community since 1986. His past experience
includes derivative products manager for the NationsBank Texas Corporate
Investment Division portfolio. Mr. Swaim received a B.S. from University of
North Texas and an M.B.A. from University of Texas at Arlington.
Brad Pope is a Product Managed, Fixed Income Management for TradeStreet
and portfolio manager for Nations Short-Term Income Fund. He is a senior member
of the Fixed Income Team. As such, his responsibilities include setting duration
policy for the Nations Fund fixed income funds. Mr. Pope has been the portfolio
manager for Nations Short-Term Income Fund since August 1996. Prior to assuming
this position, he was a manager in the structured products area. He joined the
Investment Management Group at NationsBank, TradeStreet's predecessor
organization in 1988. Mr. Pope has over nine years of investment experience,
including working on the trading floor of the Chicago Board of Trade. Mr. Pope
received a B.B.A. in Finance from the University of Texas at Austin.
Mark Rimmer is the principal portfolio manager of the Nations Global
Government Income Fund and has been an International Fixed Income Manager with
the Gartmore Group since 1990. He joined Gulf International Bank in 1986 on the
trading desk, and subsequently joined their Investment Management Group in 1988,
managing multi-currency funds for institutional clients in the Gulf region.
Prior to that he was associated with Sumitomo Finance International as a senior
trader. Mr. Rimmer graduated from Cambridge University in 1984 with an honors
degree in Economics. Mr. Rimmer also is a member of the Institute of Investment
Management and Research.
INVESTMENT STYLES
Discipline Management Style. When you invest in any fund in
the Nations Fund family, you can be assured your money is managed according to a
disciplined investment strategy; one that remains in place regardless of market
conditions. We believe this structured approach to managing portfolio securities
may provide you with consistent performance over time. The advisers to the
underlying Nations Funds use various investment strategies during the
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process of constructing and managing the underlying Nations Funds' portfolios.
These strategies have been categorized into investment styles which consist of
(i) Fixed Income Style, (ii) Growth Equity Style, (iii) Value Equity Style, (iv)
Equity Income Style, (v) Emerging Markets and Pacific Growth Style and (vi)
Global Government Income Style. Investment Styles described below relate to the
Diversified Income, Short-Intermediate Government, Short-Term Income, Strategic
Fixed Income, Capital Growth, Emerging Growth, Value, International Equity
Income, Equity Income, Emerging Markets, Pacific Growth and Global Government
Income Funds.
FIXED INCOME STYLE. The Nations Diversified Income, Government
Securities, Short-Intermediate Government, Short-Term Income and Strategic Fixed
Income, are managed by their Adviser using the Fixed Income Style. Fixed Income
Style investment philosophy is premised on the belief that a well diversified
portfolio of fixed income securities that emphasizes a combination of
investments strategies will capture relative value in the bond market.
In order to pursue this goal, the Fixed Income Style includes certain
biases. Their adviser reduces the risk by investing in many different issuers.
This is done by setting a maximum percentage permitted of any single issuer in
any portfolio. Focus on high credit quality is the second bias. Holdings are
concentrated in the upper end of the quality spectrum. Securities of less than
the highest quality are used only when the team of credit analysts support the
conclusion that the quality will remain stable or improve, and that it offers
attractive potential in expected return. The third bias is to de-emphasize
interest rate forecasts. The performance of a portfolio therefore is not held
hostage to the accuracy of a rate forecast.
This philosophy attempts to achieve consistent results while minimizing
risk. Five strategies are also utilized by the Fixed Income Style Group
Portfolio Managers to meet this objective.
Sector Spread Anomalies: When sectors of the bond market are over or
under valued, the allocation in the portfolios is adjusted accordingly. Such
decisions are made based on a sound analysis of historical bond values as well
as a review of current market conditions and its impact on future values.
Yield Curve Anomalies: Unusual shapes in the yield curve or the degree
of steepness in the yield curve provide opportunities to outperform fixed income
indices. Such opportunities are reviewed by our specialists for return
enhancement under a variety of possible interest rate shifts before they are
implemented.
Coupon/Quality Opportunities: High or low coupon securities may
represent investment value based on supply and demand conditions for bonds.
There are also times when upgrading or downgrading of the credit quality of a
bond can enhance a portfolio's return. Funds hold lower quality bonds only when
the expected reward is substantial compared to the potential risks, and credit
analysis supports the conclusion that the credit quality is stable or improving.
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Security Analysis: A full staff of credit analysts is dedicated to
supporting fixed income credit decisions. This staff gains additional support
from a substantial equity research team when analyzing bonds from corporate
issuers.
Duration Management: The duration (price volatility of a bond in
relation to interest rate movements) of the portfolios may be altered by 10%
shorter or longer than the portfolios normal benchmark. Changes in duration are
made infrequently and only when they are supported by economic expectations and
an assessment of value.
A final portfolio consists of securities that have been selected by the
Fixed Income Style Group Portfolio Managers, in-house industry specialists and
expert Wall Street sources all working together.
GROWTH EQUITY STYLE. The Capital Growth and Emerging Growth Funds are
managed by their adviser using the Growth Equity style. Growth Equity Style
investment philosophy seeks companies with superior growth prospects selling at
reasonable prices that, over time, should outperform the market.
Emphasis is placed on a "value adjusted for growth" stock selection
process. Essential to this style is their adviser's belief that absolute
valuation does not capture the powerful effects of inflation. Therefore,
relative price/earnings ranges of stocks going back 5 years are examined rather
than static absolute price/earnings ratio.
Inflation causes the market price/earnings ratio of a stock to expand
or contract. Investors are willing to pay a higher price for stock in a company
in periods of low inflation. The inverse is also true. The premium paid for
growth will increase as inflation declines and decreases as inflation rises.
The stock selection process begins with a universe of financially
strong companies. The selection process selects companies with a market
capitalization greater than $500 million (large, established companies) and a
strong price momentum (growth in share price over the last 18 months). This
results in a universe of approximately 750 companies.
These 750 companies are the universe from which their adviser's
industry specialists make their final decision for inclusion in an investment
portfolio. In accordance with the Growth Equity Style, portfolio managers focus
on those stocks among the universe with the lowest price/earnings ratio and are
in industries with above average earnings growth potential. The final portfolio
of stocks is then constructed by our Growth Equity Group Senior Portfolio
Managers who work closely with the in-house industry specialists, as well as
expert Wall Street sources.
In summary, the Growth Equity Style seeks to produce a diverse
portfolio of large capitalization growth stocks, that over time, should
outperform the market.
VALUE EQUITY STYLE. The Value Fund is managed by its adviser using the
Value Equity Style. The Value Equity Style investment philosophy is premised on
the belief that a well diversified portfolio of undervalued companies exhibiting
low price/earnings ratios will over time outperform the market while incurring
lower than market risk.
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This style utilizes a "bottom-up" approach to stock selection, focusing
on well proven factors of fundamental valuation. A low price/earnings ratio and
above market dividend yield are two of the biases which reduce market risk. A
catalyst for earnings improvement is also one of this Style's requirements as it
assists with the "timing" of the purchase of a particular company.
Stock selection process begins with a team of 10 in-house research
specialists aided by a computerized screening model. Starting with approximately
a 2,000 company universe, stocks must first pass a rigorous screening process
that selects only those companies that possess strong financial quality and a
market capitalization greater than $500 million. This results in a universe of
approximately 900 companies, representing all of the 54 major U.S. industries
and approximately 10 economic sectors.
A more sophisticated screening process is then applied to the 900
company universe. The companies are then ranked based on the following factor
weightings:
The top one-third, or approximately 300 companies, result in the final
universe from which the industry specialists make initial selections for a Fund.
To insure adherence to the discipline, price objectives (buy and sell prices)
are set for each company purchased, based on sound fundamental analysis. A final
diversified portfolio of approximately 65 issues is constructed by the Value
Equity Style Group Senior Portfolio Managers working closely with in-house
industry specialists, as well as expert Wall Street sources.
In summary, the low price/earnings ratio, value discipline seeks to
produce a well diversified portfolio of high quality companies, that over time,
should outperform the market, thereby adding value while incurring below-market
risk.
DISCIPLINED EQUITY STYLE. The Nations Disciplined Equity Fund is
managed by its adviser using Disciplined Equity Style. Disciplined Equity Style
investment philosophy seeks to identify companies which offer future near-term
earnings momentum.
Its adviser pursues this investment philosophy through the use of a
proprietary computerized tracking system (the "Alpha Model") which monitors the
earnings per share estimates of approximately 3,000 Wall Street analysts, and
through conventional security analysis. In utilizing the computerized tracking
system, its adviser identifies companies with respect to which there has been a
change in the consensus analyst estimate of earnings per share. Its adviser
believes that such a change often signifies the beginning of a trend for the
company, rather than an isolated occurrence, and that such trend ultimately will
be reflected in the share price of the company. Its adviser then buys or sells
stocks for the Fund based on the results of this analysis.
In selecting stocks pursuant to Disciplined Equity Style, its adviser
also uses conventional security analysis techniques. Starting with a universe of
approximately 2,000 companies with large market capitalizations, its adviser
eliminates stocks that have relatively low trading activity, as well as stocks
of companies of poor credit quality and those which, in the opinion of its
adviser, are overpriced. From the available pool of stocks that meet all of the
criteria, approximately 40 to 50 are selected for inclusion in the Fund's
portfolio.
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Its adviser strives to keep the assets of the Fund fully invested at
all times, except as required to meet expected liquidity needs.
EQUITY INCOME STYLE. The Equity Income Fund is managed by its adviser
using Equity Income Style. Equity Income Style investment philosophy is premised
on the belief that a diversified portfolio of stocks with an above average yield
can provide long-term returns, higher than that of the S&P 500 Index (the "S&P
500") and with less volatility.
This style utilizes a "low volatility" approach to stock selection,
focusing on tested factors of fundamental stock valuation. Volatility is reduced
through selecting stocks with Beta Coefficient ("Beta") of less than 1.0 (Beta
is a measurement of volatility relative to the stock market as a whole, which
has a Beta of 1.0). The Equity Income Style seeks to maintain a yield on the
portfolio of at least 50% higher than the dividend yield for the S&P 500. Its
adviser reduces risk by investing in both common stocks and convertible
securities.
Equity Income Style stock selection process begins with a team of
in-house research specialists aided by a computerized screening process.
Starting with a 2000 company universe, stocks must first pass a rigorous
screening process that selects companies with a yield only one-third less than
the S&P 500 and market capitalization greater than $500 million. Often stocks
with below average yields grow faster than those with average yields. Therefore,
over time, a portfolio may earn more income by purchasing stocks with below
average yields. Stocks are then ranked relative to other stocks within their
industry.
A more sophisticated screening process is then applied to the universe.
Each company is ranked based on the following factor weightings: (i) market
style analyzes correlations between crucial stock characteristics (price/book
ratios, dividends yields, and return on assets) and price performance; (ii)
Insider Trading looks at filings with the SEC and evaluates them by title, date,
transaction size and historical performance; (iii) Earnings Expectations
evaluates changes in annual earnings estimates and quarterly earnings surprises,
and (iv) Price Momentum monitors relative price strength with short term under
performance. The final portfolio of approximately 70 issues is constructed by
the Equity Income Style Group senior portfolio managers working closely with
in-house industry specialists, as well as expert Wall Street sources.
INTERNATIONAL EQUITY INCOME STYLE. The International Equity Fund is
managed by its adviser using International Equity Style. International Equity
Income Style investment philosophy is premised on the belief that a diversified
portfolio of equity securities of established, non-United States issuers can
provide long-term growth of capital and income.
This style focuses on the country selection process by utilizing
macroeconomic forecasts to identify areas of the world which will exhibit
relatively strong growth within the context of a modest inflation and low
interest rate environment. The political factors and market liquidity
constraints which can affect stock market valuations are also taken into
consideration by its adviser prior to making stock selections.
The stock selection process begins with the elimination of equity
securities with a market capitalization of less than $250 million. The next step
in the process is the ranking of each
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country and industry sector by relative price/earnings ratio using an historical
range of not less than ten years from an universe of approximately 1000 stocks.
In addition to the relative historical price/earnings ratio the portfolio
managers also employ a fundamental analysis of growth opportunities, management
and future direction of these stocks.
The International Equity Fund is a dollar-denominated mutual fund and
therefore, consideration is given to hedging part or all of the portfolio back
to U.S. dollars from international currencies. All decisions to hedge are based
upon an analysis of the relative value of the U.S. dollar on an international
purchasing power parity basis (purchasing power parity is a method for
determining the relative purchasing power of different currencies by comparing
the amount of each currency required to purchase a typical bundle of goods and
services to domestic markets) and an estimation of short-term interest rate
differentials (which affect both the direction of currency movements and also
the cost of hedging).
EMERGING MARKETS AND PACIFIC GROWTH FUNDS STYLE. The Emerging Markets
and Pacific Growth Funds utilize an investment philosophy that emphasizes
investment in reasonably priced growth stocks. This philosophy assumes that
superior earnings growth will lead to greater investment returns. In the case of
global or international portfolios this philosophy concentrates on stock
selection and asset allocation aimed at strategically overweighting growing
markets while avoiding those with less possibility of appreciation. This
investment approach is designed to add value while also providing
diversification to minimize risk.
Gartmore selects stocks for its portfolios using rigorous stock
selection criteria. Their analysis is designed to discover securities which
demonstrate a potential for above market earnings growth rates while maintaining
reasonable valuation levels and whose parent corporations show strong balance
sheets and quality management. In order to ascertain these facts, Gartmore
representatives make on site inspections of the companies under review, as well
as their competitors, suppliers and customers.
The allocation of assets is determined by portfolio managers based on
both qualitative and quantitative research. This research includes the
identification of investment themes, political and economic trends,
price/earnings ratios, real interest rates and earnings growth projections.
These factors determine economic, market, interest rate and currency forecasts
which are, in turn, used to determine regional allocations.
Utilizing the investment strategy set forth above, Nations Emerging
Markets Fund invests in securities of companies located in emerging market
countries. These countries include, but are not limited to: Argentina, Brazil,
Chile, China, Czech Republic, Colombia, Ecuador, Greece, Hong Kong, Indonesia,
India, Malaysia, Mexico, The Philippines, Poland, Portugal, Peru, Russia,
Singapore, South Africa, Thailand, Taiwan, and Turkey.
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GLOBAL GOVERNMENT INCOME FUND STYLE. The Global Government Income Fund
bases its investment decisions on an analysis of longer term economic trends
which are believed to be key to successful fixed income investing. This tendency
to take into account long term economic trends is coupled with the practice of
investing primarily in investment grade government securities which minimize the
investor's credit risk.
This investment policy is effected by carefully analyzing interest rate
forecasts and currency movements for various markets and using this information
to determine regional allocations. These allocations are then adjusted to
reflect the portfolio manager's perception of the most favorable markets and
issuers. Fundamental economic strength, credit quality and interest rate trends
are the principal factors considered by the portfolio's management in
determining whether to increase or decrease the emphasis placed on a particular
country or type of security.
ADMINISTRATOR AND CO-ADMINISTRATOR
The Company has retained Stephens Inc. ("Administrator") as the
administrator and First Data Investors Services Group, Inc. (the
"Co-Administrator") as the co-administrator of the LifeGoal Portfolios.
The Administrator and Co-Administrator serve under an administration
agreement ("Administration Agreement") and co-administration agreement
("Co-Administration Agreement"), respectively, each of which was approved by the
Board of Directors on July 10, 1996. The Administrator receives, as compensation
for its services rendered under the Administration Agreement and as agent for
the Co-Administrator for the services it provides under the Co-Administration
Agreement, an administrative fee of $10,000 per year per LifeGoal Portfolio,
which will be absorbed by NBAI.
Pursuant to the Administration Agreement, the Administrator has agreed
to, among other things, (i) maintain office facilities for the LifeGoal
Portfolios, (ii) furnish statistical and research data, data processing,
clerical, and internal executive and administrative services to the Company,
(iii) furnish corporate secretarial services to the Company, including
coordinating the preparation and distribution of materials for Board of
Directors meetings, (iv) coordinate the provision of legal advice to the Company
with respect to regulatory matters, (v) coordinate the preparation of reports to
the Company's shareholders and the SEC, including annual and semi-annual
reports, (vi) coordinate the provision of services to the Company by the
Co-Administrator, the Transfer Agents and the Custodians, and (vii) generally
assist in all aspects of the Company's operations. Additionally, the
Administrator is authorized to receive, as agent for the Co-Administrator, the
fees payable to the Co-Administrator by the Company for its services rendered
under the Co-Administration Agreement. The Administrator bears all expenses
incurred in connection with the performance of its services.
Pursuant to the Co-Administration Agreement, the Co-Administrator has
agreed to, among other things, (i) provide accounting and bookkeeping services
for the LifeGoal Portfolios, (ii) compute each Portfolio's net asset value and
net income, (iii) accumulate information required for the Company's reports to
shareholders and the SEC, (iv) prepare and file the Company's
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federal and state tax returns, (v) perform monthly compliance testing for the
Company, and (vi) prepare and furnish the Company monthly broker security
transaction summaries and transaction listings and performance information. The
Co-Administrator bears all expenses incurred in connection with the performance
of its services.
The Administration Agreement and the Co-Administration Agreement may be
terminated by a vote of a majority of the Board of Directors, or by the
Administrator or Co-Administrator, respectively, on 60 days' written notice
without penalty. The Administration Agreement and Co-Administration Agreement
are not assignable without the written consent of the non-assigning party.
Furthermore, the Administration Agreement and the Co-Administration Agreement
provide that the Administrator and Co-Administrator, respectively, shall not be
liable to the LifeGoal Portfolios or to their shareholders except in the case of
the Administrator's or Co-Administrator's respective willful misfeasance, bad
faith, gross negligence or reckless disregard of duty.
DISTRIBUTOR
Stephens Inc. (the "Distributor") serves as the principal underwriter
and distributor of the shares of the LifeGoal Portfolios.
At a meeting held on July 10, 1996, the Board of Directors selected
Stephens Inc. as Distributor, and approved a distribution agreement
("Distribution Agreement") with the Distributor. Pursuant to the Distribution
Agreement, the Distributor, as agent, sells shares of the LifeGoal Portfolios on
a continuous basis and transmits purchase and redemption orders that its
receives to the Company or the Transfer Agent (as defined under the caption
"Transfer Agents and Custodian"). Additionally, the Distributor has agreed to
use appropriate efforts to solicit orders for the sale of shares and to
undertake such advertising and promotion as it believes appropriate in
connection with such solicitation. Pursuant to the Distribution Agreement, the
Distributor, at its own expense, finances those activities which are primarily
intended to result in the sale of shares of the LifeGoal Portfolios, including,
but not limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing of prospectuses to other than existing shareholders, and
the printing and mailing of sales literature. The Distributor, however, may be
reimbursed for all or a portion of such expenses to the extent permitted by a
distribution plan adopted by the Company pursuant to Rule 12b-1 under the 1940
Act.
The Distribution Agreement will continue year to year as long as such
continuance is approved at least annually by (i) the Board of Directors or a
vote of the majority (as defined in the 1940 Act) of the outstanding voting
securities of a LifeGoal Portfolio and (ii) a majority of the directors who are
not parties to the Distribution Agreement or "interested persons" of any such
party by a vote cast in person at a meeting called for such purpose. The
Distribution Agreement is not assignable and is terminable with respect to a
Portfolio, without penalty, on 60 days' notice by the Board of Directors, the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of such LifeGoal Portfolio, or by the Distributor.
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DISTRIBUTION PLANS AND SHAREHOLDER SERVICING ARRANGEMENTS FOR INVESTOR SHARES
INVESTOR A SHARES
The Company has adopted a Shareholder Servicing and Distribution Plan
(the "Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act with respect
to each LifeGoal Portfolio's Investor A Shares. The Investor A Plan provides
that each LifeGoal Portfolio may pay the Distributor or banks, broker/dealers or
other financial institutions that offer shares of the Fund and that have entered
into a Sales Support Agreement with the Distributor ("Selling Agents") or a
Shareholder Servicing Agreement with the Company ("Servicing Agents"), up to
0.25% (on an annualized basis) of the average daily net asset value of such
LifeGoal Portfolio.
Payments under the Investor A Plan may be made to the Distributor for
reimbursements of distribution-related expenses actually incurred by the
Distributor, including, but not limited to, expenses of organizing and
conducting sales seminars, printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other than existing
shareholders, preparation and distribution of advertising material and sales
literature and costs of administering the Investor A Plan, or to Servicing
Agents that have entered into a Shareholder Servicing Agreement with the Company
for providing shareholder support services to their customers ("Customers")
which hold of record or beneficially Investor A Shares of a Fund. Such
shareholder support services provided by Servicing Agents to holders of Investor
A Shares of the LifeGoal Portfolios may include (i) aggregating and processing
purchase and redemption requests for Investor A Shares from their Customers and
transmitting promptly net purchase and redemption orders to the Company's
distributor or transfer agent; (ii) providing their Customers with a service
that invests the assets of their accounts in Investor A Shares pursuant to
specific or pre-authorized instructions; (iii) processing dividend and
distribution payments from the Company on behalf of their Customers; (iv)
providing information periodically to their Customers showing their positions in
Investor A Shares; (v) arranging for bank wires; (vi) responding to their
Customers' inquiries concerning their investment in Investor A Shares; (vii)
providing subaccounting with respect to Investor A Shares beneficially owned by
their Customers or the information necessary for subaccounting; (viii) if
required by law, forwarding shareholder communications from the Company (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to their Customers; (ix) forwarding to
their Customers proxy statements and proxies containing any proposals regarding
the Shareholder Servicing Agreement; (x) providing general shareholder liaison
services; and (xi) providing such other similar services as the Company may
reasonably request to the extent the Selling Agent is permitted to do so under
applicable statutes, rules or regulations.
Expenses incurred by the Distributor pursuant to the Investor A Plan in
any given year may exceed the sum of the fees received under the Investor A
Plan. Any such excess may be recovered by the Distributor in future years so
long as the Investor A Plan is in effect. If the Investor A Plan were terminated
or not continued, a LifeGoal Portfolio would not be contractually obligated to
pay the Distributor for any expenses not previously reimbursed by the LifeGoal
Portfolio.
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INVESTOR B SHARES
The Directors of the Company have approved a Distribution Plan in
accordance with Rule 12b-1 under the 1940 Act for the Investor B Shares of the
LifeGoal Portfolios (the "Investor B Plan"). Pursuant to the Investor B Plan,
each Portfolio may pay the Distributor for certain expenses that are incurred in
connection with the distribution of shares. Payments under the Investor B Plan
will be calculated daily and paid monthly at a rate set from time to time by the
Board of Directors provided that the annual rate may not exceed 0.75% of the
average daily net asset value of Investor B Shares of a Portfolio. Payments to
the Distributor pursuant to the Investor B Plan will be used (i) to compensate
Selling Agents for providing sales support assistance relating to Investor B
Shares, (ii) for promotional activities intended to result in the sale of
Investor B Shares such as to pay for the preparation, printing and distribution
of prospectuses to other than current shareholders, and (iii) to compensate
Selling Agents for providing sales support services with respect to their
Customers who are, from time to time, beneficial and record holders of Investor
B Shares. Currently, substantially all fees paid pursuant to the Investor B Plan
are paid to compensate Selling Agents for providing the services described in
(i) and (iii) above, with any remaining amounts being used by the Distributor to
partially defray other expenses incurred by the Distributor in distributing
Investor B Shares. Fees received by the Distributor pursuant to the Investor B
Plan will not be used to pay any interest expenses, carrying charges or other
financing costs (except to the extent permitted by the SEC) and will not be used
to pay any general and administrative expenses of the Distributor.
Pursuant to the Investor B Plan, the Distributor may enter into Sales
Support Agreements with Selling Agents for providing sales support services to
their Customers who are the record or beneficial owners of Investor B Shares of
the LifeGoal Portfolios. Such Selling Agents will be compensated at the annual
rate of up to 0.75% of the average daily net asset value of the Investor B
Shares of the LifeGoal Portfolios held of record or beneficially by such
Customers. The sales support services provided by Selling Agents may include
providing distribution assistance and promotional activities intended to result
in the sales of shares such as paying for the preparation, printing and
distribution of prospectuses to other than current shareholders.
Fees paid pursuant to the Investor B Plan are accrued daily and paid
monthly, and are charged as expenses of the relevant shares of a LifeGoal
Portfolio as accrued. Expenses incurred by the Distributor pursuant to the
Investor B Plan in any given year may exceed the sum of the fees received under
the Investor B Plan and payments received pursuant to contingent deferred sales
charges. Any such excess may be recovered by the Distributor in future years so
long as the Investor B Plan is in effect. If the Investor B Plan were terminated
or not continued, a LifeGoal Portfolio would not be contractually obligated to
pay the Distributor for any expenses not previously reimbursed by the LifeGoal
Portfolio or recovered through contingent deferred sales charges.
In addition, the Directors have approved a Shareholder Servicing Plan
("Servicing Plan") with respect to the Investor B Shares of the LifeGoal
Portfolios (the "Investor B Servicing Plan"). Pursuant to the Investor B
Servicing Plan, each LifeGoal Portfolio may pay banks, broker/dealers or other
financial institutions that have entered into a Shareholder Servicing Agreement
with
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Nations Fund ("Servicing Agents") for certain expenses that are incurred by the
Servicing Agents in connection with shareholder support services that are
provided by the Servicing Agents. Payments under the Investor B Servicing Plan
will be calculated daily and paid monthly at a rate set from time to time by the
Board of Directors, provided that the annual rate may not exceed 0.25% of the
average daily net asset value of the LifeGoal Portfolios' Investor B Shares. The
shareholder services provided by the Servicing Agents may include (i)
aggregating and processing purchase and redemption requests for such Investor B
Shares from Customers and transmitting promptly net purchase and redemption
orders to the Company's distributor or transfer agent; (ii) providing Customers
with a service that invests the assets of their accounts in such Investor B
Shares pursuant to specific or pre-authorized instructions; (iii) processing
dividend and distribution payments from the Company on behalf of Customers; (iv)
providing information periodically to Customers showing their positions in such
Investor B Shares; (v) arranging for bank wires; (vi) responding to Customers'
inquiries concerning their investment in such Investor B Shares; (vii) providing
subaccounting with respect to such Investor B Shares beneficially owned by
Customers or providing the information necessary for subaccounting; (viii) if
required by law, forwarding shareholder communications from the Company (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to Customers; (ix) forwarding to
Customers proxy statements and proxies containing any proposals regarding the
Shareholder Servicing Agreement; (x) providing general shareholder liaison
services; and (xi) providing such other similar services as the Company may
reasonably request to the extent the Servicing Agent is permitted to do so under
applicable statutes, rules or regulations.
INVESTOR C SHARES
The Directors of the Company have approved a Distribution Plan in
accordance with Rule 12b-1 under the 1940 Act for the Investor C Shares of the
LifeGoal Portfolios (the "Investor C Plan"). Pursuant to the Investor C Plan,
each Portfolio may pay the Distributor for certain expenses that are incurred in
connection with the distribution of shares. Payments under the Investor C Plan
will be calculated daily and paid monthly at a rate set from time to time by the
Board of Directors provided that the annual rate may not exceed 0.75% of the
average daily net asset value of Investor C Shares of a Portfolio. Payments to
the Distributor pursuant to the Investor C Plan will be used (i) to compensate
Selling Agents for providing sales support assistance relating to Investor C
Shares, (ii) for promotional activities intended to result in the sale of
Investor C Shares such as to pay for the preparation, printing and distribution
of prospectuses to other than current shareholders, and (iii) to compensate
Selling Agents for providing sales support services with respect to their
Customers who are, from time to time, beneficial and record holders of Investor
C Shares. Currently, substantially all fees paid pursuant to the Investor C Plan
are paid to compensate Selling Agents for providing the services described in
(i) and (iii) above, with any remaining amounts being used by the Distributor to
partially defray other expenses incurred by the Distributor in distributing
Investor C Shares. Fees received by the Distributor pursuant to the Investor C
Plan will not be used to pay any interest expenses, carrying charges or other
financing costs (except to the extent permitted by the SEC) and will not be used
to pay any general and administrative expenses of the Distributor.
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Pursuant to the Investor C Plan, the Distributor may enter into Sales
Support Agreements with Selling Agents for providing sales support services to
their Customers who are the record or beneficial owners of Investor C Shares of
the LifeGoal Portfolios. Such Selling Agents will be compensated at the annual
rate of up to 0.75% of the average daily net asset value of the Investor C
Shares of the LifeGoal Portfolios held of record or beneficially by such
Customers. The sales support services provided by Selling Agents may include
providing distribution assistance and promotional activities intended to result
in the sales of shares such as paying for the preparation, printing and
distribution of prospectuses to other than current shareholders.
Fees paid pursuant to the Investor C Plan are accrued daily and paid
monthly, and are charged as expenses of the relevant shares of a Fund as
accrued. Expenses incurred by the Distributor pursuant to the Investor C Plan in
any given year may exceed the sum of the fees received under the Investor C Plan
and payments received pursuant to contingent deferred sales charges. Any such
excess may be recovered by the Distributor in future years so long as the
Investor C Plan is in effect. If the Investor C Plan were terminated or not
continued, a LifeGoal Portfolio would not be contractually obligated to pay the
Distributor for any expenses not previously reimbursed by the LifeGoal Portfolio
or recovered through contingent deferred sales charges.
In addition, the Directors have approved a Shareholder Servicing Plan
("Servicing Plan") with respect to the Investor C Shares of the LifeGoal
Portfolios (the "Investor C Servicing Plan"). Pursuant to the Investor C
Servicing Plan, each LifeGoal Portfolio may pay banks, broker/dealers or other
financial institutions that have entered into a Shareholder Servicing Agreement
with Nations Fund ("Servicing Agents") for certain expenses that are incurred by
the Servicing Agents in connection with shareholder support services that are
provided by the Servicing Agents. Payments under the Investor C Servicing Plan
will be calculated daily and paid monthly at a rate set from time to time by the
Board of Directors, provided that the annual rate may not exceed 0.25% of the
average daily net asset value of the LifeGoal Portfolios' Investor C Shares. The
shareholder services provided by the Servicing Agents may include (i)
aggregating and processing purchase and redemption requests for such Investor C
Shares from Customers and transmitting promptly net purchase and redemption
orders to the Company's distributor or transfer agent; (ii) providing Customers
with a service that invests the assets of their accounts in such Investor C
Shares pursuant to specific or pre-authorized instructions; (iii) processing
dividend and distribution payments from the Company on behalf of Customers; (iv)
providing information periodically to Customers showing their positions in such
Investor C Shares; (v) arranging for bank wires; (vi) responding to Customers'
inquiries concerning their investment in such Investor C Shares; (vii) providing
subaccounting with respect to such Investor C Shares beneficially owned by
Customers or providing the information necessary for subaccounting; (viii) if
required by law, forwarding shareholder communications from the Company (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to Customers; (ix) forwarding to
Customers proxy statements and proxies containing any proposals regarding the
Shareholder Servicing Agreement; (x) providing general shareholder liaison
services; and (xi) providing such other similar services as the Company may
reasonably request to the extent the Servicing Agent is permitted to do so under
applicable statutes, rules or regulations.
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INFORMATION APPLICABLE TO INVESTOR A, INVESTOR B AND INVESTOR C SHARES
The Investor A Plan, the Investor B Plan, the Investor B Servicing
Plan, the Investor C Plan and the Investor C Servicing Plan, (each a "Plan" and
collectively the "Plans") may only be used for the purposes specified above and
as stated in each such Plan. Compensation payable to Selling Agents or Servicing
Agents for shareholder support services under the Plans is subject to, among
other things, the National Association of Securities Dealers, Inc.'s ("NASD")
Conduct Rules governing receipt by NASD members of shareholder servicing plan
fees from registered investment companies (the "NASD Servicing Plan Rule"),
which became effective on July 7, 1993. Such compensation shall only be paid for
services determined to be permissible under the NASD Servicing Plan Rule.
Each Plan requires the officers of the Company or the Distributor to
provide the Board of Directors at least quarterly with a written report of the
amounts expended pursuant to the Plan and the purposes for which such
expenditures were made. The Board of Directors reviews these reports in
connection with their decisions with respect to the Plans.
As required by Rule 12b-1 under the 1940 Act, each Plan was approved by
the Board of Directors, including a majority of the directors who are not
"interested persons" (as defined in the 1940 Act) of the Company and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("Qualified Directors") on July 10, 1996 (except
for the Investor B Plan and Investor B Servicing Plan, approved on June 4,
1997). The Plans continue in effect as long as such continuance is specifically
approved at least annually by the Board of Directors, including a majority of
the Qualified Directors.
In approving the Plans in accordance with the requirements of Rule
12b-1, the directors considered various factors and determined that there is a
reasonable likelihood that each Plan will benefit the respective Investor A,
Investor B or Investor C Shares and the holders of such shares. The Plans have
been approved by the initial shareholder.
Each Plan may be terminated with respect to its shares by vote of a
majority of the Qualified Directors or by vote of a majority of holders of its
outstanding voting securities. Any change in a Plan that would increase
materially the distribution expenses paid by the Investor A, Investor B or
Investor C Shares requires shareholder approval; otherwise, each Plan may be
amended by the directors, including a majority of the Qualified Directors, by
vote cast in person at a meeting called for the purpose of voting upon such
amendment. The Investor B Servicing Plan and Investor C Servicing Plan may be
terminated by a vote of a majority of the Qualified Directors. As long as a Plan
is in effect, the selection or nomination of the Qualified Directors is
committed to the discretion of the Qualified Directors.
Conflict of interest restrictions may apply to the receipt by Selling,
and/or Servicing Agents of compensation from Nations Fund in connection with the
investment of fiduciary assets in Investor Shares. Selling and/or Servicing
Agents, including banks regulated by the Comptroller of the Currency, the
Federal Reserve Board, or the Federal Deposit Insurance Corporation, and
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investment advisers and other money managers subject to the jurisdiction of the
SEC or the Department of Labor, are urged to consult their legal advisers before
investing such assets in Investor Shares.
SHAREHOLDER ADMINISTRATION PLAN (PRIMARY B SHARES)
As stated in the Prospectus describing the Primary B Shares, the
Company has a separate Shareholder Administration Plan (the "Administration
Plan") with respect to such shares. Pursuant to the Administration Plan, the
Company may enter into agreements ("Administration Agreements") with
broker/dealers, banks and other financial institutions that are dealers of
record or holders of record or which have a servicing relationship with the
beneficial owners of Primary B Shares ("Servicing Agents"). The Administration
Plan provides that pursuant to the Administration Agreements, Servicing Agents
shall provide the shareholder support services as set forth therein to their
Customers who may from time to time own of record or beneficially Primary B
Shares in consideration for the payment of up to 0.60% (on an annualized basis)
of the net asset value of such shares. Such services may include: (i)
aggregating and processing purchase, exchange and redemption requests for
Primary B Shares from Customers and transmitting promptly net purchase and
redemption orders with the Distributor or the transfer agents; (ii) providing
Customers with a service that invests the assets of their accounts in Primary B
Shares pursuant to specific or pre-authorized instructions; (iii) processing
dividend and distribution payments from the Company on behalf of Customers; (iv)
providing information periodically to Customers showing their positions in
Primary B Shares; (v) arranging for bank wires; (vi) responding to Customer
inquiries concerning their investment in Primary B Shares; (vii) providing
sub-accounting with respect to Primary B Shares beneficially owned by Customers
or the information necessary for sub-accounting; (viii) if required by law,
forwarding shareholder communications (such as proxies, shareholder reports
annual and semi-annual financial statements and dividend, distribution and tax
notices) to Customers; (ix) forwarding to Customers proxy statements and proxies
containing any proposals regarding an Administration Agreement; (x) employee
benefit plan recordkeeping, administration, custody and trustee services; (xi)
general shareholder liaison services; and (xii) providing such other similar
services as may reasonably be requested to the extent permitted under applicable
statutes, rules, or regulations.
The Administration Plan also provides that in no event may the portion
of the shareholder administration fee that constitutes a "service fee," as the
term is defined in the NASD Servicing Plan Rule, exceed 0.25% of the average
daily net asset value of the Primary B Shares of a Portfolio. In addition, to
the extent any portion of the fees payable under the Plan is deemed to be for
services primarily intended to result in the sale of LifeGoal Portfolio Primary
B Shares, such fees are deemed approved and may be paid under the Administration
Plan. Accordingly, the Administration Plan has been approved and will be
operated pursuant to Rule 12b-1 under the 1940 Act. Such Plan shall continue in
effect as long as the Board of Directors, including a majority of the Qualified
Directors, specifically approves the Plan at least annually.
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EXPENSES
The Administrator and/or Co-Administrator furnishes, without additional
cost to the Company, the services of the Treasurer and Secretary of the Company
and such other personnel (other than the personnel of the Adviser or
Sub-Adviser) as are required for the proper conduct of the Company's affairs.
The Distributor bears the incremental expenses of printing and distributing
prospectuses used by the Distributor or furnished by the Distributor to
investors in connection with the public offering of the Company's Shares and the
costs of any other promotional or sales literature, except that to the extent
permitted under the Plans relating to the Investor A, Investor B and Investor C
Shares of each LifeGoal Portfolio, sales-related expenses incurred by the
Distributor may be reimbursed by the Company.
The Company pays, or causes to be paid, all other expenses of the
Company, including without limitation: the fees of the Adviser, the Sub-Adviser,
the Administrator and Co-Administrator; the charges and expenses of any
registrar, any custodian or depository appointed by the Company for the
safekeeping of its cash, fund securities and other property, and any stock
transfer, dividend or accounting agent or agents appointed by the Company;
brokerage commissions chargeable to the Company in connection with fund
securities transactions to which the Company is a party; all taxes, including
securities issuance and transfer taxes; corporate fees payable by the Company to
federal, state or other governmental agencies; all costs and expenses in
connection with the registration and maintenance of registration of the Company
and its shares with the SEC and other jurisdictions (including filing fees,
legal fees and disbursements of counsel); the costs and expenses of typesetting
prospectuses and statements of additional information of the Company (including
supplements thereto) and periodic reports and of printing and distributing such
prospectuses and statements of additional information (including supplements
thereto) to the Company's shareholders; all expenses of shareholders' and
directors' meetings and of preparing, printing and mailing proxy statements and
reports to shareholders; fees and travel expenses of directors or director
members of any advisory board or committee; all expenses incident to the payment
of any dividend or distribution, whether in shares or cash; charges and expenses
of any outside service used for pricing of the Company's shares; fees and
expenses of legal counsel and of independent auditors in connection with any
matter relative to the Company; membership dues of industry associations;
interest payable on Company borrowings; postage and long-distance telephone
charges; insurance premiums on property or personnel (including officers and
directors) of the Company which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Company's operation unless otherwise explicitly assumed by the Adviser
(and/or the Sub-Adviser), the Administrator or Co-Administrator. The Adviser,
under its investment advisory agreement with the LifeGoal Portfolios, has agreed
to absorb all expenses of the LifeGoal Portfolios, included those listed above,
except for taxes, brokerage fees and commissions, extraordinary expenses and any
applicable Rule 12b-1 fees, shareholder servicing fees and/or shareholder
administration fees.
Expenses of the Company which are not directly attributable to the
operations of any class of shares of LifeGoal Portfolio are pro-rated among all
classes of shares of LifeGoal Portfolios of the Company based upon the relative
net assets of each class or LifeGoal Portfolio. Expenses of
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the Company which are not directly attributable to a specific class of shares
but are directly attributable to a specific LifeGoal Portfolio are prorated
among all the classes of shares of such LifeGoal Portfolio based upon the
relative net assets of each such class of shares. Expenses of the Company which
are directly attributable to a class of shares are charged against the income
available for distribution as dividends to such class of shares.
TRANSFER AGENTS AND CUSTODIANS
First Data Investors Services Group, Inc., a wholly owned subsidiary of
First Data Corporation, is located at One Exchange Place, 53 State Street,
Boston, Massachusetts 02109, and serves as transfer agent (the "Transfer Agent")
for the Company's Primary Shares and Investor Shares. Under a transfer agency
agreement, the Transfer Agent maintains shareholder account records for the
Company, handles certain communications between shareholders and the Company,
distributes dividends and distributions payable by the Company to shareholders,
produces statements with respect to account activity for the Company and its
shareholders for these services.
NationsBank of Texas, N.A. serves as custodian (the "Custodian") for
the portfolio securities (except for shares of underlying Nations Funds) and
cash of the LifeGoal Portfolios. Except with respect to shares of underlying
NationsFunds, the Custodian maintains custody of the LifeGoal Portfolios'
securities, cash and other property, delivers securities against payment upon
sale and pays for securities against delivery upon purchase, makes payments on
behalf of the LifeGoal Portfolios for payments of dividends, distributions and
redemptions, endorses and collects on behalf of the LifeGoal Portfolios all
checks, and receives all dividends and other distributions made on securities
owned by the LifeGoal Portfolios. The Company maintains direct custody of the
LifeGoal Portfolios' shares of underlying Nations Funds.
INDEPENDENT ACCOUNTANT AND REPORTS
The Board of Directors has selected Price Waterhouse LLP, 160 Federal
Street, Boston, Massachusetts 02110 as the Company's independent accountant to
audit the Company's books and review the Company's tax returns for the LifeGoal
Portfolios' fiscal years ending on and after March 31, 1997.
The audited financial statements and portfolio of investments contained
in the Annual Report for the fiscal period ended March 31, 1997, are hereby
incorporated by reference in this SAI. The Annual Reports will be sent free of
charge with this SAI to any shareholder who requests this SAI.
COUNSEL
Morrison & Foerster LLP serves as legal counsel to the Company. Its
address is 2000 Pennsylvania Avenue, N.W., Washington, D.C. 20006.
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PENDING LEGAL PROCEEDINGS
A purported class action lawsuit against, among others, Nations
Short-Intermediate Government Fund was filed by Lawrence Bergelt on May 21,
1996. The complaint was amended and consolidated on July 11, 1996 in the United
States District Court for the Middle District of Florida, Tampa Division by Mr.
Bergelt and others in an action against the Nations Government Securities Fund,
NationsBank Corporation and certain of its affiliates, Dean Witter Distributors
and certain of its affiliates, and Stephens Inc. (Case No. 94-995-Civ.-T-23E).
As relevant to Nations Short-Intermediate Government Fund, plaintiffs allege
that, among other things, defendants violated the Securities Exchange Act of
1934 and various state securities fraud statutes by employing a scheme to
defraud plaintiffs into purchasing shares of the fund and making untrue
statements of material fact and omitting to state material facts in connection
with sales of shares of the fund. Plaintiffs further allege that, among other
things, defendants concealed the risks associated with the fund by blurring the
distinctions between banks and non-bank subsidiaries and by obscuring the
differences between traditional, federally insured bank products and uninsured,
non-depository products.
ADDITIONAL INFORMATION ON PERFORMANCE
Yield information and other performance information for the Company's
LifeGoal Portfolios may be obtained by calling the Company at (800) 321-7854.
From time to time, the yield and total return of a LifeGoal Portfolio's
Investor Shares and Primary Shares may be quoted in advertisements, shareholder
reports, and other communications to shareholders. Each LifeGoal Portfolio of
the Company also may quote information obtained from the Investment Company
Institute, national financial publications, trade journals and other industry
sources in its advertising materials and sales literature. Performance
information is available by calling 1-800-321-7854 with respect to Investor
Shares and 1-800-621-2192 with respect to Primary Shares.
The international investment philosophy of certain of the underlying
Nation Funds is based on the premise that significant opportunities exist
outside of the United States. In fact, two-thirds of the world's investment
opportunities are outside of the United States and foreign stock markets have
consistently outperformed the U.S. stock market. Adding foreign stocks to a
domestic portfolio can help reduce risk and lower portfolio volatility because
world markets do not move in sync. From time to time, the LifeGoal Portfolios
might point out these opportunities and the differences that exist through
investing in overseas countries in marketing materials that reference underlying
Nations Funds.
YIELD CALCULATIONS
The yield of the Primary Shares and Investor Shares of the LifeGoal
Portfolios is a measure of the net investment income per share (as defined)
earned over a 30-day period expressed as a percentage of the maximum offering
price of a share of such classes at the end of
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the period. Yield figures are determined by dividing the net investment income
per share earned during the specified 30-day period by the maximum offering
price per share on the last day of the period, according to the following
formula:
Yield = 2[(a-b + 1)6 1]
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = average daily number of shares outstanding during
the period that were entitled to receive dividends
d = maximum offering price per share on the last day of
the period
For purposes of yield quotation, income is calculated in accordance
with standardized methods applicable to all stock and bond mutual funds. In
general, interest income is reduced with respect to bonds trading at a premium
over their par value by subtracting a portion of the premium from income on a
daily basis, and is increased with respect to bonds trading at a discount by
adding a portion of the discount to daily income.
Capital gains and losses are excluded from the calculation.
Income calculated for the purposes of calculating a LifeGoal
Portfolio's yield differs from income as determined for other accounting
purposes. Because of the different accounting methods used, and because of the
compounding assumed in yield calculations, the yield quoted for a LifeGoal
Portfolio may differ from the rate of distributions a LifeGoal Portfolio paid
over the same period or the rate of income reported in the LifeGoal Portfolios'
financial statements.
TOTAL RETURN CALCULATIONS
Total return measures both the net investment income generated by, and
the effect of any realized or unrealized appreciation or depreciation of the
underlying investments in a Portfolio. The LifeGoal Portfolios' average annual
and cumulative total return figures are computed in accordance with the
standardized methods prescribed by the SEC.
Average annual total return figures are computed by determining the
average annual compounded rates of return over the periods indicated in the
advertisement, sales literature or shareholders' report that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
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T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period
This calculation (i) assumes all dividends and distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectuses, and (ii) deducts (a) the maximum sales charge from the
hypothetical initial $1,000 investment, and (b) all recurring fees, such as
advisory and administrative fees, charged as expenses to all shareholder
accounts.
Cumulative total return is computed by finding the cumulative
compounded rate of return over the period indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
CTR = (ERV-P) 100
P
Where: CTR = Cumulative total return
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period
P = initial payment of $1,000.
This calculation (i) assumes all dividends and distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectuses, and (ii) deducts (a) the maximum sales charge from the
hypothetical initial $1,000 investment, and (b) all recurring fees, such as
advisory and administrative fees, charged as expenses to all shareholder
accounts.
The Primary Shares and Investor Shares of the LifeGoal Portfolios may
also quote their distribution rates, which express the historical amount of
income dividends paid to their shareholders during a three-month period as a
percentage of the maximum offering price per share on the last day of such
period.
The performance figures of the LifeGoal Portfolios as described above
will vary from time to time depending upon market and economic conditions, the
composition of their portfolios and operating expenses. These factors should be
considered when comparing the performance figures of the LifeGoal Portfolios
with those of other investment companies and investment vehicles.
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The LifeGoal Portfolios may quote information obtained from the
Investment Company Institute, national financial publications, trade journals
and other industry sources in its advertising and sales literature. In addition,
the LifeGoal Portfolios may compare the performance and yield of a class or
series of shares to those of other mutual funds with similar investment
objectives and to other relevant indices or to rankings prepared by independent
services or other financial or industry publications that monitor the
performance of mutual funds. For example, the performance and yield of a class
of shares in a LifeGoal Portfolio may be compared to data prepared by Lipper
Analytical Services, Inc. Performance and yield data as reported in national
financial publications such as Money Magazine, Forbes, Barron's, The Wall Street
Journal, and The New York Times, or in publications of a local or regional
nature, also may be used in comparing the performance of a class of shares in a
LifeGoal Portfolio.
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SCHEDULE A
DESCRIPTION OF RATINGS
The following summarizes the highest six ratings used by Standard & Poor's
Corporation ("S&P") for corporate and municipal bonds. The first four ratings
denote investment grade securities.
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and repay
principal.
AA - Debt rated AA is considered to have a very strong capacity to
pay interest and repay principal and differs from AAA issues only in
a small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for debt in this category than
for those in higher-rated categories.
BB, B - Bonds rated BB and B are regarded, on balance as
predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.
BB represents the lowest degree of speculation and B a higher degree
of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposure to adverse conditions.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories. The following summarizes the
highest six ratings used by Moody's Investors Service, Inc. ("Moody's") for
corporate and municipal bonds.
The first four denote investment grade securities.
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They
A-1
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are rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in
Aaa securities.
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.
Baa - Bonds that are rated Baa are considered medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very
moderate and thereby not as well safeguarded during both good times
and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bond which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small. Moody's applies numerical modifiers (1, 2 and 3)
with respect to corporate bonds rated Aa through B. The modifier 1
indicates that the bond being rated ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category. With regard to municipal
bonds, those bonds in the Aa, A and Baa groups which Moody's believes
possess the strongest investment attributes are designated by the
symbols Aa1, A1 or Baa1, respectively. The following summarizes the
highest four ratings used by Duff & Phelps Credit Rating Co. ("D&P")
for bonds, each of which denotes that the securities are investment
grade.
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly
more than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds that are rated A have protection factors which are average
but adequate. However, risk factors are more variable and greater in
periods of economic stress.
A-2
<PAGE>
BBB - Bonds that are rated BBB have below average protection factors
but still are considered sufficient for prudent investment.
Considerable variability in risk exists during economic cycles.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may modified by the addition of a plus or minus sign to show relative
standing within these major categories. The following summarizes the highest
four ratings used by Fitch Investors Service, Inc. ("Fitch") for bonds, each of
which denotes that the securities are investment grade:
AAA - Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of
these issuers is generally rated F-1+.
A - Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB - Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have
adverse impact on these bonds, and therefore impair timely payment.
The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable-rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the
best quality, enjoying strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high
quality, with ample margins of protection although not so large as in
the preceding group.
A-3
<PAGE>
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics are given a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are D-1, D-2, and D-3. D&P
employs three designations, D-1+, D-1 and D-1-, within the highest rating
category. D-1+ indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of LifeGoal Funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." D-1 indicates very high
certainty of timely payment. Liquidity factors are excellent and supported by
good fundamental protection factors. Risk factors are considered to be minor.
D-1 indicates high certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D-2 indicates good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. D-3 indicates satisfactory liquidity and other protection factors which
qualify the issue as investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
The following summarizes the three highest rating categories used by Fitch for
short-term obligations, each of which denotes that the securities are investment
grade:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less
in degree than issues rated F-1+.
F-2 securities possess good credit quality. Issues carrying this
rating have a satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned the
F-1+ and F-1 ratings.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related
A-4
<PAGE>
supporting institutions) are considered to have a strong capacity for repayment
of senior short-term promissory obligations. This will normally be evidenced by
many of the characteristics of issuers rated Prime-1, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
For commercial paper, D&P uses the short-term debt ratings described above.
For commercial paper, Fitch uses the short-term debt ratings described above.
Thomson BankWatch, Inc. ("BankWatch") ratings are based upon a qualitative and
quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries. BankWatch ratings do not
constitute a recommendation to buy or sell securities of any of these companies.
Further, BankWatch does not suggest specific investment criteria for individual
clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following are the four investment grade ratings used by
BankWatch for long-term debt:
AAA - The highest category; indicates ability to repay principal and
interest on a timely basis is extremely high.
AA - The second highest category; indicates a very strong ability to
repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category.
A - The third highest category; indicates the ability to repay
principal and interest is strong. Issues rated "A" could be more
vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
BBB - The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are,
however, more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 The highest category; indicates a very high likelihood
that principal and interest will be paid on a timely
basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
A-5
<PAGE>
strong, the relative degree of safety is not as high as
for issues rated "TBW-1".
TBW-3 The lowest investment grade category; indicates that
while more susceptible to adverse developments (both
internal and external) than obligations with higher
ratings, capacity to service principal and interest in
a timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
The following summarizes the four highest long-term debt ratings used by IBCA
Limited and its affiliate, IBCA Inc. (collectively, "IBCA"):
AAA - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and
interest is substantial such that adverse changes in business,
economic or financial conditions are unlikely to increase investment
risk significantly.
AA - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and
interest is substantial. Adverse changes in business, economic or
financial conditions may increase investment risk albeit not very
significantly.
A - Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial
conditions may lead to increased investment risk.
BBB - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic
or financial conditions are more likely to lead to increased
investment risk than for obligations in other categories.
A plus or minus sign may be appended to a rating below AAA to denote relative
status within major rating categories.
The following summarizes the three highest short-term debt ratings used by IBCA:
A-1+ Where issues possess a particularly strong credit feature.
A-1 Obligations supported by the highest capacity for timely
repayment.
A-6
<PAGE>
A-2 Obligations supported by a good capacity for timely repayment.
A-7
<PAGE>
NATIONS LIFEGOAL FUNDS, INC.
FILE NOS. 333-09703; 811-07745
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Included in Part B:
Audited Financial Statements for LifeGoal Growth Portfolio, LifeGoal
Balanced Growth Portfolio and LifeGoal Income and Growth Portfolio:
Schedule of Investments for March 31, 1997, Statements of
Assets and Liabilities for March 31, 1997, Statements of
Operations for the fiscal period ended March 31, 1997,
Statements of Changes in Net Assets for period ended March 31,
1997, Notes to Financial Statements, Report of Public
Accountants dated May 15, 1997
Included in Part C:
Consent of Independent Accountants
(b) Exhibits
Exhibit
Number Description
(1) Articles of Incorporation, dated July 3, 1996 is incorporated by
reference to the Registration Statement on Form N1-A, filed on
August 7, 1996
(1)(b) Form of Articles of Amendment is incorporated by reference to
Pre-Effective Amendment No. 1, filed October 9, 1996
(2) By-Laws, dated July 10, 1996 is incorporated by reference to the
Registration Statement on Form N1-A, filed on August 7, 1996
(3) Not Applicable
(4) None
1
<PAGE>
(5)(a) Form of Investment Advisory Agreement between Nations LifeGoal Funds,
Inc. and NationsBanc Advisors, Inc. is incorporated by reference to
Pre-Effective Amendment No. 1, filed October 9, 1996
(5)(b) Form of Sub-Advisory Agreement with NationsBanc Advisors, Inc.,
TradeStreet Investment Associates, Inc. and Nations LifeGoal Funds,
Inc. on behalf of LifeGoal Growth Fund, LifeGoal Balanced Growth Fund
and LifeGoal Income and Growth Fund is incorporated by reference to
Pre-Effective Amendment No. 1, filed October 9, 1996
(6)(a) Form of Distribution Agreement between Stephens Inc. and Nations
LifeGoal Funds, Inc. is incorporated by reference to the Registration
Statement on Form N1-A, filed on August 7, 1996
(6)(b) Form of Sales Support Agreement is incorporated by reference to the
Registration Statement on Form N1-A, filed on August 7, 1996
(6)(c) Form of Shareholder Servicing Agreement is incorporated by reference to
the Registration Statement on Form N1-A, filed on August 7, 1996
(7) Deferred Compensation Plan, to be filed by Amendment.
(8) Form of Custody Agreement between Nations LifeGoal Funds, Inc. and
NationsBank of Texas, N.A. is incorporated by reference to the
Registration Statement on Form N1-A, filed on August 7, 1996
(9)(a) Transfer Agency Agreement, to be filed by Amendment
(9)(b) Form of Amendment to Transfer Agency and Services Agreement is
incorporated by reference to the Registration Statement on Form N1-A
filed on August 7, 1996
(9)(c) Supplement to Transfer Agency and Services Agreement, to be filed by
Amendment
(9)(d) Sub-Transfer Agency and Services Agreement, to be filed by Amendment
(9)(e) Form of Amendment to Sub-Transfer Agency and Services Agreement is
incorporated by reference to the Registration Statement on Form N1-A
filed on August 7, 1996
(9)(f) Form of Administration Agreement between Stephens Inc. and Nations
LifeGoal Funds, Inc. is incorporated by reference to the Registration
Statement on Form N1-A filed on August 7, 1996
2
<PAGE>
(9)(g) Form of Co-Administration Agreement between First Data Investor
Services Group, Inc. and Nations LifeGoal Funds, Inc. is incorporated
by reference to the Registration Statement on Form N1-A filed on August
7, 1996
(10) Opinion and Consent of Counsel, filed herewith
(11) Consent of Independent Accountants, filed herewith
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15)(a) Form of Shareholder Servicing and Distribution Plan, Investor A Shares,
is incorporated by reference to the Registration Statement on Form
N1-A, filed on August 7, 1996
(15)(b) Form of Shareholder Servicing Plan, Investor C Shares is incorporated
by reference to the Registration Statement on Form N1-A, filed on
August 7, 1996
(15)(c) Form of Distribution Plan, Investor C Shares is incorporated by
reference to the Registration Statement on Form N1-A, filed on August
7, 1996
(15)(d) Form of Shareholder Administration Plan, Primary B Shares is
incorporated by reference to the Registration Statement on Form N1-A,
filed on August 7, 1996
(16) Schedule for Computation of Performance Data, to be filed by Amendment
(17) Not Applicable
(18) Rule 18f-3 Multi-Class Plan is incorporated by reference to
Pre-Effective Amendment No. 1, filed October 9, 1996
Item 25. Persons Controlled or Under Common Control with Registrant.
No person is controlled by or under common control with
Registrant.
Item 26. Number of Holders of Securities.
The following information is as of April 9, 1997.
Number of Record
Title of Class Holders
3
<PAGE>
LifeGoal Growth Portfolio -Investor A 285
-Investor C 11
-Primary A 3
-Primary B 10
LifeGoal Balanced Growth Portfolio -Investor A 75
-Investor C 13
-Primary A 3
-Primary B 1
LifeGoal Income and Growth Portfolio
-Investor A 16
-Investor C 7
-Primary A 3
-Primary B 1
Item 27. Indemnification.
The following paragraphs of Article VIII of the Registrant's
Articles of Incorporation provide:
(h) The Corporation shall indemnify (1) its Directors and
officers, whether serving the Corporation or at its request any other entity, to
the full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law, and (2) its other employees
and agents to such extent as shall be authorized by the Board of Directors or
the Corporation's Bylaws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such Bylaws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of these
Articles of Incorporation of the Corporation shall limit or eliminate the right
to indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal. Nothing contained herein shall be
construed to authorize the Corporation to indemnify any Director or officer of
the Corporation against any liability to the Corporation or to any holders of
securities of the Corporation to which he is subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. Any indemnification by the Corporation
shall be consistent with the requirements of law, including the 1940 Act.
(i) To the fullest extent permitted by Maryland statutory and
decisional law and the 1940 Act, as amended or interpreted, no Director or
officer of the Corporation shall be personally liable to the Corporation or its
stockholders for money damages;
4
<PAGE>
provided, however, that nothing herein shall be construed to protect any
Director or officer of the Corporation against any liability to which such
Director or officer would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office. No amendment, modification or repeal of this Article VIII
shall adversely affect any right or protection of a Director or officer that
exists at the time of such amendment, modification or repeal.
Under the terms of Maryland Corporation Law and the Registrant's
Charter and ByLaws, incorporated by reference as Exhibits (1) and (2) hereto,
provides for the indemnification of Registrant's directors and employees.
Indemnification of Registrant's principal underwriter, custodian, and transfer
agent is provided for respectively, in the Registrant's: Administration
Agreement with Stephens Inc.; Co-Administration Agreement with First Data
Investor Services Group, Inc.; Distribution Agreement with Stephens Inc.;
Custody Agreement with NationsBank of Texas, N.A.; and Transfer Agency Agreement
with First Data Investor Services Group, Inc.
Item 28. Business and Other Connections of Investment Adviser.
(a) To the knowledge of Registrant, none of the directors or officers
of NBAI, the adviser to the Registrant's portfolios, or TradeStreet, the
sub-investment adviser, except as set forth in the Forms ADV referenced below,
is or has been, at any time during the past two calendar years, engaged in any
other business, profession, vocation or employment of a substantial nature.
Certain directors and officers also hold various positions with, and engage in
business for, the company that owns all the outstanding stock (other than
directors' qualifying shares) of NBAI or TradeStreet, respectively, or other
subsidiaries of NationsBank Corporation.
(b) NBAI performs investment advisory services for the Registrant and
certain other customers. NBAI is a wholly owned subsidiary of NationsBank, N.A.
("NationsBank"), which in turn is a wholly owned banking subsidiary of
NationsBank Corporation. Information with respect to each director and officer
of the investment adviser is incorporated by reference to Form ADV filed by NBAI
with the Securities and Exchange Commission pursuant to the Investment Advisers
Act of 1940 (file no. 801-49874).
(c) TradeStreet performs sub-investment advisory services for the
Registrant and certain other customers. TradeStreet is a wholly owned subsidiary
of NationsBank, which in turn is a wholly owned banking subsidiary of
NationsBank Corporation. Information with respect to each director and officer
of the sub-investment adviser is incorporated by reference to Form ADV filed by
TradeStreet with the Securities and Exchange Commission pursuant to the
Investment Advisers Act of 1940 (file no. 801-50372).
Item 29. Principal Underwriters.
5
<PAGE>
(a) Stephens Inc. is the distributor and principal underwriter for Nations
LifeGoal Funds, Inc. Stephens Inc. does not presently act as investment adviser
for any other registered investment companies, but does act as principal
underwriter for Nations Fund, Inc., Nations Fund Trust, Nations Fund Portfolios
Inc., Nations Institutional Reserves, the Overland Express Funds, Inc.,
MasterWorks Funds Inc., Stagecoach Funds, Inc. and Stagecoach Trust and is the
exclusive placement agent for Master Investment Trust, Managed Series Investment
Trust, Life & Annuity Trust and Master Investment Portfolio, all of which are
registered open-end management investment companies, and has acted as principal
underwriter for the Liberty Term Trust, Inc., Nations Government Income Term
Trust 2003, Inc., Nations Government Income Term Trust 2004, Inc. and the
Nations Balanced Target Maturity Fund, Inc., closed-end management investment
companies.
(b) Information with respect to each director and officer of the principal
underwriter is incorporated by reference to Form ADV filed by Stephens Inc. with
the Securities and Exchange Commission pursuant to the Investment Advisers Act
of 1940 (file no. 501-15510).
(c) Not applicable.
Item 30. Location of Accounts and Records.
(1) NBAI, One NationsBank Plaza, Charlotte, North Carolina 28255 (records
relating to its function as Investment Adviser).
(2) TradeStreet, One NationsBank Plaza, Charlotte, North Carolina 28255
(records relating to its function as Sub-Adviser).
(3) Stephens Inc., 111 Center Street, Little Rock, Arkansas 72201 (records
relating to its function as Distributor and as Administrator).
(4) First Data Investors Services Group, Inc., One Exchange Place, Boston,
Massachusetts 02109 (records relating to its function as Co-Administrator
and Transfer Agent).
(5) NationsBank of Texas, N.A. 1401 Elm Street, Dallas, Texas 75202
(records relating to its function as Sub-Transfer Agent and Custodian).
Item 31. Management Services
Not Applicable.
Item 32. Undertakings.
(a) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant
6
<PAGE>
to the provisions set forth above in response to Item 27, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in such
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of its most current annual report to shareholders, upon
request and without charge.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Little Rock, State of Arkansas on the
29th day of May, 1997.
NATIONS LIFEGOAL FUNDS, INC.
By: *
A. Max Walker
President and Chairman
of the Board of Directors
By: /s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
*Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated:
SIGNATURES TITLE DATE
* President and Chairman May 29, 1997
- ------------------------------- of the Board of Directors
(A. Max Walker) (Principal Executive Officer)
* Treasurer May 29, 1997
- ------------------------------- Vice President
(Richard H. Rose) (Principal Financial and
Accounting Officer)
* Director May 29, 1997
- -------------------------------
(Edmund L. Benson, III)
* Director May 29, 1997
- -------------------------------
(James Ermer)
* Director May 29, 1997
- -------------------------------
(William H. Grigg)
* Director May 29, 1997
- -------------------------------
(Thomas F. Keller)
* Director May 29, 1997
- -------------------------------
(Carl E. Mundy, Jr.)
* Director May 29, 1997
- -------------------------------
(Charles B. Walker)
* Director May 29, 1997
- -------------------------------
(Thomas S. Word)
/s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
*Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
EX-27.011 Financial Data Schedules - LifeGoal Growth Portfolio - Primary A
EX-27.012 Financial Data Schedules - LifeGoal Growth Portfolio - Investor A
EX-27.013 Financial Data Schedules - LifeGoal Growth Portfolio - Investor C
EX-27.014 Financial Data Schedules - LifeGoal Balanced Growth Portfolio -
Primary A
EX-27.015 Financial Data Schedules - LifeGoal Balanced Growth Portfolio -
Investor A
EX-27.016 Financial Data Schedules - LifeGoal Balanced Growth Portfolio -
Investor C
EX-27.017 Financial Data Schedules - LifeGoal Income and Growth Portfolio
Primary A
EX-27.018 Financial Data Schedules - LifeGoal Income and Growth Portfolio
Investor A
EX-27.019 Financial Data Schedules - LifeGoal Income and Growth Portfolio
Investor C
EX-99.B10 Opinion of Counsel
EX-99.B11 Opinion of Independent Accountants
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>011
<NAME>NATIONS LIFEGOAL FUNDS GROWTH PR-A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 1,743,738
<INVESTMENTS-AT-VALUE> 1,661,594
<RECEIVABLES> 67,278
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,728,872
<PAYABLE-FOR-SECURITIES> 35,659
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 784
<TOTAL-LIABILITIES> 36,443
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 979,794
<SHARES-COMMON-STOCK> 91,607
<SHARES-COMMON-PRIOR> 4,000
<ACCUMULATED-NII-CURRENT> 174
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,232
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (82,144)
<NET-ASSETS> 929,455
<DIVIDEND-INCOME> 2,766
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 784
<NET-INVESTMENT-INCOME> 1,982
<REALIZED-GAINS-CURRENT> 3,232
<APPREC-INCREASE-CURRENT> (82,144)
<NET-CHANGE-FROM-OPS> (76,930)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,219)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 102,688
<NUMBER-OF-SHARES-REDEEMED> (15,199)
<SHARES-REINVESTED> 118
<NET-CHANGE-IN-ASSETS> 1,652,191
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 510
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 784
<AVERAGE-NET-ASSETS> 234,906
<PER-SHARE-NAV-BEGIN> 10.06
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> 0.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>012
<NAME>NATIONS LIFEGOAL FUNDS GROWTH INV-A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 1,743,738
<INVESTMENTS-AT-VALUE> 1,661,594
<RECEIVABLES> 67,278
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,728,872
<PAYABLE-FOR-SECURITIES> 35,659
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 784
<TOTAL-LIABILITIES> 36,443
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 707,365
<SHARES-COMMON-STOCK> 67,126
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 174
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,232
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (82,144)
<NET-ASSETS> 681,093
<DIVIDEND-INCOME> 2,766
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 784
<NET-INVESTMENT-INCOME> 1,982
<REALIZED-GAINS-CURRENT> 3,232
<APPREC-INCREASE-CURRENT> (82,144)
<NET-CHANGE-FROM-OPS> (76,930)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (588)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 67,184
<NUMBER-OF-SHARES-REDEEMED> (115)
<SHARES-REINVESTED> 57
<NET-CHANGE-IN-ASSETS> 1,652,191
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 510
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 784
<AVERAGE-NET-ASSETS> 178,534
<PER-SHARE-NAV-BEGIN> 10.06
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>013
<NAME>NATIONS LIFEGOAL FUNDS GROWTH INV-C
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 1,743,738
<INVESTMENTS-AT-VALUE> 1,661,594
<RECEIVABLES> 67,278
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,728,872
<PAYABLE-FOR-SECURITIES> 35,659
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 784
<TOTAL-LIABILITIES> 36,443
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 84,008
<SHARES-COMMON-STOCK> 8,070
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 174
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,232
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (82,144)
<NET-ASSETS> 81,881
<DIVIDEND-INCOME> 2,766
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 784
<NET-INVESTMENT-INCOME> 1,982
<REALIZED-GAINS-CURRENT> 3,232
<APPREC-INCREASE-CURRENT> (82,144)
<NET-CHANGE-FROM-OPS> (76,930)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,070
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,652,191
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 510
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 784
<AVERAGE-NET-ASSETS> 30,080
<PER-SHARE-NAV-BEGIN> 10.06
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> (0.11)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>021
<NAME>NATIONS LIFEGOAL FUNDS BALANCED GROWTH PR-A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 2,299,114
<INVESTMENTS-AT-VALUE> 2,225,870
<RECEIVABLES> 68,639
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,294,509
<PAYABLE-FOR-SECURITIES> 68,862
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 573
<TOTAL-LIABILITIES> 69,435
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,184,039
<SHARES-COMMON-STOCK> 212,550
<SHARES-COMMON-PRIOR> 3,000
<ACCUMULATED-NII-CURRENT> 695
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 558
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (73,244)
<NET-ASSETS> 2,113,923
<DIVIDEND-INCOME> 9,221
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 573
<NET-INVESTMENT-INCOME> 8,648
<REALIZED-GAINS-CURRENT> 558
<APPREC-INCREASE-CURRENT> (73,244)
<NET-CHANGE-FROM-OPS> (64,038)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,739)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 209,694
<NUMBER-OF-SHARES-REDEEMED> (914)
<SHARES-REINVESTED> 770
<NET-CHANGE-IN-ASSETS> 2,194,928
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 551
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 573
<AVERAGE-NET-ASSETS> 462,439
<PER-SHARE-NAV-BEGIN> 10.05
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> (0.10)
<PER-SHARE-DIVIDEND> (0.19)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.95
<EXPENSE-RATIO> 0.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>022
<NAME>NATIONS LIFEGOAL FUNDS BALANCED GROWTH INV-A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 2,299,114
<INVESTMENTS-AT-VALUE> 2,225,870
<RECEIVABLES> 68,639
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,294,509
<PAYABLE-FOR-SECURITIES> 68,862
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 573
<TOTAL-LIABILITIES> 69,435
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95,005
<SHARES-COMMON-STOCK> 9,408
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 695
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 558
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (73,244)
<NET-ASSETS> 93,610
<DIVIDEND-INCOME> 9,221
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 573
<NET-INVESTMENT-INCOME> 8,648
<REALIZED-GAINS-CURRENT> 558
<APPREC-INCREASE-CURRENT> (73,244)
<NET-CHANGE-FROM-OPS> (64,038)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (162)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,407
<NUMBER-OF-SHARES-REDEEMED> (15)
<SHARES-REINVESTED> 16
<NET-CHANGE-IN-ASSETS> 2,194,928
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 551
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 573
<AVERAGE-NET-ASSETS> 12,492
<PER-SHARE-NAV-BEGIN> 10.05
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> (0.10)
<PER-SHARE-DIVIDEND> (0.19)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.95
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>023
<NAME>NATIONS LIFEGOAL FUNDS BALANCED GROWTH INV-C
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 2,299,114
<INVESTMENTS-AT-VALUE> 2,225,870
<RECEIVABLES> 68,639
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,294,509
<PAYABLE-FOR-SECURITIES> 68,862
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 573
<TOTAL-LIABILITIES> 69,435
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,021
<SHARES-COMMON-STOCK> 1,763
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 695
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 558
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (73,244)
<NET-ASSETS> 17,541
<DIVIDEND-INCOME> 9,221
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 573
<NET-INVESTMENT-INCOME> 8,648
<REALIZED-GAINS-CURRENT> 558
<APPREC-INCREASE-CURRENT> (73,244)
<NET-CHANGE-FROM-OPS> (64,038)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (52)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,998
<NUMBER-OF-SHARES-REDEEMED> (240)
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 2,194,928
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 551
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 573
<AVERAGE-NET-ASSETS> 3,539
<PER-SHARE-NAV-BEGIN> 10.05
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> (0.10)
<PER-SHARE-DIVIDEND> (0.19)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.95
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>031
<NAME>NATIONS LIFEGOAL FUNDS INCOME AND GROWTH PR-A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 359,827
<INVESTMENTS-AT-VALUE> 354,813
<RECEIVABLES> 29,997
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 384,810
<PAYABLE-FOR-SECURITIES> 30,040
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111
<TOTAL-LIABILITIES> 30,151
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 225,598
<SHARES-COMMON-STOCK> 22,336
<SHARES-COMMON-PRIOR> 3,000
<ACCUMULATED-NII-CURRENT> 75
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 621
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5,014)
<NET-ASSETS> 222,687
<DIVIDEND-INCOME> 2,408
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 111
<NET-INVESTMENT-INCOME> 2,297
<REALIZED-GAINS-CURRENT> 621
<APPREC-INCREASE-CURRENT> (5,014)
<NET-CHANGE-FROM-OPS> (2,096)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,688)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,568
<NUMBER-OF-SHARES-REDEEMED> (401)
<SHARES-REINVESTED> 169
<NET-CHANGE-IN-ASSETS> 324,564
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 91
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 111
<AVERAGE-NET-ASSETS> 61,487
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> (0.32)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.97
<EXPENSE-RATIO> 0.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>032
<NAME>NATIONS LIFEGOAL FUNDS INCOME AND GROWTH INV-A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 359,827
<INVESTMENTS-AT-VALUE> 354,813
<RECEIVABLES> 29,997
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 384,810
<PAYABLE-FOR-SECURITIES> 30,040
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111
<TOTAL-LIABILITIES> 30,151
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 132,419
<SHARES-COMMON-STOCK> 13,144
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 75
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 621
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5,014)
<NET-ASSETS> 131,015
<DIVIDEND-INCOME> 2,408
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 111
<NET-INVESTMENT-INCOME> 2,297
<REALIZED-GAINS-CURRENT> 621
<APPREC-INCREASE-CURRENT> (5,014)
<NET-CHANGE-FROM-OPS> (2,096)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (531)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,267
<NUMBER-OF-SHARES-REDEEMED> (175)
<SHARES-REINVESTED> 52
<NET-CHANGE-IN-ASSETS> 324,564
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 91
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 111
<AVERAGE-NET-ASSETS> 17,712
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.97
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>033
<NAME>NATIONS LIFEGOAL FUNDS INCOME AND GROWTH INV-C
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 359,827
<INVESTMENTS-AT-VALUE> 354,813
<RECEIVABLES> 29,997
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 384,810
<PAYABLE-FOR-SECURITIES> 30,040
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111
<TOTAL-LIABILITIES> 30,151
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 960
<SHARES-COMMON-STOCK> 96
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 75
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 621
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5,014)
<NET-ASSETS> 957
<DIVIDEND-INCOME> 2,408
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 111
<NET-INVESTMENT-INCOME> 2,297
<REALIZED-GAINS-CURRENT> 621
<APPREC-INCREASE-CURRENT> (5,014)
<NET-CHANGE-FROM-OPS> (2,096)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 96
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 324,564
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 91
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 111
<AVERAGE-NET-ASSETS> 167
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.97
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
[MORRISON & FOERSTER LLP LETTERHEAD]
May 29, 1997
Nations LifeGoal Funds, Inc.
Re: Post-Effective Amendment No. 2 to the Registration Statement
on Form N-1A for Nations LifeGoal Funds, Inc.;
SEC File Nos. 333-09703; 811-07745
Ladies and Gentlemen:
We refer to Post-Effective Amendment No. 2 and Amendment No. 3 to the
Registration Statement on Form N-1A (the "Registration Statement") of Nations
LifeGoal Funds, Inc., a Maryland corporation (the "Company"), relating to the
registration of an indefinite number of shares of common stock of the Company's
three portfolios; namely, LifeGoal Growth Portfolio, LifeGoal Balanced Growth
Portfolio and LifeGoal Income and Growth Portfolio (collectively, the "Shares").
We have been requested by the Company to furnish this opinion as
Exhibit 10 to the Registration Statement.
We have examined documents relating to the organization of the Company
and the authorization and issuance of shares of the Funds. We have also made
such inquiries of the Company and examined such questions of law as we have
deemed necessary for the purpose of rendering the opinion set forth herein. We
have assumed the genuineness of all signatures and the authenticity of all items
submitted to us as originals and the conformity with originals of all items
submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance and sale of the Shares have been duly and validly
authorized by all appropriate corporate action, and assuming delivery of the
Shares by sale or in accord with the Company's dividend reinvestment plan in
accordance with the Company's then-current Registration Statement under the
Securities Act of 1933, the Shares will be validly issued, fully paid and
nonassessable.
<PAGE>
Nations LifeGoal Funds, Inc.
May 29, 1997
Page Two
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we consent to the use of our name and to the reference to
our firm under the heading "How The LifeGoal Portfolios Are Managed -- Other
Service Providers" in the Prospectus and under the heading "Counsel" in the
Statement of Additional Information, which is included as part of the
Registration Statement.
Very truly yours,
/s/ Morrison & Foerster LLP
MORRISON & FOERSTER LLP
[PRICE WATERHOUSE LLP LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 2
under the Securities Act of 1933 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated May 15, 1997, relating to the
financial statements and financial highlights appearing in the March 31, 1997
Annual Report to Shareholders of Nations LifeGoal Funds, Inc., which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "How The LifeGoal Portfolios Are Managed
- - Other Service Providers" in the Prospectus and under the heading "Independent
Accountant and Reports" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
May 29, 1997
<PAGE>
