<PAGE> 1
NATIONS
FUNDS
Investments For A Lifetime(SM)
LIFEGOAL
PORTFOLIOS
[GRAPHIC OF WOMAN WALKING WITH BICYCLE]
ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 1997
<PAGE> 2
NOT MAY LOSE VALUE
FDIC-
INSURED NO BANK GUARANTEE
NATIONS FUNDS DISTRIBUTOR: STEPHENS INC. STEPHENS INC., WHICH IS NOT AFFILIATED
WITH NATIONSBANK, N.A., IS NOT A BANK AND SECURITIES OFFERED BY IT ARE NOT
GUARANTEED BY ANY BANK OR INSURED BY THE FDIC. STEPHENS INC., MEMBER NYSE-SIPC.
NATIONS FUNDS INVESTMENT ADVISER: NATIONSBANC ADVISORS, INC.
NATIONS FUNDS INVESTMENT SUB-ADVISERS: TRADESTREET INVESTMENT ASSOCIATES, INC.
AND GARTMORE GLOBAL PARTNERS.
<PAGE> 3
NATIONS FUNDS
DEAR SHAREHOLDER:
We are pleased to present the Nations Funds annual report for the fiscal year
ended March 31, 1997. Overall, domestic equity markets rewarded investors with
strong returns. In fact, during this period the U.S. stock market reached record
levels. More recently, the markets have experienced increasing volatility as
concerns have surfaced about strong economic growth leading to inflation. When
markets experience fluctuations like this, it is often unsettling. Investors
should be cautioned, however, not to confuse short-term volatility with
long-term trends.
The last two years marked a period that most investors (particularly equity
investors) will look back upon with great satisfaction. Domestic equity returns
averaged better than 18% during 1996; and for the last two years, have exceeded
50%(1). Several factors contributed to 1996's favorable market results: 1) The
continued strength in the U.S. economy; 2) No real evidence of inflationary
pressures; 3) U.S. corporations experiencing continued profit growth; and 4)
Record cash inflow into equity mutual funds. Investors should note that returns
on stocks have been exceptional and well above the historical average of
10.7%.(2)
Looking out into 1997, the investment environment continues to read as if it
were being scripted to enhance financial assets -- moderate but persistent
economic growth, low inflation and strong earnings. Although the duration of
this economic expansion is six years and counting, there does not appear to be
anything on the horizon that would move the economy off its current track.
Importantly, after a long period of outperformance by stocks, investors should
pay particular attention to their current allocation relative to their
objectives and risk tolerance. We are expecting that future advances in the
markets will be accompanied by increased volatility and periodic corrections as
the market adjusts to factors such as recent changes in monetary policy. While
we believe that markets will reach significant new highs before the end of the
millennium, markets do not go straight up and there will be periods of decline
along the way.
Thank you for your continued confidence in the Nations Funds family of funds.
Sincerely,
/s/ A. Max Walker /s/ Mark H. Williamson
- ----------------------------------- ------------------------------------
A. Max Walker Mark H. Williamson
President and Chairman of the Board President, NationsBanc Advisors, Inc.
March 31, 1997
(1) AS MEASURED BY THE S&P 500 INDEX.
(2) IBBOTSON ASSOCIATES, STOCKS, BONDS, BILLS AND INFLATION 1997 YEARBOOK
<PAGE> 4
THE NATIONS FUNDS ADVANTAGE
A family of mutual funds investors with a number of advantages, including the
ability to shift investment assets among funds as their financial objectives or
market conditions change. The Nations Funds family of mutual funds includes a
broad array of professionally managed domestic and international stock, bond and
money market funds advised by NationsBanc Advisors, Inc. The family was designed
to accommodate a wide variety of investment objectives across the risk/reward
spectrum.
POTENTIAL RETURN (ARROW RIGHT)
LIFEGOAL LIFEGOAL LIFEGOAL
PORTFOLIOS PORTFOLIOS PORTFOLIOS
*Nations *Nations *Nations
LifeGoal LifeGoal LifeGoal
Income & Balanced Growth
Growth Portfolio Portfolio
Portfolio
RISK (VARIABILITY) (ARROW RIGHT)
For specific information on developing an investment portfolio that will more
closely target your investment objectives, contact your investment
representative or Nations Fund for fund brochures and prospectuses (800)
982-2271.
The Nations Funds family also includes Nations Equity Index Fund, which seeks
to match the performance of the S&P 500 fees and expenses.
<PAGE> 5
TIME AND DIVERSIFICATION
CAN SMOOTH OUT
MARKET VOLATILITY
During the past two years, many investors have enjoyed some of the most
rewarding stock market gains in history. So if you're relatively new to the
financial markets, the market fluctuations over recent months may be an
unsettling experience.
We can't say with certainty when this period of market volatility may end. But
we can say that it's an entirely normal occurrence. In fact, the history of the
market shows both periods of growth and periods of downturns. The good news is
that downturns are often short-lived, and have historically been followed by
renewed growth.
So instead of focusing on the market's daily ups and downs, keep focused on your
long-term goals. By staying invested, you won't miss out on the potential for
later gains from a market rebound. You may also want to take advantage of these
helpful strategies:
- - PUT DIVERSIFICATION ON YOUR SIDE. You may lessen the effect of market
fluctuations when you maintain a diversified portfolio of stocks, bonds, and
cash investments such as money market funds. In addition, mutual funds make it
easy to diversify within each asset class. For example, you can add an
international fund if your portfolio is largely domestic equities. Or you can
spread your fixed-income component across multiple bond funds that emphasize
different maturities and credit qualities.
- - REBALANCE YOUR ASSETS. Your original investment allocation among stocks, bonds
and money market funds may have shifted over time -- for example, with recent
gains, you may have a larger percentage of your investments in stocks than you
expect. If needed, you should rebalance your allocations in line with your
long-term strategy.
- - CONSIDER DOWNTURNS A BUYING OPPORTUNITY. By investing regular amounts in a
Nations Funds account on a set interval, regardless of the market's direction,
you wind up purchasing more shares when the price is low and fewer when the
price is high. This strategy, called dollar-cost averaging, may help lessen
the impact of market swings by averaging the cost of your shares over time.
And, with a systematic investment plan (SIP), you can have a set amount
automatically withdrawn from your bank checking or savings account and
invested directly into your Nations Funds account on a monthly or quarterly
basis.
Please note that dollar-cost averaging does not assure a profit or protect
against loss in declining markets. Since such a plan involves continuous
investment in securities, regardless of fluctuating price levels, you should
carefully consider your financial ability to continue your purchases through
periods of fluctuating price levels.
So remember, if you have a sound long-term investment program, and your
short-term needs are being met, your original decisions should still serve you
well. Simply by staying patient, you may increase your likelihood of reaching
your investment goals. For more information, please call Nations Funds at
1-800-321-7854.
3
<PAGE> 6
NATIONS LIFEGOAL GROWTH PORTFOLIO
PERFORMANCE AND COMMENTARY
PORTFOLIO MANAGER
Andrew M. Silton is Portfolio Manager of Nations LifeGoal Growth Portfolio
and President and Managing Director of TradeStreet Investment Associates, Inc.,
investment sub-adviser to the Fund.
INVESTMENT OBJECTIVE
The Fund seeks capital appreciation through exposure to a variety of equity
market segments.
PERFORMANCE REVIEW
For the period from October 15, 1996 (the Portfolio's inception date)
through March 31, 1997, Nations LifeGoal Growth Portfolio Investor A Shares
provided a total return of 2.05%.
PORTFOLIO MANAGER COMMENTARY
In the following interview, Mr. Silton shares his views on financial market
conditions and Portfolio performance for the period from October 15, 1996
through March 31, 1997.
PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND PHILOSOPHY.
Nations LifeGoal Growth Portfolio seeks to achieve long-term capital
appreciation through exposure to a diversified mix of equity products. By
diversifying the Portfolio's equity exposure across a variety of market
segments, the Portfolio should be well positioned to capture long-term growth
opportunities. The Portfolio exposes investors to large- and small-
capitalization equities as well as international equity markets through its
investments in other Nations Funds mutual funds.
WHAT WERE MARKET CONDITIONS DURING THE REPORTING PERIOD?
During the reporting period, financial markets were volatile as stronger
than expected economic growth was met with investor concerns over the monetary
posture of the Federal Reserve Board ("Fed"). Prospects for stronger than
anticipated earnings growth have been somewhat offset by fears of an overheating
economy and a preemptive tightening of interest rates by the Fed. In that
environment, the equity markets have significantly outpaced their fixed income
counterparts. Against that market backdrop, Nations LifeGoal Growth Portfolio
has been well positioned in domestic equity markets to reward investors.
However, the Portfolio's allocation to international markets impeded the
Portfolio's overall performance.
BRIEFLY DESCRIBE THE ASSET ALLOCATION PROCESS AND ANY CHANGES THAT HAVE OCCURRED
IN THE PORTFOLIO'S ALLOCATION SINCE ITS INCEPTION.
Nations LifeGoal Growth Portfolio employs a structured and disciplined
process to determine the appropriate asset allocation. Quantitative modeling is
used to develop expected returns and risk profiles for each asset class.
Analysis of historical relationships between asset classes in various market
environments is conducted on a regular basis. Appropriate adjustments, if any,
are made to the model to incorporate current and expected market environments.
The most efficient asset allocation is determined to provide the highest return
potential for a given level of risk. Since the Portfolio's inception, no
allocation changes have been made as our long-term view of the markets, in
relation to the Portfolio's objective has not changed.
DISCUSS THE ASSET ALLOCATION AND UNDERLYING NATIONS FUNDS SELECTION DURING THE
COURSE OF THE REPORTING PERIOD AND HOW THIS, ALONG WITH PREVAILING MARKET
CONDITIONS, IMPACTED THE PORTFOLIO'S PERFORMANCE.*
At the end of the reporting period, Nations LifeGoal Growth Portfolio was
approximately 45% invested in large-capitalization domestic equity funds
(Nations Value and Nations Disciplined Equity Funds), 24% invested in small- and
- ---------------
* Portfolio characteristics and outlook were current as of March 31, 1997, are
subject to change and may not be representative of current characteristics and
outlook. Also, the outlook of this Fund's portfolio manager may differ from that
of other Nations Funds' portfolio managers.
4
<PAGE> 7
mid-capitalization domestic equity funds (Nations Emerging Growth and Nations
Managed SmallCap Index Funds) and 31% invested in international funds (Nations
International Equity and Nations Pacific Growth Funds). This asset allocation
mix reflects our conviction that long-term growth opportunities exist in the
equity markets. The diversified mix of equity exposure across various domestic
and international markets reflects our desire to provide long-term growth
opportunities to investors, while maintaining a comfortable level of expected
volatility. The Portfolio's exposure to small- and mid-capitalization stocks and
international equities is expected to offer significant long-term growth
opportunities. The volatility of the overall portfolio is expected to be
somewhat controlled by the Portfolio's significant investment in
large-capitalization domestic equity funds.
Nations LifeGoal Growth Portfolio has clearly benefited from its dedicated
exposure to the equity markets. Since the Portfolio's inception, equity returns
have far outpaced the returns offered by the fixed income markets. Within the
domestic equity markets, there has been a sharp division, with
large-capitalization stocks performing considerably better than their small- and
mid-capitalization counterparts. Consequently, the Portfolio's 45% weighting in
large-capitalization equity funds was beneficial to investors. Overall,
performance was negatively impacted by the 24% weighting in smaller-
capitalization funds and by the international fund exposure. International
equities (31% of the Portfolio) lagged domestic equity returns; however, the
secular growth opportunities available in many foreign markets should provide
attractive long-term growth potential.
HOW ARE YOU POSITIONING THE PORTFOLIO GOING FORWARD?
Equities remain the investment vehicle of choice for investors seeking
long-term capital appreciation. To that end, we anticipate that Nations LifeGoal
Growth Portfolio will remain fully invested in the equity markets. However, with
an increasing concern over the valuation levels of some market segments, there
may come a point where we seek to reduce the volatility of the Portfolio by
moving to a more conservative mix of equity exposure. Our secular outlook for
international stocks remains intact and the recent underperformance of these
markets serves to bolster our conviction level.
5
<PAGE> 8
NATIONS FUNDS
Nations LifeGoal Growth Portfolio
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A, INVESTOR C AND PRIMARY A SHARES AS OF
MARCH 31, 1997
<TABLE>
<CAPTION>
AGGREGATE TOTAL RETURNS
INVESTOR A SHARES
- ---------------------------------------------
<S> <C>
Since Inception (10/15/96)* through
03/31/97 2.05%
</TABLE>
<TABLE>
<CAPTION>
INVESTOR C SHARES
- ---------------------------------------------
<S> <C>
Since Inception (10/15/96)* through
03/31/97 1.51%**
Since Inception (10/15/96) through
03/31/97 2.01%
</TABLE>
**adjusted for maximum contingent deferred sales charge of 0.50% when
Investor C Shares are redeemed within one year of purchase.
<TABLE>
<CAPTION>
PRIMARY A SHARES
- ---------------------------------------------
<S> <C>
Since Inception (10/15/96)* through
03/31/97 2.10%
</TABLE>
The charts to the right show the growth in value of a hypothetical $10,000
investment in Investor A, Investor C and Primary A Shares of Nations
LifeGoal Growth Portfolio from October 15, 1996 (inception date). Figures
for the Standard & Poor's 500 Composite Stock Price Index, an unmanaged
index of 500 widely held common stocks, include reinvestment of dividends.
Each chart assumes the reinvestment of all distributions.
* Nation's LifeGoal Growth Portfolio's Primary A, Investor A and Investor
C Shares commenced investment operations on October 2, 1996. Shares were
offered to the public on October 15, 1996.
'[LEGEND]'
PERFORMANCE COMPARISONS
INVESTOR A SHARES AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
STANDARD & GROWTH OF
POORS 500 INVESTMENT
COMPOSITE WITH
MEASUREMENT PERIOD STOCK PRICE DISTRIBUTIONS
(FISCAL YEAR COVERED) INDEX REINVESTED
<S> <C> <C>
'OCT. 15,|1996' 10000 10000
'NOV. 30,|1996' 10777 10350
'MAR. 31,|1997' 11016 10205
</TABLE>
INVESTOR C SHARES AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
STANDARD & GROWTH OF
POORS 500 INVESTMENT
COMPOSITE WITH
MEASUREMENT PERIOD STOCK PRICE DISTRIBUTIONS
(FISCAL YEAR COVERED) INDEX REINVESTED
<S> <C> <C>
'OCT. 15,|1996' 10000 10000
'NOV. 30,|1996' 10777 10352
'MAR. 31,|1997' 11016 10151
</TABLE>
PRIMARY A SHARES AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
STANDARD & GROWTH OF
POORS 500 INVESTMENT
COMPOSITE WITH
MEASUREMENT PERIOD STOCK PRICE DISTRIBUTIONS
(FISCAL YEAR COVERED) INDEX REINVESTED
<S> <C> <C>
'OCT. 15,|1996' 10000 10000
'NOV. 30,|1996' 10777 10352
'MAR. 31,|1997' 11016 10210
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Aggregate total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
6
<PAGE> 9
NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO
PERFORMANCE AND COMMENTARY
PORTFOLIO MANAGER
Andrew M. Silton is Portfolio Manager of Nations LifeGoal Balanced Growth
Portfolio and President and Managing Director of TradeStreet Investment
Associates, Inc., investment sub-adviser to the Fund.
INVESTMENT OBJECTIVE
The Fund seeks total return through a balanced portfolio of equity and
fixed income securities.
PERFORMANCE REVIEW
For the period from October 15, 1996 (the Portfolio's inception date)
through March 31, 1997, Nations LifeGoal Balanced Growth Portfolio Investor A
Shares provided a total return of 0.86%.
PORTFOLIO MANAGER COMMENTARY
In the following interview, Mr. Silton shares his views on financial market
conditions and Portfolio performance for the period from October 15, 1996
through March 31, 1997.
PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND PHILOSOPHY.
Nations LifeGoal Balanced Growth Portfolio seeks to achieve total return
through exposure to a diversified mix of equity and fixed income investments. By
diversifying across equity and fixed income instruments, the Portfolio should be
well positioned to capture attractive returns from both capital appreciation and
current income. Nations LifeGoal Balanced Growth Portfolio allows investors to
participate in large- and small-capitalization stocks, bonds, and international
equity markets through its investments in other Nations Funds mutual funds.
WHAT WERE MARKET CONDITIONS DURING THE REPORTING PERIOD?
During the reporting period, financial markets were volatile as stronger
than expected economic growth was met with investor concerns over the monetary
posture of the Federal Reserve Board ("Fed"). Prospects for stronger than
anticipated earnings growth have been somewhat offset by fears of an overheating
economy and a preemptive tightening of interest rates by the Fed. In that
environment, the equity markets have significantly outpaced their fixed income
counterparts. Against that market backdrop, Nations LifeGoal Balanced Growth
Portfolio benefited from its 34% exposure to domestic equities, but its exposure
to international funds and longer duration bond funds hampered overall
performance.
BRIEFLY DESCRIBE THE ASSET ALLOCATION PROCESS AND ANY CHANGES THAT HAVE OCCURRED
IN THE PORTFOLIO'S ALLOCATION SINCE ITS INCEPTION.
Nations LifeGoal Balanced Growth Portfolio employs a structured and
disciplined process to determine the appropriate asset allocation. Quantitative
modeling is used to develop expected returns and risk profiles for each asset
class. Analysis of historical relationships between asset classes in various
market environments is conducted on a regular basis. Appropriate adjustments, if
any, are made to the model to incorporate current and expected market
environments. The most efficient asset allocation is determined to provide the
highest return potential for a given level of risk. In mid-January of 1997, a
timely shift was made when a 10% move from bonds into stocks was executed.
DISCUSS THE ASSET ALLOCATION AND UNDERLYING NATIONS FUNDS SELECTION DURING THE
COURSE OF THE REPORTING PERIOD AND HOW THIS ALONG WITH PREVAILING MARKET
CONDITIONS, IMPACTED THE PORTFOLIO'S PERFORMANCE.*
At the end of the reporting period, Nations LifeGoal Balanced Growth
Portfolio was 24% invested in large-capitalization domestic equity funds
(Nations Value and Nations Equity Income Funds), 10% invested in small- and
mid-capitalization domestic equity funds (Nations Emerging Growth and Nations
Managed SmallCap Index Funds), 15% invested in an international fund (Nations
International Equity Fund) and 51% invested in intermediate and long duration
bond funds (Nations Strategic Fixed Income, Nations Diversified Income and
Nations Global Government
- ---------------
* Portfolio characteristics and outlook were current as of March 31, 1997, are
subject to change and may not be representative of current characteristics and
outlook. Also, the outlook of this Fund's portfolio manager may differ from
that of other Nations Funds' portfolio managers.
7
<PAGE> 10
Income Funds). This asset allocation reflects our desire to be diversified among
equity and fixed income mutual funds. The current mix of stock and bond funds
offers investors the growth potential of equities with the income stream of
fixed income instruments. In pursuing the desired long-term growth objectives,
the Portfolio maintains exposure to small- and mid-capitalization domestic
equity funds, although they have not performed as well as we would have hoped.
The Portfolio also has emphasized international markets (15% of assets which is
the top of the allowable allocation range). Although these funds may exhibit
volatility during certain time periods, their overall growth potential is
significant. The Portfolio's fixed income exposure represents a diversified mix
of international and domestic bond funds. Our expectation is that this mix will
allow investors to participate in the benefits of a broad fixed income portfolio
with reduced volatility.
The Portfolio has clearly benefited from its exposure to the domestic
equity markets. Since its inception, equity returns have far outpaced the
returns offered by fixed income markets. Within the domestic equity markets,
there has been a sharp division, with large-capitalization stocks performing
considerably better than their small- and mid-capitalization counterparts.
Consequently, the Portfolio's 24% weighting in large-capitalization equities
(after the January allocation shift) benefited investors. Nations Value and
Nations Equity Income Funds, which comprise a significant portion of the
Portfolio's holdings, have offered investors competitive returns since the
Portfolio's inception. The 10% of the Portfolio invested in small- and
mid-capitalization funds performed in line with those sectors of the general
equity market, but impeded overall performance. Returns from international
equity funds (15% of the Portfolio) lagged those of domestic equity funds;
however, the secular growth opportunities available in many foreign markets
should provide attractive long-term growth potential.
The fixed income portion of the Portfolio was invested in intermediate- and
long-term bond funds. While rising U.S. interest rates hurt these types of
funds, the underlying Funds (Nations Strategic Fixed Income, Nations Diversified
Income and Nations Global Government Income Funds) had adopted a defensive
posture, shortening their durations, in the wake of strong economic data. In
addition, Nations Diversified Income Fund benefited from its corporate bond
exposure. The combined effects of a defensive duration posture and exposure to
corporate debt securities benefited the Portfolio relative to more aggressive
fixed income positioning. However, the Portfolio's 51% weighting in fixed-income
mutual funds muted overall performance. Although strong economic data acted to
push interest rates higher, the health of the overall economy helped to
alleviate corporate credit concerns.
HOW ARE YOU POSITIONING THE PORTFOLIO GOING FORWARD?
Nations LifeGoal Balanced Growth Portfolio will continue to pursue a
strategy of building a diversified allocation of stock and bond funds. However,
with an increasing concern over the valuation levels of some segments of the
equity market, there may come a point where we seek to reduce the volatility of
the Portfolio by moving to a more conservative mix of equity and fixed income
exposure. Our secular outlook for international stocks remains intact and the
recent underperformance of these markets serves to bolster our conviction level.
8
<PAGE> 11
NATIONS FUNDS
Nations LifeGoal Balanced Growth Portfolio
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A, INVESTOR C AND PRIMARY A SHARES AS OF
MARCH 31, 1997
<TABLE>
<CAPTION>
AGGREGATE TOTAL RETURN
INVESTOR A SHARES
- ---------------------------------------------
<S> <C>
Since Inception (10/15/96)* through
03/31/97 0.86%
</TABLE>
<TABLE>
<CAPTION>
INVESTOR C SHARES
- ---------------------------------------------
<S> <C>
Since Inception (10/15/96)* through
03/31/97 0.35%**
Since Inception (10/15/96) through
03/31/97 0.85%
</TABLE>
**adjusted for maximum contingent deferred sales charge of 0.50% when
Investor C Shares are redeemed within one year of purchase.
<TABLE>
<CAPTION>
PRIMARY A SHARES
- ---------------------------------------------
<S> <C>
Since Inception (10/15/96)* through
03/31/97 0.90%
</TABLE>
The charts to the right show the growth in value of a hypothetical $10,000
investment in Investor A, Investor C and Primary A Shares of Nations
LifeGoal Balanced Growth Portfolio on October 15, 1996 (inception date).
Figures for the Standard & Poor's 500 Composite Stock Price Index, an
unmanaged index of 500 widely held common stocks, include reinvestment of
dividends. Figures for the Lehman Aggregate Bond Index, which is an
unmanaged index comprised of the Government Corporate Bond Index, the
Asset-Backed Securities Index and the Mortgage-Backed Securities Index and
includes U.S. Treasury issues, agency issues, corporate bond issues and
mortgage-backed issues, includes reinvestment of dividends.
Each chart assumes the reinvestment of all distributions.
* Nations LifeGoal Balanced Growth Portfolio's Primary A, Investor A and
Investor C Shares commenced investment operations on October 2, 1996.
Shares were offered to the public on October 15, 1996.
[LEGEND]
PERFORMANCE COMPARISONS
INVESTOR A SHARES AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
STANDARD & GROWTH OF
POOR'S 500 LEHMAN INVESTMENT
MEASUREMENT PERIOD COMPOSITE BROTHERS WITH
(FISCAL YEAR STOCK AGGREGATE DISTRIBUTIONS
COVERED) INDEX BOND INDEX REINVESTED
<S> <C> <C> <C>
'OCT. 15,|1996' 10000 10000 10000
'NOV. 30,|1996' 10777 10126 10246
'MAR. 31,|1997' 11016 9898 10086
</TABLE>
INVESTOR C SHARES AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
STANDARD & GROWTH OF
POOR'S 500 LEHMAN INVESTMENT
MEASUREMENT PERIOD COMPOSITE BROTHERS WITH
(FISCAL YEAR STOCK AGGREGATE DISTRIBUTIONS
COVERED) INDEX BOND INDEX REINVESTED
<S> <C> <C> <C>
'OCT. 15,|1996' 10000 10000 10000
'NOV. 30,|1996' 10777 10126 10247
'MAR. 31,|1997' 11016 9898 10036
</TABLE>
PRIMARY A SHARES AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
STANDARD & GROWTH OF
POOR'S 500 LEHMAN INVESTMENT
MEASUREMENT PERIOD COMPOSITE BROTHERS WITH
(FISCAL YEAR STOCK AGGREGATE DISTRIBUTIONS
COVERED) INDEX BOND INDEX REINVESTED
<S> <C> <C> <C>
'OCT. 15,|1996' 10000 10000 10000
'NOV. 30,|1996' 10777 10126 10247
'MAR. 31,|1997' 11016 9898 10090
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Aggregate total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
9
<PAGE> 12
NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO
PERFORMANCE AND COMMENTARY
PORTFOLIO MANAGER
Andrew M. Silton is Portfolio Manager of Nations LifeGoal Income and Growth
Fund and President and Managing Director of TradeStreet Investment Associates,
Inc., investment sub-adviser to the Fund.
INVESTMENT OBJECTIVE
The Fund seeks current income and modest growth to protect against
inflation and to preserve purchasing power.
PERFORMANCE REVIEW
For the period from October 15, 1996 (the Portfolio's inception date)
through March 31, 1997, Nations LifeGoal Income and Growth Portfolio Investor A
Shares provided a total return of 2.54%.
PORTFOLIO MANAGER COMMENTARY
In the following interview, Mr. Silton shares his views on financial market
conditions and Portfolio performance for the period from October 15, 1996
through March 31, 1997.
PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND PHILOSOPHY.
Nations LifeGoal Income and Growth Portfolio seeks to produce current
income and modest growth to protect against inflation through exposure to a
diversified mix of equity and fixed income investments. By diversifying across
mutual funds that invest in equities and fixed income instruments, the Portfolio
should be well positioned to capture attractive returns from both current income
and growth opportunities. Nations LifeGoal Income and Growth Portfolio allows
investors to participate in large- and small-capitalization stocks, bonds, and
international equity markets through the Portfolio's investments in other
Nations Funds mutual funds.
WHAT WERE MARKET CONDITIONS DURING THE REPORTING PERIOD?
During the reporting period, financial markets were volatile as stronger
than expected economic growth was met with investor concerns over the monetary
posture of the Federal Reserve Board ("Fed"). Prospects for stronger than
anticipated earnings growth have been somewhat offset by fears of an overheating
economy and a preemptive tightening of interest rates by the Fed. In that
environment, the equity markets have significantly outpaced their fixed income
counterparts. Against that market backdrop, the Portfolio benefited from its 30%
weighting in equity fund; however, returns were somewhat muted by the
Portfolio's 70% weighting in bond funds.
BRIEFLY DESCRIBE THE ASSET ALLOCATION PROCESS.
Nations LifeGoal Income and Growth Portfolio employs a structured and
disciplined process to determine the appropriate asset allocation. Quantitative
modeling is used to develop expected returns and risk profiles for each asset
class. Analysis of historical relationships among asset classes in various
market environments is conducted on a regular basis. Appropriate adjustments, if
any, are made to the model to incorporate current and expected market
environments. The most efficient asset allocation is the one that provides for
the highest return potential for a given level of risk.
DISCUSS THE ASSET ALLOCATION AND UNDERLYING NATIONS FUNDS SELECTION DURING THE
COURSE OF THE REPORTING PERIOD AND HOW THIS, ALONG WITH PREVAILING MARKET
CONDITIONS, IMPACTED THE PORTFOLIO'S PERFORMANCE.*
At the end of the reporting period, Nations LifeGoal Income and Growth
Portfolio was 20% invested in a large-capitalization domestic equity fund
(Nations Equity Income Fund), 10% invested in an international fund (Nations
International Equity Fund) and 70% invested in short-duration bond funds
(Nations Short-Term Income and Nations Short-Intermediate Government Funds).
This asset allocation reflects our desire to be diversified among equities and
fixed income mutual funds. The current mix of stock and bond funds offers
investors growth potential in the form of equity
- ---------------
* Portfolio characteristics and outlook were current as of March 31, 1997, are
subject to change and may not be representative of current characteristics and
outlook. Also, the outlook of this Fund's portfolio manager may differ from
that of other Nations Funds' portfolio managers.
10
<PAGE> 13
exposure, but the emphasis is on the income stream of fixed income instruments.
The Portfolio's exposure to the equity market through its investment in Nations
Equity Income Fund allows investors to participate in the equity market as well
as enjoy the advantages of reduced volatility and the potential for a solid
dividend return. The Portfolio has maintained a relatively conservative approach
to the fixed income markets through its investment in Nations Short-Term Income
Fund.
Nations LifeGoal Income and Growth Portfolio has clearly benefited from its
modest exposure to the equity market, via Nations Equity Income Fund. Since the
Portfolio's inception, equity returns, particularly those of
large-capitalization stocks, have far outpaced the returns offered by the fixed
income markets. The Portfolio's exposure to international markets acted as a
drag on overall performance as international equities lagged domestic equity
returns; however, the secular growth opportunities available in many foreign
markets should provide attractive long-term growth potential.
The fixed income portion of the Portfolio was invested in underlying
Nations Funds that invest primarily in short duration bonds. In recent months,
interest rates have risen, enabling these Funds to outperform, on a relative
basis, their long duration counterparts. Nonetheless, the Portfolio's emphasis
on fixed income investments has muted the Portfolio's overall returns.
HOW ARE YOU POSITIONING THE PORTFOLIO GOING FORWARD?
Consistent with its investment objective, the Portfolio will continue to
allocate assets across stock and bond funds with particular emphasis on fixed
income exposure. Although the Portfolio will emphasize fixed income funds in
order to pursue its objective, we expect that a modest position in domestic and
international equity funds will be maintained. Although our expectation is for
volatility to persist in the domestic equity markets, a component of the
Portfolio will remain in equity funds in order to offer investors the potential
for an element of long-term growth.
11
<PAGE> 14
NATIONS FUNDS
Nations LifeGoal Income and Growth Portfolio
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A, INVESTOR C AND PRIMARY A SHARES AS OF
MARCH 31, 1997
<TABLE>
<CAPTION>
AGGREGATE TOTAL RETURN
INVESTOR A SHARES
- ---------------------------------------------
<S> <C>
Since Inception (10/15/96)* through
03/31/97 2.54%
</TABLE>
<TABLE>
<CAPTION>
INVESTOR C SHARES
- ---------------------------------------------
<S> <C>
Since Inception (10/15/96)* through
03/31/97 2.04%**
Since Inception (10/15/96) through
03/31/97 2.54%
</TABLE>
**adjusted for maximum contingent deferred sales charge of 0.50% when
Investor C Shares are redeemed within one year of purchase.
<TABLE>
<CAPTION>
PRIMARY A SHARES
- ---------------------------------------------
<S> <C>
Since Inception (10/15/96)* through
03/31/97 2.59%
</TABLE>
The charts to the right show the growth in value of a hypothetical $10,000
investment in Investor A, Investor C and Primary A Shares of Nations
LifeGoal Income and Growth Portfolio on October 15, 1996 (inception date).
Figures for the Lehman Aggregate Bond Index, which is an unmanaged index
comprised of the Government Corporate Bond Index, the Asset-Backed
Securities Index and the Mortgage-Backed Securities Index and includes
U.S. Treasury issues, agency issues, corporate bond issues and
mortgage-backed issues, include reinvestment of dividends.
Each chart assumes the reinvestment of all distributions.
* Nations LifeGoal Income and Growth Portfolio's Primary A, Investor A and
Investor C Shares commenced investment operations on October 2, 1996.
Shares were offered to the public on October 15, 1996.
[LEGEND]
PERFORMANCE COMPARISONS
INVESTOR A SHARES AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
GROWTH OF
LEHMAN INVESTMENT
BROTHERS WITH
MEASUREMENT PERIOD AGGREGATE DISTRIBUTIONS
(FISCAL YEAR COVERED) BOND INDEX REINVESTED
<S> <C> <C>
'OCT. 15,|1996' 10000 10000
'NOV. 30,|1996' 10126 10205
'MAR. 31,|1997' 9898 10254
</TABLE>
INVESTOR C SHARES AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
GROWTH OF
LEHMAN INVESTMENT
BROTHERS WITH
MEASUREMENT PERIOD AGGREGATE DISTRIBUTIONS
(FISCAL YEAR COVERED) BOND INDEX REINVESTED
<S> <C> <C>
'OCT. 15,|1996' 10000 10000
'NOV. 30,|1996' 10126 10208
'MAR. 31,|1997' 9898 10204
</TABLE>
PRIMARY A SHARES AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
GROWTH OF
LEHMAN INVESTMENT
BROTHERS WITH
MEASUREMENT PERIOD AGGREGATE DISTRIBUTIONS
(FISCAL YEAR COVERED) BOND INDEX REINVESTED
<S> <C> <C>
'OCT. 15,|1996' 10000 10000
'NOV. 30,|1996' 10126 10208
'MAR. 31,|1997' 9898 10259
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Aggregate total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
12
<PAGE> 15
NATIONS FUNDS
NATIONS LIFEGOAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANY SECURITIES -- 98.2%
13,393 Nations Disciplined Equity Fund -- 14.6%...................................... $ 247,360
18,532 Nations Emerging Growth Fund -- 14.1%......................................... 238,322
26,296 Nations International Equity Fund -- 20.4%.................................... 345,271
16,785 Nations Managed SmallCap Index Fund -- 9.8%................................... 164,998
15,848 Nations Pacific Growth Fund -- 9.7%........................................... 164,978
19 Nations Prime Fund -- 0.0%#................................................... 19
28,016 Nations Value Fund -- 29.6%................................................... 500,646
----------
TOTAL INVESTMENT COMPANY SECURITIES (Cost $1,743,738)......................... 1,661,594
----------
TOTAL INVESTMENTS (Cost $1,743,738*)................................................ 98.2% 1,661,594
OTHER ASSETS AND LIABILITIES (NET).................................................. 1.8 30,835
----- ----------
NET ASSETS.......................................................................... 100.0% $1,692,429
===== ==========
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes was $1,745,879.
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 16
NATIONS FUNDS
NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANY SECURITIES -- 100.0%
45,339 Nations Diversified Income Fund -- 20.6%.................................... $ 458,377
8,171 Nations Emerging Growth Fund -- 4.7%........................................ 105,079
17,307 Nations Equity Income Fund -- 9.5%.......................................... 212,870
23,117 Nations Global Government Income Fund -- 10.2%.............................. 226,311
25,771 Nations International Equity Fund -- 15.2%.................................. 338,370
11,014 Nations Managed SmallCap Index Fund -- 4.9%................................. 108,270
25 Nations Prime Fund -- 0.0%#................................................. 25
46,861 Nations Strategic Fixed Income Fund -- 20.3%................................ 450,803
18,230 Nations Value Fund -- 14.6%................................................. 325,765
----------
TOTAL INVESTMENT COMPANY SECURITIES (Cost $2,299,114)....................... 2,225,870
==========
TOTAL INVESTMENTS (Cost $2,299,114*).............................................. 100.0% 2,225,870
OTHER ASSETS AND LIABILITIES (NET)................................................ (0.0)# (796)
----- ----------
NET ASSETS........................................................................ 100.0% $2,225,074
===== ==========
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes was $2,299,301.
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 17
NATIONS FUNDS
NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANY SECURITIES -- 100.0%
5,687 Nations Equity Income Fund -- 19.7%........................................... $ 69,944
2,699 Nations International Equity Fund -- 10.0%.................................... 35,432
29 Nations Prime Fund -- 0.0%#................................................... 29
13,330 Nations Short-Intermediate Government Fund -- 15.0%........................... 53,188
20,271 Nations Short-Term Income Fund -- 55.3%....................................... 196,220
--------
TOTAL INVESTMENT COMPANY SECURITIES (Cost $359,827)........................... 354,813
--------
TOTAL INVESTMENTS (Cost $359,827*).................................................. 100.0% 354,813
OTHER ASSETS AND LIABILITIES (NET).................................................. (0.0) (154)
----- --------
NET ASSETS.......................................................................... 100.0% $354,659
----- --------
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes was $359,869.
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 18
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 1997
<TABLE>
<CAPTION>
NATIONS NATIONS
NATIONS LIFEGOAL LIFEGOAL
LIFEGOAL BALANCED INCOME AND
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value. See accompanying schedules (Note 1).......... $1,661,594 $2,225,870 $354,813
Dividends and interest receivable................................... -- 5,134 897
Receivable for Portfolio shares sold................................ 67,278 63,505 29,100
---------- ---------- --------
Total Assets................................................... 1,728,872 2,294,509 384,810
---------- ---------- --------
LIABILITIES:
Payable for investment securities purchased......................... 35,659 68,862 30,040
Investment advisory fee payable (Note 2)............................ 510 551 91
Shareholder servicing and distribution fees payable (Note 3)........ 274 22 20
---------- ---------- --------
Total Liabilities.............................................. 36,443 69,435 30,151
---------- ---------- --------
NET ASSETS.......................................................... $1,692,429 $2,225,074 $354,659
---------- ---------- ----------
Investments, at cost................................................ $1,743,738 $2,299,114 $359,827
---------- ---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 19
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) MARCH 31, 1997
<TABLE>
<CAPTION>
NATIONS NATIONS
NATIONS LIFEGOAL LIFEGOAL
LIFEGOAL BALANCED INCOME AND
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------
<S> <C> <C> <C>
NET ASSETS CONSIST OF:
Undistributed net investment income.............................. $ 174 $ 695 $ 75
Accumulated net realized gain on investments..................... 3,232 558 621
Net unrealized depreciation of investments....................... (82,144) (73,244) (5,014)
Paid-in capital.................................................. 1,771,167 2,297,065 358,977
---------- ---------- --------
$1,692,429 $2,225,074 $ 354,659
---------- ---------- ----------
NET ASSETS:
Primary A Shares................................................. $ 929,455 $2,113,923 $ 222,687
---------- ---------- ----------
Investor A Shares................................................ $ 681,093 $ 93,609 $ 131,015
---------- ---------- ----------
Investor C Shares................................................ $ 81,881 $ 17,542 $ 957
---------- ---------- ---------
SHARES OUTSTANDING:
Primary A Shares................................................. 91,607 212,550 22,336
---------- ---------- -------
Investor A Shares................................................ 67,126 9,408 13,144
---------- ---------- -------
Investor C Shares................................................ 8,070 1,763 96
---------- ---------- ------
PRIMARY A SHARES:
Net asset value, offering and redemption price per share......... $10.15 $9.95 $9.97
------ ----- ------
INVESTOR A SHARES:
Net asset value, offering and redemption price per share......... $10.15 $9.95 $9.97
------ ----- ------
INVESTOR C SHARES:
Net asset value and offering price per share*.................... $10.15 $9.95 $9.97
------ ----- ------
</TABLE>
- ---------------
* Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 20
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
NATIONS NATIONS
NATIONS LIFEGOAL LIFEGOAL
LIFEGOAL BALANCED INCOME AND
GROWTH GROWTH GROWTH
PORTFOLIO(A) PORTFOLIO(A) PORTFOLIO(A)
--------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................................ $ 2,766 $ 9,221 $ 2,408
-------- -------- -------
EXPENSES:
Investment advisory fee (Note 2)..................................... 510 551 91
Shareholder servicing and distribution fees (Note 3):
Investor A Shares.................................................. 205 14 20
Investor C Shares.................................................. 69 8 0#
-------- -------- -------
Total expenses.................................................. 784 573 111
-------- -------- -------
NET INVESTMENT INCOME................................................ 1,982 8,648 2,297
-------- -------- -------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS (NOTES 1
AND 4):
Net realized gain/(loss) on investments during the period............ 1,056 (146) (34)
Capital gain distributions received.................................. 2,176 704 655
Net unrealized depreciation of investments during the period......... (82,144) (73,244) (5,014)
-------- -------- -------
Net realized and unrealized loss on investments...................... (78,912) (72,686) (4,393)
-------- -------- -------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $(76,930) $(64,038) $ (2,096)
-------- -------- -------
</TABLE>
- ---------------
(a) Nations LifeGoal Growth Portfolio, Nations LifeGoal Balanced Growth
Portfolio and Nations LifeGoal Income and Growth Portfolio commenced
investment operations on October 2, 1996. Shares were offered to the public
on October 15, 1996.
# Amount represents less than $1.00.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 21
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
NATIONS NATIONS
NATIONS LIFEGOAL LIFEGOAL
LIFEGOAL BALANCED INCOME AND
GROWTH GROWTH GROWTH
PORTFOLIO(a) PORTFOLIO(a) PORTFOLIO(a)
---------------------------------------
<S> <C> <C> <C>
Net investment income............................................... $ 1,982 $ 8,648 $ 2,297
Net realized gain/(loss) on investments during the period........... 1,056 (146) (34)
Capital gain distributions received................................. 2,176 704 655
Unrealized depreciation of investments during the period............ (82,144) (73,244) (5,014)
---------- ---------- --------
Net decrease in net assets resulting from operations................ (76,930) (64,038) (2,096)
Distributions to shareholders from net investment income:
Primary A Shares.................................................. (1,219) (7,739) (1,688)
Investor A Shares................................................. (588) (162) (531)
Investor C Shares................................................. (1) (52) (3)
Net increase in net assets from Portfolio share transactions (Note
5):
Primary A Shares.................................................. 939,556 2,153,893 195,503
Investor A Shares................................................. 707,365 95,005 132,419
Investor C Shares................................................. 84,008 18,021 960
---------- ---------- --------
Net increase in net assets.......................................... 1,652,191 2,194,928 324,564
NET ASSETS:
Beginning of period................................................. 40,238 30,146 30,095
=========== =========== =========
End of period....................................................... $ 1,692,429 $ 2,225,074 $ 354,659
------------ ------------ -----------
Undistributed net investment income at end of period................ $ 174 $ 695 $ 75
=========== =========== =========
</TABLE>
- ---------------
(a) Nations LifeGoal Growth Portfolio, Nations LifeGoal Balanced Growth
Portfolio and Nations LifeGoal Income and Growth Portfolio commenced
investment operations on October 2, 1996. Shares were offered to the public
on October 15, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 22
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
PRIMARY A INVESTOR A INVESTOR C
SHARES SHARES SHARES
--------- ---------- ----------
PERIOD PERIOD PERIOD
ENDED ENDED ENDED
03/31/97* 03/31/97* 03/31/97*
------------------------------------
<S> <C> <C> <C>
NATIONS LIFEGOAL GROWTH PORTFOLIO
OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 10.06 $10.06 $10.06
----- ------- --------
Net investment income................................................. 0.12 0.12 0.11
Net realized and unrealized gain on investments....................... 0.09 0.09 0.09
----- ------- --------
Net increase in net assets resulting from investment operations....... 0.21 0.21 0.20
DISTRIBUTIONS:
Dividends from net investment income.................................. (0.12) (0.12) (0.11)
----- ------- --------
Total distributions................................................... (0.12) (0.12) (0.11)
----- ------- --------
Net asset value, end of period........................................ $ 10.15 $10.15 $10.15
======= ======= =======
Total return++........................................................ 2.10% 2.05% 2.01%
======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).................................. $ 929 $ 681 $ 82
Ratio of operating expenses to average net assets+++.................. 0.25%+ 0.50%+ 0.75%+
Ratio of net investment income to average net assets.................. 1.11%+ 0.86%+ 0.61%+
Portfolio turnover rate............................................... 25% 25% 25%
</TABLE>
- ---------------
* Nations LifeGoal Growth Portfolio's Primary A, Investor A and Investor C
Shares commenced investment operations on October 2, 1996. Shares were
offered to the public on October 15, 1996 at $10.06 per share.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ The Portfolio's expenses do not include the expenses of the underlying
funds.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 23
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
PRIMARY A INVESTOR A INVESTOR C
SHARES SHARES SHARES
--------- ---------- ----------
PERIOD PERIOD PERIOD
ENDED ENDED ENDED
03/31/97* 03/31/97* 03/31/97*
------------------------------------
<S> <C> <C> <C>
NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO
OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 10.05 $10.05 $10.05
----- ------- --------
Net investment income................................................. 0.19 0.19 0.19
Net realized and unrealized loss on investments....................... (0.10) (0.10) (0.10)
----- ------- --------
Net increase in net assets resulting from investment operations....... 0.09 0.09 0.09
DISTRIBUTIONS:
Dividends from net investment income.................................. (0.19) (0.19) (0.19)
----- ------- --------
Total distributions................................................... (0.19) (0.19) (0.19)
----- ------- --------
Net asset value, end of period........................................ $ 9.95 $ 9.95 $ 9.95
------- -------- --------
Total return++........................................................ 0.90% 0.86% 0.85%
------- -------- --------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).................................. $ 2,114 $ 94 $ 18
Ratio of operating expenses to average net assets+++.................. 0.25%+ 0.50%+ 0.75%+
Ratio of net investment income to average net assets.................. 3.94%+ 3.69%+ 3.44%+
Portfolio turnover rate............................................... 1% 1% 1%
</TABLE>
- ---------------
* Nations LifeGoal Balanced Growth Portfolio's Primary A, Investor A and
Investor C Shares commenced investment operations on October 2, 1996. Shares
were offered to the public on October 15, 1996 at $10.05 per share.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ The Portfolio's expenses do not include the expenses of the underlying
funds.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 24
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
PRIMARY A INVESTOR A INVESTOR C
SHARES SHARES SHARES
--------- ---------- ----------
PERIOD PERIOD PERIOD
ENDED ENDED ENDED
03/31/97* 03/31/97* 03/31/97*
------------------------------------
<S> <C> <C> <C>
NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO
OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 10.03 $10.03 $10.03
----- ------- --------
Net investment income................................................. 0.32 0.31 0.31
Net realized and unrealized loss on investments....................... (0.06) (0.06) (0.06)
----- ------- --------
Net increase in net assets resulting from investment operations....... 0.26 0.25 0.25
DISTRIBUTIONS:
Dividends from net investment income.................................. (0.32) (0.31) (0.31)
----- ------- --------
Total distributions................................................... (0.32) (0.31) (0.31)
----- ------- --------
Net asset value, end of period........................................ $ 9.97 $ 9.97 $ 9.97
======= ======= ========
Total return++........................................................ 2.59% 2.54% 2.54%
======= ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).................................. $ 223 $ 131 $ 1
Ratio of operating expenses to average net assets+++.................. 0.25%+ 0.50%+ 0.75%+
Ratio of net investment income to average net assets.................. 6.34%+ 6.09%+ 5.84%+
Portfolio turnover rate............................................... 2% 2% 2%
</TABLE>
- ---------------
* Nations LifeGoal Income and Growth Portfolio's Primary A, Investor A and
Investor C Shares commenced investment operations on October 2, 1996. Shares
were offered to the public on October 15, 1996 at $10.03 per share.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ The Portfolio's expenses do not include the expenses of the underlying
funds.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 25
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Nations LifeGoal Funds, Inc. (the "Company") was organized as a Maryland
Corporation on July 3, 1996 and is registered under the Investment Company Act
of 1940, as amended, (the "1940 Act"), as an open-end management investment
company. The Company was established in order to offer a range of asset
allocation and diversification strategies to accommodate different investment
philosophies and goals. The Company offers three portfolios: LifeGoal Growth
Portfolio, LifeGoal Balanced Growth Portfolio, and LifeGoal Income and Growth
Portfolio (each a "Portfolio" and collectively, the "Portfolios"). The
Portfolios invest in other mutual funds (the "Underlying Funds") sponsored and
managed by NationsBank. The Portfolios offer three classes of shares: Primary A
Shares, Investor A Shares and Investor C Shares. The Board of Directors of the
Company has also authorized the issuance of Primary B Shares for all Portfolios.
As of March 31, 1997, no Primary B Shares have been issued to the public.
Shareholders of a Portfolio have equal voting rights on matters affecting all
shareholders of the Portfolio. In addition, each class of shares of a Portfolio
has exclusive voting rights on matters that relate solely to its class and
separate voting rights on matters in which the interests of one class of shares
differ from the interests of any other class.
On October 15, 1996, the Company commenced the sale of its shares to the public.
On October 2, 1996, Stephens Inc., the Company's distributor, made an initial
capital investment into each Portfolio, which was in turn invested into the
Underlying Funds. The operating results from October 2, 1996 through October 14,
1996 have been reflected in the beginning net asset values reported in the
Statement of Operations and the Financial Highlights.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Portfolios in the preparation of
their financial statements.
1. SIGNIFICANT ACCOUNTING POLICIES.
Portfolio Valuation: Investments in the Underlying Funds are valued at the
price of each Primary A Share of the respective Underlying Funds determined as
of the close of the New York Stock Exchange on the valuation date.
Securities Transactions and Investment Income: Securities transactions are
accounted for on trade date. Realized gains and losses are computed on the
specific identification of the securities sold. Distributions from the
Underlying Funds are recorded on ex-dividend date. Each Portfolio's investment
income and realized and unrealized gains and losses are allocated among its
classes based upon the relative net assets of each class of shares.
Dividends and Distributions to Shareholders: It is the policy of each Portfolio
to declare and pay dividends from net investment income each calendar quarter.
Each Portfolio will distribute net realized capital gains (including net short-
term capital gains), at least annually after the fiscal year in which the income
is earned, unless offset by any available capital loss carryforward. Additional
distributions of net investment income and capital gains may be made at the
discretion of the Board of Directors in order to avoid application of the 4%
non-deductible Federal excise tax. Income distributions and capital gain
distributions on a Portfolio level are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing characterization of
distributions made by a Portfolio as a whole.
Federal Income Tax: Each Portfolio intends to qualify as a regulated investment
company by complying with the requirements of the Internal Revenue Code of 1986,
as amended, applicable to regulated investment companies and by distributing
substantially all of its earnings to its shareholders. Therefore, no Federal
income or excise tax provision is applicable.
Expenses: General expenses of the Company are allocated to the relevant
Portfolios based upon relative net assets. In addition, the Portfolios
indirectly bear their pro rata share of expenses of the Underlying Funds.
Operating expenses directly attributable to a Portfolio or class of shares are
charged to that Portfolio's or class's operations. Expenses of each Portfolio
not directly attributable to the operations of any class of shares are prorated
among the classes based on the relative net assets of each class of shares.
23
<PAGE> 26
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED
PARTY TRANSACTIONS.
The Company has entered into an investment advisory agreement (the "Investment
Advisory Agreement") with NationsBanc Advisors, Inc. ("NBAI"), a wholly-owned
subsidiary of NationsBank, N.A. ("NationsBank"), pursuant to which NBAI provides
investment advisory services to the Portfolios. Under the terms of this
Investment Advisory Agreement, NBAI is entitled to receive advisory fees at the
annual rate of 0.25% of the average daily net assets of each Portfolio and has
agreed to bear any and all fees and expenses of the Portfolios (other than the
management fee payable under the agreement), except taxes, brokerage fees and
commissions, extraordinary expenses, and any applicable Rule 12b-1 fees,
shareholder servicing fees and/or shareholder administration fees.
The Company has, on behalf of its Portfolios, entered into a sub-advisory
agreement (the "Sub-Advisory Agreement") with NBAI and TradeStreet Investment
Associates, Inc. ("TradeStreet"), a wholly-owned subsidiary of NationsBank.
Under the terms of the Sub-Advisory Agreement, TradeStreet is entitled to
receive a sub-advisory fee from NBAI at the annual rate of 0.05% of the average
daily net assets of each Portfolio.
Stephens Inc. ("Stephens") serves as the administrator of the Company pursuant
to an administration agreement (the "Administration Agreement"). Stephens
receives no compensation for its services from the Portfolios.
NationsBank of Texas, N.A. ("NationsBank of Texas") acts as the custodian for
the Portfolios. First Data Investor Services Group, Inc. ("First Data"), a
wholly-owned subsidiary of First Data Corporation, serves as the transfer agent
for the Portfolios' shares. NationsBank of Texas acts as the sub-transfer agent
for the Primary Shares of the Portfolios.
NBAI may, from time to time, voluntarily reduce their fees payable by each
Portfolio. For the period ended March 31, 1997, NBAI did not waive any fees.
No officer, director or employee of NationsBank, NBAI, TradeStreet, Stephens,
First Data or any affiliate thereof, receives any compensation from the Company
for serving as a director or officer of the Company. NBAI pays each unaffiliated
Director an annual fee of $1,000 ($3,000 for the Chairman of the Board), plus
$500 per Portfolio and an additional $1,000 for each in-person board meeting,
and $500 for each telephonic board meeting attended. NBAI also reimburses
expenses incurred by each unaffiliated Director in attending such meetings.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS.
The Company has adopted shareholder administration plans (each an
"Administration Plan") for Primary B Shares of each Portfolio; shareholder
servicing and distribution plans pursuant to Rule 12b-1 under the 1940 Act for
Investor A Shares of each Portfolio ("Investor A Plan"); a shareholder servicing
plan ("Servicing Plan") for Investor C Shares of each Portfolio; and a
distribution plan ("Distribution Plan") pursuant to Rule 12b-1 for Investor C
Shares of each Portfolio (collectively, the "Plans"). The Administration Plan
permits the Portfolios to compensate institutions for shareholder administration
services provided to their customers that own Primary B Shares. The Investor A
Plan permits the Portfolios to compensate (i) servicing agents and selling
agents that have entered into a servicing agreement with the Portfolios for
services provided to their customers that own Investor A Shares and (ii)
Stephens for distribution-related expenses incurred in connection with Investor
A Shares. The Servicing Plan permits the Portfolios to compensate servicing
agents for services provided to their customers that own Investor C Shares. The
Distribution Plan permits the Portfolios to compensate or reimburse Stephens for
any activities or expenses primarily intended to result in the sale of the
Portfolios' Investor C Shares. Payments under the Plans are accrued daily and
paid monthly at a rate set, from time to time, by the Portfolios. Fees incurred
pursuant to the Plans are charged as expenses of each Portfolio directly to the
Primary B Shares, Investor A Shares and Investor C Shares, respectively.
For the period ended March 31, 1997, the effective rates incurred by the
Portfolios, as a percentage of average daily net assets, pursuant to the Plans
were as follows:
<TABLE>
<CAPTION>
INVESTOR C
INVESTOR A DISTRIBUTION
FUND PLAN PLAN
------------------------------------------------------------------------------------------------------
<S> <C> <C>
LifeGoal Growth Portfolio................................................ 0.25% 0.50%
LifeGoal Balanced Growth Portfolio....................................... 0.25% 0.50%
LifeGoal Income and Growth Portfolio..................................... 0.25% 0.50%
</TABLE>
24
<PAGE> 27
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A substantial portion of the fees paid pursuant to the Plans described above are
paid to affiliates of NationsBank and NBAI.
4. PURCHASES AND SALES OF SECURITIES.
The aggregate cost of purchases and proceeds from sales of the underlying funds
for the period ended March 31, 1997 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-----------------------
<S> <C> <C>
LifeGoal Growth Portfolio............................................... $1,833,375 $130,693
LifeGoal Balanced Growth Portfolio...................................... 2,277,045 7,785
LifeGoal Income and Growth Portfolio.................................... 331,817 1,956
</TABLE>
At March 31, 1997, aggregate gross unrealized depreciation of the Underlying
Funds for tax purposes was as follows:
<TABLE>
<CAPTION>
TAX BASIS
UNREALIZED
DEPRECIATION
----------
<S> <C>
LifeGoal Growth Portfolio........................................................ $ 84,465
LifeGoal Balanced Growth Portfolio............................................... 73,431
LifeGoal Income and Growth Portfolio............................................. 5,056
</TABLE>
5. CAPITAL STOCK.
As of March 31, 1997, 1,200,000,000 shares of $.001 par value capital stock were
authorized for the Company. The Company's Articles of Incorporation authorizes
the Board of Directors to classify or reclassify any authorized, but unissued
shares into one or more additional classes or series of shares. Transactions in
shares of capital stock were as follows:
NATIONS LIFEGOAL GROWTH PORTFOLIO
<TABLE>
<CAPTION>
PERIOD ENDED
03/31/97*
----------------------
SHARES AMOUNT
----------------------
<S> <C> <C>
PRIMARY A SHARES:
Shares sold............................................................ 102,688 $1,097,781
Shares issued upon reinvestment of dividends........................... 118 1,220
Shares redeemed........................................................ (15,199) (159,445)
------- ----------
Net increase........................................................... 87,607 $ 939,556
======= ==========
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
03/31/97*
SHARES AMOUNT
----------------------
<S> <C> <C>
INVESTOR A SHARES:
Shares sold............................................................ 67,184 $ 707,978
Shares issued upon reinvestment of dividends........................... 57 588
Shares redeemed........................................................ (115) (1,201)
------ --------
Net increase........................................................... 67,126 $ 707,365
======= ==========
</TABLE>
25
<PAGE> 28
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NATIONS LIFEGOAL GROWTH PORTFOLIO (CONTINUED):
<TABLE>
<CAPTION>
PERIOD ENDED
03/31/97*
SHARES AMOUNT
----------------------
<S> <C> <C>
INVESTOR C SHARES:
Shares sold............................................................ 8,070 $ 84,008
Shares issued upon reinvestment of dividends........................... -- --
Shares redeemed........................................................ -- --
------ --------
Net increase........................................................... 8,070 $ 84,008
======= ==========
</TABLE>
NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO
<TABLE>
<CAPTION>
PERIOD ENDED
03/31/97*
SHARES AMOUNT
----------------------
<S> <C> <C>
PRIMARY A SHARES:
Shares sold............................................................ 209,694 $2,155,343
Shares issued upon reinvestment of dividends........................... 770 7,739
Shares redeemed........................................................ (914) (9,189)
------ --------
Net increase........................................................... 209,550 $2,153,893
======= ==========
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
03/31/97*
SHARES AMOUNT
----------------------
<S> <C> <C>
INVESTOR A SHARES:
Shares sold............................................................ 9,407 $ 94,998
Shares issued upon reinvestment of dividends........................... 16 157
Shares redeemed........................................................ (15) (150)
------ --------
Net increase........................................................... 9,408 $ 95,005
======= ==========
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
03/31/97*
SHARES AMOUNT
----------------------
<S> <C> <C>
INVESTOR C SHARES:
Shares sold............................................................ 1,998 $ 20,417
Shares issued upon reinvestment of dividends........................... 5 52
Shares redeemed........................................................ (240) (2,448)
------ --------
Net increase........................................................... 1,763 $ 18,021
====== ==========
</TABLE>
NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO
<TABLE>
<CAPTION>
PERIOD ENDED
03/31/97*
SHARES AMOUNT
----------------------
<S> <C> <C>
PRIMARY A SHARES:
Shares sold............................................................ 19,568 $ 197,843
Shares issued upon reinvestment of dividends........................... 169 1,688
Shares redeemed........................................................ (401) (4,028)
------ --------
Net increase........................................................... 19,336 $ 195,503
======= ==========
</TABLE>
26
<PAGE> 29
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO (CONTINUED):
<TABLE>
<CAPTION>
PERIOD ENDED
03/31/97*
SHARES AMOUNT
----------------------
<S> <C> <C>
INVESTOR A SHARES:
Shares sold............................................................ 13,267 $ 133,673
Shares issued upon reinvestment of dividends........................... 52 524
Shares redeemed........................................................ (175) (1,778)
------ --------
Net increase........................................................... 13,144 $ 132,419
======= ==========
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
03/31/97*
SHARES AMOUNT
-----------------------
<S> <C> <C>
INVESTOR C SHARES:
Shares sold........................................................... 96 $ 960
Shares issued upon reinvestment of dividends.......................... -- --
Shares redeemed....................................................... -- --
------ --------
Net increase.......................................................... 96 $ 960
====== ==========
</TABLE>
- ---------------
* The Portfolios commenced investment operations on October 2, 1996. Shares were
offered to the public on October 15, 1996.
6. PRINCIPAL SHAREHOLDERS.
At March 31, 1997 shareholders holding more than 10% of shares outstanding are
as follows:
<TABLE>
<CAPTION>
% OF TOTAL
FUND NUMBER OF SHAREHOLDERS SHARES OUTSTANDING
------------------------------------------------------------ ---------------------- ------------------
<S> <C> <C>
LifeGoal Income and Growth Portfolio........................ 1 28%
</TABLE>
7. RISK FACTORS OF THE PORTFOLIOS.
Investing in the Underlying Funds through the Portfolios involves certain
additional expenses and tax results that would not be present in a direct
investment in the Underlying Funds. Under certain circumstances, an Underlying
Fund may determine to make payment of a redemption request by a Portfolio wholly
or partly by a distribution in kind of securities from its portfolio, instead of
cash, in accordance with the rules of the Securities and Exchange Commission. In
such cases, the Portfolios may hold securities distributed by an Underlying Fund
until NBAI determines that it is appropriate to dispose of such securities.
Each of the Underlying Funds may invest in certain specified derivative
securities, including: 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 and financial
futures and options. Certain of the Underlying Funds may invest in restricted
securities, 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. These Underlying
Funds also may engage in securities lending, reverse repurchase agreements and
dollar roll transactions. In addition, certain of the Underlying Funds may
invest in below-investment grade debt, debt obligations of foreign issuers and
stocks of foreign corporations, securities in foreign investment funds or
trusts, derivative securities including futures contracts, options, interest
rate and currency swap transactions, and various other investment vehicles each
with inherent risks.
The officers and directors of the Company also serve as officers and directors
of the Underlying Funds. In addition, NBAI, TradeStreet and NationsBank of Texas
are all wholly-owned subsidiaries of NationsBank. Conflicts may arise as these
companies seek to fulfill their fiduciary responsibilities to both the
Portfolios and Underlying Funds.
From time to time, one or more of the Underlying Funds used for investment by a
Portfolio may experience relatively large investments or redemptions due to
reallocations or rebalancings by the Portfolios as recommended by NBAI. These
transactions will affect the Underlying Funds, since the Underlying Funds that
experience redemptions as a result of the reallocations or rebalancings may have
to sell portfolio securities and Underlying Funds that receive additional cash
will
27
<PAGE> 30
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
have to invest such cash. While it is impossible to predict the overall impact
of these transactions over time, there could be adverse effects on portfolio
management to the extent that the Underlying Funds may be required to sell
securities or invest cash at times when they would not otherwise do so. These
transactions could also have tax consequences if sales of securities resulted in
gains and could also increase transactions costs. NBAI, representing the
interests of the Underlying Funds, is committed to minimizing the impact of
Portfolio transactions on the Underlying Funds to the extent it is consistent
with pursuing the investment objectives of the Portfolios. NBAI may,
nevertheless, face conflicts in fulfilling its responsibilities to both the
Portfolios and Underlying Funds.
28
<PAGE> 31
NATIONS FUNDS
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND DIRECTORS OF NATIONS LIFEGOAL FUNDS, INC.
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Nations LifeGoal Growth Portfolio,
Nations LifeGoal Balanced Growth Portfolio, and Nations LifeGoal Income and
Growth Portfolio (collectively referred to as the "Portfolios") at March 31,
1997 and the results of each of their operations, the changes in each of their
net assets and their financial highlights for the period October 2, 1996
(commencement of operations) through March 31, 1997, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at March 31, 1997 by
correspondence with the custodian provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
May 15, 1997
29
<PAGE> 32
NATIONS FUNDS
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
Of the distributions made by the following Portfolios, the corresponding
percentage represents the amount of each distribution which will qualify for the
dividends received deduction available to corporate shareholders:
<TABLE>
<S> <C>
Nations LifeGoal Growth Portfolio............................................ 84.73%
Nations LifeGoal Balanced Growth Portfolio................................... 14.96%
Nations LifeGoal Income and Growth Portfolio................................. 4.42%
</TABLE>
30
<PAGE> 33
THE NATIONS FUNDS FAMILY
EQUITY FUNDS
GROWTH
Nations Emerging Markets Fund
Nations Pacific Growth Fund
Nations International Equity Fund
Nations Managed Smallcap Index Fund
Nations Emerging Growth Fund
Nations Disciplined Equity Fund
Nations Capital Growth Fund
GROWTH AND INCOME
Nations Value Fund
Nations Managed Index Fund
Nations Equity Index Fund
Nations Equity Income Fund
Nations Balanced Assets Fund
LIFEGOAL PORTFOLIOS
LifeGoal Growth Portfolio
LifeGoal Balanced Growth Portfolio
LifeGoal Income and Growth Portfolio
BOND FUNDS
INCOME
Nations Global Government Income Fund
Nations Diversified Income Fund
Nations Strategic Fixed Income Fund
Nations Government Securities Fund
Nations Short-Intermediate Government Fund
Nations Short-Term Income Fund
TAX-EXEMPT INCOME
Nations Municipal Income Fund
Nations Intermediate Municipal Bond Fund
Nations Short-Term Municipal Income Fund
Nations Florida Municipal Bond Fund
Nations Florida Intermediate Municipal Bond Fund
Nations Georgia Municipal Bond Fund
Nations Georgia Intermediate Municipal Bond Fund
Nations Maryland Municipal Bond Fund
Nations Maryland Intermediate Municipal Bond Fund
Nations North Carolina Municipal Bond Fund
Nations North Carolina Intermediate Municipal Bond Fund
Nations South Carolina Municipal Bond Fund
Nations South Carolina Intermediate Municipal Bond Fund
Nations Tennessee Municipal Bond Fund
Nations Tennessee Intermediate Municipal Bond Fund
Nations Texas Municipal Bond Fund
Nations Texas Intermediate Municipal Bond Fund
Nations Virginia Municipal Bond Fund
Nations Virginia Intermediate Municipal Bond Fund
MONEY MARKET FUNDS
Nations Prime Fund
Nations Government Money Market Fund
Nations Treasury Fund
Nations Tax Exempt Fund
For more complete information on Nations Funds mutual funds, including charges
and expenses, please contact Nations Funds or your Investment Representative for
a current prospectus. Please read the prospectus carefully before you invest or
send money.
<PAGE> 34
This report is submitted for the general information of shareholders of Nations
Funds. This material must be preceded or accompanied by a current Nations Funds
prospectus.
<PAGE> 35
NATIONS BULK RATE
FUNDS U.S. POSTAGE
P.O. Box 34602 PAID
Charlotte, NC 28234-4602 N READING, MA
Toll Free 1-800-982-2271 PERMIT NO.
105
