<PAGE>
NATIONS
FUNDS
Investments For A Lifetime(SM)
life
LifeGoal
Income and Grow
Portfolio
[ARTWORK APPEARS HERE]
LifeGoal
Balanced Growth
Portfolio
LifeGoal
Growth
Portfolio
Semi-Annual Report For The Period
Ended September 30, 1998
<PAGE>
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.
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.
NOT FDIC INSURED
May Lose Value
No Bank Guarantee
<PAGE>
NATIONS FUNDS
Dear Shareholder:
Thus far in 1998, equity investors have experienced a "roller-coaster" ride that
has been both dramatic and ugly. Stock mutual funds of almost every stripe and
color fell sharply during the third quarter. According to Lipper Analytical
Services, Inc., the average diversified U.S. stock fund posted a negative 15%
return during the quarter, with small company funds losing over 21%.
International equity funds also experienced downturns over the last three
months, with diversified international funds losing 16% on average and emerging
markets funds sliding a steep 23%.*
The three months ending September 30 represented the worst quarter for U.S.
stock funds since the third quarter of 1990. At that time, we were in a heated
showdown with Saddam Hussein and Iraq. The obvious question on everyone's mind
today is: what are the drivers causing the extreme volatility being experienced
in the markets? We think that the answer may be as simple as a shift in
psychology by investors. From January 1997 through July 1998, investors were
comfortable with assuming risk -- almost too comfortable. Equity valuations
reflected a close to perfect environment. Bond yield comparisons to U.S.
Treasuries also reflected a comfort with credit risk. However, Russia's debt
default in August 1998 was the last in a combination of bad news and
uncertainties that changed the prevailing mind set and compelled investors to
run for cover. Global anxieties were sufficient overall to push investors in one
direction: "risk avoidance."
As we look forward, several thoughts come to mind that lead us to remain
optimistic: 1) interest rates have dropped to thirty-year lows and the U.S.
economy is very rate sensitive; 2) inflation remains in check; 3) corporate
profits, while slowing, should pick up if our economy avoids recession; 4)
Japan's government is attacking its banking crisis with an approach similar to
that used in the U.S. savings and loan crisis in the 1980s, and 5) the Federal
Reserve Board has twice moved in the last month to lower the target on the
Federal Funds rate in an effort to fend off any "credit crunch."
While the risk for recession in 1999 is growing, we believe that conditions in
the U.S. will remain sound and that next year will be another year of positive
economic activity. Consistent monetary policy, a solid fiscal condition, low
inflation, and high employment are the important ingredients for our economic
picture. Investors need to remain alert and appreciate the fact that changing
conditions may translate into further market volatility. On behalf of our
shareholders, we will stay vigilant in our work as we pursue the Portfolios'
objectives.
Sincerely,
/s/ A. Max Walker /s/ Robert H. Gordon
A. Max Walker Robert H. Gordon
President and Chairman of the Board President, NationsBanc Advisors, Inc.
September 30, 1998
Source for all statistical data: TradeStreet Investment Associates, Inc.
* Lipper Analytical Services, Inc. is an independent fund performance monitor.
Past performance is no guarantee of future results.
<PAGE>
This page intentionally left blank.
2
<PAGE>
Table
Of
Contents
Financial Statements
Statements of Net Assets 4
Statements of Operations 7
Statements of Changes in Net Assets 8
Schedules of Capital Stock Activity 10
Financial Highlights 12
Notes to Financial Statements 18
3
<PAGE>
NATIONS FUNDS
LifeGoal Income and Growth Portfolio
- --------------------------------------------------------------------------------
Statement of Net Assets September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (000)
=====================================================================================================
<S> <C> <C>
INVESTMENT COMPANY SECURITIES - 100.0%
286,152 Nations Short-Term Income Fund - 47.1%................................. $ 2,830
376,746 Nations Short-Intermediate Government Fund - 26.3%..................... 1,583
52,838 Nations Managed Index Fund - 13.7%..................................... 823
28,672 Nations Disciplined Equity Fund - 8.7%................................. 521
21,552 Nations International Value Fund - 4.2%................................ 255
-----------
TOTAL INVESTMENT COMPANY SECURITIES
(Cost $6,195).................................................... 6,012
===========
TOTAL INVESTMENTS
(Cost $6,195*)......................................................... 100.0% 6,012
OTHER ASSETS AND LIABILITIES (Net).......................................... 0.0%
Receivable for Portoflio shares sold.......................... 34
Dividends receivable.......................................... 19
Payable for Portfolio shares redeemed......................... (11)
Investment advisory fee payable............................... (1)
Dividends payable............................................. (6)
Payable for investment securities purchased................... (19)
Shareholder servicing and distribution fees payable........... (14)
-----------
TOTAL OTHER ASSETS AND LIABILITIES (Net).................................... 2
------- -----------
NET ASSETS.................................................................. 100.0% $ 6,014
======= ===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Primary A Shares
($1,191,000/115,727 shares outstanding)................................ $ 10.29
===========
Investor A Shares
($1,295,000/125,473 shares outstanding)................................ $ 10.30
===========
Investor B Shares
($3,452,000/335,701 shares outstanding)................................ $ 10.28
===========
Investor C Shares
($76,000/7,356 shares outstanding)..................................... $ 10.30
===========
AT SEPTEMBER 30, 1998, NET ASSETS CONSIST OF:
Distributions in excess of net investment income.............. $ (3)
Accumulated net realized gain on investments sold............. 43
Net unrealized depreciation of investments.................... (183)
Paid-in capital............................................... 6,157
-----------
NET ASSETS.................................................... $ 6,014
===========
</TABLE>
- --------------
* Federal Income Tax Information: Net unrealized depreciation of investment
securities was comprised of gross appreciation of $0 and gross depreciation of
$183,000 for federal income tax purposes.
4 See Notes to Financial Statements.
<PAGE>
NATIONS FUNDS
LifeGoal Balanced Growth Portfolio
- --------------------------------------------------------------------------------
Statement of Net Assets September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (000)
=======================================================================================================
<S> <C> <C>
INVESTMENT COMPANY SECURITIES - 100.1%
424,664 Nations Strategic Fixed Income Fund - 22.8%............................ $ 4,348
403,150 Nations Diversified Income Fund - 22.6%................................ 4,326
239,648 Nations Managed Index Fund - 19.5%..................................... 3,734
146,041 Nations Disciplined Equity Fund - 13.9%................................ 2,655
224,399 Nations Small Company Growth Fund - 12.3%.............................. 2,354
145,598 Nations International Value Fund - 9.0%................................ 1,722
----------
TOTAL INVESTMENT COMPANY SECURITIES
(Cost $21,052)................................................... 19,139
==========
TOTAL INVESTMENTS
(Cost $21,052*)...................................................... 100.1% 19,139
OTHER ASSETS AND LIABILITIES (Net)........................................ (0.1)%
Receivable for Portfolio shares sold........................ 30
Dividends receivable........................................ 42
Payable for Portfolio shares redeemed....................... (2)
Dividends payable........................................... (3)
Investment advisory fee payable............................. (4)
Payable for investment securities purchased................. (44)
Shareholder servicing and distribution fees payable......... (39)
----------
TOTAL OTHER ASSETS AND LIABILITIES (Net).................................. (20)
------- ----------
NET ASSETS................................................................ 100.0% $ 19,119
======= ==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Primary A Shares
($9,980,000/1,014,764 shares outstanding)................... $ 9.83
==========
Primary B Shares
($243,000/24,752 shares outstanding)........................ $ 9.84
==========
Investor A Shares
($1,266,000/128,618 shares outstanding)..................... $ 9.84
==========
Investor B Shares
($7,384,000/751,049 shares outstanding)..................... $ 9.83
==========
Investor C Shares
($245,000/24,751 shares outstanding)........................ $ 9.91
==========
AT SEPTEMBER 30, 1998, NET ASSETS CONSIST OF:
Distributions in excess of net investment income...................... $ (14)
Accumulated net realized gain on investments sold..................... 279
Net unrealized depreciation of investments............................ (1,913)
Paid-in capital....................................................... 20,767
----------
NET ASSETS............................................................ $ 19,119
==========
</TABLE>
- ------------------
* Federal Income Tax Information: Net unrealized depreciation of investment
securities was comprised of gross appreciation of $147,000 and gross
depreciation of $2,060,000 for federal income tax purposes.
See Notes to Financial Statements. 5
<PAGE>
NATIONS FUNDS
Life Goal Growth Portfolio
- --------------------------------------------------------------------------------
Statement of Net Assets September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (000)
======================================================================================================
<S> <C> <C>
INVESTMENT COMPANY SECURITIES - 99.4%
318,561 Nations Managed Index Fund - 42.3%.................................. $ 4,963
129,751 Nations Disciplined Equity Fund - 20.2%............................. 2,359
151,312 Nations Small Company Growth Fund - 13.5%........................... 1,587
156,905 Nations Emerging Growth Fund - 13.5%................................ 1,587
97,464 Nations International Value Fund - 9.9%............................. 1,153
----------
TOTAL INVESTMENT COMPANY SECURITIES (Cost $13,807).................. 11,649
==========
TOTAL INVESTMENTS
(Cost $13,807*)..................................................... 99.4% 11,649
OTHER ASSETS AND LIABILITIES (Net)....................................... 0.6%
Receivable for Portfolio shares sold....................... 134
Payable for Portfolio shares redeemed...................... (2)
Investment advisory fee payable............................ (3)
Dividends payable.......................................... (1)
Payable for investment securities purchased................ (7)
Shareholder servicing and distribution fees payable........ (46)
----------
TOTAL OTHER ASSETS AND LIABILITIES (Net)................................. 75
------- ----------
NET ASSETS............................................................... 100.0% $ 11,724
======= ==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Primary A Shares
($1,628,000/166,031 shares outstanding)................................. $ 9.80
==========
Primary B Shares
($5,000/532 shares outstanding)......................................... $ 9.82
==========
Investor A Shares
($2,540,000/258,773 shares outstanding)................................. $ 9.82
==========
Investor B Shares
($7,196,000/733,863 shares outstanding)................................. $ 9.81
==========
Investor C Shares
($355,000/36,313 shares outstanding).................................... $ 9.79
==========
AT SEPTEMBER 30, 1998, NET ASSETS CONSIST OF:
Distribution in excess net investment income........................ $ (44)
Accumulated net realized gain on investments sold................... 173
Net unrealized depreciation of investments.......................... (2,158)
Paid-in capital..................................................... 13,753
----------
NET ASSETS.......................................................... $ 11,724
==========
</TABLE>
- -------------------
* Federal Income Tax Information: Net unrealized depreciation of investment
securities was comprised of gross appreciation of $0 and gross depreciation
of $2,158,000 for federal income tax purposes.
6 See Notes to Financial Statements.
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Statements of Operations (in 000s) (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1998
<TABLE>
<CAPTION>
LifeGoal LifeGoal
Income and Balanced LifeGoal
Growth Growth Growth
Portfolio Portfolio Portfolio
-------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................................................... $ 94 $ 250 $ 40
---------- ---------- ----------
EXPENSES:
Investment advisory fee................................................. 6 21 15
Shareholder servicing and distribution fees:
Primary B Shares................................................... -- 1 --
Investor A Shares.................................................. 1 1 2
Investor B Shares.................................................. 12 31 37
Investor C Shares.................................................. -- 1 2
---------- ---------- ----------
Total Expenses..................................................... 19 55 56
---------- ---------- ----------
NET INVESTMENT INCOME/(LOSS)............................................ 75 195 (16)
---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on investments................................. 15 70 (122)
Capital gains distributions received.................................... 30 212 391
Net change in unrealized appreciation/(depreciation) of investments..... (223) (2,194) (2,577)
---------- ---------- ----------
Net realized and unrealized loss on investments......................... (178) (1,912) (2,308)
---------- ---------- ----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $ (103) $ (1,717) $ (2,324)
========== ========== ==========
</TABLE>
See Notes to Financial Statements. 7
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (in 000s)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LifeGoal Income and Growth LifeGoal Balanced
Portfolio(a) Growth Portfolio (a) (b)
---------------------------- ----------------------------
Six Months Six Months
Ended Ended
09/30/98 Year Ended 09/30/98 Year Ended
(unaudited) 03/31/98 (unaudited) 03/31/98
------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income ................................. $ 75 $ 33 $ 195 $ 79
Net realized gain on investments ...................... 15 8 70 134
Capital gains distributions received .................. 30 25 212 122
Net change in unrealized appreciation/(depreciation)
of investments ..................................... (223) 45 (2,194) 354
--------- ------------- ------------ --------------
Net increase/(decrease) in net assets
resulting from operations .......................... (103) 111 (1,717) 689
Distributions to shareholders from net
investment income:
Primary A Shares ................................... (29) (15) (141) (24)
Primary B Shares ................................... -- -- (3) --
Investor A Shares .................................. (13) (5) (11) (10)
Investor B Shares .................................. (36) (10) (53) (31)
Investor C Shares .................................. (1) (1) (1) (14)
Distributions to shareholders in excess of net
investment income:
Primary A Shares ................................... -- (4) -- (28)
Primary B Shares ................................... -- -- -- (1)
Investor A Shares .................................. -- (1) -- (11)
Investor B Shares .................................. -- (3) -- (36)
Investor C Shares .................................. -- (1) -- (17)
Distributions to shareholders from net realized
gain on investment:
Primary A Shares ................................... (7) (3) (11) (4)
Primary B Shares ................................... -- -- (1) (1)
Investor A Shares .................................. (1) (1) (7) (17)
Investor B Shares .................................. (13) (1) (70) (17)
Investor C Shares .................................. (1) (1) (10) (28)
Net increase / (decrease) in net assets from
Portfolio share transactions ....................... 4,317 1,481 14,871 3,598
--------- ------------- ------------ --------------
Net increase in net assets ............................ 4,113 1,546 12,846 4,048
NET ASSETS
Beginning of period ................................... 1,901 355 6,273 2,225
--------- ------------- ------------ --------------
End of period ......................................... 6,014 $ 1,901 19,119 $ 6,273
========= ============= ============ ==============
Undistributed/(Distribution in excess of)
net investment income at end of period ............. $ (3) $ 1 $ (14) $ --
========= ============= ============ ==============
</TABLE>
- ---------------
(a) LifeGoal Income and Growth Portfolio, LifeGoal Balanced Growth Portfolio and
LifeGoal Growth Portfolio Investor B Shares commenced operations on
August 7, August 13, and August 12, 1997, respectively.
(b) LifeGoal Balanced Growth Portfolio and LifeGoal Growth Portfolio Primary B
Shares commenced operations on August 4, and September 19, 1997,
respectively.
8 See Notes to Financial Statements.
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (in 000s) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LifeGoal Growth
Portfolio (a) (b)
----------------------
Six Months
Ended
09/30/98 Year Ended
(unaudited) 03/31/98
----------------------
<S> <C> <C>
Net investment income/(loss) ............................................ $ (16) $ 4
Net realized gain/(loss) on investments ................................. (122) 82
Capital gain distributions received ..................................... 391 356
Net change in unrealized appreciation/(depreciation) of investments ..... (2,577) 501
-------- --------
Net increase/ (decrease) in net assets resulting from operations ........ (2,324) 943
Distributions to shareholders from net investment income:
Primary A Shares ..................................................... (19) (1)
Primary B Shares ..................................................... -- --
Investor A Shares .................................................... (8) (1)
Investor B Shares .................................................... (1) (2)
Investor C Shares .................................................... -- --
Distributions to shareholders in excess of net investment income:
Primary A Shares ..................................................... -- (18)
Primary B Shares ..................................................... -- --
Investor A Shares .................................................... -- (44)
Investor B Shares .................................................... -- (65)
Investor C Shares .................................................... -- (6)
Distributions to shareholders from net realized gain on investments:
Primary A Shares ..................................................... (46) (5)
Primary B Shares ..................................................... -- --
Investor A Shares .................................................... (54) (24)
Investor B Shares .................................................... (219) (40)
Investor C Shares .................................................... (13) (3)
Net increase/ (decrease) in net assets from Portfolio share transactions: 6,414 5,567
-------- --------
Net increase in net assets: ............................................ 3,730 6,301
NET ASSETS:
Beginning of period ..................................................... 7,994 1,693
-------- --------
End of period ........................................................... 11,724 $ 7,994
======== ========
Distributions in excess of net investment income at end of period ....... (44) $ --
======== ========
</TABLE>
- ----------------
(a) LifeGoal Income and Growth Portfolio, LifeGoal Balanced Growth Portfolio
and LifeGoal Growth Portfolio Investor B Shares commenced operations on
August 7, August 13, and August 12, 1997, respectively.
(b) LifeGoal Balanced Growth Portfolio and LifeGoal Growth Portfolio Primary B
Shares commenced operations on August 4, and September 19, 1997,
respectively.
See Notes to Financial Statements. 9
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Schedule of Capital Stock Activity (in 000's)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LifeGoal Income and Growth Portfolio
Six Months Ended
September 30, 1998 Year Ended
(unaudited) March 31, 1998 (a)
------------------ ------------------
Shares Dollars Shares Dollars
------------------------------------------
<S> <C> <C> <C> <C>
Primary A Shares:
Sold .............................. 410 $ 4,332 53 $ 543
Issued as reinvestment of dividends 3 29 1 7
Redeemed .......................... (342) (3,613) (31) (324)
----- ------- ---- -------
Net increase ...................... 71 748 23 226
----- ------- ---- -------
Investor A Shares:
Sold .............................. 119 1,271 5 55
Issued as reinvestment of dividends 1 12 1 7
Redeemed .......................... (6) (67) (7) (76)
----- ------- ---- -------
Net increase/(decrease) ........... 114 1,216 (1) (15)
----- ------- ---- -------
Investor B Shares:
Sold .............................. 244 2,591 113 1,185
Issued as reinvestment of dividends 4 42 1 13
Redeemed .......................... (26) (271) (1) (11)
----- ------- ---- -------
Net increase ...................... 222 2,362 113 1,187
----- ------- ---- -------
Investor C Shares:
Sold .............................. 2 18 12 130
Issued as reinvestment of dividends --* 2 --* 2
Redeemed .......................... (3) (29) (5) (49)
----- ------- ---- -------
Net increase/(decrease) ........... (1) (9) 8 83
----- ------- ---- -------
Total net increase ................ 406 $ 4,317 142 $ 1,481
===== ======= ==== =======
</TABLE>
- -------------------
(a) LifeGoal Income and Growth Portfolio Investor B Shares commenced operations
on August 7, 1997.
* Amount represents less than $500 or 500 shares.
10 See Notes to Financial Statements.
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Schedule of Capital Stock Activity (in 000's) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LifeGoal Balanced Growth Portfolio LifeGoal Growth Portfolio
Six Months Ended Six Months Ended
September 30, 1998 Year Ended September 30, 1998 Year Ended
(unaudited) March 31, 1998 (a) (unaudited) March 31, 1998 (a)
-------------------- ------------------- ------------------- -------------------
Shares Dollars Shares Dollars Shares Dollars Shares Dollars
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Primary A Shares:
Sold ...................................... 1,899 $ 20,601 28 $ 293 770 $ 8,364 60 $ 697
Issued as reinvestment of dividends ....... 15 152 5 51 6 70 1 13
Redeemed .................................. (908) (9,801) (236) (2,563) (574) (6,761) (130) (1,479)
------- -------- ------ ------- ------ ------- ------ -------
Net increase/(decrease) ................... 1,006 10,952 (203) (2,219) 202 1,673 (67) (768)
------- -------- ------ ------- ------ ------- ------ -------
Primary B Shares:
Sold ...................................... 22 243 2 24 -- --* -- 6
Issued as reinvestment
of dividends ........................... --* 3 --* 2 --* --* --* --*
Redeemed .................................. -- -- -- -- -- -- -- --
------- -------- ------ ------- ------ ------- ------ -------
Net increase .............................. 22 246 2 26 -- -- --* 6
------- -------- ------ ------- ------ ------- ------ -------
Investor A Shares:
Sold ...................................... 88 953 38 400 144 1,569 91 1,026
Issued as reinvestment
of dividends ........................... 2 18 3 35 5 61 6 67
Redeemed .................................. (5) (58) (6) (68) (12) (138) (42) (470)
------- -------- ------ ------- ------ ------- ------ -------
Net increase .............................. 85 913 35 367 137 1,492 55 623
------- -------- ------ ------- ------ ------- ------ -------
Investor B Shares:
Sold ...................................... 386 4,110 464 4,904 315 3,647 474 5,565
Issued as reinvestment
of dividends ........................... 11 114 8 84 17 212 9 100
Redeemed .................................. (96) (1,004) (22) (239) (65) (713) (16) (183)
------- -------- ------ ------- ------ ------- ------ -------
Net increase .............................. 301 3,220 450 4,749 267 3,146 467 5,483
------- -------- ------ ------- ------ ------- ------ -------
Investor C Shares:
Sold ...................................... 21 235 70 718 11 124 20 234
Issued as reinvestment
of dividends ........................... 1 12 6 59 1 13 1 9
Redeemed .................................. (65) (707) (10) (102) (3) (34) (2) (20)
------- -------- ------ ------- ------ ------- ------ -------
Net increase/(decrease) ................... (43) (460) 66 675 9 103 19 223
------- -------- ------ ------- ------ ------- ------ -------
Total net increase ........................ 1,371 $ 14,871 350 $ 3,598 615 $ 6,414 472 $ 5,567
======= ======== ====== ======= ====== ======= ====== =======
</TABLE>
- --------------
(a) LifeGoal Balanced Growth Portfolio and LifeGoal Growth Portfolio Primary B
Shares commenced operations on August 4, and September 19, 1997,
respectively.
* Amount represents less than $500 or 500 shares.
See Notes to Financial Statements. 11
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Operating Performance
----------------------------------------------------------
Net Increase/
(Decrease)
Net Asset Net Realized in Net Assets
Value Net and Unrealized Resulting from
Beginning Investment Gain/Loss on Investment
of Period Income/(Loss) Investments Operations
----------------------------------------------------------
<S> <C> <C> <C> <C>
LIFEGOAL INCOME AND GROWTH PORTFOLIO:
Primary A Shares:
Six Months Ended 09/30/98 (unaudited)........................ $10.70 $0.26(a) $ (0.38) $(0.12)
Year Ended 03/31/98.......................................... 9.97 0.43(a) 0.89 1.32
Period Ended 03/31/97*....................................... 10.03 0.32 (0.06) 0.26
Investor A Shares:
Six Months Ended 09/30/98 (unaudited)........................ $10.71 $0.20(a) $ (0.33) $(0.13)
Year Ended 03/31/98.......................................... 9.97 0.41(a) 0.89 1.30
Period Ended 03/31/97*....................................... 10.03 0.31 (0.06) 0.25
Investor B Shares:
Six Months Ended 09/30/98 (unaudited)........................ $10.70 $0.16(a) $ (0.33) $(0.17)
Period Ended 03/31/98*....................................... 10.51 0.19(a) 0.36 0.55
Investor C Shares:
Six Months Ended 09/30/98 (unaudited)........................ $10.70 $0.16(a) $ (0.33) $(0.17)
Year Ended 03/31/98.......................................... 9.97 0.36(a) 0.89 1.25
Period Ended 03/31/97*....................................... 10.03 0.31 (0.06) 0.25
</TABLE>
- -----------------
* LifeGoal Income and Growth Portfolio Primary A Shares, Investor A Shares
and Investor C Shares commenced investment operations on October 2, 1996.
Shares were offered to the public on October 15, 1996.
** LifeGoal Income and Growth Portfolio Investor B Shares commenced investment
operations on August 7, 1997.
+ 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.
(a) Per share amounts have been calculated using the monthly average shares
method, which more appropriately represents the per share data for the
period.
12 See Notes to Financial Statements.
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Distributions
-------------------------------------------------------
In Excess From Net Net Asset
From Net of Net Realized Value
Investment Investment Capital Total End of Total
Income Income Gains Distributions Period Return++
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIFEGOAL INCOME AND GROWTH PORTFOLIO:
Primary A Shares:
Six Months Ended 09/30/98 (unaudited) .. $(0.17) $ -- $(0.12) $(0.29) $10.29 (1.20)%
Year Ended 03/31/98 .................... (0.40) (0.12) (0.07) (0.59) 10.70 13.56
Period Ended 03/31/97* ................. (0.32) -- -- (0.32) 9.97 2.59
Investor A Shares:
Six Months Ended 09/30/98 (unaudited) .. $(0.16) $ -- $(0.12) $(0.28) $10.30 (1.29)%
Year Ended 03/31/98 .................... (0.38) (0.11) (0.07) (0.56) 10.71 13.38
Period Ended 03/31/97* ................. (0.31) -- -- (0.31) 9.97 2.54
Investor B Shares:
Six Months Ended 09/30/98 (unaudited) .. $(0.13) $ -- $(0.12) $(0.25) $10.28 (1.68)%
Period Ended 03/31/98* ................. (0.22) (0.07) (0.07) (0.36) 10.70 5.33
Investor C Shares:
Six Months Ended 09/30/98 (unaudited) .. $(0.11) $ -- $(0.12) $(0.23) $10.30 (1.68)%
Year Ended 03/31/98 .................... (0.35) (0.10) (0.07) (0.52) 10.70 12.83
Period Ended 03/31/97* ................. (0.31) -- -- (0.31) 9.97 2.54
<CAPTION>
Ratios to Average Net Assets / Supplemental Data
--------------------------------------------------------
Net Asset
End of Portfolio
Period Operating Net Investment Turnover
(in 000's) Expenses +++ Income Rate
--------------------------------------------------------
<S> <C> <C> <C> <C>
LIFEGOAL INCOME AND GROWTH PORTFOLIO:
Primary A Shares:
Six Months Ended 09/30/98 (unaudited) .. $1,191 0.25%+ 4.06%+ 99%
Year Ended 03/31/98 .................... 476 0.25 4.17 64
Period Ended 03/31/97* ................. 223 0.25+ 6.34+ 2
Investor A Shares:
Six Months Ended 09/30/98 (unaudited) .. $1,295 0.50%+ 3.81%+ 99%
Year Ended 03/31/98 .................... 126 0.50 3.92 64
Period Ended 03/31/97* ................. 131 0.50+ 6.09+ 2
Investor B Shares:
Six Months Ended 09/30/98 (unaudited) .. $3,452 1.25%+ 3.06%+ 99%
Period Ended 03/31/98* ................. 1,212 1.25+ 3.17+ 64
Investor C Shares:
Six Months Ended 09/30/98 (unaudited) .. $ 76 1.25%+ 3.06%+ 99%
Year Ended 03/31/98 .................... 87 1.09 3.33 64
Period Ended 03/31/97* ................. 1 0.75+ 5.84+ 2
</TABLE>
- -----------------
* LifeGoal Income and Growth Portfolio Primary A Shares, Investor A Shares
and Investor C Shares commenced investment operations on October 2, 1996.
Shares were offered to the public on October 15, 1996.
** LifeGoal Income and Growth Portfolio Investor B Shares commenced investment
operations on August 7, 1997.
+ 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.
(a) Per share amounts have been calculated using the monthly average shares
method, which more appropriately represents the per share data for the
period.
See Notes to Financial Statements. 13
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Operating Performance
--------------------------------------------------------
Net Increase/
(Decrease)
Net Asset Net Realized in Net Assets
Value Net and Unrealized Resulting from
Beginning Investment Gain/Loss on Investment
of Period Income/(Loss) Investments Operations
--------------------------------------------------------
<S> <C> <C> <C> <C>
LIFEGOAL BALANCED GROWTH PORTFOLIO
Primary A Shares:
Six Months Ended 09/30/98 (unaudited)................................... $10.92 $0.16(a) $(0.98) $(0.82)
Year Ended 03/31/98..................................................... 9.95 0.33(a) 1.74 2.07
Period Ended 03/31/97*.................................................. 10.05 0.19 (0.10) 0.09
Primary B Shares:
Six Months Ended 09/30/98 (unaudited)................................... $10.94 $0.12(a) $(0.97) $(0.85)
Period Ended 03/31/98*.................................................. 10.95 0.16(a) 0.77 $0.93
Investor A Shares:
Six Months Ended 09/30/98 (unaudited)................................... $10.94 $0.13(a) $(0.97) $(0.84)
Year Ended 03/31/98..................................................... 9.95 0.28(a) 1.79 2.07
Period Ended 03/31/97*.................................................. 10.05 0.19 (0.10) 0.09
Investor B Shares:
Six Months Ended 09/30/98 (unaudited)................................... $10.92 $0.09(a) $(0.95) $(0.86)
Period Ended 03/31/98**................................................. 10.88 0.11(a) 0.87 0.98
Investor C Shares:
Six Months Ended 09/30/98 (unaudited)................................... $10.92 $0.10(a) $(0.91) $(0.81)
Year Ended 03/31/98..................................................... 9.95 0.23(a) 1.78 2.01
Period Ended 03/31/97*.................................................. 10.05 0.19 (0.10) 0.09
- ---------------
</TABLE>
* LifeGoal Balanced Growth Portfolio Primary A Shares, Investor A Shares and
Investor C Shares commenced investment operations on October 2, 1996.
Shares were offered to the public on October 15, 1996.
** LifeGoal Balanced Growth Portfolio Primary B Shares and Investor B Shares
commenced investment operations on August 4, and August 13, 1997,
respectively.
+ 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.
(a) Per share amounts have been calculated using the monthly average shares
method, which more appropriately represents the per share data for the
period.
14 See Notes to Financial Statements.
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Distributions
-------------------------------------------------------
Net Asset
From Net In Excess of Net From Net Value
Investment Investment Realized Total End of Total
Income Income Capital Gains Distributions Period Return+
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIFEGOAL BALANCED GROWTH PORTFOLIO
Primary A Shares:
Six Months Ended 09/30/98 (unaudited) ..... $(0.12) $ -- $(0.15) $(0.27) $ 9.83 (7.65)%
Year Ended 03/31/98 ....................... (0.28) (0.32) (0.50) (1.10) 10.92 21.74
Period Ended 03/31/97* .................... (0.19) -- -- (0.19) 9.95 0.90
Primary B Shares:
Six Months Ended 09/30/98 (unaudited) ..... $(0.10) $ -- $(0.15) $(0.25) $ 9.84 (7.92)%
Period Ended 03/31/98* .................... (0.20) (0.24) (0.50) (0.94) $10.94 9.24
Investor A Shares:
Six Months Ended 09/30/98 (unaudited) ..... $(0.11) $ -- $(0.15) $(0.26) $ 9.84 (7.83)%
Year Ended 03/31/98 ....................... (0.27) (0.31) (0.50) (1.08) 10.94 21.76
Period Ended 03/31/97* .................... (0.19) -- -- (0.19) 9.95 0.86
Investor B Shares:
Six Months Ended 09/30/98 (unaudited) ..... $(0.08) $ -- $(0.15) $(0.23) $ 9.83 (8.05)%
Period Ended 03/31/98** ................... (0.20) (0.24) (0.50) (0.94) 10.92 9.70
Investor C Shares:
Six Months Ended 09/30/98 (unaudited) ..... $(0.05) $ -- $(0.15) $(0.20) $ 9.91 (7.51)%
Year Ended 03/31/98 ....................... (0.25) (0.29) (0.50) (1.04) 10.92 21.10
Period Ended 03/31/97* .................... (0.19) -- -- (0.19) 9.95 0.85
<CAPTION>
Ratios to Average Net Assets / Supplemental Data
---------------------------------------------------------
Net Assets
End of Portfolio
Period Operating Net Investment Turnover
(in 000's) Expenses +++ Income Rate
---------------------------------------------------------
<S> <C> <C> <C> <C>
LIFEGOAL BALANCED GROWTH PORTFOLIO
Primary A Shares:
Six Months Ended 09/30/98 (unaudited) .......... $9,980 0.25%+ 2.69%+ 109%
Year Ended 03/31/98 ............................ 103 0.25 2.87 94
Period Ended 03/31/97* ......................... 2,114 0.25+ 3.94+ 1
Primary B Shares:
Six Months Ended 09/30/98 (unaudited) .......... $ 243 0.75%+ 2.19%+ 109%
Period Ended 03/31/98* ......................... 26 0.75+ 2.37+ 94
Investor A Shares:
Six Months Ended 09/30/98 (unaudited) .......... $1,266 0.50%+ 2.44%+ 109%
Year Ended 03/31/98 ............................ 489 0.50 2.62 94%
Period Ended 03/31/97* ......................... 94 0.50+ 3.69+ 1
Investor B Shares:
Six Months Ended 09/30/98 (unaudited) .......... $7,384 1.25%+ 1.69%+ 109%
Period Ended 03/31/98** ........................ 4,917 1.25+ 1.87+ 94
Investor C Shares:
Six Months Ended 09/30/98 (unaudited) .......... $ 245 1.25%+ 1.69%+ 109%
Year Ended 03/31/98 ............................ 737 1.09 2.03 94
Period Ended 03/31/97* ......................... 18 0.75+ 3.44+ 1
</TABLE>
- --------------------------------------
* LifeGoal Balanced Growth Portfolio Primary A Shares, Investor A Shares and
Investor C Shares commenced investment operations on October 2, 1996.
Shares were offered to the public on October 15, 1996.
** LifeGoal Balanced Growth Portfolio Primary B Shares and Investor B Shares
commenced investment operations on August 4, and
August 13, 1997, respectively.
+ 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.
(a) Per share amounts have been calculated using the monthly average shares
method, which more appropriately represents the per share data for the
period.
See Notes to Financial Statements. 15
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a Share outstanding throughout each period.
<TABLE>
<CAPTION>
Operating Performance
-----------------------------------------------------------
Net Increase/
(Decrease)
Net Asset Net Realized in Net Assets
Value Net and Unrealized Resulting from
Beginning Investment Gain/Loss on Investment
of Period Income/(Loss) Investments Operations
-----------------------------------------------------------
<S> <C> <C> <C> <C>
LIFEGOAL GROWTH PORTFOLIO
Primary A Shares:
Six Months Ended 09/30/98 (unaudited) ................................ $12.49 $0.03(a) $(2.23) $(2.20)
Year Ended 03/31/98 .................................................. 10.15 0.08(a) 2.87 2.95
Period Ended 03/31/97* ............................................... 10.06 0.12 0.09 0.21
Primary B Shares:
Six Months Ended 09/30/98 (unaudited) ................................ $12.49 $0.00(a) $(2.21) $(2.21)
Period Ended 03/31/98** .............................................. 12.25 0.01(a) 0.70 0.71
Investor A Shares:
Six Months Ended 09/30/98 (unaudited) ................................ $12.50 $0.01(a) $(2.21) $(2.20)
Year Ended 03/31/98 .................................................. 10.15 0.05(a) 2.89 2.94
Period Ended 03/31/97* ............................................... 10.06 0.12 0.09 0.21
Investor B Shares:
Six Months Ended 09/30/98 (unaudited) ................................ $12.49 $(0.03)(a) $(2.21) $(2.24)
Period Ended 03/31/98** .............................................. 11.98 (0.02)(a) 0.99 0.97
Investor C Shares:
Six Months Ended 09/30/98 (unaudited) ................................ $12.46 $(0.03)(a) $(2.20) $(2.23)
Year Ended 03/31/98 .................................................. 10.15 (0.02)(a) 2.89 2.87
Period Ended 03/31/97* ............................................... 10.06 0.11 0.09 0.20
</TABLE>
- -------------------
* LifeGoal Growth Portfolio Primary A Shares, Investor A Shares and Investor
C Shares commenced investment operations on October 2, 1996. Shares were
offered to the public on October 15, 1996.
** LifeGoal Growth Portfolio Primary B Shares and Investor B Shares commenced
investment operations on September19, and August 12, 1997 respectively.
+ 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.
(a) Per share amounts have been calculated using the monthly average shares
method, which more appropriately represents the per share data for the
period.
16 See Notes to Financial Statements.
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Distributions
-------------------------------------------------------------------------------
Net Assets
From Net In Excess of Net From Net Value
Investment Investment Realized Total End of
Income Income Capital Gains Distributions Period
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIFEGOAL GROWTH PORTFOLIO
Primary A Shares:
Six Months Ended 09/30/98 (unaudited) . $(0.05) $ -- $(0.44) $(0.49) $ 9.80
Year Ended 03/31/98 ................... (0.01) (0.39) (0.21) (0.61) 12.49
Period Ended 03/31/97* ................ (0.12) -- -- (0.12) 10.15
Primary B Shares:
Six Months Ended 09/30/98 (unaudited) . $(0.02) $ -- $(0.44) $(0.46) $ 9.82
Period Ended 03/31/98** ............... (0.01) (0.25) (0.21) (0.47) 12.49
Investor A Shares:
Six Months Ended 09/30/98 (unaudited) . $(0.04) $ -- $(0.44) $(0.48) $ 9.82
Year Ended 03/31/98 ................... (0.01) (0.37) (0.21) (0.59) 12.50
Period Ended 03/31/97* ................ (0.12) -- -- (0.12) 10.15
Investor B Shares:
Six Months Ended 09/30/98 (unaudited) . $ 0.00 $ -- $(0.44) $(0.44) $ 9.81
Period Ended 03/31/98** ............... (0.01) (0.24) (0.21) (0.46) 12.49
Investor C Shares:
Six Months Ended 09/30/98 (unaudited) . $ 0.00 $ -- $(0.44) $(0.44) $ 9.79
Year Ended 03/31/98 ................... (0.01) (0.34) (0.21) (0.56) 12.46
Period Ended 03/31/97* ................ (0.11) -- -- (0.11) 10.15
<CAPTION>
Ratio's to Average Net Assets/Supplemental Data
-------------------------------------------------------------------------------
Net Assets
End of Portfolio
Total Period Operating Net Investment Turnover
Return++ (in 000's) Expenses+++ Income Rate
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIFEGOAL GROWTH PORTFOLIO
Primary A Shares:
Six Months Ended 09/30/98 (unaudited) . (18.32)% $1,628 0.25%+ 0.43%+ 132%
Year Ended 03/31/98 ................... 29.80 289 0.25 0.65 69
Period Ended 03/31/97* ................ 2.10 929 0.25+ 1.11+ 25
Primary B Shares:
Six Months Ended 09/30/98 (unaudited) . (18.36)% $ 5 0.75%+ (0.07)%+ 132%
Period Ended 03/31/98** ............... 6.24 6 0.75+ 0.15+ 69
Investor A Shares:
Six Months Ended 09/30/98 (unaudited) . (18.31)% $2,540 0.50%+ 0.18%+ 132%
Year Ended 03/31/98 ................... 29.68 1,526 0.50 0.40 69
Period Ended 03/31/97* ................ 2.05 681 0.50+ 0.86+ 25
Investor B Shares:
Six Months Ended 09/30/98 (unaudited) . (18.70)% $7,196 1.25%+ (0.57)%+ 132%
Period Ended 03/31/98** ............... 8.55 5,829 1.25+ (0.35)+ 69
Investor C Shares:
Six Months Ended 09/30/98 (unaudited) . (18.75)% $ 355 1.25%+ (0.57)%+ 132%
Year Ended 03/31/98 ................... 29.89 342 1.09 (0.19) 69
Period Ended 03/31/97* ................ 2.01 82 0.75+ 0.61+ 25
</TABLE>
- -------------------------
* LifeGoal Growth Portfolio Primary A Shares, Investor A Shares and Investor
C Shares commenced investment operations on October 2, 1996. Shares were
offered to the public on October 15, 1996.
** Life Goal Growth Portfolio Primary B Shares and Investor B Shares
commenced investment operations on September 19, and August 12, 1997
respectively.
+ 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.
(a) Per share amounts have been calculated using the monthly average shares
method, which more appropriately represents the per share data for the
period.
16 See Notes to Financial Statements.
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Nations LifeGoal Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Company offers three Portfolios: LifeGoal Income and
Growth Portfolio, LifeGoal Balanced Growth Portfolio and LifeGoal
Growth Portfolio (each, a "Portfolio" and collectively, the "Portfolios"). The
Portfolios invest in other mutual funds (the "Underlying Funds") distributed by
Stephens, Inc. ("Stephens") and advised by NationsBanc Advisors, Inc. ("NBAI").
The Portfolios offer five classes of shares: Primary A Shares, Primary B Shares,
Investor A Shares, Investor B Shares and Investor C Shares. 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 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, 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 are
reflected in the beginning net asset value reported in the Financial Highlights.
1. SIGNIFICANT ACCOUNTING POLICIES
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.
Securities Valuation: Investments in the Underlying Funds are valued at the net
asset value of each Primary A Share of the respective Underlying Fund 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 based on the
specific identification of 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
capital gains were earned, unless offset by any available capital loss
carryforward. 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.
Federal Income Tax: Each Portfolio intends to continue to qualify as a regulated
investment company by complying with the applicable requirements of the Internal
Revenue Code of 1986, as amended, and by distributing substantially all of its
earnings to its shareholders. Therefore, no provision is made for Federal income
or excise taxes.
Expenses: General expenses of the Company are allocated to the relevant
Portfolios based upon relative net assets. Operating expenses directly
attributable to a Portfolio or class of shares are charged to that Portfolio's
or class's operations. Expenses not directly attributable to the operations of
any class are prorated based on the relative net assets of each class. In
addition, the Portfolios indirectly bear their pro rata share of expenses of the
Underlying Funds.
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED
PARTY TRANSACTIONS
The Company, on behalf of its Portfolios, has entered into an investment
advisory agreement (the "Investment Advisory Agreement") with NBAI, a
wholly-owned subsidiary of NationsBank, N.A. ("NationsBank"), pursuant to which
NBAI provides investment advisory services to the Portfolios. Under this
Investment Advisory Agreement, NBAI is entitled to receive a fee 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, taxes, brokerage fees and
commissions, extraordinary expenses, and any applicable Rule 12b-1 fees,
shareholder servicing fees and/or shareholder administration fees).
The Company, on behalf of its Portfolios, has entered into a sub-advisory
agreement with NBAI and TradeStreet Investment Associates, Inc. ("TradeStreet"),
a wholly-owned subsidiary of NationsBank, pursuant to which 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 serves as administrator of the Company pursuant to an Administration
Agreement. Stephens receives no compensation for its services as administrator.
First Data Investor Services Group, Inc. ("First Data"), a wholly-owned
subsidiary of First Data Corporation, serves as co-administrator.
18
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
NationsBank of Texas, N.A. ("NationsBank of Texas") served as the custodian of
the Company's assets until it merged with NationsBank on May 6, 1998.
NationsBank began serving as custodian for the Company's assets on that date and
is providing the same services as were previously provided by NationsBank of
Texas.
First Data also serves as the transfer agent for the Portfolios' shares.
NationsBank of Texas also served as sub-transfer agent for the Portfolios'
Primary A and Primary B shares until May 6, 1998. At that time NationsBank began
serving as sub-transfer agent and is providing the same services as were
previously provided by NationsBank of Texas.
NBAI may, from time to time, voluntarily reduce its respective fees payable by
each Portfolio. For the six months ended September 30, 1998, NBAI did not waive
any fees.
Stephens also serves as distributor of the Portfolios' shares. For the six
months ended September 30, 1998, the Portfolios were informed that the
distributor received $301 in contingent deferred sales charges from shares which
were subject to such charges. A substantial portion of these fees is paid to
affiliates of NationsBank and NBAI.
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.
A significant portion of each Fund's Primary A Shares represents investments by
fiduciary accounts of which NationsBank has either sole or joint investment
discretion.
On September 30, 1998 NationsBank Corporation, the parent company of NationsBank
merged with the BankAmerica Corporation.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS
The Company has adopted a shareholder administration plan ("Administration
Plan") for Primary B shares of each Portfolio, and shareholder servicing plans
and distribution plans pursuant to Rule 12b-1 under the 1940 Act, for the
Investor A, Investor B and Investor C Shares of each Portfolio. The
Administration Plan permits the Portfolios to compensate institutions for
shareholder administration services provided to their customers that own Primary
B Shares. The shareholder servicing plans permits the Portfolios to compensate
or reimburse servicing agents for shareholder services provided by the servicing
agents. The distribution plans, adopted pursuant to Rule 12b-1 under the 1940
Act, permit the Portfolios to compensate or reimburse the distributor (and for
Investor A shares, the distributor and/or selling agents) for activities or
expenses primarily intended to result in the sale of the class's shares.
Payments are made at an annual rate, as a percentage of average daily net
assets, set from time to time by the Board of Directors and are charged as
expenses of each Portfolio directly to the applicable class. A substantial
portion of the amounts paid pursuant to these plans are paid to affiliates of
NationsBank and NBAI.
At September 30, 1998, the current rates and the plan limits in effect, as a
percentage of average daily net assets, were as follows:
Current Plan
Rate Limits
--------------------------
Primary B Administration Plan 0.50% 0.50%
Investor A Shareholder Servicing
and Distribution Plan 0.25% 0.25%
Investor B and Investor C
Distribution Plan 0.75% 0.75%
Investor B and Investor C
Shareholder Servicing Plan 0.25% 0.25%
4. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of the Underlying Funds
for the six months ended September 30, 1998 were as follows:
Purchases Sales
(000) (000)
-----------------------------
LifeGoal Income and Growth $8,705 $4,388
LifeGoal Balanced Growth $33,276 $18,242
LifeGoal Growth $21,791 $15,442
5. CAPITAL STOCK
At September 30, 1998, 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. See
Schedule of Capital Stock Activity.
6. 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 pay 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
19
<PAGE>
NATIONS FUNDS
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
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/trustees of the Underlying Funds. In addition, NBAI and TradeStreet
are wholly-owned subsidiaries of NationsBank. NationsBank of Texas was a
wholly-owned subsidiary of NationsBank during the period. 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 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.
7. SUBSEQUENT EVENT
On November 5, 1998, the Company's Board of Directors approved changes in the
Company's administration arrangements whereby NBAI and Stephens, Inc. will each
serve as co-administrators of the Company and the Bank of New York will serve as
sub-administrator under an agreement with the Company and NBAI. These changes
will become effective for the Portfolios in the first quarter of 1999.
20
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NATIONS BULK RATE
FUNDS U.S. POSTAGE
PAID
P.O. Box 32602 N READING, MA
Charlotte, NC 28234-4602 PERMIT NO.
Toll Free 1-800-982-2271 105
