<PAGE> 1
[NATIONSFUNDS LOGO]
[GRAPHIC OF TREE]
INVESTMENTS FOR A LIFETIME(SM)
LIFEGOALS
LifeGoal
Income And Growth
Portfolio
LifeGoal
Balanced Growth
Portfolio
LifeGoal
Growth
Portfolio
ANNUAL REPORT FOR THE
YEAR ENDED MARCH 31, 1999
[GRAPHIC DEPICTING FACES]
<PAGE> 2
This Report is submitted for
the general information of
shareholders of Nations Funds.
This material must be preceeded or
accompanied by a current Nations
Funds prospectus.
Nations Funds Distributor
Stephens Inc. Stephens Inc. which
is not affiliated with Bank of
America National trust and
Savings Association or
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.
[ARROW GRAPHIC]
NOT FDIC
INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
[GRAPHIC DEPICTING BASKET]
<PAGE> 3
Presidents'
Message
Dear Shareholder:
We'd like to thank you for being a part of the
Nations Funds family. Your continued trust and
confidence are greatly appreciated. Many noteworthy
events have taken place during the past year. Let's
take a look.
A ROLLER-COASTER-RIDE OF A YEAR
We know the past 12 months have proved to be quite an
unsettling time for investors. You've seen major
market indexes reach all-time highs, even after the
significant market volatility of late summer-early
fall 1998. Much of the volatility was attributed to
financial crises in Brazil and Russia, the continuing
malaise in Asia, as well as a slowdown in U.S.
corporate earnings growth. However, the Federal
Reserve Board came to the rescue in late September
with the first of three successive cuts in interest
rates. By year-end, investors were feeling confident
once again and many stocks had soared, moving the Dow
Jones Industrial Average closer to the 10,000
milestone.*
While some stock indexes had another impressive year
of double-digit performance -- the Standard & Poor's
500 Composite Stock Price Index (S&P 500)** of
large-company stocks was up 18.46% for the 12 months
ending March 31, 1999 -- focusing on these particular
indexes doesn't give you the complete picture. For
example, during the same 12-month period, the
Standard & Poor's MidCap 400 Index*** posted a gain
of only 0.43% and the Russell 2000 Index(+) of
small-company stocks actually posted negative
performance of -16.20%. There was even divergence
among the stocks in the S&P 500, with the performance
of the 25 largest stocks accounting for approximately
70% of the Index's return.
THE VALUE OF ADVICE
Diversification, along with a long-term perspective,
are among the best tools for investors to weather
changing markets and create a balanced investment
portfolio. That's where the value of professional
financial advice comes in. The role of a good
financial adviser, especially during volatile times,
is to help you make smart investment decisions that
help you pursue your long-term goals. During last
year's downturn in
* The Dow Jones Industrial Average is a
price-weighted index of 30 of the largest, most
widely held stocks traded on the New York Stock
Exchange. It is unmanaged and unavailable for
investment.
** The Standard & Poor's 500 Composite Stock Price
Index is an unmanaged index of 500 widely held common
stocks. It is unavailable for investment.
*** The Standard & Poor's MidCap 400 Index is a
market-value weighted index that measures the market
value of 400 domestic stocks chosen for market size,
liquidity and industry representation. It is
unmanaged and unavailable for investment.
+ The Russell 2000 Index is a capitalization-weighted
index that includes 2,000 of the smallest stocks
representing approximately 11% of the U.S. equity
market. It is unmanaged and unavailable for
investment.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
<PAGE> 4
Presidents'
Message continued...
the markets, many mutual fund shareholders who
invested through a financial adviser remained calm
and ignored short-term corrections.
Today, these same investors are probably glad they
did, as the markets continue their generally upward
trend. Of course, history tells us that these trends
do not continue indefinitely, and our belief is that
the best way to weather changing market conditions is
by working with a professional financial adviser.
YOUR MANAGERS OF DISTINCTION(SM)
Financial advisers are there to guide and assist you,
but it also helps to invest with a company that has
experienced fund managers who have weathered various
market cycles over time. At Nations Funds, we call
them our Managers of Distinction(SM).
In bringing you the wide range of funds we offer,
we've carefully selected a roster of specialized
investment management firms. Nations Funds Managers
of Distinction(SM) are all seasoned and
well-respected investment firms. We are pleased to
bring this talent together in one place to offer you
a variety of distinct money management styles.
And, our fund family should get even better with the
completion of our merger with Pacific Horizon
Funds -- the largest merger in mutual fund
history -- anticipated for May. Together, the new
Nations Funds family will be able to offer you an
even broader selection of mutual funds.
Of course, customer service continues to be of
tremendous importance to us and, for the second year
in a row, Nations Funds received the Key Honors award
for superior customer support from DALBAR, Inc. -- an
independent evaluator of customer service in the
mutual fund industry. Our commitment is to provide
you with the best products and services, and we will
seek to continue to do so in the coming year.
We are excited about the past year and the
opportunities ahead of us. If you have any questions
or comments on your annual report, please contact us
at 1.800.321.7854 or e-mail your comments to us via
our Web site at www.nationsbank.com/nationsfunds.
Once again, thank you for being a part of the Nations
Funds family.
Sincerely,
<TABLE>
<S> <C>
/s/ A. Max Walker /s/ Robert H. Gordon
A. Max Walker Robert H. Gordon
President and Chairman President
of the Board NationsBanc Advisors, Inc.
</TABLE>
March 31, 1999
P.S. On May 21, 1999, the Nations Funds/Pacific
Horizon Funds merger was successfully completed.
<PAGE> 5
Table
Of
Contents
<TABLE>
<S> <C>
NATIONS FUNDS SPECTRUM 2
ECONOMIC OVERVIEW 4
PORTFOLIO COMMENTARY
Nations LifeGoal Income And Growth Portfolio 6
Nations LifeGoal Balanced Growth Portfolio 10
Nations LifeGoal Growth Portfolio 14
FINANCIAL STATEMENTS
Statements of Net Assets 19
Statements of Operations 22
Statements of Changes in Net Assets 23
Schedules of Capital Stock Activity 25
Financial Highlights 28
Notes to Financial Statements 34
</TABLE>
<TABLE>
<S> <C>
---------------------------------------------------------------------------------
Nations Funds [Dalbar Logo]
Recognized For
Outstanding DALBAR, Inc., is a well-respected research firm
Customer Service that measures customer service levels and
establishes benchmarks in the financial services
In recognition of our industry.
commitment to retail
shareholders through
consistently providing
superior customer service,
Nations Funds was awarded
DALBAR Key Honors in 1997
and 1998.
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
THE
NATIONS FUNDS
FAMILY AT A GLANCE
POTENTIAL RETURN
GROWTH & INCOME
------------------
CURRENT INCOME
- ------------------------------------------------------------------------------------------------------------------------------
LIQUIDITY
- ----------------------------------------------
MONEY SHORTER INTERMEDIATE LONGER TERM LARGE
MARKET MATURITY MATURITY DOMESTIC CAPITALIZATION
FUNDS BOND FUNDS BOND FUNDS BOND FUNDS VALUE FUNDS
- ----- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
*Nations *Nations Short- *Nations *Nations *Nations
Prime Fund Intermediate Strategic Fixed Diversified Value Fund
Government Income Fund Income Fund
*Nations Government Fund *Nations
Money Market *Nations *Nations Managed
Fund *Nations Government U.S. Government Value Index
Short-Term Securities Fund Bond Fund Fund
*Nations Income Fund
Treasury Fund *Nations *Nations *Nations
*Nations Short- Intermediate Municipal Balanced Assets
*Nations Tax Term Municipal Municipal Income Fund Fund
Exempt Fund Income Fund Bond Fund
*Nations
*Nations State-Specific
State-Specific Long-Term
Intermediate Municipal Bond
Municipal Bond Funds
Funds
</TABLE>
RISK (VARIABILITY)
2
<PAGE> 7
<TABLE>
<CAPTION>
[NATIONS FUNDS LOGO]
INVESTMENTS FOR A LIFETIME(SM)
POTENTIAL RETURN
AGGRESSIVE GROWTH
-----------------------------------------------------------------------------
GROWTH
- -------------------------------------------------------------------
GROWTH & INCOME
- -------------------------------------------
LARGE
CAPITALI- LARGE MID SMALL REGION-SPECIFIC
ZATION CAPITALIZATION INTERNATIONAL CAPITALIZATION CAPITALIZATION INTERNATIONAL
FUNDS GROWTH FUNDS EQUITY FUNDS FUNDS FUNDS FUNDS
- ----- ------------ ------------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
*Nations *Nations *Nations *Nations *Nations *Nations
Marsico Growth Marsico Focused International Emerging Small Company Emerging
& Income Fund Equities Fund Value Fund Growth Fund Growth Fund Markets Fund
*Nations *Nations *Nations *Nations
Equity Disciplined International Managed
Index Fund Equity Fund Growth Fund SmallCap
Index Fund
*Nations *Nations *Nations
Managed Capital Growth International *Nations
Index Fund Fund Equity Fund Managed
SmallCap
*Nations *Nations Value Index
Equity Strategic Equity Fund
Income Fund Fund
RISK (VARIABILITY)
</TABLE>
LIFEGOAL PORTFOLIOS
*LifeGoal Income And Growth Portfolio
*LifeGoal Balanced Growth Portfolio
*LifeGoal Growth Portfolio
3
<PAGE> 8
Economic
Overview
The U.S. economy expanded strongly and the stock
market surged for the 12 months ending March 31,
1999.
Declining interest rates, confident consumers,
healthy corporate capital spending and an expanding
housing industry all helped propel the economy and
fuel a persistent rally in stocks, particularly of
large-capitalization companies. It was an
event-filled period, punctuated by abrupt changes in
investor sentiment and even some signs of a slowing
of growth in the middle of the year. Through it all,
the nation's Gross Domestic Product (the market value
of the goods and services produced) grew. In 1998,
the growth rate was an estimated 3.6%, only slightly
less than the healthy 3.9% growth rate of 1997.
Upon closer examination, the story of the 12-month
period actually was a tale of two economies -- a
strong consumer economy and a weak industrial sector.
Solid employment growth and increased real disposable
personal income translated to a high level of
consumer confidence. Industries linked closely to
consumer behavior -- including autos, housing and
retail -- were quite strong. At the same time, a
number of factors contributed to weakness on the
industrial side of the economy. The economic problems
of some of our key trading partners, combined with
the strength of the U.S. dollar, led to sluggishness
in exports. While the evidence remains mixed, the
worst of these problems for industrial industries may
be ending. The most recent view of the National
Association of Purchasing Managers, for example, is
that manufacturing conditions in the U.S. may have
bottomed.
Inflation, as measured by the Consumer Price Index,
averaged 1.5% in 1998, following a 2.3% rise in 1997.
Lower food and energy prices, combined with cheaper
import prices, contributed significantly to the tame
inflation picture. The low inflation rate came
despite a low unemployment rate of 5% or less for
most of the year. In the past, low unemployment
accompanied by growth in money supply has tended to
fuel inflation. However, that did not happen last
year, as concerns about a worldwide credit crunch,
global recession and deflation acted as a brake on
inflation. The U.S. Federal Reserve Board moved away
from its tight monetary policy stance of early 1998
and cut short-term interest rates three successive
times in the fall, easing the availability of credit
and liquidity. As we entered the second calendar
quarter of 1999, economists were debating what the
next move of the Federal Reserve Board might be.
If the economic story during the period was split
into two sections -- consumer and industrial -- the
year in the stock market
Source for all statistical data -- TradeStreet
Investment Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
4
<PAGE> 9
Economic
Overview continued...
was divided into three periods. For the first seven
months, the market steadily progressed, peaking in
July. Then, the market abruptly reversed course,
diving in August through early October as
international concerns -- starting with the
devaluation of the Russian ruble -- overwhelmed
relatively benign reports about the U.S. economy.
However, the Federal Reserve Board's actions helped
restore confidence, and the market went on to new
highs in late 1998 and early 1999.
The fiscal year also encompassed several different
periods for bond market investors. Earlier in the
year, investor uneasiness about the possibility of a
revival of inflation worried the bond market, and
interest rates tended to rise and bond prices slumped
going into the summer of 1998. That situation changed
dramatically with the Russian economic crisis of
April. Fears about a global economic slowdown drove
investor dollars toward only the highest quality
securities -- principally U.S. Treasuries, and
interest rates fell sharply. This period of investor
anxiety ended in early October, however, as the
Federal Reserve Board's intervention calmed the
markets. For the remainder of the fiscal year,
corporate and mortgage-backed securities -- with
yield spread advantages over U.S.
Treasuries -- tended to return to favor.
International economic forces continue to send mixed
signals. In early 1999, we could see scattered signs
of an economic turnaround in Southeast Asia. Japan
was beginning to reform its banking system, and
investors were waiting to see the impact of an
injection of 40 trillion yen into the banking system.
Japan suffered through its worst economic performance
in 50 years during 1998. The key to its economic
rebound will be how quickly the business community,
consumers and investors regain confidence. Worth
watching will be whether Japan's export industry can
grow. Elsewhere, the international scene provided
additional signs of progress. The International
Monetary Fund (IMF) finally received funding from the
U.S. Congress, easing investor concerns. The
devaluation of the real -- the Brazilian
currency -- seemed to be postponed, but Brazil's
government remained under pressure to carry out
needed economic reforms.
But if U.S. investors found reasons for guarded
optimism in some international developments, they
also found sources for concern. China appeared unable
to meet its ambitious growth targets and Hong Kong's
economy remained under pressure. The world continued
to watch to see whether China would feel pressure to
devalue its currency. Meanwhile, the ability of
Russia to pay its bills remained in doubt and the
Russian domestic political situation raised questions
as Foreign Minister Primakov took over day-to-day
decision-making from an ailing Boris Yeltsin.
5
<PAGE> 10
Economic
Overview continued...
Our outlook for 1999 calls for a possible slowing,
but not reversal, of the domestic economic expansion.
In light of reports of a slowdown in employment
growth, a reduction in capital spending and continued
sluggishness in international trade, we think
economic expansion may have peaked. However, we still
see room for continued growth in 1999 at lower levels
than in 1998, perhaps at a rate of between 3% and
3.5%.
Viewing the domestic stock market in early 1999, the
big question is whether the third quarter of 1998
represented a bottom for earnings and for stock
prices. Given expectations of a slowing of U.S.
economic growth and continued sluggishness in the
global economy, investors are concerned about
corporate earnings expectations for 1999. However, we
do not think the most recent stock market levels
reflected these investor concerns.
In the bond market, we see the potential of a more
stable interest rate climate over the next several
months, with the possibility of less dramatic changes
in investor sentiment than we saw over the past 12
months.
We believe the direction of the markets will depend
greatly on the economy's ability to continue to move
forward at a controlled pace.
C. Thomas Clapp
Chief Equity Investment Officer
TradeStreet Investment Associates, Inc.
March 31, 1999
6
<PAGE> 11
Nations
LifeGoal Income And Growth
Portfolio Portfolio Manager Commentary*
<TABLE>
<S> <C>
In the following interview, Mr. Clapp shares his views on
Nations LifeGoal Income And Growth Portfolio's performance
for the 12-month period ended March 31, 1999, and his
current outlook.
PORTFOLIO MANAGER PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND
C. Thomas Clapp, CFA, is a PHILOSOPHY.
Co-Portfolio Manager of Nations Nations LifeGoal Income And Growth Portfolio is the most
LifeGoal Income And Growth conservative of the three Nations LifeGoal Portfolios. We
Portfolio and Chief Equity allocate a relatively small percentage of assets to stock
Investment Officer for TradeStreet funds in order to achieve some growth potential and protect
Investment Associates, Inc., the against inflation; primarily, however, this Portfolio
investment sub-adviser to the invests in bond funds to seek to provide current income and
Portfolio. to help reduce the risks associated with a pure stock
INVESTMENT OBJECTIVE investment. By diversifying investments across various
The Portfolio seeks current income Nations Funds mutual funds, Nations LifeGoal Income And
and modest growth to protect Growth Portfolio allows investors to participate in short-
against inflation and to preserve to intermediate-term bond funds, large- and
purchasing power. small-capitalization domestic stock funds and stock funds
PERFORMANCE REVIEW that invest internationally.
For the 12-month period ended WHAT WERE THE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
March 31, 1999, Nations LifeGoal REPORTING PERIOD?
Income And Growth Portfolio During the 12 months ended March 31, 1999, investors enjoyed
Investor A Shares provided a total a nearly ideal economic environment in which to manage their
return of 6.92%.** investments. The U.S. economy grew at a manageable rate,
corporate profits slowed somewhat but were strong overall,
and inflation remained benign. Against this favorable
backdrop, most stock indices posted solid gains. Bond market
returns were also positive, thanks in part to lower
short-term interest rates and to the prospect of continued
federal budget surpluses that would significantly reduce the
government's borrowing needs.
IN BROAD TERMS, HOW DID THE VARIOUS ASSET CLASSES PERFORM
DURING THE PERIOD?
In general, these were the performance trends among the
major asset classes (types of investments):
-- Stocks outperformed bonds
-- Large-capitalization stocks performed better than small-
capitalization stocks
-- Growth stocks delivered better results than value stocks
-- Bonds had better returns than money market securities
*The outlook for this Fund may differ from that presented
for other Nations Funds mutual funds.
**The performance shown does not reflect the maximum
front-end sales charge of 5.75% that may apply to purchases
of Investor A Shares. For standardized performance, please
refer to the "Fund Performance" table.
Source for all statistical data -- Tradestreet Investment
Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
7
<PAGE> 12
Nations
LifeGoal Income And Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
CAN YOU DESCRIBE THE ASSET ALLOCATION PROCESS AND HOW THE
PORTFOLIO WAS POSITIONED AT THE BEGINNING OF THE REPORTING
PERIOD?***
We use a structured, disciplined process to determine the
appropriate asset allocation for Nations LifeGoal Income And
Growth Portfolio. By "asset allocation" we mean the
percentages of the portfolio that are invested in various
investment categories, or asset classes. In deciding how to
allocate the Portfolio's assets, we employ quantitative
models that allow us to develop expected returns and
profiles for each asset class. We also analyze the
historical relationships among asset classes -- whether, and
how much, movements in one have correlated with movements in
the others -- in varying market environments. Based on this
information, we try to allocate the Portfolio's assets as
efficiently as possible -- which means seeking the highest
return potential for a given level of risk, while staying
true to the Portfolio's investment objective.
The Portfolio began the period with a 70% exposure to
intermediate-term bonds, 20% in equities, 5% in
international equities, and 5% in cash.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO'S ASSET
ALLOCATION DURING THE REPORTING PERIOD?
We made two minor adjustments to the asset mix in the
12-month period ending March 31, 1999. At the beginning of
this period, we took advantage of modest weakness in U.S.
equities, increasing the Portfolio's allocation in them by
5% to 25% of Portfolio assets. At the same time, we reduced
the Portfolio's cash allocation from 5% to less than 1%.
This turned out to be a good move, benefiting performance as
stocks significantly outperformed cash for the remainder of
the year.
Almost one year later, in March of 1999, we decided to take
some profits from the domestic equity allocation and reduced
the Portfolio's position from 25% to 15%. This decision was
the result of our concerns over high valuations in the U.S.
equity market in the face of weak 1998 earnings and rising
interest rates. While the fundamental outlook for the U.S.
economy remains very positive, valuations by almost any
measure are at unprecedented levels. We used the proceeds to
increase the Portfolio's bond allocation by 10%, to 80%. At
present, these moves appear premature as equity markets have
continued to soar to record highs, however, our valuation
models have historically been very accurate and thus we
remain firm in our conviction. This most recent move had
only a small negative impact on performance for the year
ending March 31, 1999 due to the time of implementation.
***Portfolio characteristics are subject to change and may
not be representative of current characteristics.
</TABLE>
8
<PAGE> 13
Nations
LifeGoal Income And Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
WHICH ASSET ALLOCATION DECISIONS HELPED PORTFOLIO
PERFORMANCE?
Most of the gains recorded in the major market indices
during the period can be traced to the strong performance of
large-capitalization stocks. Therefore, our commitment to
the large-capitalization segment of the equity market
benefited the Portfolio overall. Although the Portfolio's
exposure to the equity market was relatively low, this
emphasis on large-capitalization stocks helped returns, as
those issues substantially outperformed companies with
smaller capitalizations. The Portfolio's exposure to this
segment of the equities market came through ownership of
Nations Managed Index Fund and Nations Disciplined Equity
Fund.
WHICH ASSET ALLOCATION DECISIONS HAD A NEGATIVE IMPACT ON
PORTFOLIO PERFORMANCE?
As mentioned earlier, with the continued strength of the
equity market relative to bonds, even the small reduction
that we made in the Portfolio's exposure to equities at the
end of the year served as a slight drag on returns. Further,
in hindsight we could have been more aggressive adding to
our equity exposure at the beginning of the year and holding
it to year-end. Of course, that is with the benefit of
hindsight. We still believe, however, that current valuation
levels are high, and that, in time, this decision should
benefit the Portfolio.
LOOKING AHEAD, WHAT INVESTMENT OPPORTUNITIES DO YOU
ANTICIPATE AND HOW ARE YOU POSITIONING THE PORTFOLIO TO TAKE
ADVANTAGE OF THEM?
We continue to approach the equity market warily, as
concerns about high valuations dominate our outlook;
nevertheless, our long-term view is positive. Should the
equity markets decline, we will try to take advantage of
lower prices by positioning the Portfolio more heavily in
stocks. However, Nations LifeGoal Income And Growth
Portfolio is the most conservative of the LifeGoal
Portfolios; exposure to the equity market will always be
relatively low.
</TABLE>
9
<PAGE> 14
Nations
LifeGoal Income And Growth
Portfolio Performance
GROWTH OF $10,000 INVESTMENT
[INVESTOR A SHARES AT MOP* RETURN CHART]
<TABLE>
<CAPTION>
S&P
LIFEGOAL|INCOME LEHMAN|AGGREGATE|BOND 500|COMPOSITE|STOCK
AND|GROWTH|$11,714 INDEX|$12,215 PRICE|INDEX|$18,978
------------------ --------------------- -------------------
<S> <C> <C> <C>
Oct. 15|1996 9425.00 10000.00 10000.00
'1996' 9618.00 10300.00 10542.00
9664.00 10242.00 10825.00
10137.00 10618.00 12716.00
10453.00 10971.00 13667.00
'1997' 10435.00 11293.00 14059.00
10956.00 11469.00 16020.00
11079.00 11738.00 16549.00
10815.00 12234.00 14902.00
'1998' 11491.00 12276.00 18076.00
Mar. 31|1999 11714.00 12215.00 18978.00
</TABLE>
[INVESTOR A SHARES AT NAV** RETURN CHART]
<TABLE>
<CAPTION>
S&P
LIFEGOAL|INCOME LEHMAN|AGGREGATE|BOND 500|COMPOSITE|STOCK
AND|GROWTH|$12,429 INDEX|$12,215 PRICE|INDEX|$18,978
------------------ --------------------- -------------------
<S> <C> <C> <C>
Oct. 15|1996 10000 10000 10000
'1996' 10205 10300 10542
10254 10242 10825
10755 10618 12716
11091 10971 13667
'1997' 11072 11293 14059
11625 11469 16020
11755 11738 16549
11475 12234 14902
'1998' 12192 12276 18076
Mar. 31|1999 12429 12215 18978
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
<TABLE>
<CAPTION>
Since Inception NAV** MOP*
<S> <C> <C>
(10/15/96
through
3/31/99) 9.25% 6.66%
</TABLE>
The charts to the left show
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations LifeGoal
Income And Growth Portfolio
from the inception of the
shareclass. 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. Figures for
the Standard & Poor's 500
Composite Stock Price Index,
an unmanaged index of 500
widely held common stocks,
include reinvestment of
dividends. The Indexes are
unavailable for investment.
The performance of Primary
A, Investor B and Investor C
Shares may vary based on the
differences in sales loads
and fees paid by the
shareholders investing in
each class.
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.
[CHART LEGEND]
TOTAL RETURN(AS OF 3/31/99)
<TABLE>
<CAPTION>
Investor A Investor B Investor C
Primary A NAV MOP NAV CDSC*** NAV CDSC
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Inception Date 10/15/96 10/15/96 10/15/96 8/7/97 8/7/97 10/15/96 10/15/96
- ------------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 6.98% 6.92% 0.80% 6.16% 1.16% 6.02% 5.02%
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS -- -- -- -- -- -- --
SINCE INCEPTION 9.37% 9.25% 6.66% 7.02% 4.68% 8.67% 8.67%
</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 THEIR ORIGINAL COST. Average annual returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 5.75%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
10
<PAGE> 15
Nations
LifeGoal Balanced Growth
Portfolio Portfolio Manager Commentary*
<TABLE>
<S> <C>
In the following interview, Mr. Clapp shares his views on
Nations LifeGoal Balanced Growth Portfolio's performance for
the 12-month period ended March 31, 1999, and his current
outlook.
PORTFOLIO MANAGER PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND
C. Thomas Clapp, CFA, is PHILOSOPHY.
Co-Portfolio Manager of Nations Nations LifeGoal Balanced Growth Portfolio aims to provide a
LifeGoal Balanced Growth Portfolio moderate approach to growth. The Portfolio holds stock funds
and Chief Equity Investment for their growth potential and bond funds for current income
Officer for TradeStreet Investment potential. Bond fund holdings are also intended to help
Associates, Inc., the investment reduce the risk of a portfolio comprised entirely of stocks.
sub-adviser to the Portfolio. By diversifying investments across various Nations Funds
INVESTMENT OBJECTIVE mutual funds, Nations LifeGoal Balanced Growth Portfolio
The Portfolio seeks total return gives investors the opportunity to participate in large- and
through a balanced portfolio of small-capitalization domestic stocks, diversified bond funds
equity and fixed income and international stock funds.
securities. WHAT WERE THE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
PERFORMANCE REVIEW REPORTING PERIOD?
For the 12-month period ended During the 12 months ended March 31, 1999, investors enjoyed
March 31, 1999, Nations LifeGoal a nearly ideal economic environment in which to manage their
Balanced Growth Portfolio Investor investments: the U.S. economy grew at a manageable rate,
A Shares provided a total return corporate profits slowed somewhat but were strong overall,
of 4.44%.** and inflation remained benign. Against this favorable
backdrop, most stock indices posted solid gains. Bond market
returns were also positive, thanks in part to lower
short-term interest rates and to the prospect of continued
federal budget surpluses that would significantly reduce the
government's borrowing needs.
IN BROAD TERMS, HOW DID THE VARIOUS ASSET CLASSES PERFORM
DURING THE PERIOD?
In general, these were the performance trends among the
major asset classes:
-- Stocks outperformed bonds
-- Large-capitalization stocks performed better than small-
capitalization stocks
-- Growth stocks delivered better results than value stocks
-- Bonds had better returns than money market securities
*The outlook for this Fund may differ from that presented
for other Nations Funds mutual funds.
**The performance shown does not reflect the maximum
front-end sales charge of 5.75% that may apply to purchases
of Investor A Shares. For standardized performance, please
refer to the "Fund Performance" table.
Source for all statistical data -- Tradestreet Investment
Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
11
<PAGE> 16
Nations
LifeGoal Balanced Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
HOW MUCH OF A FACTOR WAS STOCK MARKET VOLATILITY?
The stock market's strong rise was punctuated by moments of
marked volatility. The most significant drop came in
September 1998, when worried investors slashed their equity
exposure because of fears that persistent financial crises
in the Asian markets might eventually damage the U.S.
economy. But by early 1999, the final quarter of the
reporting period, stocks had stabilized and resumed their
climb to new record levels, as measured by the major
indices.
CAN YOU DESCRIBE THE ASSET ALLOCATION PROCESS AND HOW THE
PORTFOLIO WAS POSITIONED AT THE BEGINNING OF THE REPORTING
PERIOD?***
We use a structured, disciplined process to determine the
appropriate asset allocation for Nations LifeGoal Balanced
Growth Portfolio. By "asset allocation" we mean the
percentages of the portfolio that are invested in various
investment categories, or asset classes. In deciding how to
allocate Portfolio assets, we employ quantitative models
that allow us to develop expected returns and profiles for
each asset class. We also analyze the historical
relationships among asset classes -- whether, and how much,
movements in one have correlated in the past with movements
in the others -- in varying market environments. Based on
this information, we try to allocate the Portfolio's assets
as efficiently as possible -- which means seeking the
highest return potential for a given level of risk, while
staying true to the Portfolio's investment objective.
The Portfolio began the period with a 35% exposure to large-
capitalization equities, 15% in small-capitalization stocks,
10% in international equities, and 40% in intermediate-term
bonds.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO'S ASSET
ALLOCATION DURING THE REPORTING PERIOD?
We reduced the Portfolio's equity exposure late in the
second half of 1998, reflecting our concerns over high
valuation levels. At the same time, we increased the
allocation to fixed-income funds by adding to the position
in Nations Strategic Fixed Income Fund, a move that was
consistent with our cautious view toward equities. These
allocation changes did not have a material impact on
performance for the year ending March 31, 1999 due to the
time of implementation.
At present, these moves appear premature as equity markets
have continued to soar to record highs, however, our
valuation models
***Portfolio characteristics are subject to change and may
not be representative of current characteristics.
</TABLE>
12
<PAGE> 17
Nations
LifeGoal Balanced Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
have historically been very accurate and thus we remain firm
in our conviction. While the fundamental outlook for the
U.S. economy remains very positive, valuations by almost any
measure are at unprecedented levels.
We also shifted the Portfolio's exposure within equities by
moving 10% of assets into Nations Small Company Growth Fund
to take advantage of what we think are very attractive
valuations in the small-capitalization area of the market.
Again, these were done late in the year and had no impact on
the annual performance ending March 31, 1999, however, we
believe these moves will add handsomely to our performance
in the coming year. The Portfolio's exposure to
international equities remained constant throughout the
year, comprising 10% of total assets. The Portfolio's
exposure to international equities was a small drag on
performance, especially relative to the robust performance
of the U.S. equity markets.
LOOKING AHEAD, WHAT INVESTMENT OPPORTUNITIES DO YOU
ANTICIPATE AND HOW ARE YOU POSITIONING THE PORTFOLIO TO TAKE
ADVANTAGE OF THEM?
We continue to approach the equity market warily, as
concerns about high valuations dominate our outlook;
nevertheless, our long-term view is positive. Should the
equity markets decline, we will try to take advantage of
lower prices by positioning the Portfolio more heavily in
stocks. However, the Portfolio will continue to pursue its
objective through a broadly diversified mix of investment
assets.
BECAUSE SMALL COMPANIES OFTEN HAVE NARROWER MARKETS AND
LIMITED FINANCIAL RESOURCES, AND THEIR STOCKS ARE NOT AS
ACTIVELY TRADED AS LARGE COMPANY STOCKS, THEIR SHARE PRICES
WILL BE MORE VOLATILE.
INVESTING IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL
RISKS, INCLUDING FOREIGN TAXATION, CURRENCY RISKS, RISKS
ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS,
AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATED WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
</TABLE>
13
<PAGE> 18
Nations
LifeGoal Balanced Growth
Portfolio Performance
GROWTH OF $10,000 INVESTMENT
[INVESTOR A SHARES AT MOP* RETURN CHART]
<TABLE>
<CAPTION>
LIFEGOAL|BALANCED|GROWTH|$12,089 S&P
-------------------------------- LEHMAN|AGGREGATE|BOND 500|COMPOSITE|STOCK
INDEX|$12,215 PRICE|INDEX|$18,978
--------------------- -------------------
<S> <C> <C> <C>
Oct. 15|1996 9425.00 10000.00 10000.00
'1996' 9657.00 10300.00 10542.00
9506.00 10242.00 10825.00
10263.00 10618.00 12716.00
10790.00 10971.00 13667.00
'1997' 10740.00 11293.00 14059.00
11575.00 11469.00 16020.00
11719.00 11738.00 16549.00
10669.00 12234.00 14902.00
'1998' 11991.00 12276.00 18076.00
Mar. 31|1999 12089.00 12215.00 18978.00
</TABLE>
[INVESTOR A SHARES AT NAV** RETURN CHART]
<TABLE>
<CAPTION>
LIFEGOAL|BALANCED|GROWTH|$12,826 S&P
-------------------------------- LEHMAN|AGGREGATE|BOND 500|COMPOSITE|STOCK
INDEX|$12,215 PRICE|INDEX|$18,978
--------------------- -------------------
<S> <C> <C> <C>
Oct. 16|1996 10000 10000 10000
'1996' 10246 10300 10542
10086 10242 10825
10889 10618 12716
11449 10971 13667
'1997' 11395 11293 14059
12281 11469 16020
12434 11738 16549
11320 12234 14902
'1998' 12722 12276 18076
Mar. 31|1999 12826 12215 18978
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
<TABLE>
<CAPTION>
Since Inception NAV** MOP*
<S> <C> <C>
(10/15/96
through
3/31/99) 10.66% 8.04%
</TABLE>
The charts to the left show
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations LifeGoal
Balanced Growth Portfolio
from the inception of the
shareclass. 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, include reinvestment
of dividends. The Indexes
are unavailable for
investment. The performance
of Primary A, Primary B,
Investor B and Investor C
Shares may vary based on the
differences in sales loads
and fees paid by the
shareholders investing in
each class.
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.
[CHART LEGEND]
TOTAL RETURN(AS OF 3/31/99)
<TABLE>
<CAPTION>
Investor A Investor B Investor C
Primary A Primary B NAV MOP NAV CDSC*** NAV CDSC
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Inception Date 10/15/96 8/4/97 10/15/96 10/15/96 8/13/97 8/13/97 10/15/96 10/15/96
- -----------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 4.77% 4.15% 4.44% -1.59% 3.78% -1.21% 4.43% 3.43%
- -----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
SINCE INCEPTION 10.81% 10.55% 10.66% 8.04% 8.26% 5.92% 10.40% 10.40%
</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 THEIR ORIGINAL COST. Average annual returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 5.75%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
14
<PAGE> 19
Nations
LifeGoal Growth
Portfolio Portfolio Manager Commentary*
<TABLE>
<S> <C>
In the following interview, Mr. Clapp shares his views on
Nations LifeGoal Growth Portfolio's performance for the 12-
month period ended March 31, 1999, and his current outlook.
PORTFOLIO MANAGER PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND
C. Thomas Clapp, CFA, is a PHILOSOPHY.
Co-Portfolio Manager of Nations Nations LifeGoal Growth Portfolio is the most aggressive of
LifeGoal Growth Portfolio and the three Nations LifeGoal Portfolios. This Portfolio aims
Chief Equity Investment Officer to provide long-term capital appreciation for
for TradeStreet Investment growth-oriented investors with an investment time frame of
Associates, Inc., the investment at least five years who are comfortable with
sub-adviser to the Portfolio. moderate-to-high risk. By diversifying investments across
INVESTMENT OBJECTIVE various Nations Funds mutual funds, Nations LifeGoal Growth
The Portfolio seeks capital Portfolio gives investors the opportunity to participate in
appreciation through exposure to a a variety of large- and small-capitalization domestic stock
variety of equity market segments. funds, and well as stock funds that invest internationally.
PERFORMANCE REVIEW WHAT WERE THE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
For the 12-month period ended REPORTING PERIOD?
March 31, 1999, Nations LifeGoal During the 12 months ended March 31, 1999, investors enjoyed
Growth Portfolio Investor A Shares a nearly ideal economic environment in which to manage their
provided a total return of investments. The U.S. economy grew at a manageable rate,
2.87%.** corporate profits slowed somewhat but were strong overall,
and inflation remained benign. Against this favorable
backdrop, most stock indices posted solid gains. Bond market
returns were also positive, thanks in part to lower
short-term interest rates and to the prospect of continued
federal budget surpluses that would significantly reduce the
government's borrowing needs.
IN BROAD TERMS, HOW DID THE VARIOUS ASSET CLASSES PERFORM
DURING THE PERIOD?
In general, these were the performance trends among the
major asset classes:
-- Stocks outperformed bonds
-- Large-capitalization stocks performed better than small-
capitalization stocks
-- Growth stocks delivered better results than value stocks
-- Bonds had better returns than money market securities
*The outlook for this Fund may differ from that presented
for other Nations Funds mutual funds.
**The performance shown does not reflect the maximum
front-end sales charge of 5.75% that may apply to purchases
of Investor A Shares. For standardized performance, please
refer to the "Fund Performance" table.
Source for all statistical data -- Tradestreet Investment
Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
15
<PAGE> 20
Nations
LifeGoal Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
HOW MUCH OF A FACTOR WAS STOCK MARKET VOLATILITY?
The stock market's strong rise was punctuated by moments of
marked volatility. The most significant drop came in
September 1998, when worried investors slashed their equity
exposure because of fears that persistent financial crises
in the Asian markets might damage the U.S. economy. By early
1999, the final quarter of the reporting period, stocks had
stabilized and resumed their climb to new record levels, as
measured by the major indices.
CAN YOU DESCRIBE THE ASSET ALLOCATION PROCESS AND HOW THE
PORTFOLIO WAS POSITIONED AT THE BEGINNING OF THE REPORTING
PERIOD?***
We use a structured, disciplined process to determine the
appropriate asset allocation for Nations LifeGoal Growth
Portfolio. By "asset allocation" we mean the percentages of
the Portfolio that are invested in various investment
categories, or asset classes. In deciding how to allocate
Portfolio assets, we employ quantitative models that allow
us to develop expected returns and profiles for each asset
class. We also analyze the historical relationships among
asset classes -- whether, and how much, movements in one
have correlated with movements in the others -- in varying
market environments. Based on this information, we try to
allocate the Portfolio's assets as efficiently as
possible -- which means seeking to provide the highest
return potential for a given level of risk, while staying
true to the Portfolio's investment objective.
The Portfolio is designed so that a minimum of 35% and a
maximum of 75% of its assets are invested in
large-capitalization domestic stock funds. The Portfolio's
allocation to small-and mid-capitalization domestic stock
funds ranges from 20% to 35%. For added growth potential,
the Portfolio may invest between 10% and 20% of its assets
in core international stock funds.
At the beginning of the reporting period, the Portfolio's
assets were allocated 80% to domestic equity funds and 20%
to international funds. Approximately one-fourth of domestic
assets were invested in Nations Value Fund, which lagged the
overall market due to its value orientation. Another
one-fourth was allocated to Nations Disciplined Equity Fund,
which contributed strongly to performance. The balance of
domestic assets were allocated to small-capitalization
funds.
***Portfolio holdings are subject to change and may not be
representative of current holdings.
</TABLE>
16
<PAGE> 21
Nations
LifeGoal Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
WHAT THEMES DID YOU EMPHASIZE IN THE PORTFOLIO'S ASSET
ALLOCATION DURING THE REPORTING PERIOD?
We emphasized two themes in the changes that we made to the
Portfolio's asset allocation; maintaining exposure to
equities and decreasing the exposure to non-U.S. stock
markets. At the beginning of the fiscal year, we shifted 10%
of the Portfolio's assets from international equities to
large-capitalization U.S. equities. This turned out to be a
good move as the Standard & Poor's 500 Composite Stock Price
Index+ handily outperformed international markets and
small-capitalization stocks during the period. The
Portfolio's exposure to large-capitalization stocks still
allowed the Portfolio to participate indirectly in the
growth of international markets through the expansion of
their global presence. Large-capitalization stocks continued
to benefit from the dominant performance of health-care and
technology stocks, which in turn benefited the Portfolio.
WHICH ASSET ALLOCATION DECISIONS HELPED THE PORTFOLIO'S
PERFORMANCE?
The addition of Nations Managed Index Fund helped the
Portfolio's returns during the period, due to its bias
toward large-capitalization stocks. Likewise, the
Portfolio's reduction in exposure to the small-
capitalization sector also helped performance, as small
company stocks continued their multi-year lag versus the
overall market.
WHICH ASSET ALLOCATION DECISIONS HAD A NEGATIVE IMPACT ON
PORTFOLIO PERFORMANCE?
Given the weak performance of international stocks, the
Portfolio's international allocation hindered performance.
Commitments to small- and mid-capitalization stocks also
detracted from results as these segments underperformed the
large-capitalization sectors.
BECAUSE SMALL COMPANIES OFTEN HAVE NARROWER MARKETS AND
LIMITED FINANCIAL RESOURCES, AND THEIR STOCKS ARE NOT AS
ACTIVELY TRADED AS LARGE COMPANY STOCKS, THEIR SHARE PRICES
WILL BE MORE VOLATILE.
INVESTING IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL
RISKS, INCLUDING FOREIGN TAXATION, CURRENCY RISKS, RISKS
ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS,
AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATED WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
+The Standard & Poor's 500 Composite Stock Price Index is an
unmanaged index of 500 widely held common stocks. It is not
available for investment.
</TABLE>
17
<PAGE> 22
Nations
LifeGoal Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
LOOKING AHEAD, WHAT INVESTMENT OPPORTUNITIES DO YOU
ANTICIPATE AND HOW ARE YOU POSITIONING THE PORTFOLIO TO TAKE
ADVANTAGE OF THEM?
Overall, we remain optimistic about the U.S. economy -- we
see nothing on the horizon that's likely to impede the
current business expansion, although the pace of growth may
slow somewhat. Corporate profit growth should continue to
moderate, in our opinion. We maintain the view that the
equity market should offer investors the potential for
attractive long-term returns in spite of inevitable periods
of volatility.
</TABLE>
18
<PAGE> 23
Nations
LifeGoal Growth
Portfolio Performance
GROWTH OF $10,000 INVESTMENT
[INVESTOR A SHARES AT MOP* RETURN CHART]
<TABLE>
<CAPTION>
S&P 500|COMPOSITE|STOCK
LIFEGOAL|GROWTH|$12,832 PRICE|INDEX|$18,978
----------------------- -----------------------
<S> <C> <C>
Oct. 15|1996 9425.00 10000.00
'1996' 9755.00 10542.00
9609.00 10825.00
10934.00 12716.00
11757.00 13667.00
'1997' 11176.00 14059.00
12474.00 16020.00
12229.00 16549.00
10189.00 14902.00
'1998' 12589.00 18076.00
Mar. 31|1999 12832.00 18978.00
</TABLE>
[INVESTOR A SHARES AT NAV** RETURN CHART]
<TABLE>
<CAPTION>
S&P 500|COMPOSITE|STOCK
LIFEGOAL|GROWTH|$13,615 PRICE|INDEX|$18,978
----------------------- -----------------------
<S> <C> <C>
Oct. 15|1996 10000.00 10000.00
'1996' 10350.00 10542.00
10195.00 10825.00
11601.00 12716.00
12474.00 13667.00
'1997' 11858.00 14059.00
13235.00 16020.00
12975.00 16549.00
10811.00 14902.00
'1998' 13357.00 18076.00
Mar. 31|1999 13615.00 18978.00
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
<TABLE>
<CAPTION>
Since Inception NAV** MOP*
<S> <C> <C>
(10/15/96
through
3/31/99) 13.38% 10.69%
</TABLE>
The charts to the left show
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations LifeGoal
Growth Portfolio from the
inception of the shareclass.
Figures for the Standard &
Poor's 500 Composite Stock
Price Index, an unmanaged
index of 500 widely held
common stocks, include
reinvestment of dividends.
It is not available for
investment. The performance
of Primary A, Primary B,
Investor B and Investor C
Shares may vary based on the
differences in sales loads
and fees paid by the
shareholders investing in
each class.
Nations LifeGoal Growth
Portfolio's Primary A,
Primary B, Investor A and
Investor C Shares commenced
investment operations on
October 2, 1996. Shares were
offered to the public on
October 15, 1996.
[CHART LEGEND]
TOTAL RETURN(AS OF 3/31/99)
<TABLE>
<CAPTION>
Investor A Investor B Investor C
Primary A Primary B NAV MOP NAV CDSC*** NAV CDSC
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Inception Date 10/15/96 9/19/97 10/15/96 10/15/96 8/12/97 8/12/97 10/15/96 10/15/96
- -----------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 3.04% 2.58% 2.87% -3.02% 2.14% -2.72% 2.07% 1.10%
- -----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
SINCE INCEPTION 13.52% 13.24% 13.38% 10.69% 6.52% 4.15% 12.71% 12.71%
</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 THEIR ORIGINAL COST. Average annual returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 5.75%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
19
<PAGE> 24
NATIONS FUNDS
Nations LifeGoal Income And Growth Portfolio
STATEMENT OF NET ASSETS MARCH 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ----------------------------------------------------------------------------------
<C> <S> <C>
INVESTMENT COMPANY SECURITIES -- 100.3%
31,187 Nations Disciplined Equity Fund............................. $ 729
52,240 Nations International Value Fund............................ 755
75,911 Nations Managed Index Fund.................................. 1,472
900,423 Nations Short-Intermediate Government Fund.................. 3,692
831,276 Nations Short-Term Income Fund.............................. 8,137
-------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $14,713*)........................................... 100.3% 14,785
-------
OTHER ASSETS AND LIABILITIES (NET).......................... (0.3)%
Receivable for Fund shares sold.................................... 9
Dividends receivable............................................... 52
Payable for Fund shares redeemed................................... (58)
Investment advisory fee payable.................................... (6)
Shareholder servicing and distribution fees payable................ (35)
Distributions payable.............................................. (5)
-------
TOTAL OTHER ASSETS AND LIABILITIES (NET)........................... (43)
-------
NET ASSETS.................................................. 100.0% $14,742
=======
Net Assets Consist Of:
Undistributed net investment income................................ $ 32
Accumulated net realized gain on investments sold.................. 206
Net unrealized appreciation of investments......................... 72
Paid-in capital.................................................... 14,432
-------
Net Assets......................................................... $14,742
=======
Primary A Shares:
Net Asset Value, Offering and Redemption Price per Share
($8,489,429 -- 781,387 shares outstanding)......................... $10.86
-------
-------
Investor A Shares:
Net Asset Value, Offering and Redemption Price per Share
($1,346,666 -- 123,616 shares outstanding)......................... $10.89
-------
-------
Maximum Sales Charge............................................... 5.75%
Maximum Offering Price per Share................................... $11.55
Investor B Shares:
Net Asset Value and Offering Price per Share+
($4,806,192 -- 441,379 shares outstanding)......................... $10.89
-------
-------
Investor C Shares:
Net Asset Value and Offering Price per Share+
($100,141 -- 9,185 shares outstanding)............................. $10.90
-------
-------
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $109 and gross depreciation
of $49 for Federal income tax purposes. At March 31, 1999, the aggregate cost
of securities for federal income tax purposes was $14,725.
+ The redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 25
NATIONS FUNDS
Nations LifeGoal Balanced Growth Portfolio
STATEMENT OF NET ASSETS MARCH 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ----------------------------------------------------------------------------------
<C> <S> <C>
INVESTMENT COMPANY SECURITIES -- 99.9%
107,851 Nations Disciplined Equity Fund............................. $ 2,519
495,924 Nations Diversified Income Fund............................. 5,113
180,761 Nations International Value Fund............................ 2,612
196,937 Nations Managed Index Fund.................................. 3,819
225,048 Nations Small Company Growth Fund........................... 2,588
900,202 Nations Strategic Fixed Income Fund......................... 8,939
-------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $25,549*)........................................... 99.9% 25,590
-------
OTHER ASSETS AND LIABILITIES (NET).......................... 0.1%
Receivable for Fund shares sold.................................... 59
Dividends receivable............................................... 65
Payable for Fund shares redeemed................................... (1)
Investment advisory fee payable.................................... (10)
Shareholder servicing and distribution fees payable................ (78)
Distributions payable.............................................. (6)
-------
TOTAL OTHER ASSETS AND LIABILITIES (NET)........................... 29
-------
NET ASSETS.................................................. 100.0% $25,619
=======
Net Assets Consist Of:
Undistributed net investment income................................ $ 56
Accumulated net realized gain on investments sold.................. 202
Net unrealized appreciation of investments......................... 41
Paid-in capital.................................................... 25,320
-------
Net Assets......................................................... $25,619
=======
Primary A Shares:
Net Asset Value, Offering and Redemption Price per Share
($14,844,196 -- 1,374,057 shares outstanding)...................... $10.80
-------
-------
Primary B Shares:
Net Asset Value, Offering and Redemption Price per Share
($275,737 -- 25,490 shares outstanding)............................ $10.82
-------
-------
Investor A Shares:
Net Asset Value and Redemption Price per Share
($1,308,293 -- 120,900 shares outstanding)......................... $10.82
-------
-------
Maximum Sales Charge............................................... 5.75%
Maximum Offering Price per Share................................... $11.48
Investor B Shares:
Net Asset Value and Offering Price per Share+
($8,925,356 -- 824,579 shares outstanding)......................... $10.82
-------
-------
Investor C Shares:
Net Asset Value and Offering Price per Share+
($265,832 -- 24,343 shares outstanding)............................ $10.92
-------
-------
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $365 and gross depreciation
of $567 for Federal income tax purposes. At March 31, 1999, the aggregate cost
of securities for federal income tax purposes was $25,792.
+ The redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 26
NATIONS FUNDS
Nations LifeGoal Growth Portfolio
STATEMENT OF NET ASSETS MARCH 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ----------------------------------------------------------------------------------
<C> <S> <C>
INVESTMENT COMPANY SECURITIES -- 100.9%
70,833 Nations Disciplined Equity Fund............................. $ 1,655
130,087 Nations Emerging Growth Fund................................ 1,731
118,670 Nations International Value Fund............................ 1,715
301,708 Nations Managed Index Fund.................................. 5,850
147,732 Nations Small Company Growth Fund........................... 1,699
231,814 Nations Value Fund.......................................... 4,210
-------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $16,213*)........................................... 100.9% 16,860
-------
OTHER ASSETS AND LIABILITIES (NET).......................... (0.9)%
Payable for Fund shares redeemed................................... (62)
Investment advisory fee payable.................................... (7)
Shareholder servicing and distribution fees payable................ (79)
Distributions payable.............................................. (6)
-------
TOTAL OTHER ASSETS AND LIABILITIES (NET)........................... (154)
-------
NET ASSETS.................................................. 100.0% $16,706
=======
Net Assets Consist Of:
Accumulated net realized gain on investments sold.................. $ 258
Net unrealized appreciation of investments......................... 647
Paid-in capital.................................................... 15,801
-------
Net Assets......................................................... $16,706
=======
Primary A Shares:
Net Asset Value, Offering and Redemption Price per Share
($4,291,459 -- 353,313 shares outstanding)......................... $12.15
-------
-------
Primary B Shares:
Net Asset Value, Offering and Redemption Price per Share
($6,571 -- 541 shares outstanding)................................. $12.14
-------
-------
Investor A Shares:
Net Asset Value and Redemption Price per Share
($3,403,768 -- 279,931 shares outstanding)......................... $12.16
-------
-------
Maximum Sales Charge............................................... 5.75%
Maximum Offering Price per Share................................... $12.90
Investor B Shares:
Net Asset Value and Offering Price per Share+
($8,531,508 -- 703,489 shares outstanding)......................... $12.13
-------
-------
Investor C Shares:
Net Asset Value and Offering Price per Share+
($472,642 -- 39,083 shares outstanding)............................ $12.09
-------
-------
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $733 and gross depreciation
of $211 for Federal income tax purposes. At March 31, 1999, the aggregate cost
of securities for federal income tax purposes was $16,338.
+ The redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 27
NATIONS FUNDS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
LIFEGOAL LIFEGOAL
INCOME AND BALANCED LIFEGOAL
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
INVESTMENT INCOME:
Dividends................................................... $295 $ 598 $ 94
---- ----- ----
EXPENSES:
Investment advisory fee..................................... 17 49 33
Shareholder servicing and distribution fees:
Primary B Shares.......................................... -- 1 --
Investor A Shares......................................... 3 3 6
Investor B Shares......................................... 32 73 78
Investor C Shares......................................... 1 3 4
---- ----- ----
Total Expenses.......................................... 53 129 121
---- ----- ----
NET INVESTMENT INCOME/(LOSS)................................ 242 469 (27)
---- ----- ----
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on investments..................... 211 143 60
Capital gains distributions received........................ 56 504 575
Net unrealized appreciation/(depreciation) of investments
during the year........................................... 33 (240) 227
---- ----- ----
Net realized and unrealized gain/(loss) on investments...... 300 407 862
---- ----- ----
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $542 $ 876 $835
==== ===== ====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 28
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LIFEGOAL INCOME AND GROWTH LIFEGOAL BALANCED
PORTFOLIO(a) GROWTH PORTFOLIO(a)(b)
--------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
3/31/99 3/31/98 3/31/99 3/31/98
-------------------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Net investment income.............................. $ 242 $ 33 $ 469 $ 79
Net realized gain/(loss) on investments during the
year............................................. 211 8 143 134
Capital gain distributions received................ 56 25 504 122
Net change in unrealized
appreciation/(depreciation) of investments during
the year......................................... 33 45 (240) 354
------- ------ ------- ------
Net increase/(decrease) in net assets resulting
from operations.................................. 542 111 876 689
Distributions to shareholders from net investment
income:
Primary A Shares................................. (104) (15) (319) (24)
Primary B Shares................................. -- -- (5) --
Investor A Shares................................ (33) (5) (27) (10)
Investor B Shares................................ (78) (10) (116) (31)
Investor C Shares................................ (2) (1) (3) (14)
Distributions to shareholders in excess of net
investment income:
Primary A Shares................................. -- (4) (12) (28)
Primary B Shares................................. -- -- --* (1)
Investor A Shares................................ -- (1) (1) (11)
Investor B Shares................................ -- (3) (4) (36)
Investor C Shares................................ -- (1) --* (17)
Distributions to shareholders from net realized
gain on investments:
Primary A Shares................................. (17) (3) (206) (4)
Primary B Shares................................. -- -- (5) (1)
Investor A Shares................................ (12) (1) (28) (17)
Investor B Shares................................ (45) (1) (214) (17)
Investor C Shares................................ (2) (1) (14) (28)
Net increase/(decrease) in net assets from
Portfolio share transactions..................... 12,592 1,481 19,424 3,598
------- ------ ------- ------
Net increase/(decrease) in net assets.............. 12,841 1,546 19,346 4,048
NET ASSETS:
Beginning of year.................................. 1,901 355 6,273 2,225
------- ------ ------- ------
End of year........................................ $14,742 $1,901 $25,619 $6,273
======= ====== ======= ======
Undistributed/(distributions in excess of) net
investment income at end of year................. $ 32 $ 1 $ 56 $ --
======= ====== ======= ======
</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.
* Amount represents less than $500.
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE> 29
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
LIFEGOAL GROWTH
PORTFOLIO(a)(b)
--------------------------
YEAR ENDED YEAR ENDED
3/31/99 3/31/98
--------------------------
<S> <C> <C>
(IN THOUSANDS)
Net investment income....................................... $ (27) $ 4
Net realized gain/(loss) on investments during the year..... 60 82
Capital gain distributions received......................... 575 356
Net change in unrealized appreciation/(depreciation) of
investments during the year............................... 227 501
------- ------
Net increase/(decrease) in net assets resulting from
operations................................................ 835 943
Distributions to shareholders from net investment income:
Primary A Shares.......................................... -- (1)
Primary B Shares.......................................... -- --
Investor A Shares......................................... -- (1)
Investor B Shares......................................... -- (2)
Investor C Shares......................................... -- --
Distributions to shareholders in excess of net investment
income:
Primary A Shares.......................................... (29) (18)
Primary B Shares.......................................... -- --
Investor A Shares......................................... (18) (44)
Investor B Shares......................................... (10) (65)
Investor C Shares......................................... -- (6)
Distributions to shareholders from net realized gain on
investments:
Primary A Shares.......................................... (78) (5)
Primary B Shares.......................................... -- --
Investor A Shares......................................... (98) (24)
Investor B Shares......................................... (335) (40)
Investor C Shares......................................... (18) (3)
Net increase/(decrease) in net assets from Portfolio share
transactions.............................................. 8,463 5,567
------- ------
Net increase/(decrease) in net assets....................... 8,712 6,301
NET ASSETS:
Beginning of year........................................... 7,994 1,693
------- ------
End of year................................................. $16,706 $7,994
======= ======
Undistributed/(distributions in excess of) net investment
income at end of year..................................... $ -- $ --
======= ======
</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.
25
<PAGE> 30
NATIONS FUNDS
SCHEDULE OF CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
LIFEGOAL INCOME AND GROWTH PORTFOLIO
YEAR ENDED YEAR ENDED
MARCH 31, 1999 MARCH 31, 1998(a)
--------------------- ---------------------
SHARES DOLLARS SHARES DOLLARS
------------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold...................................................... 1,215 $12,984 53 $ 543
Issued as reinvestment of dividends....................... 11 114 1 7
Redeemed.................................................. (489) (5,201) (31) (324)
----- ------- --- ------
Net increase/(decrease)................................... 737 $ 7,897 23 $ 226
===== ======= === ======
INVESTOR A SHARES:
Sold...................................................... 128 $ 1,364 5 $ 54
Issued as reinvestment of dividends....................... 4 42 1 7
Redeemed.................................................. (20) (213) (7) (76)
----- ------- --- ------
Net increase/(decrease)................................... 112 $ 1,193 (1) $ (15)
===== ======= === ======
INVESTOR B SHARES:
Sold...................................................... 416 $ 4,427 113 $1,185
Issued as reinvestment of dividends....................... 10 106 1 13
Redeemed.................................................. (98) (1,042) (1) (11)
----- ------- --- ------
Net increase/(decrease)................................... 328 $ 3,491 113 $1,187
===== ======= === ======
INVESTOR C SHARES:
Sold...................................................... 4 $ 45 12 $ 130
Issued as reinvestment of dividends....................... --* 3 --* 2
Redeemed.................................................. (3) (37) (5) (49)
----- ------- --- ------
Net increase/(decrease)................................... 1 $ 11 7 $ 83
===== ======= === ======
Total net increase.......................................... 1,178 $12,592 142 $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.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 31
NATIONS FUNDS
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
LIFEGOAL BALANCED GROWTH PORTFOLIO LIFEGOAL GROWTH PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1999 1998(a) 1999 1998(b)
------------------ ------------------ ------------------ ------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold................................... 2,353 $ 25,445 28 $ 293 929 $10,881 60 $ 698
Issued as reinvestment of dividends.... 51 535 5 51 10 110 1 13
Redeemed............................... (1,039) (11,171) (236) (2,563) (609) (7,166) (130) (1,479)
------ -------- ---- ------- ---- ------- ---- -------
Net increase/(decrease)................ 1,365 $ 14,809 (203) $(2,219) 330 $ 3,825 (69) $ (768)
====== ======== ==== ======= ==== ======= ==== =======
PRIMARY B SHARES:
Sold................................... 22 $ 243 2 $ 24 -- $ -- --* $ 6
Issued as reinvestment of dividends.... 1 10 --* 2 --* --* --* --*
Redeemed............................... -- -- -- -- -- -- -- --
------ -------- ---- ------- ---- ------- ---- -------
Net increase/(decrease)................ 23 $ 253 2 $ 26 -- $ -- -- $ 6
====== ======== ==== ======= ==== ======= ==== =======
INVESTOR A SHARES:
Sold................................... 114 $ 1,232 38 $ 400 213 $ 2,362 91 $ 1,026
Issued as reinvestment of dividends.... 5 56 3 35 10 113 6 67
Redeemed............................... (43) (444) (6) (68) (65) (746) (42) (470)
------ -------- ---- ------- ---- ------- ---- -------
Net increase/(decrease)................ 76 $ 844 35 $ 367 158 $ 1,729 55 $ 623
====== ======== ==== ======= ==== ======= ==== =======
INVESTOR B SHARES:
Sold................................... 592 $ 6,244 464 $ 4,904 354 $ 4,096 474 $ 5,566
Issued as reinvestment of dividends.... 30 321 8 84 28 333 9 100
Redeemed............................... (248) (2,584) (22) (239) (146) (1,652) (16) (183)
------ -------- ---- ------- ---- ------- ---- -------
Net increase/(decrease)................ 374 $ 3,981 450 $ 4,749 236 $ 2,777 467 $ 5,483
====== ======== ==== ======= ==== ======= ==== =======
INVESTOR C SHARES:
Sold................................... 25 $ 273 70 $ 718 20 $ 226 20 $ 234
Issued as reinvestment of dividends.... 1 16 6 59 2 19 1 9
Redeemed............................... (69) (752) (10) (102) (10) (113) (2) (20)
------ -------- ---- ------- ---- ------- ---- -------
Net increase/(decrease)................ (43) $ (463) 66 $ 675 12 $ 132 19 $ 223
====== ======== ==== ======= ==== ======= ==== =======
Total net increase....................... 1,795 $ 19,424 350 $ 3,598 736 $ 8,463 472 $ 5,567
====== ======== ==== ======= ==== ======= ==== =======
</TABLE>
- ---------------
(a) LifeGoal Balanced Growth Portfolio Primary B Shares and Investor B Shares
commenced operations on August 4, 1997 and August 13, 1997, respectively.
(b) LifeGoal Growth Portfolio Primary B Shares and Investor B Shares commenced
operations on September 19, 1997 and August 12, 1997, respectively.
* Amount represents less than $500 or 500 shares.
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 32
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:
Year Ended 3/31/1999......................... $10.70 $0.35 $ 0.37 $0.72
Year Ended 3/31/1998......................... 9.97 0.43(a) 0.89 1.32
Period Ended 3/31/1997*...................... 10.03 0.32 (0.06) 0.26
INVESTOR A SHARES:
Year Ended 3/31/1999......................... $10.71 $0.36 $ 0.35 $0.71
Year Ended 3/31/1998......................... 9.97 0.41(a) 0.89 1.30
Period Ended 3/31/1997*...................... 10.03 0.31 (0.06) 0.25
INVESTOR B SHARES:
Year Ended 3/31/1999......................... $10.70 $0.28 $ 0.35 $0.63
Year Ended 3/31/1998**....................... 10.51 0.19(a) 0.36 0.55
INVESTOR C SHARES:
Year Ended 3/31/1999......................... $10.70 $0.31 $ 0.31 $0.62
Year Ended 3/31/1998......................... 9.97 0.36(a) 0.89 1.25
Period Ended 3/31/1997*...................... 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.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 33
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
DISTRIBUTIONS
- -------------------------------------------------------------
DISTRIBUTIONS
DISTRIBUTIONS IN EXCESS OF DISTRIBUTIONS NET ASSET
FROM NET NET FROM NET VALUE
INVESTMENT INVESTMENT REALIZED TOTAL END OF TOTAL
INCOME INCOME CAPITAL GAINS DISTRIBUTIONS PERIOD RETURN++
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$(0.36) -- $(0.20) $(0.56) $10.86 6.98%
(0.40) $(0.12) (0.07) (0.59) 10.70 13.56%
(0.32) -- -- (0.32) 9.97 2.59%
$(0.33) -- $(0.20) $(0.53) $10.89 6.92%
(0.38) $(0.11) (0.07) (0.56) 10.71 13.38%
(0.31) -- -- (0.31) 9.97 2.54%
$(0.24) -- $(0.20) $(0.44) $10.89 6.16%
(0.22) $(0.07) (0.07) (0.36) 10.70 5.33%
$(0.22) -- $(0.20) $(0.42) $10.90 6.02%
(0.35) $(0.10) (0.07) (0.52) 10.70 12.83%
(0.31) -- -- (0.31) 9.97 2.54%
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-------------------------------------------------------
RATIO OF RATIO OF
NET ASSETS OPERATING NET INVESTMENT
END OF EXPENSES TO INCOME TO PORTFOLIO
PERIOD AVERAGE AVERAGE TURNOVER
(000'S) NET ASSETS+++ NET ASSETS RATE
-------------------------------------------------------
<C> <C> <C> <C>
$8,489 0.25% 3.99% 107%
476 0.25% 4.17% 64%
223 0.25%+ 6.34%+ 2%
$1,347 0.50% 3.74% 107%
126 0.50% 3.92% 64%
131 0.50%+ 6.09%+ 2%
$4,806 1.25% 2.99% 107%
1,212 1.25%+ 3.17%+ 64%
$ 100 1.25% 2.99% 107%
87 1.09% 3.33% 64%
1 0.75%+ 5.84%+ 2%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 34
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 BALANCED GROWTH PORTFOLIO:
PRIMARY A SHARES:
Year Ended 3/31/1999......................... $10.92 $0.26 $ 0.23 $0.49
Year Ended 3/31/1998......................... 9.95 0.33(a) 1.74 2.07
Period Ended 3/31/1997*...................... 10.05 0.19 (0.10) 0.09
PRIMARY B SHARES:
Year Ended 3/31/1999......................... $10.94 $0.23 $ 0.20 $0.43
Year Ended 3/31/1998**....................... 10.95 0.16(a) 0.77 0.93
INVESTOR A SHARES:
Year Ended 3/31/1999......................... $10.94 $0.25 $ 0.21 $0.46
Year Ended 3/31/1998......................... 9.95 0.28(a) 1.79 2.07
Year Ended 3/31/1997*........................ 10.05 0.19 (0.10) 0.09
INVESTOR B SHARES:
Year Ended 3/31/1999......................... $10.92 $0.17 $ 0.22 $0.39
Year Ended 3/31/1998**....................... 10.88 0.11(a) 0.87 0.98
INVESTOR C SHARES:
Year Ended 3/31/1999......................... $10.92 $0.20 $ 0.26 $0.46
Year Ended 3/31/1998......................... 9.95 0.23(a) 1.78 2.01
Year Ended 3/31/1997*........................ 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.
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 35
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
DISTRIBUTIONS
- -------------------------------------------------------------
DISTRIBUTIONS
DISTRIBUTIONS IN EXCESS OF DISTRIBUTIONS NET ASSET
FROM NET NET FROM NET VALUE
INVESTMENT INVESTMENT REALIZED TOTAL END OF TOTAL
INCOME INCOME CAPITAL GAINS DISTRIBUTIONS PERIOD RETURN++
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$(0.28) -- $(0.33) $(0.61) $10.80 4.77%
(0.28) $(0.32) (0.50) (1.10) 10.92 21.74%
(0.19) -- -- (0.19) 9.95 0.90%
$(0.22) -- $(0.33) $(0.55) $10.82 4.15%
(0.20) $(0.24) (0.50) (0.94) 10.94 9.24%
$(0.25) -- $(0.33) $(0.58) $10.82 4.44%
(0.27) $(0.31) (0.50) (1.08) 10.94 21.76%
(0.19) -- -- (0.19) 9.95 0.86%
$(0.16) -- $(0.33) $(0.49) $10.82 3.78%
(0.20) $(0.24) (0.50) (0.94) 10.92 9.70%
$(0.13) -- $(0.33) $(0.46) $10.92 4.43%
(0.25) $(0.29) (0.50) (1.04) 10.92 21.10%
(0.19) -- -- (0.19) 9.95 0.85%
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-------------------------------------------------------
RATIO OF RATIO OF
NET ASSETS OPERATING NET INVESTMENT
END OF EXPENSES TO INCOME TO PORTFOLIO
PERIOD AVERAGE AVERAGE TURNOVER
(000'S) NET ASSETS+++ NET ASSETS RATE
-------------------------------------------------------
<C> <C> <C> <C>
$14,844 0.25% 2.77% 121%
103 0.25% 2.87% 94%
2,114 0.25%+ 3.94%+ 1%
$ 276 0.75% 2.27% 121%
26 0.75%+ 2.37%+ 94%
$ 1,308 0.50% 2.52% 121%
489 0.50% 2.62% 94%
94 0.50%+ 3.69%+ 1%
$ 8,925 1.25% 1.77% 121%
4,917 1.25%+ 1.87%+ 94%
$ 266 1.25% 1.77% 121%
737 1.09% 2.03% 94%
18 0.75%+ 3.44%+ 1%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 36
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:
Year Ended 3/31/1999......................... $12.49 $ 0.04 $0.31 $0.35
Year Ended 3/31/1998......................... 10.15 0.08(a) 2.87 2.95
Period Ended 3/31/1997*...................... 10.06 0.12 0.09 0.21
PRIMARY B SHARES:
Year Ended 3/31/1999......................... $12.49 $ 0.00 $0.30 $0.30
Year Ended 3/31/1998**....................... 12.25 0.01(a) 0.70 0.71
INVESTOR A SHARES:
Year Ended 3/31/1999......................... $12.50 $ 0.04 $0.30 $0.34
Year Ended 3/31/1998......................... 10.15 0.05(a) 2.89 2.94
Year Ended 3/31/1997*........................ 10.06 0.12 0.09 0.21
INVESTOR B SHARES:
Year Ended 3/31/1999......................... $12.49 $(0.06) $0.31 $0.25
Year Ended 3/31/1998**....................... 11.98 (0.02)(a) 0.99 0.97
INVESTOR C SHARES:
Year Ended 3/31/1999......................... $12.46 $(0.05) $0.30 $0.25
Year Ended 3/31/1998......................... 10.15 0.02(a) 2.89 2.87
Year Ended 3/31/1997*........................ 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 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.
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 37
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
DISTRIBUTIONS
----------------------------------------------------------------
DISTRIBUTIONS
DISTRIBUTIONS IN EXCESS OF DISTRIBUTIONS NET ASSET
FROM NET 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>
-- $(0.09) $(0.60) $(0.69) $12.15 3.04%
$(0.01) (0.39) (0.21) (0.61) 12.49 29.80%
(0.12) -- -- (0.12) 10.15 2.10%
-- $(0.05) $(0.60) $(0.65) $12.14 2.58%
$(0.01) (0.25) (0.21) (0.47) 12.49 6.24%
-- $(0.08) $(0.60) $(0.68) $12.16 2.87%
$(0.01) (0.37) (0.21) (0.59) 12.50 29.68%
(0.12) -- -- (0.12) 10.15 2.05%
-- $(0.01) $(0.60) $(0.61) $12.13 2.14%
$(0.01) (0.24) (0.21) (0.46) 12.49 8.55%
-- $(0.02) $(0.60) $(0.62) $12.09 2.07%
$(0.01) (0.34) (0.21) (0.56) 12.46 28.89%
(0.11) -- -- (0.11) 10.15 2.01%
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-------------------------------------------------------
RATIO OF RATIO OF
NET ASSETS OPERATING NET INVESTMENT
END OF EXPENSES TO INCOME PORTFOLIO
PERIOD AVERAGE TO AVERAGE TURNOVER
(000'S) NET ASSETS+++ NET ASSETS RATE
-------------------------------------------------------
<S> <C> <C> <C> <C>
$4,291 0.25% 0.46% 159%
289 0.25% 0.65% 69%
929 0.25%+ 1.11%+ 25%
$ 7 0.75% (0.04)% 159%
6 0.75%+ 0.15%+ 69%
$3,404 0.50% 0.21% 159%
1,526 0.50% 0.40% 69%
681 0.50%+ 0.86%+ 25%
$8,531 1.25% (0.54)% 159%
5,829 1.25%+ (0.35)+ 69%
$ 473 1.25% (0.54)% 159%
342 1.09% (0.19)% 69%
82 0.75%+ 0.61%+ 25%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE> 38
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS
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. Primary B Shares are
not currently offered to the Public except for the LifeGoal Balanced Growth
Portfolio and LifeGoal Growth Portfolio. 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 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.
Certain reclassifications are made to each Portfolio's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryforwards) under Federal income tax regulations. These reclassifications are
due to different book and tax accounting for short-term capital gain
distributions received and differing characterizations of distributions made by
the Portfolios.
Reclassifications for the year ended March 31, 1999 were as follows:
<TABLE>
<CAPTION>
INCREASE/
(DECREASE) INCREASE/
UNDISTRIBUTED (DECREASE)
NET ACCUMULATED
INVESTMENT NET REALIZED
INCOME GAIN/(LOSS)
(000) (000)
----------------------------
<S> <C> <C>
Income And Growth...................... $ 6 $ (6)
Balanced Growth........................ 74 (74)
Growth................................. 84 (84)
</TABLE>
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 or other expense allocation
34
<PAGE> 39
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
methodologies determined by the nature of the expense. Expenses directly
attributable to a Portfolio or class of shares are charged to such Portfolio or
class. Expenses not directly attributable to any class of shares 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 has entered into an investment advisory agreement (the "Investment
Advisory Agreement") with NBAI, a wholly-owned subsidiary of NationsBank, N.A.
("NationsBank"), which in turn is an indirect wholly-owned banking subsidiary of
Bank of America Corporation, a bank holding company organized as a Delaware
corporation, pursuant to which NBAI provides investment advisory services to the
Portfolios. Under the Investment Advisory Agreement, NBAI is entitled to receive
an advisory fee, calculated daily and payable monthly, at the annual rate of
0.25% of each Portfolio's average daily net assets and has agreed to bear any
and all fees and expenses of the Portfolios (other than the investment advisory
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 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 fee from
NBAI at the annual rate of 0.05% of each Portfolio's average daily net assets.
Stephens serves as co-administrator of the Company. On February 12, 1999, NBAI
began serving as co-administrator of the Portfolios with Stephens, and The Bank
of New York ("BNY") began serving as sub-administrator of the Company pursuant
to an agreement with NBAI. Stephens and NBAI receive no compensation for their
services as administrator. Prior to February 12, 1999, First Data Investor
Services Group, Inc. ("First Data"), a wholly-owned subsidiary of First Data
Corporation, served as co-administrator.
NationsBank serves as the custodian of the Portfolios' assets.
First Data serves as the transfer agent for the Portfolios' shares. NationsBank
of Texas also served as sub-transfer agent for the Primary A and Primary B
shares of the Portfolios until it merged with NationsBank on May 6, 1998.
NationsBank began serving as sub-transfer agent on that date 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 and/or
expenses payable by each Portfolio. For the year ended March 31, 1999 NBAI did
not waive or reimburse any fees or expenses.
Stephens serves as distributor of the Portfolios' shares. For the year ended
March 31, 1999, the Portfolios were informed that the distributor received
$610,006 in front end sales charges for sales of Investor A Shares and $9,302 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.
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 Portfolio's Primary A Shares represents
investments by fiduciary accounts of which NationsBank and its affiliates has
either sole or joint investment discretion.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS
The Company has adopted a shareholder administration plan for Primary B Shares
of each Portfolio and shareholder servicing plans and distribution plans 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
35
<PAGE> 40
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 classes' 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 expenses incurred pursuant to
these plans is paid to affiliates of NationsBank and NBAI.
At March 31, 1999, the rates in effect and plan limits, as a percentage of
average daily net assets, were as follows:
<TABLE>
<CAPTION>
CURRENT PLAN
RATE LIMITS
-----------------
<S> <C> <C>
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 Plans.... 0.75% 0.75%
Investor B and Investor C Shareholder Servicing
Plans.......................................... 0.25% 0.25%
</TABLE>
4. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of the Underlying Funds
for the year ended March 31, 1999 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
(000) (000)
--------------------
<S> <C> <C>
Income And Growth.......................... $20,515 $ 7,876
Balanced Growth............................ 43,651 24,193
Growth..................................... 29,573 21,001
</TABLE>
5. CAPITAL STOCK
At March 31, 1999, 1,200,000,000 shares of $.001 par value capital stock were
authorized for the Company. The Company's Articles of Incorporation authorize
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 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
36
<PAGE> 41
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 transaction 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.
37
<PAGE> 42
NATIONS FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND DIRECTORS OF NATIONS LIFEGOAL FUNDS, INC.
In our opinion, the accompanying statements of net assets, 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 Income And Growth Portfolio, Nations LifeGoal Balanced Growth
Portfolio and Nations LifeGoal Growth Portfolio (constituting Nations LifeGoal
Funds, Inc., hereafter referred to as the "Portfolios") at March 31, 1999, and
the results of each of their operations, the changes in each of their net assets
and the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolios' 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, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 28, 1999
38
<PAGE> 43
NATIONS FUNDS
TAX INFORMATION (UNAUDITED)
Of the distributions paid 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>
LifeGoal Growth And Income Portfolio........................ 19.15%
LifeGoal Balanced Growth Portfolio.......................... 12.20%
LifeGoal Growth Portfolio................................... 17.26%
</TABLE>
For the year ended March 31, 1999 the amount of long-term capital gain
distributed by the Portfolios was as follows:
<TABLE>
<CAPTION>
LONG TERM
CAPITAL GAIN
DISTRIBUTION
FUND DESIGNATION
- --------------------------------------------------------------------------
<S> <C>
LifeGoal Growth And Income Portfolio........................ $ 26,246
LifeGoal Balanced Growth Portfolio.......................... 168,168
LifeGoal Growth Portfolio................................... 395,716
</TABLE>
39
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40
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41
<PAGE> 46
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42
<PAGE> 47
[GRAPHIC DEPICTING BASKETS]
<PAGE> 48
[NATIONS FUNDS LOGO] BULK RATE
P.O. Box 32602 U.S. POSTAGE
Charlotte, NC 28234-4602 PAID
Toll Free 1-800-982-2271 N READING, MA
PERMIT NO.
105
AR8 IN97117 3/99
