As filed with the Securities and Exchange Commission
on November 15, 1999
Registration No. 333-09703; 811-07745
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Post-Effective Amendment No. 9 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 10 [X]
(Check appropriate box or boxes)
-------------------------------
NATIONS LIFEGOAL FUNDS, INC.
(Exact Name of Registrant as specified in Charter)
One NationsBank Plaza
33rd Floor
Charlotte, North Carolina 28255
(Address of Principal Executive Offices, including Zip Code)
-------------------------------
Registrant's Telephone Number, including Area Code: (800) 626-2275
c/o The Corporation Trust Company
32 South Street
Baltimore, Maryland 21202
(Name and Address of Agent for Service)
With copies to:
Robert M. Kurucza, Esq. Carl Frischling, Esq.
Marco E. Adelfio, Esq. Kramer, Levin, Naftalis & Frankel
Morrison & Foerster LLP 919 3rd Avenue
2000 Pennsylvania Ave., N.W. New York, New York 10022
Suite 5500
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing [ ] on (date) pursuant
pursuant to Rule 485(b), or to Rule 485(b), or
[ ] 60 days after filing [ ] on (date) pursuant
pursuant to Rule 485(a), or to Rule 485(a).
[ ] 75 days after filing [ ] on (date) pursuant to
pursuant to paragraph (a)(2) paragraph (a)(2) of rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
<PAGE>
EXPLANATORY NOTE
This Post-Effective Amendment No. 9 to the Registration Statement of
Nations LifeGoal Funds, Inc. (the "Company") is being filed to reflect certain
non-material changes.
<PAGE>
NATIONS LIFEGOAL FUNDS, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Part A
Item No. Prospectus
- -------- ----------
<S> <C> <C>
1. Front and Back Cover Pages ................................ Front and Back Cover Pages
2. Risk/Return Summary: Investments, Risks
and Performance............................................. About this Prospectus
3. Risk/Return Summary: Fee Tables.............................. About the Funds; Financial Highlights
4. Investment Objectives, Principal Investment
Strategies and Related Risks................................ About the Funds;
Other Important Information
5. Management's Discussion of Fund
Performance................................................. About the Funds
6. Management, Organization, and Capital Structure............. What's Inside; About the
Funds; How the Funds are Managed; About
your Investment
7. Shareholder Information..................................... About the Funds; About your
Investment
8. Distribution Arrangements................................... Information for Investors
9. Financial Highlights Information............................ Financial Highlights;
About the Funds
Part B
Item No.
- --------
10. Cover Page and Table of Contents............................ Cover Page and Table of Contents
11. Fund History................................................ Introduction
12. Description of the Fund and Its Investments
and Risks................................................... Additional Information on
Portfolio Investments
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
13. Management of the Funds..................................... Trustees and Officers;
Investment Advisory, Administration,
Custody, Transfer Agency, Shareholder
Servicing and Distribution Agreements
14. Control Persons and Principal
Holders of Securities....................................... Not Applicable
15. Investment Advisory and Other Services...................... Investment Advisory,
Administration, Custody, Transfer Agency,
Shareholder Servicing And Distribution
Agreements
16. Brokerage Allocation and Other Practices.................... Portfolio Transactions and
Brokerage--General Brokerage Policy
17. Capital Stock and Other
Securities.................................................. Description Of Shares;
Investment Advisory, Administration,
Custody, Transfer Custody, Transfer
Agency, Shareholder Servicing And
Distribution Agreements
18. Purchase, Redemption and Pricing
of Shares................................................... Net Asset Value -- Purchases
And Redemptions; Distributor
19. Taxation of the Fund........................................ Additional Information Concerning
Taxes
20. Underwriters................................................ Investment Advisory,
Administration Custody, Transfer Agency
Shareholder Servicing And Distribution
Agreements; Distributor
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
21. Calculation of Performance Data............................. Additional Information on
Performance
22. Financial Statements........................................ Independent Accountant and
Reports
Part C
Item No. Other Information
- -------- -----------------
Information required to be
included in Part C is set forth
under the appropriate Item, so
numbered, in Part C of this
Document
</TABLE>
<PAGE>
LIFEGOAL PORTFOLIOS
PROSPECTUS -- PRIMARY A SHARES
NOVEMBER 15, 1999
LifeGoal Portfolios
LIFEGOAL GROWTH PORTFOLIO
LIFEGOAL BALANCED GROWTH PORTFOLIO
LIFEGOAL INCOME AND GROWTH PORTFOLIO
THE SECURITIES AND
EXCHANGE COMMISSION
(SEC) HAS NOT APPROVED OR
DISAPPROVED THESE
SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
NOT FDIC
INSURED
------------------------
May Lose Value
------------------------
No Bank Guarantee
------------------------
(Logo) Nations Funds
<PAGE>
AN OVERVIEW OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
[GRAPHIC]
TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC]
YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON
PAGE 38.
YOUR INVESTMENT IN A PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N. A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE PORTFOLIOS AND THE UNDERLYING FUNDS.
This booklet, which is called a prospectus, tells you about Nations Funds
LifeGoal Portfolios. Please read it carefully because it contains information
that's designed to help you make informed investment decisions.
Unlike traditional mutual funds, which invest in individual securities, the
Portfolios invest in a mix of Nations Funds Equity, Fixed Income and Money
Market Funds using an asset allocation approach. This kind of mutual fund is
sometimes called a "fund of funds."
ABOUT ASSET ALLOCATION
Asset allocation is the process of creating a diversified portfolio by
investing in different asset classes -- for example, EQUITY SECURITIES, FIXED
INCOME SECURITIES and MONEY MARKET INSTRUMENTS -- in varying proportions.
The mix of asset classes and how much is invested in each may be the most
important factor in how a Portfolio performs and the amount of risk involved.
Each asset class, and market segments within a class, like large, mid- and
small capitalization stocks, has different return and risk characteristics,
and reacts in different ways to changes in the economy. An investment approach
that combines asset classes and market segments may help to reduce overall
Portfolio volatility.
ABOUT THE PORTFOLIOS
Each Portfolio has its own asset allocation strategy, which gives it
distinctive risk/return characteristics. The performance of each Portfolio
depends on many factors, including its allocation strategy and the performance
of the Nations Funds it invests in. In general, the more a LifeGoal Portfolio
allocates to Equity Funds, the greater the potential return and the greater
the risk of a decline in share price. The more a LifeGoal Portfolio allocates
to Fixed Income Funds, the greater the potential for price stability and the
lower the potential return. There's always a risk, however, that you'll lose
money or you may not earn as much as you expect.
LifeGoal Growth Portfolio focuses on long-term growth by normally allocating
all of its assets to a mix of Funds that invest primarily in equity
securities. Equities have the potential to provide higher returns than many
other kinds of investments, but they also tend to have the highest risk.
LifeGoal Balanced Growth Portfolio focuses on long-term growth by normally
allocating its assets to a balanced mix of Funds that invest in equity and
fixed income securities. Fixed income securities have the potential to
increase in value, because, when interest rates fall, the value of these
securities tends to rise. When interest rates rise, however, the value of
these securities tends to fall. Other things can also affect the value of
fixed income securities.
2
<PAGE>
LifeGoal Income and Growth Portfolio focuses on current income and modest
growth. It normally allocates most of its assets to Funds that invest in fixed
income securities, but may also allocate some assets to Funds that invest in
equity securities. Over time, the return on this Portfolio may be lower than
the return on the other Portfolios.
IS LIFEGOAL RIGHT FOR YOU?
When you're choosing a Portfolio to invest in, you should consider things like
your investment goals, how much risk you can accept and how long you're
planning to hold your investment.
The LifeGoal Portfolios may be suitable for you if:
o you have longer-term investment goals
o they're part of a balanced portfolio
They may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with equity and fixed income securities
o you have short-term investment goals
o you're looking for a regular stream of income
You'll find a discussion of each Portfolio's principal investments, strategies
and risks in the Portfolio descriptions that start on page 5.
FOR MORE INFORMATION
If you have any questions about the Portfolios, please call us at
1.800.765.2668 or contact your investment professional.
You'll find more information about the Portfolios in the Statement of
Additional Information (SAI). The SAI includes more detailed information about
each Portfolio's investments, policies, performance and management, among
other things. Please turn to the back cover to find out how you can get a
copy.
3
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC]
BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI) IS THE INVESTMENT ADVISER TO
EACH OF THE PORTFOLIOS. BAAI IS RESPONSIBLE FOR THE OVERALL
MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
PORTFOLIO. BAAI AND NATIONS FUNDS HAVE ENGAGED A
SUB-ADVISER -- TRADESTREET INVESTMENT ASSOCIATES, INC.
(TRADESTREET) -- WHICH IS RESPONSIBLE FOR THE DAY-TO-DAY
INVESTMENT DECISIONS FOR EACH OF THE PORTFOLIOS.
[GRAPHIC]
YOU'LL FIND MORE ABOUT
BAAI AND TRADESTREET
STARTING ON PAGE 24.
<TABLE>
<S> <C>
[GRAPHIC] About the LifeGoal Portfolios
LIFEGOAL GROWTH PORTFOLIO 5
Sub-adviser: TradeStreet
- -------------------------------------------------------
LIFEGOAL BALANCED GROWTH PORTFOLIO 9
Sub-adviser: TradeStreet
- -------------------------------------------------------
LIFEGOAL INCOME AND GROWTH PORTFOLIO 14
Sub-adviser: TradeStreet
- -------------------------------------------------------
ABOUT THE NATIONS FUNDS 19
- -------------------------------------------------------
OTHER IMPORTANT INFORMATION 22
- -------------------------------------------------------
HOW THE PORTFOLIOS ARE MANAGED 24
[GRAPHIC] About your investment
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 30
Distributions and taxes 33
- -------------------------------------------------------
FINANCIAL HIGHLIGHTS 35
- -------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 38
- -------------------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
4
<PAGE>
ABOUT THE LIFEGOAL PORTFOLIOS
- --------------------------------------------------------------------------------
[GRAPHIC]
ABOUT THE SUB-ADVISER
TRADESTREET IS THIS PORTFOLIO'S SUB-ADVISER. TIMOTHY P. BEYER AND
C. THOMAS CLAPP ARE ITS PORTFOLIO MANAGERS AND MAKE THE DAY-TO-DAY
INVESTMENT DECISIONS FOR THE PORTFOLIO.
[GRAPHIC]
YOU'LL FIND MORE ABOUT
TRADESTREET, MR. BEYER AND
MR. CLAPP ON PAGE 25.
[GRAPHIC]
ABOUT THE UNDERLYING NATIONS FUNDS
YOU'LL FIND MORE INFORMATION ABOUT THE FUNDS THE PORTFOLIO INVESTS
IN, INCLUDING THEIR OBJECTIVES AND STRATEGIES, IN ABOUT THE
NATIONS FUNDS AND IN THE SAI.
LifeGoal Growth Portfolio
[GRAPHIC] INVESTMENT OBJECTIVE
This Portfolio seeks capital appreciation through exposure to a variety
of equity market segments.
[GRAPHIC] INVESTMENT STRATEGIES
This Portfolio normally invests most of its assets in Primary A Shares
of Nations Funds Equity Funds.
The portfolio managers use asset allocation as their principal investment
approach. They:
o allocate assets among Fund categories, within the target allocations set
for the Portfolio. They base their allocations on the Portfolio's
investment objective, historical returns for each asset class and on their
outlook for the economy
o choose individual Funds within each category and the amount they will
allocate to each, looking at each Fund's historical returns, as well as
the expected performance of the mix of Funds
o review the allocations to Fund categories and individual Funds at least
monthly, and may change these allocations when they believe it's
appropriate to do so
The actual amount in each Fund or category of Funds may vary from the
allocations set by the portfolio managers, depending on how the Funds perform,
and for other reasons. The portfolio managers may use various strategies to
try to manage how much the actual amount varies, and for how long. For
example:
o if there are more assets in a Fund category than in the target allocation,
the portfolio managers may allocate money coming into the Portfolio to the
other Fund categories
o if there are fewer assets in a Fund category than in the target
allocation, they may allocate money coming into the Portfolio to that Fund
category
The Portfolio normally sells a proportionate amount of the shares it owns in
each Nations Fund to meet its redemption requests.
5
<PAGE>
[GRAPHIC]
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS PORTFOLIO STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC]
YOU'LL FIND DETAILED INFORMATION ABOUT EACH FUND'S INVESTMENT
STRATEGIES AND RISKS IN ITS PROSPECTUS, AND IN ITS SAI. PLEASE
CALL US AT 1.800.765.2668 FOR A COPY.
<TABLE>
<CAPTION>
LifeGoal Growth Portfolio Target allocation for each
can invest in: Fund category:
<S> <C>
Large-capitalization domestic equity funds 40-75%
Nations Value Fund
Nations Blue Chip Fund
Nations Strategic Equity Fund
Nations Marsico Focused Equities Fund
Small-capitalization domestic equity fund 15-35%
Nations Small Company Growth Fund
International equity funds 10-30%
Nations International Value Fund
Nations International Equity Fund
</TABLE>
The portfolio managers can substitute or add other Funds to this list
at any time, including Funds introduced after the date of this
prospectus.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
LifeGoal Growth Portfolio has the following risks:
o INVESTMENT STRATEGY RISK - The portfolio managers use an asset allocation
strategy to try to achieve the highest total return. There is a risk that
the mix of investments will not produce the returns they expect, or that
the Portfolio will fall in value. There is also the risk that the Funds
the Portfolio invests in will not produce the returns the portfolio
managers expect, or will fall in value.
o STOCK MARKET RISK - The Portfolio allocates assets to Funds that invest in
stocks. The value of the stocks a Fund holds can be affected by changes in
U.S. or foreign economies and financial markets, and the companies that
issue the stocks, among other things. Stock prices can rise or fall over
short as well as long periods. In general, stock markets tend to move in
cycles, with periods of rising prices and periods of falling prices. As of
the date of this prospectus, the stock markets, as measured by the S&P 500
and other commonly used indices, were trading at or close to record
levels. There can be no guarantee that these levels will continue.
o SMALL COMPANY RISK - The Portfolio allocates assets to Funds that may
invest in smaller companies. Stocks of smaller companies tend to have
greater price swings than stocks of larger companies because they trade
less frequently and in lower volumes. These securities may have a higher
potential for gains, but also carry more risk.
6
<PAGE>
o FOREIGN INVESTMENT RISK - The Portfolio allocates assets to Funds that
invest in FOREIGN SECURITIES. Foreign investments may be riskier than U.S.
investments because of political and economic conditions, changes in
currency exchange rates, the implementation of the Euro, foreign controls
on investment, difficulties selling some securities and lack of or limited
financial information. Withholding taxes also may apply to some foreign
investments. Funds that invest in securities of companies in emerging
markets have high growth potential, but can be more volatile than
securities in more developed markets.
o FUTURES RISK - Some Funds the Portfolio invests in may use FUTURES to help
manage LIQUIDITY or to hedge portfolio risk. There is a risk that this
could result in losses, reduce returns, increase transaction costs or
increase the Fund's volatility.
o REBALANCING POLICY - The actual amount in each Fund or category of Funds
may vary from the allocations set by the portfolio managers. This could
continue for some time.
[GRAPHIC]
MANY THINGS AFFECT A PORTFOLIO'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE PORTFOLIO'S HOLDINGS, AND
PORTFOLIO EXPENSES.
[GRAPHIC] A LOOK AT THE PORTFOLIO'S PERFORMANCE
The following bar chart and table show you how the Portfolio has
performed in the past, and can help you understand the risks of
investing in the Portfolio. A PORTFOLIO'S PAST PERFORMANCE IS NO
GUARANTEE OF HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURNS (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Portfolio's Primary
A Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
(BAR CHART APPEARS HERE. SEE TABLE BELOW FOR PLOT POINTS.)
1996 1997 1998
3.52%* 14.70% 12.74%
*Return is from inception (10-15-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF SEPTEMBER 30, 1999: 5.30%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 23.67%
Worst: 3rd quarter 1998: -16.67%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Portfolio's average annual total return for each
period, compared with the S&P 500, an unmanaged index of 500 widely
held COMMON STOCKS, weighted by market capitalization. The index is not
available for investment.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Primary A Shares 12.74% 14.10%
S&P 500 28.58% 31.43%
</TABLE>
7
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A
PORTFOLIO'S ASSETS AND FROM THE ASSETS OF THE NATIONS FUNDS THE
PORTFOLIO INVESTS IN.
[GRAPHIC]
WHAT IT COSTS TO INVEST IN THE PORTFOLIO
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Portfolio.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Primary A Shares
<S> <C>
Maximum sales charge (load) none
Maximum deferred sales charge (load) none
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from the
Portfolio's assets)
Management fees 0.25%
----
Total annual Portfolio operating expenses 0.25%
====
</TABLE>
INDIRECT EXPENSES
The Portfolio's annual operating expenses include a portion of the
annual Fund operating expenses of the Nations Funds the Portfolio
invests in. This portion is estimated to be between 1.00% and 1.17%
(expressed as a weighted average, including fee waiver and/or
reimbursement commitments that will expire in May or July 2000), and is
based on:
o the amount the Portfolio expects to invest in each Fund, based on
the target allocation
o each Fund's annualized expense ratio for the period ended March 31,
1999, adjusted as necessary to reflect current service provider fees
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE PORTFOLIO'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Portfolio with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Portfolio for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Portfolio
o your investment has a 5% return each year
o the Portfolio's operating expenses remain the same as shown in the
table above
o the Portfolio's indirect expenses remain at the average of the range
as shown above for the 1 year example, and at the weighted average
excluding fee waivers and/or reimbursements for the 3, 5 and 10 year
examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $136 $431 $747 $1,644
</TABLE>
8
<PAGE>
ABOUT THE LIFEGOAL PORTFOLIOS
- --------------------------------------------------------------------------------
[GRAPHIC]
ABOUT THE SUB-ADVISER
TRADESTREET IS THIS PORTFOLIO'S SUB-ADVISER. TIMOTHY P. BEYER AND
C. THOMAS CLAPP ARE ITS PORTFOLIO MANAGERS AND MAKE THE DAY-TO-DAY
INVESTMENT DECISIONS FOR THE PORTFOLIO.
[GRAPHIC]
YOU'LL FIND MORE ABOUT TRADESTREET, MR. BEYER AND
MR. CLAPP ON PAGE 25.
[GRAPHIC]
ABOUT THE UNDERLYING NATIONS FUNDS
YOU'LL FIND MORE INFORMATION ABOUT THE FUNDS THE PORTFOLIO INVESTS
IN, INCLUDING THEIR OBJECTIVES AND STRATEGIES, IN ABOUT THE
NATIONS FUNDS AND IN THE SAI.
LifeGoal Balanced Growth Portfolio
[GRAPHIC] INVESTMENT OBJECTIVE
This Portfolio seeks total return through a balanced portfolio of EQUITY
and FIXED INCOME SECURITIES.
[GRAPHIC] INVESTMENT STRATEGIES
This Portfolio normally invests all of its assets in Primary A Shares of
a balanced mix of Nations Funds Equity and Fixed Income Funds.
The portfolio managers use asset allocation as their principal investment
approach. They:
o allocate assets among Fund categories, within the target allocations set
for the Portfolio. They base their allocations on the Portfolio's
investment objective, historical returns for each asset class and on their
outlook for the economy
o choose individual Funds within each category and the amount they will
allocate to each, looking at each Fund's historical returns, as well as
the expected performance of the mix of Funds
o review the allocations to Fund categories and individual Funds at least
monthly, and may change these allocations when they believe it's
appropriate to do so
The actual amount in each Fund or category of Funds may vary from the
allocations set by the portfolio managers, depending on how the Funds perform,
and for other reasons. The portfolio managers may use various strategies to
try to manage how much the actual amount varies, and for how long. For
example:
o if there are more assets in a Fund category than in the target allocation,
the portfolio managers may allocate money coming into the Portfolio to the
other Fund categories
o if there are fewer assets in a Fund category than in the target
allocation, they may allocate money coming into the Portfolio to that Fund
category
The Portfolio normally sells a proportionate amount of the shares it owns in
each Nations Fund to meet its redemption requests.
9
<PAGE>
[GRAPHIC]
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS PORTFOLIO STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC]
YOU'LL FIND DETAILED INFORMATION ABOUT EACH FUND'S INVESTMENT
STRATEGIES AND RISKS IN ITS PROSPECTUS, AND IN ITS SAI. PLEASE
CALL US AT 1.800.765.2668 FOR A COPY.
<TABLE>
<CAPTION>
LifeGoal Balanced Growth Target allocation for each
Portfolio can invest in: Fund category:
<S> <C>
Large-capitalization domestic equity funds 20-40%
Nations Value Fund
Nations Blue Chip Fund
Nations Strategic Equity Fund
Nations Marsico Focused Equities Fund
Small-capitalization domestic equity fund 10-20%
Nations Small Company Growth Fund
International equity funds 5-15%
Nations International Value Fund
Nations International Equity Fund
Bond funds 40-60%
Nations Strategic Fixed Income Fund
Nations Diversified Income Fund
</TABLE>
The portfolio managers can substitute or add other Funds to this list
at any time, including Funds introduced after the date of this
prospectus.
[GRAPHIC]
RISKS AND OTHER THINGS TO CONSIDER
LifeGoal Balanced Growth Portfolio has the following risks:
o INVESTMENT STRATEGY RISK - The portfolio managers use an asset
allocation strategy to try to achieve the highest total return.
There is a risk that the mix of investments will not produce the
returns they expect, or that the Portfolio will fall in value. There
is also the risk that the Funds the Portfolio invests in will not
produce the returns the portfolio managers expect, or will fall in
value.
o STOCK MARKET RISK - The Portfolio allocates assets to Funds that
invest in stocks. The value of the stocks a Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o SMALL COMPANY RISK - The Portfolio allocates assets to Funds that
may invest in smaller companies. Stocks of smaller companies tend to
have greater price swings than stocks of larger companies because
they trade less frequently and in lower volumes. These securities
may have a higher potential for gains, but also carry more risk.
10
<PAGE>
o FOREIGN INVESTMENT RISK - The Portfolio allocates assets to Funds
that invest in FOREIGN SECURITIES. Foreign investments may be
riskier than U.S. investments because of political and economic
conditions, changes in currency exchange rates, the implementation
of the Euro, foreign controls on investment, difficulties selling
some securities and lack of or limited financial information.
Withholding taxes may also apply to some foreign investments. Funds
that invest in securities of companies in emerging markets have high
growth potential, but can be more volatile than securities in more
developed markets.
o FUTURES RISK - Some Funds the Portfolio invests in may use FUTURES
to help manage LIQUIDITY or to hedge portfolio risk. There is a risk
that this could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o INTEREST RATE RISK - The Portfolio allocates assets to Funds that
may invest in fixed income securities. The prices of fixed income
securities will tend to fall when interest rates rise. In general,
fixed income securities with longer terms tend to fall more in value
when interest rates rise than fixed income securities with shorter
terms.
o CREDIT RISK - A Fund that invests in fixed income securities could
lose money if the issuer of a fixed income security is unable to pay
interest or repay principal when it's due. Credit risk usually
applies to most fixed income securities, but generally is not a
factor for U.S. GOVERNMENT OBLIGATIONS. Fixed income securities with
the lowest INVESTMENT GRADE rating or that aren't investment grade
are more speculative in nature than securities with higher ratings,
and they tend to be more sensitive to credit risk, particularly
during a downturn in the economy.
o REBALANCING POLICY - The actual amount in each Fund or category of
Funds may vary from the allocations set by the portfolio managers.
This could continue for some time.
[GRAPHIC]
MANY THINGS AFFECT A PORTFOLIO'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE PORTFOLIO'S HOLDINGS, AND
PORTFOLIO EXPENSES.
[GRAPHIC] A LOOK AT THE PORTFOLIO'S PERFORMANCE
The following bar chart and table show you how the Portfolio has
performed in the past, and can help you understand the risks of
investing in the Portfolio. A PORTFOLIO'S PAST PERFORMANCE IS NO
GUARANTEE OF HOW IT WILL PERFORM IN THE FUTURE.
11
<PAGE>
YEAR BY YEAR TOTAL RETURNS (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Portfolio's Primary
A Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[GRAPHIC]
(BAR CHART APPEARS HERE. SEE TABLE BELOW FOR PLOT POINTS.)
1996 1997 1998
2.47%* 11.42% 11.76%
*Return is from inception (10-15-96) to 12-31-96
YEAR-TO-DATE RETURN AS OF SEPTEMBER 30, 1999: 3.12%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 12.48%
Worst: 3rd quarter 1998: -8.92%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Portfolio's average annual total return for each
period, compared with the S&P 500 and the LEHMAN AGGREGATE BOND INDEX.
The S&P 500 is an unmanaged index of 500 widely held COMMON STOCKS,
weighted by market capitalization. The Lehman Aggregate Bond Index is
an index of fixed income securities issued by the U.S. government and
its agencies, and by corporations. These indexes are not available for
investment.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Primary A Shares 11.76% 11.66%
S&P 500 28.58% 31.43%
Lehman Aggregate Bond Index 8.69% 8.82%
</TABLE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A
PORTFOLIO'S ASSETS AND FROM THE ASSETS OF THE NATIONS FUNDS THE
PORTFOLIO INVESTS IN.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE PORTFOLIO
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Portfolio.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Primary A Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from the Portfolio's assets)
Management fees 0.25%
----
Total annual Portfolio operating expenses 0.25%
====
</TABLE>
12
<PAGE>
INDIRECT EXPENSES
The Portfolio's annual operating expenses include a portion of the
annual Fund operating expenses of the Nations Funds the Portfolio
invests in. This portion is estimated to be between 0.80% and 1.04%
(expressed as a weighted average, including fee waiver and/or
reimbursement commitments that will expire in May or July 2000), and is
based on:
o the amount the Portfolio expects to invest in each Fund, based on
the target allocation
o each Fund's annualized expense ratio for the period ended March 31,
1999, adjusted as necessary to reflect current service provider fees
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE PORTFOLIO'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Portfolio with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Portfolio for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Portfolio
o your investment has a 5% return each year
o the Portfolio's operating expenses remain the same as shown in the
table above
o the Portfolio's indirect expenses remain at the average of the range
as shown above for the 1 year example, and at the weighted average
excluding fee waivers and/or reimbursements for the 3, 5 and 10 year
examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $119 $378 $657 $1,452
</TABLE>
13
<PAGE>
ABOUT THE LIFEGOAL PORTFOLIOS
- --------------------------------------------------------------------------------
[GRAPHIC]
ABOUT THE SUB-ADVISER
TRADESTREET IS THIS PORTFOLIO'S SUB-ADVISER. TIMOTHY P. BEYER AND
C. THOMAS CLAPP ARE ITS PORTFOLIO MANAGERS AND MAKE ITS DAY-TO-DAY
INVESTMENT DECISIONS FOR THE PORTFOLIO.
[GRAPHIC]
YOU'LL FIND MORE ABOUT TRADESTREET, MR. BEYER AND
MR. CLAPP ON PAGE 25.
[GRAPHIC]
ABOUT THE UNDERLYING NATIONS FUNDS
YOU'LL FIND MORE INFORMATION ABOUT THE FUNDS THE PORTFOLIO INVESTS
IN, INCLUDING THEIR OBJECTIVES AND STRATEGIES, IN ABOUT THE
NATIONS FUNDS AND IN THE SAI.
LifeGoal Income and Growth Portfolio
[GRAPHIC] INVESTMENT OBJECTIVE
This Portfolio seeks current income and modest growth to protect
against inflation and to preserve purchasing power.
[GRAPHIC] INVESTMENT STRATEGIES
This Portfolio normally invests most of its assets in Primary A Shares
of Nations Funds Fixed Income Funds, but may also invest in Nations
Funds Equity Funds, and Nations Funds Money Market Funds.
The portfolio managers use asset allocation as their principal investment
approach. They:
o allocate assets among Fund categories, within the target allocations
set for the Portfolio. They base their allocations on the
Portfolio's investment objective, historical returns for each asset
class and on their outlook for the economy
o choose individual Funds within each category and the amount they
will allocate to each, looking at each Fund's historical returns, as
well as the expected performance of the mix of Funds
o review the allocations to Fund categories and individual Funds at
least monthly, and may change these allocations when they believe
it's appropriate to do so
The actual amount in each Fund or category of Funds may vary from the
allocations set by the portfolio managers, depending on how the Funds perform,
and for other reasons. The portfolio managers may use various strategies to
try to manage how much the actual amount varies, and for how long. For
example:
o if there are more assets in a Fund category than in the target
allocation, the portfolio managers may allocate money coming into
the Portfolio to the other Fund categories
o if there are fewer assets in a Fund category than in the target
allocation, they may allocate money coming into the Portfolio to
that Fund category
The Portfolio normally sells a proportionate amount of the shares it owns in
each Nations Fund to meet its redemption requests.
14
<PAGE>
[GRAPHIC]
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS PORTFOLIO STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC]
YOU'LL FIND DETAILED INFORMATION ABOUT EACH FUND'S INVESTMENT
STRATEGIES AND RISKS IN ITS PROSPECTUS, AND IN ITS SAI. PLEASE
CALL US AT 1.800.765.2668 FOR A COPY.
<TABLE>
<CAPTION>
LifeGoal Income and Growth Target allocation for each
can invest in: Fund category:
<S> <C>
Large-capitalization domestic equity funds 10-30%
Nations Value Fund
Nations Blue Chip Fund
Nations Strategic Equity Fund
Nations Marsico Focused Equities Fund
Small-capitalization domestic equity fund 0-10%
Nations Small Company Growth Fund
International equity funds 0-10%
Nations International Value Fund
Nations International Equity Fund
Bond funds 50-90%
Nations Short-Term Income Fund
Nations Strategic Fixed Income Fund
Nations Diversified Income Fund
Money market fund 0-20%
Nations Prime Fund
</TABLE>
LifeGoal Income and Growth's target allocation for total investments in
equity funds is 30%. The portfolio managers can substitute or add other
Funds to this list at any time, including Funds introduced after the
date of this prospectus.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
LifeGoal Income and Growth Portfolio has the following risks:
o INVESTMENT STRATEGY RISK - The portfolio managers use an asset
allocation strategy to try to achieve the highest total return.
There is a risk that the mix of investments will not produce the
returns they expect, or that the Portfolio will fall in value. There
is also the risk that the Funds the Portfolio invests in will not
produce the returns the portfolio managers expect, or will fall in
value.
o STOCK MARKET RISK - The Portfolio allocates assets to Funds that
invest in stocks. The value of the stocks a Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o SMALL COMPANY RISK - The Portfolio allocates assets to Funds that
may invest in smaller companies. Stocks of smaller companies tend to
have greater price swings than stocks of larger companies because
they trade less frequently and in lower volumes. These securities
may have a higher potential for gains, but also carry more risk.
15
<PAGE>
o FOREIGN INVESTMENT RISK - The Portfolio allocates assets to Funds
that invest in FOREIGN SECURITIES. Foreign investments may be
riskier than U.S. investments because of political and economic
conditions, changes in currency exchange rates, the implementation
of the Euro, foreign controls on investment, difficulties selling
some securities and lack of or limited financial information.
Withholding taxes also may apply to some foreign investments. Funds
that invest in securities of companies in emerging markets have high
growth potential, but can be more volatile than securities in more
developed markets.
o FUTURES RISK - Some Funds the Portfolio invests in may use FUTURES
to help manage LIQUIDITY or to hedge portfolio risk. There is a risk
that this could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o INTEREST RATE RISK - The Portfolio allocates assets to Funds that
may invest in FIXED INCOME SECURITIES. The prices of fixed income
securities will tend to fall when interest rates rise. In general,
fixed income securities with longer terms tend to fall more in value
when interest rates rise than fixed income securities with shorter
terms.
o CREDIT RISK - A Fund that invests in fixed income securities could
lose money if the issuer of a fixed income security is unable to pay
interest or repay principal when it's due. Credit risk usually
applies to most fixed income securities, but generally is not a
factor for U.S. GOVERNMENT OBLIGATIONS.
o REBALANCING POLICY - The actual amount in each Fund or category of
Funds may vary from the allocations set by the portfolio managers.
This could continue for some time.
[GRAPHIC]
MANY THINGS AFFECT A PORTFOLIO'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE PORTFOLIO'S HOLDINGS, AND
PORTFOLIO EXPENSES.
[GRAPHIC] A LOOK AT THE PORTFOLIO'S PERFORMANCE
The following bar chart and table show you how the Portfolio has
performed in the past, and can help you understand the risks of
investing in the Portfolio. A PORTFOLIO'S PAST PERFORMANCE IS NO
GUARANTEE OF HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURNS (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Portfolio's Primary
A Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[GRAPHIC]
YEAR-TO-DATE RETURN AS OF SEPTEMBER 30, 1999: 3.07%
(BAR CHART APPEARS HERE. SEE TABLE BELOW FOR PLOT POINTS.)
1996 1997 1998
2.08%* 8.73% 10.17%
*Return is from inception (10-15-96) to 12-31-96.
16
<PAGE>
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 6.23%
Worst: 3rd quarter 1998: -2.33%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Portfolio's average annual total return for each
period, compared with the S&P 500 and the LEHMAN AGGREGATE BOND INDEX.
The S&P 500 is an unmanaged index of 500 widely held common stocks,
weighted by market capitalization. The Lehman Aggregate Bond Index is
an index of fixed income securities issued by the U.S. government and
its agencies, and by corporations. These indexes are not available for
investment.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares 10.17% 9.52%
S&P 500 28.58% 31.43%
Lehman Aggregate Bond Index 8.69% 8.82%
</TABLE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A
PORTFOLIO'S ASSETS AND FROM THE ASSETS OF THE NATIONS FUNDS THE
PORTFOLIO INVESTS IN.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE PORTFOLIO
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Portfolio.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Primary A Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from the Portfolio's assets)
Management fees 0.25%
----
Total annual Portfolio operating expenses 0.25%
====
</TABLE>
INDIRECT EXPENSES
The Portfolio's annual operating expenses include a portion of the
annual Fund operating expenses of the Nations Funds the Portfolio
invests in. This portion is estimated to be between 0.48% and 0.93%
(expressed as a weighted average, including fee waiver and/or
reimbursement commitments that will expire in May or July 2000), and is
based on:
o the amount the Portfolio expects to invest in each Fund, based on
the target allocation
o each Fund's annualized expense ratio for the period ended March 31,
1999, adjusted as necessary to reflect current service provider fees
17
<PAGE>
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE PORTFOLIO'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Portfolio with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Portfolio for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Portfolio
o your investment has a 5% return each year
o the Portfolio's operating expenses remain the same as shown in the
table above
o the Portfolio's indirect expenses remain at the average of the range
as shown above for the 1 year example, and at the weighted average
excluding fee waivers and/or reimbursements for the 3, 5 and 10 year
examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $97 $320 $561 $1,252
</TABLE>
18
<PAGE>
About the Nations Funds
The table starting on the next page is a brief overview of the objectives and
principal investments of the Nations Funds the LifeGoal Portfolios invest in.
Each Portfolio invests in a different mix of Nations Funds. You'll find the
mix of Nations Funds and target allocations for each Portfolio starting on
page 5.
The portfolio managers can substitute or add other Funds to this table at any
time, including Funds introduced after the date of this prospectus.
FOR MORE INFORMATION
You'll find more detailed information about each Fund's investment strategies
and risks in its prospectus and in its SAI. Please call us at 1.800.765.2668
for copies.
19
<PAGE>
<TABLE>
<CAPTION>
The Fund's investment objective What the Fund invests in
------------------------------------------- ----------------------------------------------------
<S> <C>
EQUITY FUNDS
Nations Value Fund Growth of capital by investing in o at least 65% of its assets in common stocks of
companies that are believed to be U.S. companies. The Fund generally invests in
undervalued. companies in a broad range of industries with
market capitalizations of at least $1 billion and
daily trading volumes of at least $3 million.
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Blue Chip Fund Long-term capital appreciation through Nations Blue Chip Master Portfolio. The Master
investments in blue chip stocks. Portfolio invests:
o at least 65% of its assets in blue chip stocks
o primarily in blue chip stocks that are included in
the S&P 500 Index
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Strategic Equity Fund Long-term, after-tax returns by investing o at least 65% of its assets in common stocks of
in a diversified portfolio of common companies selected from most major industry
stocks. sectors
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Marsico Focused Long-term growth of capital. Nations Marsico Focused Equities Master
Equities Fund Portfolio. The Master Portfolio invests in:
o at least 65% of its assets in common stocks of
large companies. The Master Portfolio, which is
non-diversified, generally holds a core position
of 20 to 30 common stocks
o up to 25% of its assets in foreign securities
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Small Company Growth Long-term capital growth by investing o at least 65% of its assets in companies with a
Fund primarily in equity securities. market capitalization of $1 billion or less. The
Fund usually holds 75 to 130 securities, which
include common stocks, preferred stocks and
convertible securities like warrants, rights and
convertible debt
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL FUNDS
Nations International Value Fund Long-term capital appreciation by o at least 65% of its assets in foreign companies
investing primarily in equity securities of anywhere in the world that have a market
foreign issuers, including emerging capitalization of more than $1 billion at the time
markets countries. of investment. The Fund typically invests in at
least three countries other than the United
States at any one time
o primarily in common stocks, preferred stocks,
convertible securities, either directly or
indirectly through closed-end investment
companies and depositary receipts
- ------------------------------------------------------------------------------------------------------------------------------------
Nations International Equity Fund Long-term capital growth by investing Nations International Equity Master Portfolio. The
primarily in equity securities of Master Portfolio invests:
non-United States companies in Europe, o at least 65% of its assets in established
Australia, the Far East and other regions, companies located in at least three countries
including developing countries. other than the United States. The investment
managers select countries, including emerging
market or developing countries, that they
believe have the potential for growth
o primarily in equity securities, which may
include equity interests in foreign investment
funds or trusts, convertible securities, real
estate investment trust securities and
depositary receipts
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
The Fund's investment objective What the Fund invests in
------------------------------------------- ----------------------------------------------------
<S> <C>
FIXED INCOME FUNDS
Nations Short-Term Income Fund High current income consistent with o at least 65% of its total assets in investment
minimal fluctuations of principal. grade fixed income securities. The portfolio
management team may choose unrated
securities if it believes they are of comparable
quality to investment grade securities at the
time of investment
o securities are principally corporate debt
securities, including bonds, notes and
debentures, mortgage-related securities issued
by governments, asset-backed securities and
U.S. government obligations
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Strategic Fixed Income Total return by investing in investment o at least 65% of its assets in investment grade
Fund grade fixed income securities. fixed income securities. The portfolio
management team may choose unrated
securities if it believes they are of comparable
quality to investment grade securities at the
time of investment
o securities are principally corporate debt
securities, including bonds, notes and
debentures, U.S. government obligations,
foreign debt securities denominated in U.S.
dollars, mortgage-related securities issued by
governments, asset-backed securities and
municipal securities
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Diversified Income Fund Total return with an emphasis on current o at least 65% of its assets in investment grade
income by investing in a diversified debt securities, including corporate debt
portfolio of fixed income securities. securities, U.S. government obligations, foreign
debt securities denominated in U.S. dollars or
foreign currencies, and mortgage-related
securities issued by governments and
non-government issuers
o up to 35% of its assets in lower-quality fixed
income securities ("junk bonds" or "high yield
bonds") rated "B"or better by Moody's or S&P.
The portfolio management team may choose
unrated securities if it believes they are of
comparable quality at the time of investment
- ------------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
Nations Prime Fund Maximization of current income to the o money market instruments, including
extent consistent with the preservation commercial paper, bank obligations, short-term
of capital and the maintenance of debt securities, guaranteed investment
liquidity. contracts, short-term taxable municipal
securities, repurchase agreements secured by
first-tier securities or U.S. government
obligations
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
[GRAPHIC]
YOU'LL FIND SPECIFIC INFORMATION ABOUT EACH PORTFOLIO'S PRINCIPAL
INVESTMENTS, STRATEGIES AND RISKS IN THE DESCRIPTIONS STARTING ON
PAGE 5.
[GRAPHIC]
Other important information
The following are some other risks and information you should consider before
you invest:
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment
objective and certain investment policies of any Portfolio can be
changed without shareholder approval. Other investment policies may
be changed only with shareholder approval.
o HOLDING OTHER KINDS OF INVESTMENTS - The Portfolios may hold
investments that aren't part of their principal investment
strategies. Please refer to the SAI for more information. The
portfolio managers or management team can also choose not to invest
in specific securities described in this prospectus and in the SAI.
o FOREIGN INVESTMENT RISK - Funds that invest in FOREIGN SECURITIES
may be affected by changes in currency exchange rates and the costs
of converting currencies; the implementation of the Euro; foreign
government controls on foreign investment, repatriation of capital,
and currency and exchange; foreign taxes; inadequate supervision and
regulation of some foreign markets; difficulties selling some
investments, which may increase volatility; different settlement
practices or delayed settlements in some markets; difficulty getting
complete or accurate information about foreign companies; less
strict accounting, auditing and financial reporting standards than
those in the U.S.; political, economic or social instability; and
difficulty enforcing legal rights outside the U.S.
o INVESTING DEFENSIVELY - A Portfolio may temporarily hold up to 100%
of its assets in Nations Prime Fund, a money market fund, to try to
protect it during a market or economic downturn or because of
political or other conditions. A Portfolio may not achieve its
investment objective while it is investing defensively.
o PORTFOLIO TURNOVER - A Portfolio or Fund that replaces -- or turns
over -- more than 100% of its investments in a year is considered to
trade frequently. Frequent trading can result in larger
distributions of short-term CAPITAL GAINS to shareholders. These
gains are taxable at higher rates than long-term capital gains.
Frequent trading can also mean higher brokerage and other
transaction costs, which could reduce the Portfolio's returns. The
Portfolios generally buy securities for capital appreciation,
investment income, or both, and don't engage in short-term trading.
You'll find the portfolio turnover rate for each Portfolio in
FINANCIAL HIGHLIGHTS.
22
<PAGE>
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
All of the Portfolios' primary service providers have confirmed that
they have been working to make the necessary changes to their
systems, and that they expect them to be adapted in time. There is no
guarantee, however, that their computer systems will be ready by the
year 2000. If their computer systems are not ready in time, there
could be a negative effect on Portfolio operations.
A Portfolio's performance could also be affected if Funds it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer
systems of foreign issuers, governments or other entities may not be
ready for the year 2000.
23
<PAGE>
[GRAPHIC]
BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] How the Portfolios are managed
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in the
Nations Funds family, including the LifeGoal Portfolios described in this
prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation. Nations Funds
pays BAAI an annual fee for its investment advisory services. The fee is
calculated daily based on the average net assets of each Portfolio and is paid
monthly. BAAI uses part of this money to pay investment sub-advisers for the
services they provide to each Portfolio. BAAI has also agreed to pay all other
Portfolio expenses, except taxes, brokerage fees and commissions,
extraordinary expenses, and any distribution (12b-1), shareholder servicing or
shareholder administration fees.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Portfolios' last fiscal
year, after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee fiscal year
<S> <C> <C>
Nations LifeGoal Growth Portfolio 0.25% 0.25%
Nations LifeGoal Balanced Growth Portfolio 0.25% 0.25%
Nations LifeGoal Income and Growth Portfolio 0.25% 0.25%
</TABLE>
24
<PAGE>
INVESTMENT SUB-ADVISERS
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Portfolios. TradeStreet functions under the supervision of BAAI and the
Boards of Directors of Nations Funds.
[GRAPHIC]
TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in the
Nations Funds family. TradeStreet generally takes a team approach to
investment management. Each team or individual portfolio manager has access to
the latest technology and analytical resources.
TradeStreet is the investment sub-adviser to all of the LifeGoal Portfolios.
Timothy P. Beyer and C. Thomas Clapp are co-portfolio managers, responsible
for making the day-to-day investment decisions for each Portfolio.
MR. BEYER is a member of TradeStreet's Value Management Team. In this role, he
manages many separate accounts and assists in the team's management of Nations
Value Fund. Before joining TradeStreet in 1995, he was an equity analyst for
NationsBank's Investment Management Group and a corporate bond analyst with
NationsBank. He has a BS in Finance from East Carolina University and is a
Chartered Financial Analyst. He also serves on the Council of Examiners for
the Association of Investment Management and Research, and is a member of the
North Carolina Society of Financial Analysts.
MR. CLAPP is chief equity investment officer at TradeStreet, and previously
was director of its Equity Management Group. Before joining TradeStreet in
1995, he was senior vice president and director of research for NationsBank's
Investment Management Group, and senior portfolio manager with Royal Insurance
Group. He began working in the investment community in 1984. He has a BA in
Economics from the University of North Carolina at Chapel Hill and an MBA from
the University of South Carolina. He is a Chartered Financial Analyst, and a
member of the Association for Investment Management and Research and the North
Carolina Society of Financial Analysts.
25
<PAGE>
TradeStreet is also the investment sub-adviser to the Nations Funds that
appear in the table below. The table tells you which internal TradeStreet
asset management team is responsible for making the day-to-day investment
decisions for each Fund.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Value Fund Value Management Team
Nations Small Company Growth Fund Strategic Growth Management Team
Nations Short-Term Income Fund Fixed Income Management Team
Nations Strategic Fixed Income Fund Fixed Income Management Team
Nations Diversified Income Fund Fixed Income Management Team
Nations Prime Fund Taxable Money Market Management Team
</TABLE>
[GRAPHIC]
MARSICO CAPITAL
MANAGEMENT, LLC
1200 17TH STREET
SUITE 1300
DENVER, COLORADO 80202
MARSICO CAPITAL MANAGEMENT, LLC
Marsico Capital is a full service investment advisory firm founded by Thomas
F. Marsico in September 1997. It is a registered investment adviser,
specializing in large capitalization stocks, and currently has $6.5 billion in
assets under management.
Marsico Management Holdings, LLC, a wholly-owned subsidiary of Bank of America
Corporation, indirectly owns 50% of the equity of Marsico Capital.
Marsico Capital is the investment sub-adviser to Nations Marsico Focused
Equities Master Portfolio.
THOMAS F. MARSICO, Chairman and Chief Executive Officer of Marsico Capital, is
the portfolio manager responsible for making the day-to-day investment
decisions for the Master Portfolio. Mr. Marsico was an executive vice
president and portfolio manager at Janus Capital Corporation from 1988 until
he formed Marsico Capital in September 1997. He has more than 20 years of
experience as a securities analyst and portfolio manager.
26
<PAGE>
[GRAPHIC]
BANK OF AMERICA INVESTMENT MANAGEMENT
100 NORTH BROADWAY
ST. LOUIS, MISSOURI 63102
BANK OF AMERICA INVESTMENT MANAGEMENT
BAIM, a division of Bank of America, is the investment sub-adviser to Nations
Strategic Equity Fund.
The Fund is managed by MICHAEL E. KENNEALLY, president and chief investment
officer of BAIM since 1997. He has managed the Fund since its inception on
October 2, 1998. Before joining BAIM, Mr. Kenneally was managing director at
Boatmen's Trust Company, in charge of fundamental and quantitative research,
small-capatalization, passive and international equity investment. He holds a
bachelor's degree in economics and an MBA in finance from the University of
Missouri.
[GRAPHIC]
BRANDES INVESTMENT
PARTNERS, L.P.
12750 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
BRANDES INVESTMENT PARTNERS, L.P.
Founded in 1974, Brandes is an investment advisory firm with 46 investment
professionals who manage more than $30 billion in assets. Brandes uses a
value-oriented approach to managing international investments, seeking to
build wealth by buying high quality, undervalued stocks.
Brandes is the investment sub-adviser to Nations International Value Fund.
Brandes' Large Cap Investment Committee is responsible for making the
day-to-day investment decisions for the Fund.
[GRAPHIC]
CHICAGO EQUITY PARTNERS
CORPORATION
231 SOUTH LASALLE
CHICAGO, ILLINOIS 60697
CHICAGO EQUITY PARTNERS CORPORATION
Chicago Equity is a registered investment adviser and a wholly-owned
subsidiary of Bank of America. Chicago Equity is the investment sub-adviser to
Nations Blue Chip Master Portfolio.
Chicago Equity's Equity Management Team is responsible for making the
day-to-day investment decisions for Nations Blue Chip Master Portfolio.
[GRAPHIC]
GARTMORE GLOBAL PARTNERS
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
GARTMORE GLOBAL PARTNERS
Gartmore is a global asset manager dedicated to serving the needs of U.S.
based investors. Gartmore was formed in 1995 as a registered investment
adviser and manages more than $1 billion in assets.
Gartmore is a joint venture structured as a general partnership between NB
Partner Corp., a wholly-owned subsidiary of Bank of America, and Gartmore U.S.
Limited, an indirect, wholly-owned subsidiary of Gartmore Investment
Management plc, a UK holding company for a leading UK-based international fund
management group of companies.
Gartmore follows a growth philosophy, which is reflected in its active
management of market allocation and stock selection.
Gartmore is one of three investment sub-advisers to Nations International
Equity Master Portfolio.
27
<PAGE>
Gartmore's portion of Nations International Equity Master Portfolio is
co-managed by six portfolio managers:
CHRISTOPHER PALMER has been responsible since May 1999 for investments in
developing countries, and has been the principal portfolio manager of Nations
Emerging Markets Fund since that time. He joined Gartmore in 1995 and is a
senior investment manager on the Gartmore Emerging Markets Team. Before he
joined Gartmore, Mr. Palmer worked for Unifund, S.A., a private investment
bank, in its Mexico City and Hong Kong offices, and managed global
derivatives, credit and counterparty credit risk as vice president in the
Institutional Credit Department of Bear Stearns & Co. He graduated from
Colgate University in 1986 with a BA Honors degree in History and completed an
MBA in Finance at New York University in 1988. Mr. Palmer was awarded the CFA
designation by the Association of Investment Management and Research in 1993.
SEOK TEOH has been responsible since June 1998 for investments in Asia. Ms.
Teoh has been with Gartmore since 1990 as the London based manager of its Far
East Team. Previously, she managed four equity funds for Rothschild Asset
Management in Tokyo and Singapore, and was also responsible for Singaporean
and Malaysian equity sales at Overseas Union Bank Securities in Singapore. Ms.
Teoh is native to Singapore and is fluent in Mandarin and Cantonese. She
received an Economics degree from the University of Durham.
JOHN STEWART has shared responsibility with Nick Reid for investments in Japan
since August 1999. He is also senior investment manager for the Gartmore
Japanese Equities Team and is responsible for managing specialist
institutional portfolios and providing input to the global asset allocation
team in London. Mr. Stewart joined Gartmore in 1992, after starting his career
at the London office of Prudential Portfolio Managers. He graduated from
Loughborough University in 1991 with a BS Honors degree in Banking and
Finance. Mr. Stewart is also a member of the Institute of Investment
Management and Research, and the Chartered Institute of Bankers.
NICK REID has shared responsibility with John Stewart for investments in Japan
since August 1999. He has been investment manager for the Gartmore Japanese
Equities Team since he joined Gartmore in 1994 and has specific responsibility
for managing retail funds. Before he joined Gartmore, Mr. Reid was an United
Kingdom Smaller Companies Analyst with Panmure Gordon and a fund manager
covering Japanese and other Asian markets with Refuge Assurance. He graduated
from Cambridge University in 1989 with an honors degree in History. Mr. Reid
is also an associate member of the Institute of Investment Management and
Research.
STEPHEN JONES has been responsible for investments in Europe since 1998. He is
also head of Gartmore European Equities. Mr. Jones joined Gartmore in 1994 and
was appointed head of the European equity team in 1995. He began his career at
The Prudential in 1984, and became a European equities investment manager in
1987, focusing on France, Belgium and Switzerland. He graduated from
Manchester University in 1984 with an honors degree in Economics.
28
<PAGE>
STEPHEN WATSON has been responsible since June 1998 for allocating assets
among the various regions, and for determining investments in regions not
covered by the other portfolio managers. He was the sole portfolio manager of
Nations International Equity Fund from February 1995 to June 1998. Mr. Watson
joined Gartmore in 1993 as a global fund manager, and is the chief investment
officer of Gartmore Global Partners and a member of Gartmore's global policy
group. Before joining Gartmore, he was a director and global fund manager with
James Capel Fund Managers, London, as well as client service manager for
international clients. He was in Capel-Cure Myers' portfolio management
division from 1980 to 1987, and began his career in 1976 with Samuel Motagu.
He is a member of the Securities Institute.
[GRAPHIC]
INVESCO GLOBAL ASSET
MANAGEMENT (N.A.), INC.
1315 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309
INVESCO GLOBAL ASSET MANAGEMENT (N.A.), INC.
INVESCO is a division of INVESCO Global, a publicly traded investment
management firm located in London, England, and a wholly-owned subsidiary of
AMVESCAP PLC, a publicly traded UK financial holding company, which is also
located in London.
INVESCO is one of three investment sub-advisers to Nations International
Equity Master Portfolio. INVESCO's International Equity Portfolio Management
Team is responsible for making the day-to-day investment decisions for its
portion of the Master Portfolio.
[GRAPHIC]
PUTNAM INVESTMENT
MANAGEMENT, INC.
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
PUTNAM INVESTMENT MANAGEMENT, INC.
Putnam is a wholly-owned subsidiary of Putnam Investments, Inc., which, except
for shares held by employees, is owned by Marsh & McLennan Companies.
Putnam is one of three investment sub-advisers to Nations International Equity
Master Portfolio. Putnam's Core International Equity Group is responsible for
making the day-to-day investment decisions for its portion of the Master
Portfolio.
[GRAPHIC]
STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
OTHER SERVICE PROVIDERS
The Portfolios are distributed and co-administered by Stephens Inc., a
registered broker/dealer. Stephens does not receive any fees for the
administrative services it provides to the Portfolios.
BAAI is also co-administrator of the Portfolios, and assists in overseeing the
administrative operations of the Funds.
[GRAPHIC]
FIRST DATA INVESTOR
SERVICES GROUP, INC.
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Portfolios' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
29
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC]
WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC]
A BUSINESS DAY IS ANY DAY THAT THE NEW YORK STOCK EXCHANGE (NYSE)
IS OPEN. A BUSINESS DAY ENDS AT THE CLOSE OF REGULAR TRADING ON
THE NYSE, USUALLY AT 4:00 P.M. EASTERN TIME. IF THE NYSE CLOSES
EARLY, THE BUSINESS DAY ENDS AS OF THE TIME THE NYSE CLOSES.
THE NYSE IS CLOSED ON WEEKENDS AND ON THE FOLLOWING NATIONAL
HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER KING, JR. DAY, PRESIDENTS'
DAY, GOOD FRIDAY, MEMORIAL DAY, INDEPENDENCE DAY, LABOR DAY,
THANKSGIVING DAY AND CHRISTMAS DAY.
[GRAPHIC] Buying, selling and exchanging shares
This prospectus offers Primary A Shares of the Portfolios. Here are some
general rules about this class of shares:
o Primary A Shares are available to certain financial institutions and
intermediaries for their own accounts, and for certain client
accounts for which they act as a fiduciary, agent or custodian.
These include:
o Bank of America and certain of its affiliates
o certain other financial institutions and intermediaries, including
financial planners and investment advisers
o institutional investors
o charitable foundations
o endowments
o other Funds in the Nations Funds Family
o The minimum initial investment is $250,000. Financial institutions
or intermediaries can total the investments they make on behalf of
their clients to meet the minimum initial investment amount.
o There is no minimum amount for additional investments.
o There are no sales charges for buying, selling or exchanging these
shares.
You'll find more information about buying, selling and exchanging Primary A
Shares on the pages that follow. You should also ask your financial
institution or intermediary about its limits, fees and policies for buying,
selling and exchanging shares, which may be different from those described
here, and about its related programs and services.
The Portfolios also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. Please contact your
investment professional, or call us at 1.800.765.2668 if you have any
questions, or you need help placing an order.
HOW SHARES ARE PRICED
All transactions are based on the price of a Portfolio's shares -- or its net
asset value per share. We calculate net asset value per share for each class
of each Portfolio at the end of each business day. The net asset value per
share of a Portfolio is based on the net asset value per share of the Nations
Funds the Portfolio invests in.
We calculate the net asset value for each class of a Fund by determining the
value of the Fund's assets in the class and then subtracting its liabilities.
Next, we divide this amount by the number of shares that investors are holding
in the class.
30
<PAGE>
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. The prices reported on stock exchanges and securities
markets around the world are usually used to value securities in a Fund. If
prices aren't readily available, we'll base the price of a security on its
fair market value. We use the amortized cost method, which approximates market
value, to value short-term investments maturing in 60 days or less.
International markets may be open on days when U.S. markets are closed. The
value of foreign securities owned by a Fund could change on days when Fund
shares may not be bought or sold.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents before the end of a business
day (usually 4:00 p.m. Eastern time, unless the NYSE closes early) will
receive that day's net asset value per share. Orders received after the end of
a business day will receive the next business day's net asset value per share.
The business day that applies to your order is also called the TRADE DATE. We
may refuse any order to buy or exchange shares. If this happens, we'll return
any money we've received.
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Primary A Shares at net asset value per share.
o If we don't receive payment within three business days of receiving
an order, we'll refuse the order. We'll return any payment received
for orders that we refuse.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for ensuring that we receive
payment on time.
o Shares purchased are recorded on the books of the Portfolio. We
don't issue certificates.
o Financial institutions and intermediaries are responsible for
recording the beneficial ownership of the shares of their clients,
and for reporting this ownership on account statements they send to
their clients.
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire within
three business days after Stephens, First Data or their agents
receive the order.
o If you paid for your shares with a check that wasn't certified,
we'll hold the sale proceeds when you sell those shares for at least
15 days after the trade date of the purchase, or until the check has
cleared.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for depositing the sale
proceeds to their accounts on time.
31
<PAGE>
o Under certain circumstances allowed under the Investment Company Act
of 1940 (1940 Act), we can pay investors in securities or other
property when they sell shares.
o We can delay payment of the sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information about these restrictions, please contact your retirement
plan administrator.
We may sell shares:
o if the value of an investor's account falls below $500. We'll
provide 60 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the
shares for a client under arrangements it has made with its clients
o under certain other circumstances allowed under the 1940 Act
[GRAPHIC]
YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE PORTFOLIO OR FUND YOU'RE EXCHANGING INTO. PLEASE
READ ITS PROSPECTUS CAREFULLY.
[GRAPHIC] EXCHANGING SHARES
Investors can sell shares of a Portfolio to buy shares of another
Portfolio or Nations Fund. This is called an exchange, and may be
appropriate if investment goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Primary A Shares of a Portfolio for Primary A
Shares of any other Portfolio or Nations Fund. In some cases, the
only Money Market Fund option is Trust Class Shares of Nations
Reserves Money Market Funds.
o The rules for buying shares of a Portfolio or Fund, including any
minimum investment requirements, apply to exchanges into that
Portfolio or Fund.
o Exchanges can only be made into a Portfolio or Fund that is legally
sold in the investor's state of residence.
o Exchanges can generally only be made into a Portfolio or Fund that
is accepting investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
32
<PAGE>
[GRAPHIC]
Distributions and taxes
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
PORTFOLIO -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and
dividends paid on COMMON STOCKS.
o A fund can also have CAPITAL GAIN if the value of its investments
increases. If a fund sells an investment at a gain, the gain is
realized. If a fund continues to hold the investment, any gain is
unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gain to its shareholders. The
Portfolios intend to pay out a sufficient amount of their income and capital
gain to their shareholders so the Portfolios won't have to pay any income tax.
When a Portfolio makes this kind of a payment, it's split equally among all
shares, and is called a distribution.
All of the Portfolios distribute net investment income quarterly, and any net
realized capital gain at least once a year.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Portfolio usually pay different distribution
amounts, because each class has different expenses. Each time a distribution
is made, the net asset value per share of the share class is reduced by the
amount of the distribution.
We'll automatically reinvest distributions in additional shares of the same
Portfolio unless you tell us you want to receive your distributions in cash.
You can do this by writing to us at the address on the back cover or by
calling us at 1.800.765.2668.
We generally pay cash distributions within five business days after the end of
the month, quarter or year in which the distribution was made. If you sell all
of your shares, we'll pay any distribution that applies to those shares in
cash within five business days after the sale was made.
If you buy shares of a Portfolio shortly before it makes a distribution, you
will, in effect, receive part of your purchase back in the distribution, which
is subject to tax. Similarly, if you buy shares of a Portfolio that holds
securities with unrealized capital gain, you will, in effect, receive part of
your purchase back if and when the Portfolio sells those securities and
distributes the gain. This distribution is also subject to tax. Some
Portfolios have built up, or have the potential to build up, high levels of
unrealized capital gain.
33
<PAGE>
[GRAPHIC]
THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUNDS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC]
FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions that come from net investment income and any net short-term
capital gain (generally the excess of net short-term capital gain over net
long-term capital loss) generally are taxable to you as ordinary income.
Corporate shareholders may be able to exclude a portion of these distributions
from their taxable income.
Distributions that come from net capital gain (generally the excess of net
long-term capital gain over net short-term capital loss) generally are taxable
to you as net capital gain.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the
Portfolio. However, any distributions declared in October, November or
December of one year and distributed in January of the following year will be
taxable as if they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN)
and haven't certified that the TIN is correct and withholding
doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN
listed on your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup
withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
Your redemptions (including redemptions "in kind") and exchanges of Portfolio
shares will usually result in a taxable capital gain or loss to you, depending
on the amount you receive for your shares (or are deemed to receive in the
case of exchanges) and the amount you paid (or are deemed to have paid) for
them.
34
<PAGE>
[GRAPHIC] Financial highlights
The financial highlights table is designed to help you understand how the
Portfolios have performed for the past five years. Certain information
reflects financial results for a single Portfolio share. The total investment
return line indicates how much an investment in the Portfolio would have
earned, assuming all dividends and distributions had been reinvested.
This information has been audited by PricewaterhouseCoopers LLP. The
independent accountant's report and Nations Funds financial statements are
incorporated by reference into the SAI. Please see the back cover to find out
how you can get a copy.
35
<PAGE>
LIFEGOAL GROWTH PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Period ended
PRIMARY A SHARES 03/31/99 03/31/98 03/31/97*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of year $ 12.49 $ 10.15 $ 10.06
Net investment income/(loss) 0.04 0.08 (a) 0.12
Net realized and unrealized gain on investments 0.31 2.87 0.09
Net increase in net assets resulting from investment
operations 0.35 2.95 0.21
DISTRIBUTIONS:
Distributions from net investment income -- ( 0.01) ( 0.12)
Distributions in excess of net investment income ( 0.09) ( 0.39) --
Distributions from net realized capital gains ( 0.60) ( 0.21) --
Total distributions ( 0.69) ( 0.61) ( 0.12)
Net asset value, end of year $ 12.15 $ 12.49 $ 10.15
TOTAL RETURN++ 3.04% 29.80% 2.10%
=================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) $4,291 $ 289 $ 929
Ratio of operating expenses to average net
assets+++ 0.25% 0.25% 0.25%+
Ratio of net investment income/(loss) to average
net assets 0.46% 0.65% 1.11%+
Portfolio turnover rate 159% 69% 25%
</TABLE>
* LifeGoal Growth Portfolio Primary A Shares
commenced investment operations on October 2, 1996.
Shares were offered to the public on October 15,
1996.
+ 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.
LIFEGOAL BALANCED GROWTH PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Period ended
PRIMARY A SHARES 03/31/99 03/31/98 03/31/97*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of year $ 10.92 $ 9.95 $ 10.05
Net investment income 0.26 0.33 (a) 0.19
Net realized and unrealized gain/(loss) on
investments 0.23 1.74 ( 0.10)
Net increase/(decrease) in net assets resulting from
investment operations 0.49 2.07 0.09
DISTRIBUTIONS:
Distributions from net investment income ( 0.28) ( 0.28) ( 0.19)
Distributions in excess of net investment income -- ( 0.32) --
Distributions from net realized capital gains ( 0.33) ( 0.50) --
Total distributions ( 0.61) ( 1.10) ( 0.19)
Net asset value, end of year $ 10.80 $ 10.92 $ 9.95
TOTAL RETURN++ 4.77% 21.74% 0.90%
=================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) $14,844 $ 103 $2,114
Ratio of operating expenses to average net
assets+++ 0.25% 0.25% 0.25%+
Ratio of net investment income to average net
assets 2.77% 2.87% 3.94%+
Portfolio turnover rate 121% 94% 1%
</TABLE>
* LifeGoal Balanced Growth Portfolio Primary A
Shares commenced investment operations on October 2,
1996. Shares were offered to the public on October
15, 1996.
+ 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 share method, which more
appropriately represents the per share data for the
period.
36
<PAGE>
LIFEGOAL INCOME AND GROWTH PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Period ended
PRIMARY A SHARES 03/31/99 03/31/98 03/31/97*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of year $ 10.70 $ 9.97 $ 10.03
Net investment income 0.35 0.43 (a) 0.32
Net realized and unrealized gain/(loss) on
investments 0.37 0.89 ( 0.06)
Net increase in net assets resulting from investment
operations 0.72 1.32 0.26
DISTRIBUTIONS:
Distributions from net investment income ( 0.36) ( 0.40) ( 0.32)
Distributions in excess of net investment income -- ( 0.12) --
Distributions from net realized capital gains ( 0.20) ( 0.07) --
Total distributions ( 0.56) ( 0.59) ( 0.32)
Net asset value, end of year $ 10.86 $ 10.70 $ 9.97
TOTAL RETURN++ 6.98% 13.56% 2.59%
=================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) $8,489 $ 476 $ 223
Ratio of operating expenses to average net
assets+++ 0.25% 0.25% 0.25%+
Ratio of net investment income to average net
assets 3.99% 4.17% 6.34%+
Portfolio turnover rate 107% 64% 2%
</TABLE>
* LifeGoal Income and Growth Portfolio Primary A
Shares commenced investment operations on October 2,
1996. Shares were offered to the public on October
15, 1996.
+ 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.
37
<PAGE>
[GRAPHIC] Terms used in this prospectus
ASSET-BACKED SECURITY - a debt security that gives you an interest in a pool
of assets that is collateralized or "backed" by one or more kinds of assets,
including real property, receivables or mortgages, generally issued by banks,
credit card companies or other lenders. Some securities may be issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities. Asset-backed securities typically make periodic payments,
which may be interest or a combination of interest and a portion of the
principal of the underlying assets.
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
CASH EQUIVALENTS - short-term, interest-bearing instruments, including
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities, bank obligations, asset-backed securities, foreign
government securities and commercial paper issued by U.S. and foreign issuers
which, at the time of investment, is rated at least Prime-2 by Moody's
Investor Services, Inc. (Moody's), A-2 by S&P, or F-1 by Fitch IBCA (Fitch).
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
CONVERTIBLE DEBT - a debt security that can be exchanged for common stock (or
another type of security) on a specified basis and date.
CONVERTIBLE SECURITY - a security that can be exchanged for common stock (or
another type of security) at a specified rate. Convertible securities include
convertible debt, rights and warrants.
CORPORATE OBLIGATION - a money market instrument issued by a corporation or
commercial bank.
38
<PAGE>
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
DEPOSITARY RECEIPTS - evidence of the deposit of a security with a custodian
bank. American Depositary Receipts (ADRs), for example, are certificates
traded in U.S. markets representing an interest of a foreign company. They
were created to make it possible for foreign issuers to meet U.S. security
registration requirements. Other examples include ADSs, GDRs and EDRs.
DIVIDEND YIELD - rate of return of dividends paid on a common or preferred
stock. It equals the amount of the annual dividend on a stock expressed as a
percentage of the stock's current market value.
DURATION - a measure used to estimate a security's or portfolio's sensitivity
to changes in interest rates. For example, if interest rates rise by one
percentage point, the share price of a fund with a duration of five years
would decline by about 5%. If interest rates fall by one percentage point, the
fund's share price would rise by about 5%.
EQUITY SECURITY - an investment that gives you an equity ownership right in a
company. Equity securities (or "equities") include common and preferred stock,
rights and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
FOREIGN SECURITY - a debt or equity security issued by a foreign company or
government.
FUNDAMENTAL ANALYSIS - a method of securities analysis that tries to evaluate
the intrinsic, or "true," value of a particular stock. It includes a study of
the overall economy, industry conditions and the financial condition and
management of a company.
FUTURES - a contract to buy or sell an asset or an index of securities at a
specified price on a specified future date. The price is set through a futures
exchange.
39
<PAGE>
INVESTMENT GRADE - a debt security that has been given a medium to high credit
rating (Baa or higher by Moody's, BBB or higher by S&P or a comparable rating
by other NRSROs) based on the issuer's ability to pay interest and repay
principal on time. The portfolio management team may consider an unrated debt
security to be investment grade if the team believes it is of comparable
quality. Please see the SAI for more information about credit ratings.
LEHMAN AGGREGATE BOND INDEX - an index made up of the Lehman
Government/Corporate Index, the Asset-Backed Securities Index and the
Mortgage-Backed Securities Index. These indexes include U.S. government agency
and U.S. Treasury securities, corporate bonds and mortgage-backed securities.
All dividends are reinvested.
LIQUIDITY - a measurement of how easily a security can be bought or sold at a
price that is close to its market value.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MORTGAGE-BACKED SECURITY OR MORTGAGE-RELATED SECURITY - a debt security that
gives you an interest in, and is backed by, a pool of residential mortgages
issued by the U.S. government or by financial institutions. The underlying
mortgages may be guaranteed by the U.S. government or one of its agencies,
authorities or instrumentalities. Mortgage-backed securities typically make
monthly payments, which are a combination of interest and a portion of the
principal of the underlying mortgages.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PREFERRED STOCK - a type of equity security that gives you a limited ownership
right in a company, with certain preferences or priority over common stock.
Preferred stock generally pays a fixed annual dividend. If the company goes
bankrupt, preferred shareholders generally receive their share of the
company's remaining assets before common shareholders and after bondholders
and other creditors.
40
<PAGE>
QUANTITATIVE ANALYSIS - an analysis of financial information about a company
or security to identify securities that have the potential for growth or are
otherwise suitable for a fund to buy.
REAL ESTATE INVESTMENT TRUST (REIT) - a portfolio of real estate investments
which may include office buildings, apartment complexes, hotels and shopping
malls, and real-estate-related loans or interests.
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
RIGHT - a temporary privilege allowing investors who already own a common
stock to buy additional shares directly from the company at a specified price
or formula.
S&P 500(1) - Standard & Poor's 500 Composite Stock Price Index, an unmanaged
index of 500 widely held common stocks. It is not available for investment.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SENIOR SECURITY - a debt security that allows holders to receive their share
of a company's remaining assets in a bankruptcy before other bondholders,
creditors, and common and preferred shareholders.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
WARRANT - a certificate that gives you the right to buy common shares at a
specified price within a specified period of time.
(1)S&P has not reviewed any stock included in the S&P 500 for its investment
merit. S&P determines and calculates its index independently of the Funds and
is not a sponsor or affiliate of the Funds. S&P gives no information and
makes no statements about the suitability of investing in the Funds or the
ability of its index to track stock market performance. S&P makes no
guarantees about the index, any data included in it and the suitability of
the index or its data for any purpose. "Standard and Poor's" and "S&P 500"
are trademarks of The McGraw-Hill Companies, Inc.
41
<PAGE>
[GRAPHIC] Where to find more information
You'll find more information about the LifeGoal Portfolios in the following
documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about
Portfolio investments and performance, the financial statements and the
auditor's reports. The annual report also includes a discussion about
the market conditions and investment strategies that had a significant
effect on each Portfolio's performance during the period covered.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Portfolios and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Portfolios and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.765.2668
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1-800-SEC-0330
WWW.SEC.GOV
SEC file number: (Logo) Nations Funds
Nations LifeGoal Funds, Inc., 811-07745
NF-LGPROPA-11/99
<PAGE>
LIFEGOAL PORTFOLIOS
PROSPECTUS -- PRIMARY B SHARES
NOVEMBER 15, 1999
LifeGoal Portfolios
LIFEGOAL GROWTH PORTFOLIO
LIFEGOAL BALANCED GROWTH PORTFOLIO
LIFEGOAL INCOME AND GROWTH PORTFOLIO
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOT FDIC
INSURED
--------
MAY LOSE VALUE
--------------
NO BANK GUARANTEE
[LOGO] NATIONS FUNDS
<PAGE>
AN OVERVIEW OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
[GRAPHIC]
TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC]
YOU'LL FIND TERMS USED
IN THIS PROSPECTUS ON
PAGE 39.
YOUR INVESTMENT IN A PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N. A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE PORTFOLIOS AND THE UNDERLYING FUNDS.
This booklet, which is called a prospectus, tells you about Nations Funds
LifeGoal Portfolios. Please read it carefully because it contains information
that's designed to help you make informed investment decisions.
Unlike traditional mutual funds, which invest in individual securities, the
Portfolios invest in a mix of Nations Funds Equity, Fixed Income and Money
Market Funds using an asset allocation approach. This kind of mutual fund is
sometimes called a "fund of funds."
ABOUT ASSET ALLOCATION
Asset allocation is the process of creating a diversified portfolio by
investing in different asset classes -- for example, EQUITY SECURITIES, FIXED
INCOME SECURITIES and MONEY MARKET INSTRUMENTS -- in varying proportions.
The mix of asset classes and how much is invested in each may be the most
important factor in how a Portfolio performs and the amount of risk involved.
Each asset class, and market segments within a class, like large, mid- and
small capitalization stocks, has different return and risk characteristics,
and reacts in different ways to changes in the economy. An investment approach
that combines asset classes and market segments may help to reduce overall
Portfolio volatility.
ABOUT THE PORTFOLIOS
Each Portfolio has its own asset allocation strategy, which gives it
distinctive risk/return characteristics. The performance of each Portfolio
depends on many factors, including its allocation strategy and the performance
of the Nations Funds it invests in. In general, the more a LifeGoal Portfolio
allocates to Equity Funds, the greater the potential return and the greater
the risk of a decline in share price. The more a LifeGoal Portfolio allocates
to Fixed Income Funds, the greater the potential for price stability and the
lower the potential return. There's always a risk, however, that you'll lose
money or you may not earn as much as you expect.
LifeGoal Growth Portfolio focuses on long-term growth by normally allocating
all of its assets to a mix of Funds that invest primarily in equity
securities. Equities have the potential to provide higher returns than many
other kinds of investments, but they also tend to have the highest risk.
LifeGoal Balanced Growth Portfolio focuses on long-term growth by normally
allocating its assets to a balanced mix of Funds that invest in equity and
fixed income securities. Fixed income securities have the potential to
increase in value, because, when interest rates fall, the value of these
securities tends to rise. When interest rates rise, however, the value of
these securities tends to fall. Other things can also affect the value of
fixed income securities.
2
<PAGE>
LifeGoal Income and Growth Portfolio focuses on current income and modest
growth. It normally allocates most of its assets to Funds that invest in fixed
income securities, but may also allocate some assets to Funds that invest in
equity securities. Over time, the return on this Portfolio may be lower than
the return on the other Portfolios.
IS LIFEGOAL RIGHT FOR YOU?
When you're choosing a Portfolio to invest in, you should consider things like
your investment goals, how much risk you can accept and how long you're
planning to hold your investment.
The LifeGoal Portfolios may be suitable for you if:
o you have longer-term investment goals
o they're part of a balanced portfolio
They may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with equity and fixed income securities
o you have short-term investment goals
o you're looking for a regular stream of income
You'll find a discussion of each Portfolio's principal investments, strategies
and risks in the Portfolio descriptions that start on page 5.
FOR MORE INFORMATION
If you have any questions about the Portfolios, please call us at
1.800.321.7854 or contact your investment professional.
You'll find more information about the Portfolios in the Statement of
Additional Information (SAI). The SAI includes more detailed information about
each Portfolio's investments, policies, performance and management, among
other things. Please turn to the back cover to find out how you can get a
copy.
3
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC]
BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI) IS THE INVESTMENT ADVISER TO
EACH OF THE PORTFOLIOS. BAAI IS RESPONSIBLE FOR THE OVERALL
MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
PORTFOLIO. BAAI AND NATIONS FUNDS HAVE ENGAGED A
SUB-ADVISER -- TRADESTREET INVESTMENT ASSOCIATES, INC.
(TRADESTREET), WHICH IS RESPONSIBLE FOR THE DAY-TO-DAY INVESTMENT
DECISIONS FOR EACH OF THE PORTFOLIOS.
[GRAPHIC]
YOU'LL FIND MORE ABOUT
BAAI AND TRADESTREET
STARTING ON PAGE 25.
<TABLE>
<S> <C>
[GRAPHIC]
About the LifeGoal Portfolios
LIFEGOAL GROWTH PORTFOLIO 5
Sub-adviser: TradeStreet
- ---------------------------------------------
LIFEGOAL BALANCED GROWTH PORTFOLIO 10
Sub-adviser: TradeStreet
- ---------------------------------------------
LIFEGOAL INCOME AND GROWTH PORTFOLIO 15
Sub-adviser: TradeStreet
- ---------------------------------------------
ABOUT THE NATIONS FUNDS 20
- ---------------------------------------------
OTHER IMPORTANT INFORMATION 23
- ---------------------------------------------
HOW THE PORTFOLIOS ARE MANAGED 25
[GRAPHIC]
About your investment
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 31
How selling and servicing agents are paid 34
Distributions and taxes 35
- ---------------------------------------------
FINANCIAL HIGHLIGHTS 37
- ---------------------------------------------
TERMS USED IN THIS PROSPECTUS 39
- ---------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
4
<PAGE>
ABOUT THE LIFEGOAL PORTFOLIOS
- --------------------------------------------------------------------------------
[GRAPHIC]
ABOUT THE SUB-ADVISER
TRADESTREET IS THIS PORTFOLIO'S SUB-ADVISER. TIMOTHY P. BEYER AND
C. THOMAS CLAPP ARE ITS PORTFOLIO MANAGERS AND MAKE THE DAY-TO-DAY
INVESTMENT DECISIONS FOR THE PORTFOLIO.
[GRAPHIC]
YOU'LL FIND MORE ABOUT TRADESTREET, MR. BEYER
AND MR. CLAPP ON PAGE 26.
[GRAPHIC]
ABOUT THE UNDERLYING NATIONS FUNDS
YOU'LL FIND MORE INFORMATION ABOUT THE FUNDS THE PORTFOLIO INVESTS
IN, INCLUDING THEIR OBJECTIVES AND STRATEGIES, IN ABOUT THE
NATIONS FUNDS AND IN THE SAI.
LifeGoal Growth Portfolio
[GRAPHIC]
INVESTMENT OBJECTIVE
This Portfolio seeks capital appreciation through exposure to a variety
of equity market segments.
[GRAPHIC]
INVESTMENT STRATEGIES
This Portfolio normally invests most of its assets in Primary A Shares
of Nations Funds Equity Funds.
The portfolio managers use asset allocation as their principal investment
approach. They:
o allocate assets among Fund categories, within the target allocations set
for the Portfolio. They base their allocations on the Portfolio's
investment objective, historical returns for each asset class and on their
outlook for the economy
o choose individual Funds within each category and the amount they will
allocate to each, looking at each Fund's historical returns, as well as
the expected performance of the mix of Funds
o review the allocations to Fund categories and individual Funds at least
monthly, and may change these allocations when they believe it's
appropriate to do so
The actual amount in each Fund or category of Funds may vary from the
allocations set by the portfolio managers, depending on how the Funds perform,
and for other reasons. The portfolio managers may use various strategies to
try to manage how much the actual amount varies, and for how long. For
example:
o if there are more assets in a Fund category than in the target allocation,
the portfolio managers may allocate money coming into the Portfolio to the
other Fund categories
o if there are fewer assets in a Fund category than in the target
allocation, they may allocate money coming into the Portfolio to that Fund
category
The Portfolio normally sells a proportionate amount of the shares it owns in
each Nations Fund to meet its redemption requests.
5
<PAGE>
[GRAPHIC]
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS PORTFOLIO STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC]
YOU'LL FIND DETAILED INFORMATION ABOUT EACH FUND'S INVESTMENT
STRATEGIES AND RISKS IN ITS PROSPECTUS, AND IN ITS SAI. PLEASE
CALL US AT 1.800.321.7854 FOR A COPY.
<TABLE>
<CAPTION>
LifeGoal Growth Portfolio Target allocation for each
can invest in: Fund category:
<S> <C>
Large-capitalization domestic equity funds 40-75%
Nations Value Fund
Nations Blue Chip Fund
Nations Strategic Equity Fund
Nations Marsico Focused Equities Fund
Small-capitalization domestic equity fund 15-35%
Nations Small Company Growth Fund
International equity funds 10-30%
Nations International Value Fund
Nations International Equity Fund
</TABLE>
The portfolio managers can substitute or add other Funds to this list
at any time, including Funds introduced after the date of this
prospectus.
[GRAPHIC]
RISKS AND OTHER THINGS TO CONSIDER
LifeGoal Growth Portfolio has the following risks:
o INVESTMENT STRATEGY RISK - The portfolio managers use an asset
allocation strategy to try to achieve the highest total return.
There is a risk that the mix of investments will not produce the
returns they expect, or that the Portfolio will fall in value. There
is also the risk that the Funds the Portfolio invests in will not
produce the returns the portfolio managers expect, or will fall in
value.
o STOCK MARKET RISK - The Portfolio allocates assets to Funds that
invest in stocks. The value of the stocks a Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o SMALL COMPANY RISK - The Portfolio allocates assets to Funds that
may invest in smaller companies. Stocks of smaller companies tend to
have greater price swings than stocks of larger companies because
they trade less frequently and in lower volumes. These securities
may have a higher potential for gains, but also carry more risk.
6
<PAGE>
o FOREIGN INVESTMENT RISK - The Portfolio allocates assets to Funds
that invest in FOREIGN SECURITIES. Foreign investments may be
riskier than U.S. investments because of political and economic
conditions, changes in currency exchange rates, the implementation
of the Euro, foreign controls on investment, difficulties selling
some securities and lack of or limited financial information.
Withholding taxes may also apply to some foreign investments. Funds
that invest in securities of companies in emerging markets have high
growth potential, but can be more volatile than securities in more
developed markets.
o FUTURES RISK - Some Funds the Portfolio invests in may use FUTURES
to help manage LIQUIDITY or to hedge portfolio risk. There is a risk
that this could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o REBALANCING POLICY - The actual amount in each Fund or category of
Funds may vary from the allocations set by the portfolio managers.
This could continue for some time.
[GRAPHIC]
MANY THINGS AFFECT A PORTFOLIO'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE PORTFOLIO'S HOLDINGS, AND
PORTFOLIO EXPENSES.
[GRAPHIC]
A LOOK AT THE PORTFOLIO'S PERFORMANCE
The following bar chart and table show you how the Portfolio has
performed in the past, and can help you understand the risks of
investing in the Portfolio. A PORTFOLIO'S PAST PERFORMANCE IS NO
GUARANTEE OF HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURNS (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Portfolio's Primary
B Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[GRAPHIC TABLE APPEARS HERE]
1996 1997 1998
---- ---- ----
2.08% 8.73% 10.17%
* Return is from inception (10-15-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF SEPTEMBER 30, 1999: 4.87%
7
<PAGE>
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 23.37%
Worst: 3rd quarter 1998: -16.68%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Portfolio's average annual total return for each
period, compared with the S&P 500, an unmanaged index of 500 widely
held COMMON STOCKS, weighted by market capitalization. The index is not
available for investment.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Primary B Shares 12.32% 13.88%
S&P 500 28.58% 31.43%
</TABLE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A PORTFOLIO'S ASSETS AND FROM THE ASSETS OF
THE NATIONS FUNDS THE PORTFOLIO INVESTS IN.
[GRAPHIC]
WHAT IT COSTS TO INVEST IN THE PORTFOLIO
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Portfolio.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Primary B Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from the Portfolio's assets)
Management fees 0.25%
Shareholder administration fees(1) 0.60%
----
Total annual Portfolio operating expenses 0.85%
====
</TABLE>
(1) Shareholder administration fees of 0.10% are voluntarily waived on
Primary B Shares; however, there is no guarantee that these waivers
will continue for any specified period of time. This waiver is not
reflected in the table above.
INDIRECT EXPENSES
The Portfolio's annual operating expenses include a portion of the
annual Fund operating expenses of the Nations Funds the Portfolio
invests in. This portion is estimated to be between 1.00% and 1.17%
(expressed as a weighted average, including fee waiver and/or
reimbursement commitments that will expire in May or July 2000), and is
based on:
o the amount the Portfolio expects to invest in each Fund, based on
the target allocation
o each Fund's annualized expense ratio for the period ended March 31,
1999, adjusted as necessary to reflect current service provider fees
8
<PAGE>
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE PORTFOLIO'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Portfolio with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary B Shares of the Portfolio for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Portfolio
o your investment has a 5% return each year
o the Portfolio's operating expenses remain the same as shown in the
table above
o the Portfolio's indirect expenses remain at the average of the range
as shown above for the 1 year example, and at the weighted average
excluding fee waivers and/or reimbursements for the 3, 5 and 10 year
examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary B Shares $197 $615 $1,060 $2,293
</TABLE>
9
<PAGE>
ABOUT THE LIFEGOAL PORTFOLIOS
- --------------------------------------------------------------------------------
[GRAPHIC]
ABOUT THE SUB-ADVISER
TRADESTREET IS THIS PORTFOLIO'S SUB-ADVISER. TIMOTHY P. BEYER AND
C. THOMAS CLAPP ARE ITS PORTFOLIO MANAGERS AND MAKE THE DAY-TO-DAY
INVESTMENT DECISIONS FOR THE PORTFOLIO.
[GRAPHIC]
YOU'LL FIND MORE ABOUT TRADESTREET, MR. BEYER
AND MR. CLAPP ON PAGE 26.
[GRAPHIC]
ABOUT THE UNDERLYING NATIONS FUNDS
YOU'LL FIND MORE INFORMATION ABOUT THE FUNDS THE PORTFOLIO INVESTS
IN, INCLUDING THEIR OBJECTIVES AND STRATEGIES, IN ABOUT THE
NATIONS FUNDS AND IN THE SAI.
LifeGoal Balanced Growth Portfolio
[GRAPHIC]
INVESTMENT OBJECTIVE
This Portfolio seeks total return through a balanced portfolio of EQUITY
and FIXED INCOME SECURITIES.
[GRAPHIC]
INVESTMENT STRATEGIES
This Portfolio normally invests all of its assets in Primary A Shares of
a balanced mix of Nations Funds Equity and Fixed Income Funds.
The portfolio managers use asset allocation as their principal investment
approach. They:
o allocate assets among Fund categories, within the target allocations
set for the Portfolio. They base their allocations on the
Portfolio's investment objective, historical returns for each asset
class and on their outlook for the economy
o choose individual Funds within each category and the amount they
will allocate to each, looking at each Fund's historical returns, as
well as the expected performance of the mix of Funds
o review the allocations to Fund categories and individual Funds at
least monthly, and may change these allocations when they believe
it's appropriate to do so
The actual amount in each Fund or category of Funds may vary from the
allocations set by the portfolio managers, depending on how the Funds perform,
and for other reasons. The portfolio managers may use various strategies to
try to manage how much the actual amount varies, and for how long. For
example:
o if there are more assets in a Fund category than in the target
allocation, the portfolio managers may allocate money coming into
the Portfolio to the other Fund categories
o if there are fewer assets in a Fund category than in the target
allocation, they may allocate money coming into the Portfolio to
that Fund category
The Portfolio normally sells a proportionate amount of the shares it owns in
each Nations Fund to meet its redemption requests.
10
<PAGE>
[GRAPHIC]
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS PORTFOLIO STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC]
YOU'LL FIND DETAILED INFORMATION ABOUT EACH FUND'S INVESTMENT
STRATEGIES AND RISKS IN ITS PROSPECTUS, AND IN ITS SAI. PLEASE
CALL US AT 1.800.321.7854 FOR A COPY.
<TABLE>
<CAPTION>
LifeGoal Balanced Growth Portfolio Target allocation for each
can invest in: Fund category:
<S> <C>
Large-capitalization domestic equity funds 20-40%
Nations Value Fund
Nations Blue Chip Fund
Nations Strategic Equity Fund
Nations Marsico Focused Equities Fund
Small-capitalization domestic equity fund 10-20%
Nations Small Company Growth Fund
International equity funds 5-15%
Nations International Value Fund
Nations International Equity Fund
Bond funds 40-60%
Nations Strategic Fixed Income Fund
Nations Diversified Income Fund
</TABLE>
The portfolio managers can substitute or add other Funds to this list
at any time, including Funds introduced after the date of this
prospectus.
[GRAPHIC]
RISKS AND OTHER THINGS TO CONSIDER
LifeGoal Balanced Growth Portfolio has the following risks:
o INVESTMENT STRATEGY RISK - The portfolio managers use an asset
allocation strategy to try to achieve the highest total return.
There is a risk that the mix of investments will not produce the
returns they expect, or that the Portfolio will fall in value. There
is also the risk that the Funds the Portfolio invests in will not
produce the returns the portfolio managers expect, or will fall in
value.
o STOCK MARKET RISK - The Portfolio allocates assets to Funds that
invest in stocks. The value of the stocks a Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o SMALL COMPANY RISK - The Portfolio allocates assets to Funds that
may invest in smaller companies. Stocks of smaller companies tend to
have greater price swings than stocks of larger companies because
they trade less frequently and in lower volumes. These securities
may have a higher potential for gains, but also carry more risk.
11
<PAGE>
o FOREIGN INVESTMENT RISK - The Portfolio allocates assets to Funds
that invest in FOREIGN SECURITIES. Foreign investments may be
riskier than U.S. investments because of political and economic
conditions, changes in currency exchange rates, the implementation
of the Euro, foreign controls on investment, difficulties selling
some securities and lack of or limited financial information.
Withholding taxes may also apply to some foreign investments. Funds
that invest in securities of companies in emerging markets have high
growth potential, but can be more volatile than securities in more
developed markets.
o FUTURES RISK - Some Funds the Portfolio invests in may use FUTURES
to help manage LIQUIDITY or to hedge portfolio risk. There is a risk
that this could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o INTEREST RATE RISK - The Portfolio allocates assets to Funds that
may invest in fixed income securities. The prices of fixed income
securities will tend to fall when interest rates rise. In general,
fixed income securities with longer terms tend to fall more in value
when interest rates rise than fixed income securities with shorter
terms.
o CREDIT RISK - A Fund that invests in fixed income securities could
lose money if the issuer of a fixed income security is unable to pay
interest or repay principal when it's due. Credit risk usually
applies to most fixed income securities, but generally is not a
factor for U.S. GOVERNMENT OBLIGATIONS. Fixed income securities with
the lowest INVESTMENT GRADE rating or that aren't investment grade
are more speculative in nature than securities with higher ratings,
and they tend to be more sensitive to credit risk, particularly
during a downturn in the economy.
o REBALANCING POLICY - The actual amount in each Fund or category of
Funds may vary from the allocations set by the portfolio managers.
This could continue for some time.
[GRAPHIC]
MANY THINGS AFFECT A PORTFOLIO'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE PORTFOLIO'S HOLDINGS, AND
PORTFOLIO EXPENSES.
[GRAPHIC]
A LOOK AT THE PORTFOLIO'S PERFORMANCE
The following bar chart and table show you how the Portfolio has
performed in the past, and can help you understand the risks of
investing in the Portfolio. A PORTFOLIO'S PAST PERFORMANCE IS NO
GUARANTEE OF HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURNS (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Portfolio's Primary
B Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[GRAPHIC TABLE APPEARS HERE]
1996 1997 1998
---- ---- ----
2.47% 11.35% 11.27%
* Return is from inception (10-15-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF SEPTEMBER 30, 1999: 2.77%
12
<PAGE>
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 12.22%
Worst: 3rd quarter 1998: -9.02%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Portfolio's average annual total return for each
period, compared with the S&P 500 and the LEHMAN AGGREGATE BOND INDEX.
The S&P 500 is an unmanaged index of 500 widely held COMMON STOCKS,
weighted by market capitalization. The Lehman Aggregate Bond Index is
an index of fixed income securities issued by the U.S. government and
its agencies, and by corporations. These indexes are not available for
investment.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Primary B Shares 11.27% 11.40%
S&P 500 28.58% 31.43%
Lehman Aggregate Bond Index 8.69% 8.82%
</TABLE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A
PORTFOLIO'S ASSETS AND FROM THE ASSETS OF THE NATIONS FUNDS THE
PORTFOLIO INVESTS IN.
[GRAPHIC]
WHAT IT COSTS TO INVEST IN THE PORTFOLIO
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Portfolio.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Primary B Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from the Portfolio's assets)
Management fees 0.25%
Shareholder administration fees(1) 0.60%
----
Total annual Portfolio operating expenses 0.85%
====
</TABLE>
(1) Shareholder administration fees of 0.10% are voluntarily waived on
Primary B Shares; however, there is no guarantee that these waivers
will continue for any specified period of time. This waiver is not
reflected in the table above.
INDIRECT EXPENSES
The Portfolio's annual operating expenses include a portion of the
annual Fund operating expenses of the Nations Funds the Portfolio
invests in. This portion is estimated to be between 0.80% and 1.04%
(expressed as a weighted average, including fee waiver and/or
reimbursement commitments that will expire in May or July 2000), and is
based on:
o the amount the Portfolio expects to invest in each Fund, based on
the target allocation
o each Fund's annualized expense ratio for the period ended March 31,
1999, adjusted as necessary to reflect current service provider fees
13
<PAGE>
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE PORTFOLIO'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Portfolio with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary B Shares of the Portfolio for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Portfolio
o your investment has a 5% return each year
o the Portfolio's operating expenses remain the same as shown above
o the Portfolio's indirect expenses remain at the average of the range
as shown above for the 1 year example, and at the weighted average
excluding fee waivers and/or reimbursements for the 3, 5 and 10 year
examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary B Shares $180 $563 $972 $2,113
</TABLE>
14
<PAGE>
ABOUT THE LIFEGOAL PORTFOLIOS
- --------------------------------------------------------------------------------
[GRAPHIC]
ABOUT THE SUB-ADVISER
TRADESTREET IS THIS PORTFOLIO'S SUB-ADVISER. TIMOTHY P. BEYER AND
C. THOMAS CLAPP ARE ITS PORTFOLIO MANAGERS AND MAKE THE DAY-TO-DAY
INVESTMENT DECISIONS FOR THE PORTFOLIO.
[GRAPHIC]
YOU'LL FIND MORE ABOUT TRADESTREET, MR. BEYER
AND MR. CLAPP ON PAGE 26.
[GRAPHIC]
ABOUT THE UNDERLYING NATIONS FUNDS
YOU'LL FIND MORE INFORMATION ABOUT THE FUNDS THE PORTFOLIO INVESTS
IN, INCLUDING THEIR OBJECTIVES AND STRATEGIES, IN ABOUT THE
NATIONS FUNDS AND IN THE SAI.
LifeGoal Income and Growth Portfolio
[GRAPHIC]
INVESTMENT OBJECTIVE
This Portfolio seeks current income and modest growth to protect
against inflation and to preserve purchasing power.
[GRAPHIC]
INVESTMENT STRATEGIES
This Portfolio normally invests most of its assets in Primary A Shares
of Nations Funds Fixed Income Funds, but may also invest in Nations
Funds Equity Funds, and Nations Funds Money Market Funds.
The portfolio managers use asset allocation as their principal investment
approach. They:
o allocate assets among Fund categories, within the target allocations
set for the Portfolio. They base their allocations on the
Portfolio's investment objective, historical returns for each asset
class and on their outlook for the economy
o choose individual Funds within each category and the amount they
will allocate to each, looking at each Fund's historical returns, as
well as the expected performance of the mix of Funds
o review the allocations to Fund categories and individual Funds at
least monthly, and may change these allocations when they believe
it's appropriate to do so
The actual amount in each Fund or category of Funds may vary from the
allocations set by the portfolio managers, depending on how the Funds perform,
and for other reasons. The portfolio managers may use various strategies to
try to manage how much the actual amount varies, and for how long. For
example:
o if there are more assets in a Fund category than in the target
allocation, the portfolio managers may allocate money coming into
the Portfolio to the other Fund categories
o if there are fewer assets in a Fund category than in the target
allocation, they may allocate money coming into the Portfolio to
that Fund category
The Portfolio normally sells a proportionate amount of the shares it owns in
each Nations Fund to meet its redemption requests.
15
<PAGE>
[GRAPHIC]
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS PORTFOLIO STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC]
YOU'LL FIND DETAILED INFORMATION ABOUT EACH FUND'S INVESTMENT
STRATEGIES AND RISKS IN ITS PROSPECTUS, AND IN ITS SAI. PLEASE
CALL US AT 1.800.321.7854 FOR A COPY.
<TABLE>
<CAPTION>
LifeGoal Income and Growth Target allocation for each
can invest in: Fund category:
<S> <C>
Large-capitalization domestic equity funds 10-30%
Nations Value Fund
Nations Blue Chip Fund
Nations Strategic Equity Fund
Nations Marsico Focused Equities Fund
Small-capitalization domestic equity fund 0-10%
Nations Small Company Growth Fund
International equity funds 0-10%
Nations International Value Fund
Nations International Equity Fund
Bond funds 50-90%
Nations Short-Term Income Fund
Nations Strategic Fixed Income Fund
Nations Diversified Income Fund
Money market funds 0-20%
Nations Prime Fund
</TABLE>
LifeGoal Income and Growth's target allocation for total investments in
equity funds is 30%. The portfolio managers can substitute or add other
Funds to this list at any time, including Funds introduced after the
date of this prospectus.
[GRAPHIC]
RISKS AND OTHER THINGS TO CONSIDER
LifeGoal Income and Growth Portfolio has the following risks:
o INVESTMENT STRATEGY RISK - The portfolio managers use an asset
allocation strategy to try to achieve the highest total return.
There is a risk that the mix of investments will not produce the
returns they expect, or that the Portfolio will fall in value. There
is also the risk that the Funds the Portfolio invests in will not
produce the returns the portfolio managers expect, or will fall in
value.
o STOCK MARKET RISK - The Portfolio allocates assets to Funds that
invest in stocks. The value of the stocks a Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o SMALL COMPANY RISK - The Portfolio allocates assets to Funds that
may invest in smaller companies. Stocks of smaller companies tend to
have greater price swings than stocks of larger companies because
they trade less frequently and in lower volumes. These securities
may have a higher potential for gains, but also carry more risk.
16
<PAGE>
o FOREIGN INVESTMENT RISK - The Portfolio allocates assets to Funds
that invest in FOREIGN SECURITIES. Foreign investments may be
riskier than U.S. investments because of political and economic
conditions, changes in currency exchange rates, the implementation
of the Euro, foreign controls on investment, difficulties selling
some securities and lack of or limited financial information.
Withholding taxes may also apply to some foreign investments. Funds
that invest in securities of companies in emerging markets have high
growth potential, but can be more volatile than securities in more
developed markets.
o FUTURES RISK - Some Funds the Portfolio invests in may use FUTURES
to help manage LIQUIDITY or to hedge portfolio risk. There is a risk
that this could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o INTEREST RATE RISK - The Portfolio allocates assets to Funds that
may invest in FIXED INCOME SECURITIES. The prices of fixed income
securities will tend to fall when interest rates rise. In general,
fixed income securities with longer terms tend to fall more in value
when interest rates rise than fixed income securities with shorter
terms.
o CREDIT RISK - A Fund that invests in fixed income securities could
lose money if the issuer of a fixed income security is unable to pay
interest or repay principal when it's due. Credit risk usually
applies to most fixed income securities, but generally is not a
factor for U.S. GOVERNMENT OBLIGATIONS.
o REBALANCING POLICY - The actual amount in each Fund or category of
Funds may vary from the allocations set by the portfolio managers.
This could continue for some time.
[GRAPHIC]
MANY THINGS AFFECT A PORTFOLIO'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE PORTFOLIO'S HOLDINGS, AND
PORTFOLIO EXPENSES.
[GRAPHIC]
A LOOK AT THE PORTFOLIO'S PERFORMANCE
The following bar chart and table show you how the Portfolio has
performed in the past, and can help you understand the risks of
investing in the Portfolio. A PORTFOLIO'S PAST PERFORMANCE IS NO
GUARANTEE OF HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURNS (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Portfolio's Primary
B Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[GRAPHIC TABLE APPEARS HERE]
1996 1997 1998
---- ---- ----
2.08% 8.73% 10.17%
* Return is from inception (10-15-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF SEPTEMBER 30, 1999: 0.97%
17
<PAGE>
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 6.23%
Worst: 3rd quarter 1998: -2.33%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Portfolio's average annual total return for each
period, compared with the S&P 500 and the LEHMAN AGGREGATE BOND INDEX.
The S&P 500 is an unmanaged index of 500 widely held common stocks,
weighted by market capitalization. The Lehman Aggregate Bond Index is
an index of fixed income securities issued by the U.S. government and
its agencies, and by corporations. These indexes are not available for
investment.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Primary B Shares 10.17% 9.52%
S&P 500 28.58% 31.43%
Lehman Aggregate Bond Index 8.69% 8.82%
</TABLE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A
PORTFOLIO'S ASSETS AND FROM THE ASSETS OF THE NATIONS FUNDS THE
PORTFOLIO INVESTS IN.
[GRAPHIC]
WHAT IT COSTS TO INVEST IN THE PORTFOLIO
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Portfolio.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Primary B Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from the Portfolio's assets)
Management fees 0.25%
Shareholder administration fees(1) 0.60%
----
Total annual Portfolio operating expenses 0.85%
====
</TABLE>
(1) Shareholder administration fees of 0.10% are voluntarily waived on
Primary B Shares; however, there is no guarantee that these waivers
will continue for any specified period of time. This waiver is not
reflected in the table above.
INDIRECT EXPENSES
The Portfolio's annual operating expenses include a portion of the
annual Fund operating expenses of the Nations Funds the Portfolio
invests in. This portion is estimated to be between 0.48% and 0.93%
(expressed as a weighted average, including fee waiver and/or
reimbursement commitments that will expire in May or July 2000), and is
based on:
o the amount the Portfolio expects to invest in each Fund, based on
the target allocation
o each Fund's annualized expense ratio for the period ended March 31,
1999, adjusted as necessary to reflect current service provider fees
18
<PAGE>
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE PORTFOLIO'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Portfolio with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary B Shares of the Portfolio for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Portfolio
o your investment has a 5% return each year
o the Portfolio's operating expenses remain the same as shown above
o the Portfolio's indirect expenses remain at the average of the range
as shown above for the 1 year example, and at the weighted average
excluding fee waivers and/or reimbursements for the 3, 5 and 10 year
examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary B Shares $158 $506 $879 $1,926
</TABLE>
19
<PAGE>
About the Nations Funds
The table starting on the next page is a brief overview of the objectives and
principal investments of the Nations Funds the LifeGoal Portfolios invest in.
Each Portfolio invests in a different mix of Nations Funds. You'll find the
mix of Nations Funds and target allocations for each Portfolio starting on
page 5.
The portfolio managers can substitute or add other Funds to this table at any
time, including Funds introduced after the date of this prospectus.
FOR MORE INFORMATION
You'll find more detailed information about each Fund's investment strategies
and risks in its prospectus and in its SAI. Please call us at 1.800.321.7854
for copies.
20
<PAGE>
<TABLE>
<CAPTION>
The Fund's investment objective What the Fund invests in
---------------------------------------- ----------------------------------------------------
<S> <C>
EQUITY FUNDS Growth of capital by investing in o at least 65% of its assets in common stocks of
Nations Value Fund companies that are believed to be U.S. companies. The Fund generally invests in
undervalued. companies in a broad range of industries with
market capitalizations of at least $1 billion and
daily trading volumes of at least $3 million
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Blue Chip Fund Long-term capital appreciation through Nations Blue Chip Master portfolio. The Master
investments in blue chip stocks. Portfolio invests:
o at least 65% of its assets in blue chip stocks
o primarily in blue chip stocks that are
included in the S&P 500 Index
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Strategic Equity Fund Long-term, after-tax returns by investing At least 65% of its assets in common stocks of
in a diversified portfolio of common companies selected from most major industry
stocks. sectors.
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Marsico Focused Equities Long-term growth of capital. Nations Marsico Focused Equities Master
Fund Portfolio. The Master Portfolio invests:
o at least 65% of its assets in common stocks of
large companies. The Master Portfolio, which is
non-diversified, generally holds a core position
of 20 to 30 common stocks
o up to 25% of its assets in foreign securities
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Small Company Growth Long-term capital growth by investing o at least 65% of its assets in companies with a
Fund primarily in equity securities. market capitalization of $1 billion or less. The
Fund usually holds 75 to 130 securities, which
include common stocks, preferred stocks and
convertible securities like warrants, rights and
convertible debt
- ------------------------------------------------------------------------------------------------------------------------------------
International Funds Long-term capital appreciation by o at least 65% of its assets in foreign companies
Nations International Value Fund investing primarily in equity securities of anywhere in the world that have a market
foreign issuers, including emerging capitalization of more than $1 billion at the time
markets countries. of investment. The Fund typically invests in at
least three countries other than the United
States at any one time
o primarily in common stocks, preferred stocks,
convertible securities, either directly or
indirectly through closed-end investment
companies and depositary receipts
- ------------------------------------------------------------------------------------------------------------------------------------
Nations International Equity Fund Long-term capital growth by investing Nations International Equity Master Portfolio. The
primarily in equity securities of Master Portfolio invests:
non-United States companies in Europe, o at least 65% of its assets in established
Australia, the Far East and other regions, companies located in at least three countries
including developing countries. other than the United States. The investment
managers select countries, including emerging
market or developing countries, that they
believe have the potential for growth
o primarily in equity securities, which may
include equity interests in foreign investment
funds or trusts, convertible securities, real
estate investment trust securities and
epositary receipts
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
The Fund's investment objective What the Fund invests in
---------------------------------------- ----------------------------------------------------
<S> <C>
FIXED INCOME FUNDS High current income consistent with o at least 65% of its total assets in investment
Nations Short-Term Income Fund minimal fluctuations of principal. grade fixed income securities. The portfolio
management team may choose unrated
securities if it believes they are of comparable
quality to investment grade securities at the
time of investment
o securities are principally corporate debt
securities, including bonds, notes and
debentures, mortgage-related securities issued
by governments, asset-backed securities and
U.S. government obligations
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Strategic Fixed Income Total return by investing in investment o at least 65% of its assets in investment grade
Fund grade fixed income securities. fixed income securities. The portfolio
management team may choose unrated
securities if it believes they are of comparable
quality to investment grade securities at the
time of investment
o securities are principally corporate debt
securities, including bonds, notes and
debentures, U.S. government obligations,
foreign debt securities denominated in U.S.
dollars, mortgage-related securities issued by
governments, asset-backed securities and
municipal securities
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Diversified Income Fund Total return with an emphasis on current o at least 65% of its assets in investment grade
income by investing in a diversified debt securities, including corporate debt
portfolio of fixed income securities. securities, U.S. government obligations, foreign
debt securities denominated in U.S. dollars or
foreign currencies, and mortgage-related
securities issued by governments and
non-government issuers
o up to 35% of its assets in lower-quality fixed
income securities ("junk bonds" or "high yield
bonds") rated "B" or better by Moody's or S&P.
The portfolio management team may choose
unrated securities if it believes they are of
comparable quality at the time of investment
- ------------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND Maximization of current income to the o money market instruments, including
Nations Prime Fund extent consistent with the preservation commercial paper, bank obligations, short-term
of capital and the maintenance of debt securities, guaranteed investment
liquidity. contracts, short-term taxable municipal
securities, repurchase agreements secured by
first-tier securities or U.S. government
obligations
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
[GRAPHIC]
YOU'LL FIND SPECIFIC INFORMATION ABOUT EACH PORTFOLIO'S PRINCIPAL
INVESTMENTS, STRATEGIES AND RISKS IN THE DESCRIPTIONS STARTING ON
PAGE 5.
[GRAPHIC]
Other important information
The following are some other risks and information you should consider before
you invest:
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment
objective and certain investment policies of any Portfolio can be
changed without shareholder approval. Other investment policies may
be changed only with shareholder approval.
o HOLDING OTHER KINDS OF INVESTMENTS - The Portfolios may hold
investments that aren't part of their principal investment
strategies. Please refer to the SAI for more information. The
portfolio managers or management team can also choose not to invest
in specific securities described in this prospectus and in the SAI.
o FOREIGN INVESTMENT RISK - Funds that invest in FOREIGN SECURITIES
may be affected by changes in currency exchange rates and the costs
of converting currencies; the implementation of the Euro; foreign
government controls on foreign investment, repatriation of capital,
and currency and exchange; foreign taxes; inadequate supervision and
regulation of some foreign markets; difficulties selling some
investments, which may increase volatility; different settlement
practices or delayed settlements in some markets; difficulty getting
complete or accurate information about foreign companies; less
strict accounting, auditing and financial reporting standards than
those in the U.S.; political, economic or social instability; and
difficulty enforcing legal rights outside the U.S.
o INVESTING DEFENSIVELY - A Portfolio may temporarily hold up to 100%
of its assets in Nations Prime Fund, a money market fund, to try to
protect it during a market or economic downturn or because of
political or other conditions. A Portfolio may not achieve its
investment objective while it is investing defensively.
23
<PAGE>
o PORTFOLIO TURNOVER - A Portfolio or Fund that replaces -- or turns
over -- more than 100% of its investments in a year is considered to
trade frequently. Frequent trading can result in larger
distributions of short-term CAPITAL GAINS to shareholders. These
gains are taxable at higher rates than long-term capital gains.
Frequent trading can also mean higher brokerage and other
transaction costs, which could reduce the Portfolio's returns. The
Portfolios generally buy securities for capital appreciation,
investment income, or both, and don't engage in short-term trading.
You'll find the portfolio turnover rate for each Portfolio in
FINANCIAL HIGHLIGHTS.
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
All of the Portfolios' primary service providers have confirmed that
they have been working to make the necessary changes to their
systems, and that they expect them to be adapted in time. There is
no guarantee, however, that their computer systems will be ready by
the year 2000. If their computer systems are not ready in time,
there could be a negative effect on Portfolio operations.
A Portfolio's performance could also be affected if the Funds it
holds decrease in value because of year 2000 issues. Funds that
invest in foreign securities may be at greater risk because the
computer systems of foreign issuers, governments or other entities
may not be ready for the year 2000.
24
<PAGE>
[GRAPHIC]
How the Portfolios are managed
[GRAPHIC]
BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in the
Nations Funds family, including the LifeGoal Portfolios described in this
prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation. Nations Funds
pays BAAI an annual fee for its investment advisory services. The fee is
calculated daily based on the average net assets of each Portfolio and is paid
monthly. BAAI uses part of this money to pay investment sub-advisers for the
services they provide to each Portfolio. BAAI has also agreed to pay all other
Portfolio expenses, except taxes, brokerage fees and commissions,
extraordinary expenses, and any distribution (12b-1), shareholder servicing or
shareholder administration fees.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Portfolios' last fiscal
year, after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee fiscal year
<S> <C> <C>
Nations LifeGoal Growth Portfolio 0.25% 0.25%
Nations LifeGoal Balanced Growth Portfolio 0.25% 0.25%
Nations LifeGoal Income and Growth Portfolio 0.25% 0.25%
</TABLE>
25
<PAGE>
INVESTMENT SUB-ADVISERS
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Portfolios. TradeStreet functions under the supervision of BAAI and the
Boards of Directors of Nations Funds.
[GRAPHIC]
TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES, and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in the
Nations Funds family. TradeStreet generally takes a team approach to
investment management. Each team or individual portfolio manager has access to
the latest technology and analytical resources.
TradeStreet is the investment sub-adviser to all of the LifeGoal Portfolios.
Timothy P. Beyer and C. Thomas Clapp are co-portfolio managers, responsible
for making the day-to-day investment decisions for each Portfolio.
MR. BEYER is a member of TradeStreet's Value Management Team. In this role, he
manages many separate accounts and assists in the team's management of Nations
Value Fund. Before joining TradeStreet in 1995, he was an equity analyst for
NationsBank's Investment Management Group and a corporate bond analyst with
NationsBank. He has a BS in Finance from East Carolina University and is a
Chartered Financial Analyst. He also serves on the Council of Examiners for
the Association of Investment Management and Research, and is a member of the
North Carolina Society of Financial Analysts.
MR. CLAPP is chief equity investment officer at TradeStreet, and previously
was director of its Equity Management Group. Before joining TradeStreet in
1995, he was senior vice president and director of research for NationsBank's
Investment Management Group, and senior portfolio manager with Royal Insurance
Group. He began working in the investment community in 1984. He has a BA in
Economics from the University of North Carolina at Chapel Hill and an MBA from
the University of South Carolina. He is a Chartered Financial Analyst, and a
member of the Association for Investment Management and Research and the North
Carolina Society of Financial Analysts.
26
<PAGE>
TradeStreet is also the investment sub-adviser to the Nations Funds that
appear in the table below. The table tells you which internal TradeStreet
asset management team is responsible for making the day-to-day investment
decisions for each Fund.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Value Fund Value Management Team
Nations Small Company Growth Fund Strategic Growth Management Team
Nations Short-Term Income Fund Fixed Income Management Team
Nations Strategic Fixed Income Fund Fixed Income Management Team
Nations Diversified Income Fund Fixed Income Management Team
Nations Prime Fund Taxable Money Market Management Team
</TABLE>
[GRAPHIC]
MARSICO CAPITAL
MANAGEMENT, LLC
1200 17TH STREET
SUITE 1300
DENVER, COLORADO 80202
MARSICO CAPITAL MANAGEMENT, LLC
Marsico Capital is a full service investment advisory firm founded by Thomas
F. Marsico in September 1997. It is a registered investment adviser,
specializing in large capitalization stocks, and currently has $6.5 billion in
assets under management.
Marsico Management Holdings, LLC, a wholly-owned subsidiary of Bank of America
Corporation, indirectly owns 50% of the equity of Marsico Capital.
Marsico Capital is the investment sub-adviser to Nations Marsico Focused
Equities Master Portfolio.
THOMAS F. MARSICO, Chairman and Chief Executive Officer of Marsico Capital, is
the portfolio manager responsible for making the day-to-day investment
decisions for the Master Portfolio. Mr. Marsico was an executive vice
president and portfolio manager at Janus Capital Corporation from 1988 until
he formed Marsico Capital in September 1997. He has more than 20 years of
experience as a securities analyst and portfolio manager.
27
<PAGE>
[GRAPHIC]
BANK OF AMERICA INVESTMENT
MANAGEMENT
100 NORTH BROADWAY
ST. LOUIS, MISSOURI 63102
BANK OF AMERICA INVESTMENT MANAGEMENT
BAIM, a division of Bank of America, is the investment sub-adviser to Nations
Strategic Equity Fund.
The Fund is managed by MICHAEL E. KENNEALLY, president and chief investment
officer of BAIM since 1997. He has managed the Fund since its inception on
October 2, 1998. Before joining BAIM, Mr. Kenneally was managing director at
Boatmen's Trust Company, in charge of fundamental and quantitative research,
small-capitalization, passive and international equity investment. He holds a
bachelor's degree in economics and an MBA in finance from the University of
Missouri.
[GRAPHIC]
BRANDES INVESTMENT
PARTNERS, L.P.
12750 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
BRANDES INVESTMENT PARTNERS, L.P.
Founded in 1974, Brandes is an investment advisory firm with 46 investment
professionals who manage more than $30 billion in assets. Brandes uses a
value-oriented approach to managing international investments, seeking to
build wealth by buying high quality, undervalued stocks.
Brandes is the investment sub-adviser to Nations International Value Fund.
Brandes' Large Cap Investment Committee is responsible for making the
day-to-day investment decisions for the Fund.
[GRAPHIC]
CHICAGO EQUITY PARTNERS
CORPORATION
231 SOUTH LASALLE
CHICAGO, ILLINOIS 60697
CHICAGO EQUITY PARTNERS CORPORATION
Chicago Equity is a registered investment adviser and a wholly-owned
subsidiary of Bank of America. Chicago Equity is the investment sub-adviser to
Nations Blue Chip Master Portfolio.
Chicago Equity's Equity Management Team is responsible for making the
day-to-day investment decisions for Nations Blue Chip Master Portfolio.
[GRAPHIC]
GARTMORE GLOBAL PARTNERS
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
GARTMORE GLOBAL PARTNERS
Gartmore is a global asset manager dedicated to serving the needs of U.S.
based investors. Gartmore was formed in 1995 as a registered investment
adviser and manages more than $1 billion in assets.
Gartmore is a joint venture structured as a general partnership between NB
Partner Corp., a wholly-owned subsidiary of Bank of America, and Gartmore U.S.
Limited, an indirect, wholly-owned subsidiary of Gartmore Investment
Management plc, a UK holding company for a leading UK-based international fund
management group of companies.
Gartmore follows a growth philosophy, which is reflected in its active
management of market allocation and stock selection.
Gartmore is one of three investment sub-advisers to Nations International
Equity Master Portfolio.
28
<PAGE>
Gartmore's portion of Nations International Equity Master Portfolio is
co-managed by six portfolio managers:
CHRISTOPHER PALMER has been responsible since May 1999 for investments in
developing countries, and has been the principal portfolio manager of Nations
Emerging Markets Fund since that time. He joined Gartmore in 1995 and is a
senior investment manager on the Gartmore Emerging Markets Team. Before he
joined Gartmore, Mr. Palmer worked for Unifund, S.A., a private investment
bank, in its Mexico City and Hong Kong offices, and managed global
derivatives, credit and counterparty credit risk as vice president in the
Institutional Credit Department of Bear Stearns & Co. He graduated from
Colgate University in 1986 with a BA Honors degree in History and completed an
MBA in Finance at New York University in 1988. Mr. Palmer was awarded the CFA
designation by the Association of Investment Management and Research in 1993.
SEOK TEOH has been responsible since June 1998 for investments in Asia. Ms.
Teoh has been with Gartmore since 1990 as the London based manager of its Far
East Team. Previously, she managed four equity funds for Rothschild Asset
Management in Tokyo and Singapore, and was also responsible for Singaporean
and Malaysian equity sales at Overseas Union Bank Securities in Singapore. Ms.
Teoh is native to Singapore and is fluent in Mandarin and Cantonese. She
received an Economics degree from the University of Durham.
JOHN STEWART has shared responsibility with Nick Reid for investments in Japan
since August 1999. He is also senior investment manager for the Gartmore
Japanese Equities Team and is responsible for managing specialist
institutional portfolios and providing input to the global asset allocation
team in London. Mr. Stewart joined Gartmore in 1992, after starting his career
at the London office of Prudential Portfolio Managers. He graduated from
Loughborough University in 1991 with a BS Honors degree in Banking and
Finance. Mr. Stewart is also a member of the Institute of Investment
Management and Research, and the Chartered Institute of Bankers.
NICK REID has shared responsibility with John Stewart for investments in Japan
since August 1999. He has been investment manager for the Gartmore Japanese
Equities Team since he joined Gartmore in 1994 and has specific responsibility
for managing retail funds. Before he joined Gartmore, Mr. Reid was an United
Kingdom Smaller Companies Analyst with Panmure Gordon and a fund manager
covering Japanese and other Asian markets with Refuge Assurance. He graduated
from Cambridge University in 1989 with an honors degree in History. Mr. Reid
is also an associate member of the Institute of Investment Management and
Research.
STEPHEN JONES has been responsible for investments in Europe since 1998. He is
also head of Gartmore European Equities. Mr. Jones joined Gartmore in 1994 and
was appointed head of the European equity team in 1995. He began his career at
The Prudential in 1984, and became a European equities investment manager in
1987, focusing on France, Belgium and Switzerland. He graduated from
Manchester University in 1984 with an honors degree in Economics.
29
<PAGE>
STEPHEN WATSON has been responsible since June 1998 for allocating assets
among the various regions, and for determining investments in regions not
covered by the other portfolio managers. He was the sole portfolio manager of
Nations International Equity Fund from February 1995 to June 1998. Mr. Watson
joined Gartmore in 1993 as a global fund manager, and is the chief investment
officer of Gartmore Global Partners and a member of Gartmore's global policy
group. Before joining Gartmore, he was a director and global fund manager with
James Capel Fund Managers, London, as well as client service manager for
international clients. He was in Capel-Cure Myers' portfolio management
division from 1980 to 1987, and began his career in 1976 with Samuel Motagu.
He is a member of the Securities Institute.
[GRAPHIC]
INVESCO GLOBAL ASSET
MANAGEMENT (N.A), INC.
1315 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309
INVESCO GLOBAL ASSET MANAGEMENT (N.A), INC.
INVESCO is a division of INVESCO Global, a publicly traded investment
management firm located in London, England, and a wholly-owned subsidiary of
AMVESCAP PLC, a publicly traded UK financial holding company, which is also
located in London.
INVESCO is one of three investment sub-advisers to Nations International
Equity Master Portfolio. INVESCO's International Equity Portfolio Management
Team is responsible for making the day-to-day investment decisions for its
portion of the Master Portfolio.
[GRAPHIC]
PUTNAM INVESTMENT MANAGEMENT, INC.
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
PUTNAM INVESTMENT MANAGEMENT, INC.
Putnam is a wholly-owned subsidiary of Putnam Investments, Inc., which, except
for shares held by employees, is owned by Marsh & McLennan Companies.
Putnam is one of three investment sub-advisers to Nations International Equity
Master Portfolio. Putnam's Core International Equity Group is responsible for
making the day-to-day investment decisions for its portion of the Master
Portfolio.
[GRAPHIC]
STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
OTHER SERVICE PROVIDERS
The Portfolios are distributed and co-administered by Stephens Inc., a
registered broker/dealer. Stephens does not receive any fees for the
administrative services it provides to the Portfolios. The Portfolios pay
shareholder administration fees to BAAI or financial institutions for
providing services to investors.
BAAI is also co-administrator of the Portfolios, and assists in overseeing the
administrative operations of the Funds.
[GRAPHIC]
FIRST DATA INVESTOR
SERVICES GROUP, INC.
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
First Data Investor Services Group, Inc. is also the transfer agent for the
Portfolios' shares. Its responsibilities include processing purchases, sales
and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
30
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC]
WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC]
A BUSINESS DAY IS ANY DAY THAT THE NEW YORK STOCK EXCHANGE (NYSE)
IS OPEN. A BUSINESS DAY ENDS AT THE CLOSE OF REGULAR TRADING ON
THE NYSE, USUALLY AT 4:00 P.M. EASTERN TIME. IF THE NYSE CLOSES
EARLY, THE BUSINESS DAY ENDS AS OF THE TIME THE NYSE CLOSES.
THE NYSE IS CLOSED ON WEEKENDS AND ON THE FOLLOWING NATIONAL
HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER KING, JR. DAY, PRESIDENTS'
DAY, GOOD FRIDAY, MEMORIAL DAY, INDEPENDENCE DAY, LABOR DAY,
THANKSGIVING DAY AND CHRISTMAS DAY.
[GRAPHIC]
Buying, selling and exchanging shares
This prospectus offers Primary B Shares of the Portfolios. Here are some
general rules about this class of shares:
o Primary B Shares are generally available only to financial
institutions and intermediaries that sign an account with us or
Stephens. These include:
o Bank of America and certain of its affiliates
o brokerage firms
o other financial institutions
o The minimum initial investment is $1,000.
o There is no minimum amount for additional investments.
o There are no sales charges for buying, selling or exchanging these
shares.
You'll find more information about buying, selling and exchanging Primary B
Shares on the pages that follow. You should also ask your financial
institution or intermediary about its limits, fees and policies for buying,
selling and exchanging shares, which may be different from those described
here, and about its related programs or services.
The Portfolios also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. Please contact your
investment professional, or call us at 1.800.321.7854 if you have any
questions or you need help placing an order.
HOW SHARES ARE PRICED
All transactions are based on the price of a Portfolio's shares -- or its net
asset value per share. We calculate net asset value per share for each class
of each Portfolio at the end of each business day. The net asset value per
share of a Portfolio is based on the net asset value per share of the Nations
Funds the Portfolio invests in.
We calculate the net asset value for each class of a Fund by determining the
value of the Fund's assets in the class and then subtracting its liabilities.
Next, we divide this amount by the number of shares that investors are holding
in the class.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. The prices reported on stock exchanges and securities
markets around the world are usually used to value securities in a Fund. If
prices aren't readily available, we'll base the price of a security on its
fair market value. We use the amortized cost method, which approximates market
value, to value short-term investments maturing in 60 days or less.
International markets may be open on days when U.S. markets are closed. The
value of foreign securities owned by a Fund could change on days when Fund
shares may not be bought or sold.
31
<PAGE>
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents before the end of a business
day (usually 4:00 p.m. Eastern time, unless the NYSE closes early) will
receive that day's net asset value per share. Orders received after the end of
a business day will receive the next business day's net asset value per share.
The business day that applies to your order is also called the TRADE DATE. We
may refuse any order to buy or exchange shares. If this happens, we'll return
any money we've received.
[GRAPHIC]
BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Primary B Shares at net asset value per share.
o If we don't receive payment within three business days of receiving
an order, we'll refuse the order. We'll return any payment received
for orders that we refuse.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for ensuring that we receive
payment on time.
o Shares purchased are recorded on the books of the Portfolio. We
don't issue certificates.
o Financial institutions and intermediaries are responsible for
recording the beneficial ownership of the shares of their clients,
and for reporting this ownership on account statements they send to
their clients.
[GRAPHIC]
SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire within
three business days after Stephens, First Data or their agents
receive the order.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for depositing the sale
proceeds to their accounts on time.
o If you paid for your shares with a check that wasn't certified,
we'll hold the sale proceeds when you sell those shares for at least
15 days after the trade date of the purchase, or until the check has
cleared.
o Under certain circumstances allowed under the Investment Company Act
of 1940 (1940 Act), we can pay investors in securities or other
property when they sell shares.
o We can delay payment of the sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information on these restrictions, please contact your retirement
plan administrator.
32
<PAGE>
We may sell shares:
o if the value of an investor's account falls below $500. We'll
provide 60 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the
shares for a client under arrangements it has made with its clients
o under certain other circumstances allowed under the 1940 Act
[GRAPHIC]
YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE PORTFOLIO OR FUND YOU'RE EXCHANGING INTO. PLEASE
READ ITS PROSPECTUS CAREFULLY.
[GRAPHIC]
EXCHANGING SHARES
Investors can sell shares of a Portfolio to buy shares of another
Portfolio or Nations Fund. This is called an exchange, and may be
appropriate if investment goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Primary B Shares of a Portfolio for Primary B
Shares of any other Portfolio or Nations Fund.
o The rules for buying shares of a Portfolio or Fund, including any
minimum investment requirements, apply to exchanges into that
Portfolio or Fund.
o Exchanges can only be made into a Portfolio or Fund that is legally
sold in the investor's state of residence.
o Exchanges can generally only be made into a Portfolio or Fund that
is accepting investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
33
<PAGE>
[GRAPHIC]
How selling and servicing agents are paid
[GRAPHIC]
THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU
IS ALSO SOMETIMES REFERRED TO AS A SELLING AGENT.
THE SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO
YOUR ACCOUNT.
Selling and servicing agents usually receive compensation when you invest in
the Portfolios. The kind and amount of the compensation depends on the share
class you invest in. Selling agents typically pay a portion of the
compensation they receive to their investment professionals.
SHAREHOLDER ADMINISTRATION FEES
BAAI, its affiliates and/or other financial institutions and intermediaries
may receive a maximum annual shareholder administration fee of up to 0.60% of
the average daily net assets of Primary B Shares of the Portfolios under a
shareholder administration plan.
Fees are calculated daily and deducted monthly. Because these fees are paid
out of the Portfolios' assets on an ongoing basis they will increase the cost
of your investment over time, and may cost you more than any sales charge you
may pay.
The Portfolios pay these fees to eligible financial institutions for as long
as the plan continues. We may reduce or discontinue payments at any time.
OTHER COMPENSATION
Selling and servicing agents may also receive non-cash compensation like trips
to sales seminars or vacation destinations, tickets to sporting events,
theater or other entertainment, opportunities to participate in golf or other
outings and gift certificates for meals or merchandise.
This compensation, which is not paid by the Portfolios, is discretionary and
may be available only to selected selling and servicing agents. For example,
Stephens sometimes sponsors promotions involving Banc of America Investments,
Inc., an affiliate of BAAI, and certain other selling or servicing agents.
Selected selling and servicing agents may also receive compensation for
opening a minimum number of accounts.
BAAI may pay amounts from its own assets to Stephens or to selling or
servicing agents for services they provide.
34
<PAGE>
[GRAPHIC]
Distributions and taxes
[GRAPHIC]
THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
PORTFOLIO -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and
dividends paid on COMMON STOCKS.
o A fund can also have CAPITAL GAIN if the value of its investments
increases. If a fund sells an investment at a gain, the gain is
realized. If a fund continues to hold the investment, any gain is
unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gain to its shareholders. The
Portfolios intend to pay out a sufficient amount of their income and capital
gain to their shareholders so the Portfolios won't have to pay any income tax.
When a Portfolio makes this kind of a payment, it's split equally among all
shares, and is called a distribution.
All of the Portfolios distribute net investment income quarterly, and any net
realized capital gain at least once a year.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Portfolio usually pay different distribution
amounts, because each class has different expenses. Each time a distribution
is made, the net asset value per share of the share class is reduced by the
amount of the distribution.
We'll automatically reinvest distributions in additional shares of the same
Portfolio unless you tell us you want to receive your distributions in cash.
You can do this by writing to us at the address on the back cover or by
calling us at 1.800.321.7854.
We generally pay cash distributions within five business days after the end of
the month, quarter or year in which the distribution was made. If you sell all
of your shares, we'll pay any distribution that applies to those shares in
cash within five business days after the sale was made.
If you buy shares of a Portfolio shortly before it makes a distribution, you
will, in effect, receive part of your purchase back in the distribution, which
is subject to tax. Similarly, if you buy shares of a Portfolio that holds
securities with unrealized capital gain, you will, in effect, receive part of
your purchase back if and when the Portfolio sells those securities and
distributes the gain. This distribution is also subject to tax. Some
Portfolios have built up, or have the potential to build up, high levels of
unrealized capital gain.
35
<PAGE>
[GRAPHIC]
THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE PORTFOLIOS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC]
FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions that come from net investment income and any net short-term
capital gain (generally the excess of net short-term capital gain over net
long-term capital loss) generally are taxable to you as ordinary income.
Corporate shareholders may be able to exclude a portion of these distributions
from their taxable income.
Distributions that come from net capital gain (generally the excess of net
long-term capital gain over net short-term capital loss) generally are taxable
to you as net capital gain.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the
Portfolio. However, any distributions declared in October, November or
December of one year and distributed in January of the following year will be
taxable as if they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN)
and haven't certified that the TIN is correct and withholding
doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN
listed on your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup
withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
Your redemptions (including redemptions "in kind") and exchanges of Portfolio
or Fund shares will usually result in a taxable capital gain or loss to you,
depending on the amount you receive for your shares (or are deemed to receive
in the case of exchanges) and the amount you paid (or are deemed to have paid)
for them.
36
<PAGE>
[GRAPHIC]
Financial highlights
The financial highlights table is designed to help you understand how the
Portfolios have performed for the past five years. Certain information
reflects financial results for a single Portfolio share. The total investment
return line indicates how much an investment in the Portfolio would have
earned, assuming all dividends and distributions had been reinvested.
This information has been audited by PricewaterhouseCoopers LLP. The
independent accountant's report and Nations Funds financial statements are
incorporated by reference into the SAI. Financial highlights for Primary B
Shares of LifeGoal Income and Growth Portfolio are not provided because this
class of shares had not yet commenced operations during the period indicated.
Please see the back cover to find out how you can get a copy.
37
<PAGE>
LIFEGOAL GROWTH PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year ended Period ended
PRIMARY B SHARES 03/31/99 03/31/98*
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.49 $ 12.25
Net investment income/(loss) 0.00 0.01 (a)
Net realized and unrealized gain on investments 0.30 0.70
Net increase in net assets resulting from investment
operations 0.30 0.71
Distributions:
Distributions from net investment income -- ( 0.01)
Distributions in excess of net investment income ( 0.05) ( 0.25)
Distributions from net realized capital gains ( 0.60) ( 0.21)
Total distributions ( 0.65) ( 0.47)
Net asset value, end of period $ 12.14 $ 12.49
TOTAL RETURN++ 2.58% 6.24%
======================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 7 $ 6
Ratio of operating expenses to average net
assets+++ 0.75% 0.75%+
Ratio of net investment income to average net
assets ( 0.04)% 0.15%+
Portfolio turnover rate 159% 69%
</TABLE>
* LifeGoal Growth Portfolio Primary B Shares
commenced investment operations on September 19,
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 share method, which more
appropriately represents the per share data for the
period. LifeGoal Balanced Growth Portfolio
For a Share outstanding throughout the period
LIFEGOAL BALANCED GROWTH
PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year ended Period ended
PRIMARY B SHARES 03/31/99 03/31/98*
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.94 $ 10.95
Net investment income 0.23 0.16 (a)
Net realized and unrealized gain/(loss) on
investments 0.20 0.77
Net increase/(decrease) in net assets resulting from
investment operations 0.43 0.93
DISTRIBUTIONS:
Distributions from net investment income ( 0.22) ( 0.20)
Distributions in excess of net investment income -- ( 0.24)
Distributions from net realized capital gains ( 0.33) ( 0.50)
Total distributions ( 0.55) ( 0.94)
Net asset value, end of period $ 10.82 $ 10.94
TOTAL RETURN++ 4.15% 9.24%
======================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 276 $ 26
Ratio of operating expenses to average net
assets+++ 0.75% 0.75%+
Ratio of net investment income to average net
assets 2.27% 2.37%+
Portfolio turnover rate 121% 94%
</TABLE>
* LifeGoal Balanced Growth Portfolio Primary B Shares commenced investment
operations on August 4, 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.
38
<PAGE>
[GRAPHIC]
Terms used in this prospectus
ASSET-BACKED SECURITY - a debt security that gives you an interest in a pool
of assets that is collateralized or "backed" by one or more kinds of assets,
including real property, receivables or mortgages, generally issued by banks,
credit card companies or other lenders. Some securities may be issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities. Asset-backed securities typically make periodic payments,
which may be interest or a combination of interest and a portion of the
principal of the underlying assets.
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
CASH EQUIVALENTS - short-term, interest-bearing instruments, including
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities, bank obligations, asset-backed securities, foreign
government securities and commercial paper issued by U.S. and foreign issuers
which, at the time of investment, is rated at least Prime-2 by Moody's
Investor Services, Inc. (Moody's), A-2 by S&P, or F-1 by Fitch IBCA (Fitch).
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
CONVERTIBLE DEBT - a debt security that can be exchanged for common stock (or
another type of security) on a specified basis and date.
CONVERTIBLE SECURITY - a security that can be exchanged for common stock (or
another type of security) at a specified rate. Convertible securities include
convertible debt, rights and warrants.
CORPORATE OBLIGATION - a money market instrument issued by a corporation or
commercial bank.
39
<PAGE>
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
DEPOSITARY RECEIPTS - evidence of the deposit of a security with a custodian
bank. American Depositary Receipts (ADRs), for example, are certificates
traded in U.S. markets representing an interest of a foreign company. They
were created to make it possible for foreign issuers to meet U.S. security
registration requirements. Other examples include ADSs, GDRs and EDRs.
DIVIDEND YIELD - rate of return of dividends paid on a common or preferred
stock. It equals the amount of the annual dividend on a stock expressed as a
percentage of the stock's current market value.
DURATION - a measure used to estimate a security's or portfolio's sensitivity
to changes in interest rates. For example, if interest rates rise by one
percentage point, the share price of a fund with a duration of five years
would decline by about 5%. If interest rates fall by one percentage point, the
fund's share price would rise by about 5%.
EQUITY SECURITY - an investment that gives you an equity ownership right in a
company. Equity securities (or "equities") include common and preferred stock,
rights and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
FOREIGN SECURITY - a debt or equity security issued by a foreign company or
government.
FUNDAMENTAL ANALYSIS - a method of securities analysis that tries to evaluate
the intrinsic, or "true," value of a particular stock. It includes a study of
the overall economy, industry conditions and the financial condition and
management of a company.
FUTURES - a contract to buy or sell an asset or an index of securities at a
specified price on a specified future date. The price is set through a futures
exchange.
40
<PAGE>
INVESTMENT GRADE - a debt security that has been given a medium to high credit
rating (Baa or higher by Moody's, BBB or higher by S&P or a comparable rating
by other NRSROs) based on the issuer's ability to pay interest and repay
principal on time. The portfolio management team may consider an unrated debt
security to be investment grade if the team believes it is of comparable
quality. Please see the SAI for more information about credit ratings.
LEHMAN AGGREGATE BOND INDEX - an index made up of the Lehman
Government/Corporate Index, the Asset-Backed Securities Index and the
Mortgage-Backed Securities Index. These indexes include U.S. government agency
and U.S. Treasury securities, corporate bonds and mortgage-backed securities.
All dividends are reinvested.
LIQUIDITY - a measurement of how easily a security can be bought or sold at a
price that is close to its market value.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MORTGAGE-BACKED SECURITY OR MORTGAGE-RELATED SECURITY - a debt security that
gives you an interest in, and is backed by, a pool of residential mortgages
issued by the U.S. government or by financial institutions. The underlying
mortgages may be guaranteed by the U.S. government or one of its agencies,
authorities or instrumentalities. Mortgage-backed securities typically make
monthly payments, which are a combination of interest and a portion of the
principal of the underlying mortgages.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income is exempt from
federal income taxes and is generally exempt from state taxes if you live in
the state that issued the security. If you live in the municipality that
issued the security, interest income may also be exempt from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PREFERRED STOCK - a type of equity security that gives you a limited ownership
right in a company, with certain preferences or priority over common stock.
Preferred stock generally pays a fixed annual dividend. If the company goes
bankrupt, preferred shareholders generally receive their share of the
company's remaining assets before common shareholders and after bondholders
and other creditors.
41
<PAGE>
QUANTITATIVE ANALYSIS - an analysis of financial information about a company
or security to identify securities that have the potential for growth or are
otherwise suitable for a fund to buy.
REAL ESTATE INVESTMENT TRUST (REIT) - a portfolio of real estate investments
which may include office buildings, apartment complexes, hotels and shopping
malls, and real-estate-related loans orinterests.
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
RIGHT - a temporary privilege allowing investors who already own a common
stock to buy additional shares directly from the company at a specified price
or formula.
S&P 500(1) - Standard & Poor's 500 Composite Stock Price Index, an unmanaged
index of 500 widely held common stocks. It is not available for investment.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SENIOR SECURITY - a debt security that allows holders to receive their share
of a company's remaining assets in a bankruptcy before other bondholders,
creditors, and common and preferred shareholders.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
WARRANT - a certificate that gives you the right to buy common shares at a
specified price within a specified period of time.
(1)S&P has not reviewed any stock included in the S&P 500 for its investment
merit. S&P determines and calculates its index independently of the Funds and
is not a sponsor or affiliate of the Funds. S&P gives no information and makes
no statements about the suitability of investing in the Funds or the ability of
its index to track stock market performance. S&P makes no guarantees about the
index, any data included in it and the suitability of the index or its data for
any purpose. "Standard and Poor's" and "S&P 500" are trademarks of The
McGraw-Hill Companies, Inc.
42
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
[GRAPHIC]
Where to find more information
You'll find more information about the LifeGoal Portfolios in the following
documents:
[GRAPHIC]
ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about
Portfolio investments and performance, the financial statements and the
auditor's reports. The annual report also includes a discussion about
the market conditions and investment strategies that had a significant
effect on each Portfolio's performance during the period covered.
[GRAPHIC]
STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Portfolios and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Portfolios and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.321.7854
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file number:
[NATIONS FUNDS LOGO]
Nations LifeGoal Funds, Inc., 811-07745
NF-LGPROPB-11/99
<PAGE>
LIFEGOAL PORTFOLIOS
PROSPECTUS -- INVESTOR A, B AND C SHARES
NOVEMBER 15, 1999
LIFEGOAL PORTFOLIOS
LIFEGOAL GROWTH PORTFOLIO
LIFEGOAL BALANCED GROWTH PORTFOLIO
LIFEGOAL INCOME AND GROWTH PORTFOLIO
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
NOT FDIC
INSURED
------------------------
May Lose Value
------------------------
No Bank Guaranteed
------------------------
(Logo) Nations Funds
<PAGE>
AN OVERVIEW OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
[GRAPHIC]
TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST APPEAR
IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS PROSPECTUS.
[GRAPHIC]
YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 60.
YOUR INVESTMENT IN A PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N. A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE PORTFOLIOS AND THE UNDERLYING FUNDS.
This booklet, which is called a prospectus, tells you about Nations Funds
LifeGoal Portfolios. Please read it carefully because it contains information
that's designed to help you make informed investment decisions.
Unlike traditional mutual funds, which invest in individual securities, the
Portfolios invest in a mix of Nations Funds Equity, Fixed Income and Money
Market Funds using an asset allocation approach. This kind of mutual fund is
sometimes called a "fund of funds."
ABOUT ASSET ALLOCATION
Asset allocation is the process of creating a diversified portfolio by
investing in different asset classes -- for example, EQUITY SECURITIES, FIXED
INCOME SECURITIES and MONEY MARKET INSTRUMENTS -- in varying proportions.
The mix of asset classes and how much is invested in each may be the most
important factor in how a Portfolio performs and the amount of risk involved.
Each asset class, and market segments within a class, like large, mid- and
small capitalization stocks, has different return and risk characteristics, and
reacts in different ways to changes in the economy. An investment approach that
combines asset classes and market segments may help to reduce overall Portfolio
volatility.
ABOUT THE PORTFOLIOS
Each Portfolio has its own asset allocation strategy, which gives it
distinctive risk/return characteristics. The performance of each Portfolio
depends on many factors, including its allocation strategy and the performance
of the Nations Funds it invests in. In general, the more a LifeGoal Portfolio
allocates to Equity Funds, the greater the potential return and the greater the
risk of a decline in share price. The more a LifeGoal Portfolio allocates to
Fixed Income Funds, the greater the potential for price stability and the lower
the potential return. There's always a risk, however, that you'll lose money or
you may not earn as much as you expect.
LifeGoal Growth Portfolio focuses on long-term growth by normally allocating
all of its assets to a mix of Funds that invest primarily in equity securities.
Equities have the potential to provide higher returns than many other kinds of
investments, but they also tend to have the highest risk.
LifeGoal Balanced Growth Portfolio focuses on long-term growth by normally
allocating its assets to a balanced mix of Funds that invest in equity and
fixed income securities. Fixed income securities have the potential to increase
in value, because, when interest rates fall, the value of these securities
tends to rise. When interest rates rise, however, the value of these securities
tends to fall. Other things can also affect the value of fixed income
securities.
2
<PAGE>
LifeGoal Income and Growth Portfolio focuses on current income and modest
growth. It normally allocates most of its assets to Funds that invest in fixed
income securities, but may also allocate some assets to Funds that invest in
equity securities. Over time, the return on this Portfolio may be lower than
the return on the other Portfolios.
IS LIFEGOAL RIGHT FOR YOU?
When you're choosing a Portfolio to invest in, you should consider things like
your investment goals, how much risk you can accept and how long you're
planning to hold your investment.
The LifeGoal Portfolios may be suitable for you if:
o you have longer-term investment goals
o they're part of a balanced portfolio
They may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with equity and fixed income securities
o you have short-term investment goals
o you're looking for a regular stream of income
You'll find a discussion of each Portfolio's principal investments, strategies
and risks in the Portfolio descriptions that start on page 5.
FOR MORE INFORMATION
If you have any questions about the Portfolios, please call us at
1.800.321.7854 or contact your investment professional.
You'll find more information about the Portfolios in the Statement of
Additional Information (SAI). The SAI includes more detailed information about
each Portfolio's investments, policies, performance and management, among other
things. Please turn to the back cover to find out how you can get a copy.
3
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC]
BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI) IS THE INVESTMENT ADVISER TO
EACH OF THE PORTFOLIOS. BAAI IS RESPONSIBLE FOR THE OVERALL
MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
PORTFOLIO. BAAI AND NATIONS FUNDS HAVE ENGAGED A
SUB-ADVISER -- TRADESTREET INVESTMENT ASSOCIATES, INC.
(TRADESTREET), WHICH IS RESPONSIBLE FOR THE DAY-TO-DAY INVESTMENT
DECISIONS FOR EACH OF THE PORTFOLIOS.
[GRAPHIC]
YOU'LL FIND MORE ABOUT
BAAI AND TRADESTREET
STARTING ON PAGE 27.
<TABLE>
<S> <C>
[GRAPHIC] About the LifeGoal Portfolios
LIFEGOAL GROWTH PORTFOLIO 5
Sub-adviser: TradeStreet
- ----------------------------------------------------------
LIFEGOAL BALANCED GROWTH PORTFOLIO 10
Sub-adviser: TradeStreet
- ----------------------------------------------------------
LIFEGOAL INCOME AND GROWTH PORTFOLIO 16
Sub-adviser: TradeStreet
- ----------------------------------------------------------
ABOUT THE NATIONS FUNDS 22
- ----------------------------------------------------------
OTHER IMPORTANT INFORMATION 25
- ----------------------------------------------------------
HOW THE PORTFOLIOS ARE MANAGED 27
[GRAPHIC] About your investment
INFORMATION FOR INVESTORS
Choosing a share class 33
Buying, selling and exchanging shares 41
How selling and servicing agents are paid 50
Distributions and taxes 52
- ----------------------------------------------------------
FINANCIAL HIGHLIGHTS 54
- ----------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 60
- ----------------------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
4
<PAGE>
ABOUT THE LIFEGOAL PORTFOLIOS
- --------------------------------------------------------------------------------
[GRAPHIC]
ABOUT THE SUB-ADVISER
TRADESTREET IS THIS PORTFOLIO'S SUB-ADVISER. TIMOTHY P. BEYER AND
C. THOMAS CLAPP ARE ITS PORTFOLIO MANAGERS AND MAKE THE DAY-TO-DAY
INVESTMENT DECISIONS FOR THE PORTFOLIO.
[GRAPHIC]
YOU'LL FIND MORE ABOUT
TRADESTREET, MR. BEYER AND
MR. CLAPP ON PAGE 28.
[GRAPHIC]
ABOUT THE UNDERLYING NATIONS FUNDS
YOU'LL FIND MORE INFORMATION ABOUT THE FUNDS THE PORTFOLIO INVESTS
IN, INCLUDING THEIR OBJECTIVES AND STRATEGIES, IN ABOUT THE
NATIONS FUNDS AND IN THE SAI.
LifeGoal Growth Portfolio
[GRAPHIC] INVESTMENT OBJECTIVE
This Portfolio seeks capital appreciation through exposure to a
variety of equity market segments.
[GRAPHIC] INVESTMENT STRATEGIES
This Portfolio normally invests most of its assets in Primary A Shares
of Nations Funds Equity Funds.
The portfolio managers use asset allocation as their principal investment
approach. They:
o allocate assets among Fund categories, within the target allocations set
for the Portfolio. They base their allocations on the Portfolio's
investment objective, historical returns for each asset class and on their
outlook for the economy
o choose individual Funds within each category and the amount they will
allocate to each, looking at each Fund's historical returns, as well as
the expected performance of the mix of Funds
o review the allocations to Fund categories and individual Funds at least
monthly, and may change these allocations when they believe it's
appropriate to do so
The actual amount in each Fund or category of Funds may vary from the
allocations set by the portfolio managers, depending on how the Funds perform,
and for other reasons. The portfolio managers may use various strategies to try
to manage how much the actual amount varies, and for how long. For example:
o if there are more assets in a Fund category than in the target allocation,
the portfolio managers may allocate money coming into the Portfolio to the
other Fund categories
o if there are fewer assets in a Fund category than in the target
allocation, they may allocate money coming into the Portfolio to that Fund
category
The Portfolio normally sells a proportionate amount of the shares it owns in
each Nations Fund to meet its redemption requests.
5
<PAGE>
<TABLE>
<CAPTION>
LIFEGOAL GROWTH PORTFOLIO TARGET ALLOCATION FOR EACH
CAN INVEST IN: FUND CATEGORY:
<S> <C>
Large-capitalization domestic equity funds 40-75%
Nations Value Fund
Nations Blue Chip Fund
Nations Strategic Equity Fund
Nations Marsico Focused Equities Fund
Small-capitalization domestic equity fund 15-35%
Nations Small Company Growth Fund
International equity funds 10-30%
Nations International Value Fund
Nations International Equity Fund
</TABLE>
The portfolio managers can substitute or add other Funds to this list at
any time, including Funds introduced after the date of this prospectus.
[GRAPHIC]
YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN THIS PORTFOLIO
STARTING ON PAGE 25 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
LifeGoal Growth Portfolio has the following risks:
o INVESTMENT STRATEGY RISK - The portfolio managers use an asset
allocation strategy to try to achieve the highest total return.
There is a risk that the mix of investments will not produce the
returns they expect, or that the Portfolio will fall in value. There
is also the risk that the Funds the Portfolio invests in will not
produce the returns the portfolio managers expect, or will fall in
value.
[GRAPHIC]
YOU'LL FIND DETAILED INFORMATION ABOUT EACH FUND'S INVESTMENT
STRATEGIES AND RISKS IN ITS PROSPECTUS, AND IN ITS SAI. PLEASE
CALL US AT 1.800.321.7584 FOR A COPY.
o STOCK MARKET RISK - The Portfolio allocates assets to Funds that
invest in stocks. The value of the stocks a Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o SMALL COMPANY RISK - The Portfolio allocates assets to Funds that
may invest in smaller companies. Stocks of smaller companies tend to
have greater price swings than stocks of larger companies because
they trade less frequently and in lower volumes. These securities
may have a higher potential for gains, but also carry more risk.
o FOREIGN INVESTMENT RISK - The Portfolio allocates assets to Funds
that invest in FOREIGN SECURITIES. Foreign investments may be
riskier than U.S. investments because of political and economic
conditions, changes in currency exchange rates, the implementation
of the Euro, foreign controls on investment, difficulties selling
some securities and lack of or limited financial information.
Withholding taxes may also apply to some foreign investments. Funds
that invest in securities of companies in emerging markets have high
growth potential, but can be more volatile than securities in more
developed markets.
6
<PAGE>
o FUTURES RISK - Some Funds the Portfolio invests in may use FUTURES
to help manage LIQUIDITY or to hedge portfolio risk. There is a risk
that this could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o REBALANCING POLICY - The actual amount in each Fund or category of
Funds may vary from the allocations set by the portfolio managers.
This could continue for some time.
[GRAPHIC]
MANY THINGS AFFECT A PORTFOLIO'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE PORTFOLIO'S HOLDINGS, AND
PORTFOLIO EXPENSES.
[GRAPHIC] A LOOK AT THE PORTFOLIO'S PERFORMANCE
The following bar chart and table show you how the Portfolio has
performed in the past, and can help you understand the risks of
investing in the Portfolio. A PORTFOLIO'S PAST PERFORMANCE IS NO
GUARANTEE OF HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Portfolio's
Investor A Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and would
be lower if they did. Returns for Investor B and Investor C Shares are
different because they have their own expenses, pricing and sales
charges.
(Bar graph appears here. See table below for plot points.)
1996 1997 1998
3.50%* 14.57% 12.64%
*Return is from inception (10-15-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF SEPTEMBER 30, 1999: 5.12%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 23.55%
Worst: 3rd quarter 1998: -16.68%
</TABLE>
7
<PAGE>
[GRAPHIC]
THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998 The table shows
the Portfolio's average annual total return for each period, compared
with the S&P 500, an unmanaged index of 500 widely held COMMON STOCKS,
weighted by market capitalization. The index is not available for
investment.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Investor A Shares 6.19% 10.99%
Investor B Shares 6.83% 3.56%
Investor C Shares 10.68% 13.33%
S&P 500 28.58% 31.69%**
</TABLE>
**Return is from inception of Investor A Shares. Inception dates for
the other classes shown may vary.
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL PORTFOLIO OPERATING EXPENSES THAT ARE DEDUCTED FROM A
PORTFOLIO'S ASSETS AND FROM THE ASSETS OF THE NATIONS FUNDS THE
PORTFOLIO INVESTS IN.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE PORTFOLIO
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Portfolio.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases,
as a % of offering price 5.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from the Portfolio's assets)
Management fees 0.25% 0.25% 0.25%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
----- ------ ------
Total annual Fund operating expenses 0.50% 1.25% 1.25%
===== ====== ======
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 35 for details.
(2)This charge decreases over time. Please see page 36 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 37 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Portfolio. Please see page 35 for details.
8
<PAGE>
INDIRECT EXPENSES
The Portfolio's annual Fund operating expenses include a portion of
the annual Fund operating expenses of the Nations Funds the Portfolio
invests in. This portion is estimated to be between 1.00% and 1.17%
(expressed as a weighted average, including fee waiver and/or
reimbursement commitments that will expire in May or July 2000), and
is based on:
o the amount the Portfolio expects to invest in each Fund, based on
the target allocation
o each Fund's annualized expense ratio for the period ended March 31,
1999, adjusted as necessary to reflect current service provider fees
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE PORTFOLIO'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Portfolio with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Portfolio for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Portfolio
o your investment has a 5% return each year
o the Portfolio's operating expenses remain the same as shown in the
table above
o the Portfolio's indirect expenses remain at the average of the range
as shown above for the 1 year example, and at the weighted average
excluding fee waivers and/or reimbursements for the 3, 5 and 10 year
examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $728 $1,055 $1,404 $2,388
Investor B Shares $737 $1,037 $1,463 $2,517
Investor C Shares $337 $ 737 $1,263 $2,704
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $237 $737 $1,263 $2,517
Investor C Shares $237 $737 $1,263 $2,704
</TABLE>
9
<PAGE>
ABOUT THE LIFEGOAL PORTFOLIOS
- --------------------------------------------------------------------------------
[GRAPHIC]
ABOUT THE SUB-ADVISER
TRADESTREET IS THIS PORTFOLIO'S SUB-ADVISER. TIMOTHY P. BEYER AND
C. THOMAS CLAPP ARE THE PORTFOLIO MANAGERS AND MAKE THE DAY-TO-DAY
INVESTMENT DECISIONS FOR THE PORTFOLIO.
[GRAPHIC]
YOU'LL FIND MORE ABOUT TRADESTREET, MR. BEYER AND MR. CLAPP ON
PAGE 28.
[GRAPHIC]
ABOUT THE UNDERLYING NATIONS FUNDS
YOU'LL FIND MORE INFORMATION ABOUT THE FUNDS THE PORTFOLIO INVESTS
IN, INCLUDING THEIR OBJECTIVES AND STRATEGIES, IN ABOUT THE
NATIONS FUNDS AND IN THE SAI.
LifeGoal Balanced Growth Portfolio
[GRAPHIC] INVESTMENT OBJECTIVE
This Portfolio seeks total return through a balanced portfolio of
EQUITY and FIXED INCOME SECURITIES.
[GRAPHIC] INVESTMENT STRATEGIES
This Portfolio normally invests all of its assets in Primary A Shares
of a balanced mix of Nations Funds Equity and Fixed Income Funds.
The portfolio managers use asset allocation as their principal investment
approach. They:
o allocate assets among Fund categories, within the target allocations set for
the Portfolio. They base their allocations on the Portfolio's investment
objective, historical returns for each asset class and on their outlook for
the economy
o choose individual Funds within each category and the amount they will
allocate to each, looking at each Fund's historical returns, as well as the
expected performance of the mix of Funds
o review the allocations to Fund categories and individual Funds at least
monthly, and may change these allocations when they believe it's appropriate
to do so
The actual amount in each Fund or category of Funds may vary from the
allocations set by the portfolio managers, depending on how the Funds perform,
and for other reasons. The portfolio managers may use various strategies to try
to manage how much the actual amount varies, and for how long. For example:
o if there are more assets in a Fund category than in the target allocation,
the portfolio managers may allocate money coming into the Portfolio to the
other Fund categories
o if there are fewer assets in a Fund category than in the target allocation,
they may allocate money coming into the Portfolio to that Fund category
The Portfolio normally sells a proportionate amount of the shares it owns in
each Nations Fund to meet its redemption requests.
10
<PAGE>
<TABLE>
<CAPTION>
LIFEGOAL BALANCED GROWTH TARGET ALLOCATION FOR EACH
PORTFOLIO CAN INVEST IN: FUND CATEGORY:
<S> <C>
Large-capitalization domestic equity funds 20-40%
Nations Value Fund
Nations Blue Chip Fund
Nations Strategic Equity Fund
Nations Marsico Focused Equities Fund
Small-capitalization domestic equity fund 10-20%
Nations Small Company Growth Fund
International equity funds 5-15%
Nations International Value Fund
Nations International Equity Fund
Bond funds 40-60%
Nations Strategic Fixed Income Fund
Nations Diversified Income Fund
</TABLE>
The portfolio managers can substitute or add other Funds to this list
at any time, including Funds introduced after the date of this
prospectus.
[GRAPHIC]
YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN THIS PORTFOLIO
STARTING ON PAGE 25 AND IN THE SAI.
[GRAPHIC]
YOU'LL FIND DETAILED INFORMATION ABOUT EACH FUND'S INVESTMENT
STRATEGIES AND RISKS IN ITS PROSPECTUS, AND IN ITS SAI. PLEASE
CALL US AT 1.800.321.7854 FOR A COPY.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
LifeGoal Balanced Growth Portfolio has the following risks:
o INVESTMENT STRATEGY RISK - The portfolio managers use an asset
allocation strategy to try to achieve the highest total return.
There is a risk that the mix of investments will not produce the
returns they expect, or that the Portfolio will fall in value. There
is also the risk that the Funds the Portfolio invests in will not
produce the returns the portfolio managers expect, or will fall in
value.
o STOCK MARKET RISK - The Portfolio allocates assets to Funds that
invest in stocks. The value of the stocks a Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o SMALL COMPANY RISK - The Portfolio allocates assets to Funds that
may invest in smaller companies. Stocks of smaller companies tend to
have greater price swings than stocks of larger companies because
they trade less frequently and in lower volumes. These securities
may have a higher potential for gains, but also carry more risk.
11
<PAGE>
o FOREIGN INVESTMENT RISK - The Portfolio allocates assets to Funds
that invest in FOREIGN SECURITIES. Foreign investments may be
riskier than U.S. investments because of political and economic
conditions, changes in currency exchange rates, the implementation
of the Euro, foreign controls on investment, difficulties selling
some securities and lack of or limited financial information.
Withholding taxes may also apply to some foreign investments. Funds
that invest in securities of companies in emerging markets have high
growth potential, but can be more volatile than securities in more
developed markets.
o FUTURES RISK - Some Funds the Portfolio invests in may use FUTURES
to help manage LIQUIDITY or to hedge portfolio risk. There is a risk
that this could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o INTEREST RATE RISK - The Portfolio allocates assets to Funds that
may invest in fixed income securities. The prices of fixed income
securities will tend to fall when interest rates rise. In general,
fixed income securities with longer terms tend to fall more in value
when interest rates rise than fixed income securities with shorter
terms.
o CREDIT RISK - A Fund that invests in fixed income securities could
lose money if the issuer of a fixed income security is unable to pay
interest or repay principal when it's due. Credit risk usually
applies to most fixed income securities, but generally is not a
factor for U.S. GOVERNMENT OBLIGATIONS. Fixed income securities with
the lowest INVESTMENT GRADE rating or that aren't investment grade
are more speculative in nature than securities with higher ratings,
and they tend to be more sensitive to credit risk, particularly
during a downturn in the economy.
o REBALANCING POLICY - The actual amount in each Fund or category of
Funds may vary from the allocations set by the portfolio managers.
This could continue for some time.
12
<PAGE>
[GRAPHIC]
MANY THINGS AFFECT A PORTFOLIO'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE PORTFOLIO'S HOLDINGS, AND
PORTFOLIO EXPENSES.
[GRAPHIC] A LOOK AT THE PORTFOLIO'S PERFORMANCE
The following bar chart and table show you how the Portfolio has
performed in the past, and can help you understand the risks of
investing in the Portfolio. A PORTFOLIO'S PAST PERFORMANCE IS NO
GUARANTEE OF HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Portfolio's
Investor A Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, and would be
lower if they did. Returns for Investor B and Investor C Shares are
different because they have their own expenses, pricing and sales
charges.
(Bar graph appears here. See table below for plot points.)
1996 1997 1998
2.46%* 11.20% 11.66%
*Return is from inception (10-15-96) to 12-31-96.
[GRAPHIC]
YEAR-TO-DATE RETURN AS OF SEPTEMBER 30, 1999: 2.94%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 12.39%
Worst: 3rd quarter 1998: -8.96%
</TABLE>
[GRAPHIC]
THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEXES' RETURNS DO NOT REFLECT SALES CHARGES.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Portfolio's average annual total return for each
period, compared with the S&P 500 and the LEHMAN AGGREGATE BOND INDEX.
The S&P 500 is an unmanaged index of 500 widely held COMMON STOCKS,
weighted by market capitalization. The Lehman Aggregate Bond Index is an
index of fixed income securities issued by the U.S. government and its
agencies, and by corporations. These indexes are not available for
investment.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Investor A Shares 5.23% 8.57%
Investor B Shares 5.99% 6.58%
Investor C Shares 10.63% 11.31%
S&P 500 28.58% 31.69%**
Lehman Aggregate Bond Index 8.29% 8.75%**
</TABLE>
**Return is from inception of Investor A Shares. Inception dates for
the other classes shown may vary.
13
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL PORTFOLIO OPERATING EXPENSES THAT ARE DEDUCTED FROM A
PORTFOLIO'S ASSETS AND FROM THE ASSETS OF THE NATIONS FUNDS THE
PORTFOLIO INVESTS IN.
[GRAPHIC]
WHAT IT COSTS TO INVEST IN THE PORTFOLIO
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Portfolio.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases,
as a % of offering price 5.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from the Portfolio's assets)
Management fees 0.25% 0.25% 0.25%
Distribution (12-b1) and shareholder
servicing fees 0.25% 1.00% 1.00%
----- ------ ------
Total annual Fund operating expenses 0.50% 1.25% 1.25%
===== ====== ======
</TABLE>
(1)1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 35 for details.
(2)This charge decreases over time. Please see page 36 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997. Please see page 36 for details.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 37 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Portfolio. Please see page 35 for details.
INDIRECT EXPENSES
The Portfolio's annual Fund operating expenses include a portion of the
annual Fund operating expenses of the Nations Funds the Portfolio
invests in. This portion is estimated to be between 0.80% and 1.04%
(expressed as a weighted average, including fee waiver and/or
reimbursement commitments that will expire in May or July 2000), and is
based on:
o the amount the Portfolio expects to invest in each Fund, based
on the target allocation
o each Fund's annualized expense ratio for the period ended March
31, 1999, adjusted as necessary to reflect current service
provider fees
14
<PAGE>
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE PORTFOLIO'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Portfolio with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C
Shares of the Portfolio for the time periods indicated and then
sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Portfolio
o your investment has a 5% return each year
o the Portfolio's operating expenses remain the same as shown in
the table above
o the Portfolio's indirect expenses remain at the average of the
range as shown above for the 1 year example, and at the weighted
average excluding fee waivers and/or reimbursements for the 3, 5
and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $711 $1,005 $1,320 $2,211
Investor B Shares $720 $ 985 $1,377 $2,342
Investor C Shares $320 $ 685 $1,177 $2,532
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $220 $685 $1,177 $2,342
Investor C Shares $220 $685 $1,177 $2,532
</TABLE>
15
<PAGE>
ABOUT THE LIFEGOAL PORTFOLIOS
- --------------------------------------------------------------------------------
[GRAPHIC]
ABOUT THE SUB-ADVISER
TRADESTREET IS THIS PORTFOLIO'S SUB-ADVISER. TIMOTHY P. BEYER AND
C. THOMAS CLAPP ARE ITS PORTFOLIO MANAGERS AND MAKE THE DAY-TO-DAY
INVESTMENT DECISIONS FOR THE PORTFOLIO.
[GRAPHIC]
YOU'LL FIND MORE ABOUT TRADESTREET, MR. BEYER
AND MR. CLAPP ON PAGE 28.
[GRAPHIC]
ABOUT THE UNDERLYING NATIONS FUNDS
YOU'LL FIND MORE INFORMATION ABOUT THE FUNDS THE PORTFOLIO INVESTS
IN, INCLUDING THEIR OBJECTIVES AND STRATEGIES, IN ABOUT THE
NATIONS FUNDS AND IN THE SAI.
LifeGoal Income and Growth Portfolio
[GRAPHIC]
INVESTMENT OBJECTIVE
This Portfolio seeks current income and modest growth to protect against
inflation and to preserve purchasing power.
[GRAPHIC]
INVESTMENT STRATEGIES
This Portfolio normally invests most of its assets in Primary A Shares
of Nations Funds Fixed Income Funds, but may also invest in Nations
Funds Equity Funds, and Nations Funds Money Market Funds.
The portfolio managers use asset allocation as their principal investment
approach. They:
o allocate assets among Fund categories, within the target allocations set
for the Portfolio. They base their allocations on the Portfolio's
investment objective, historical returns for each asset class and on their
outlook for the economy
o choose individual Funds within each category and the amount they will
allocate to each, looking at each Fund's historical returns, as well as
the expected performance of the mix of Funds
o review the allocations to Fund categories and individual Funds at least
monthly, and may change these allocations when they believe it's
appropriate to do so
The actual amount in each Fund or category of Funds may vary from the
allocations set by the portfolio managers, depending on how the Funds perform,
and for other reasons. The portfolio managers may use various strategies to try
to manage how much the actual amount varies, and for how long. For example:
o if there are more assets in a Fund category than in the target allocation,
the portfolio managers may allocate money coming into the Portfolio to the
other Fund categories
o if there are fewer assets in a Fund category than in the target
allocation, they may allocate money coming into the Portfolio to that Fund
category
The Portfolio normally sells a proportionate amount of the shares it owns in
each Nations Fund to meet its redemption requests.
16
<PAGE>
<TABLE>
<CAPTION>
LIFEGOAL INCOME AND GROWTH TARGET ALLOCATION FOR EACH
CAN INVEST IN: FUND CATEGORY:
<S> <C>
Large-capitalization domestic equity funds 10-30%
Nations Value Fund
Nations Blue Chip Fund
Nations Strategic Equity Fund
Nations Marsico Focused Equities Fund
Small-capitalization domestic equity fund 0-10%
Nations Small Company Growth Fund
International equity funds 0-10%
Nations International Value Fund
Nations International Equity Fund
Bond funds 50-90%
Nations Short-Term Income Fund
Nations Strategic Fixed Income Fund
Nations Diversified Income Fund
Money market fund 0-20%
Nations Prime Fund
</TABLE>
LifeGoal Income and Growth Portfolio's target allocation for total
investments in equity funds is 30%. The portfolio managers can
substitute or add other Funds to this list at any time, including Funds
introduced after the date of this prospectus.
[GRAPHIC]
YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN THIS PORTFOLIO
STARTING ON PAGE 25 AND IN THE SAI.
[GRAPHIC]
YOU'LL FIND DETAILED INFORMATION ABOUT EACH FUND'S INVESTMENT
STRATEGIES AND RISKS IN ITS PROSPECTUS, AND IN ITS SAI. PLEASE
CALL US AT 1.800.321.7854 FOR A COPY.
[GRAPHIC]
RISKS AND OTHER THINGS TO CONSIDER
LifeGoal Income and Growth Portfolio has the following risks:
o INVESTMENT STRATEGY RISK - The portfolio managers use an asset
allocation strategy to try to achieve the highest total return. There
is a risk that the mix of investments will not produce the returns
they expect, or that the Portfolio will fall in value. There is also
the risk that the Funds the Portfolio invests in will not produce the
returns the portfolio managers expect, or will fall in value.
o STOCK MARKET RISK - The Portfolio allocates assets to Funds that
invest in stocks. The value of the stocks a Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other things.
Stock prices can rise or fall over short as well as long periods. In
general, stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices. As of the date of this
prospectus, the stock markets, as measured by the S&P 500 and other
commonly used indices, were trading at or close to record levels.
There can be no guarantee that these levels will continue.
o SMALL COMPANY RISK - The Portfolio allocates assets to Funds that may
invest in smaller companies. Stocks of smaller companies tend to have
greater price swings than stocks of larger companies because they
trade less frequently and in lower volumes. These securities may have
a higher potential for gains, but also carry more risk.
17
<PAGE>
o FOREIGN INVESTMENT RISK - The Portfolio allocates assets to Funds
that invest in FOREIGN SECURITIES. Foreign investments may be riskier
than U.S. investments because of political and economic conditions,
changes in currency exchange rates, the implementation of the Euro,
foreign controls on investment, difficulties selling some securities
and lack of or limited financial information. Withholding taxes may
also apply to some foreign investments. Funds that invest in
securities of companies in emerging markets have high growth
potential, but can be more volatile than securities in more developed
markets.
o FUTURES RISK - Some Funds the Portfolio invests in may use FUTURES to
help manage LIQUIDITY or to hedge portfolio risk. There is a risk
that this could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o INTEREST RATE RISK - The Portfolio allocates assets to Funds that may
invest in FIXED INCOME SECURITIES. The prices of fixed income
securities will tend to fall when interest rates rise. In general,
fixed income securities with longer terms tend to fall more in value
when interest rates rise than fixed income securities with shorter
terms.
o CREDIT RISK - A Fund that invests in fixed income securities could
lose money if the issuer of a fixed income security is unable to pay
interest or repay principal when it's due. Credit risk usually
applies to most fixed income securities, but generally is not a
factor for U.S. GOVERNMENT OBLIGATIONS.
o REBALANCING POLICY - The actual amount in each Fund or category of
Funds may vary from the allocations set by the portfolio managers.
This could continue for some time.
18
<PAGE>
[GRAPHIC]
MANY THINGS AFFECT A PORTFOLIO'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE PORTFOLIO'S HOLDINGS, AND
PORTFOLIO EXPENSES.
[GRAPHIC]
A LOOK AT THE PORTFOLIO'S PERFORMANCE
The following bar chart and table show you how the Portfolio has
performed in the past, and can help you understand the risks of
investing in the Portfolio. A PORTFOLIO'S PAST PERFORMANCE IS NO
GUARANTEE OF HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR The bar chart shows you how the performance of the Portfolio's
Investor A Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, and would be lower
if they did. Returns for Investor B and Investor C Shares are different
because they have their own expenses, pricing and sales charges.
[GRAPHIC]
1996 1997 1998
--------------------------
2.05% 8.50% 10.12%
*Return is from inception (10-15-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF SEPTEMBER 30, 1999: 3.14%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 6.25%
Worst: 3rd quarter 1998: -2.38%
</TABLE>
[GRAPHIC]
THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEXES' RETURNS DO NOT REFLECT SALES CHARGES.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998 The table shows the
Portfolio's average annual total return for each period, compared with
the S&P 500 and the LEHMAN AGGREGATE BOND INDEX. The S&P 500 is an
unmanaged index of 500 widely held common stocks, weighted by market
capitalization. The Lehman Aggregate Bond Index is an index of fixed
income securities issued by the U.S. government and its agencies, and by
corporations. These indexes are not available for investment.
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Investor A Shares 3.76% 6.50 %
Investor B Shares 4.31% 4.15 %
Investor C Shares 8.27% 8.86 %
S&P 500 28.58% 31.69%**
Lehman Aggregate Bond Index 8.29% 8.75%**
</TABLE>
**Return is from inception of Investor A Shares. Inception dates for
the other classes shown may vary.
19
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL PORTFOLIO OPERATING EXPENSES THAT ARE DEDUCTED FROM A
PORTFOLIO'S ASSETS AND FROM THE ASSETS OF THE NATIONS FUNDS THE
PORTFOLIO INVESTS IN.
[GRAPHIC]
WHAT IT COSTS TO INVEST IN THE PORTFOLIO
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Portfolio.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases,
as a % of offering price 5.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from the Portfolio's assets)
Management fees 0.25% 0.25% 0.25%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
----- ------ ------
Total annual Fund operating expenses 0.50% 1.25% 1.25%
===== ====== ======
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 35 for details.
(2)This charge decreases over time. Please see page 36 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 37 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Portfolio. Please see page 35 for details.
INDIRECT EXPENSES
The Portfolio's annual Fund operating expenses include a portion of the
annual Fund operating expenses of the Nations Funds the Portfolio
invests in. This portion is estimated to be between 0.48% and 0.93%
(expressed as a weighted average, including fee waiver and/or
reimbursement commitments that will expire in May or July 2000), and is
based on:
o the amount the Portfolio expects to invest in each Fund, based on
the target allocation
o each Fund's annualized expense ratio for the period ended March
31, 1999, adjusted as necessary to reflect current service
provider fees
20
<PAGE>
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE PORTFOLIO'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Portfolio with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Portfolio for the time periods indicated and then sell all
of your shares at the end of those periods
o you reinvest all dividends and distributions in the Portfolio
o your investment has a 5% return each year
o the Portfolio's operating expenses remain the same as shown in
the table above
o the Portfolio's indirect expenses remain at the average of the
range as shown above for the 1 year example, and at the weighted
average excluding fee waivers and/or reimbursements for the 3, 5
and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $690 $951 $1,231 $2,028
Investor B Shares $698 $929 $1,286 $2,159
Investor C Shares $298 $629 $1,086 $2,352
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $198 $629 $1,086 $2,159
Investor C Shares $198 $629 $1,086 $2,352
</TABLE>
21
<PAGE>
About the Nations Funds
The table starting on the next page is a brief overview of the objectives
and principal investments of the Nations Funds the LifeGoal Portfolios
invest in. Each Portfolio invests in a different mix of Nations Funds.
You'll find the mix of Nations Funds and target allocations for each
Portfolio starting on page 5.
The portfolio managers can substitute or add other Funds to this table at
any time, including Funds introduced after the date of this prospectus.
FOR MORE INFORMATION
You'll find more detailed information about each Fund's investment
strategies and risks in its prospectus and in its SAI. Please call us at
1.800.321.7854 for copies.
22
<PAGE>
<TABLE>
<CAPTION>
The Fund's investment objective What the Fund invests in
------------------------------- -------------------------------------------------
<S> <C> <C>
EQUITY FUNDS
Nations Value Fund Growth of capital by investing in o at least 65% of its assets in common stocks of
companies that are believed to be U.S. companies. The Fund generally invests in
undervalued. companies in a broad range of industries with
market capitalizations of at least $1 billion and
daily trading volumes of at least $3 million
Nations Blue Chip Fund Long-term capital appreciation through Nations Blue Chip Master portfolio. The Master
investments in blue chip stocks. Portfolio invests:
o at least 65% of its assets in blue chip stocks
o primarily in blue chip stocks that are included in
the S&P 500 Index
Nations Strategic Equity Fund Long-term, after-tax returns by investing o at least 65% of its assets in common stocks of
in a diversified portfolio of common companies selected from most major industry
stocks. sectors
Nations Marsico Focused Long-term growth of capital. Nations Marsico Focused Equities Master
Equities Fund Portfolio. The Master Portfolio invests:
o at least 65% of its assets in common stocks of
large companies. The Master Portfolio, which is
non-diversified, generally holds a core position
of 20 to 30 common stocks
o up to 25% of its assets in foreign securities
Nations Small Company Growth Long-term capital growth by investing o at least 65% of its assets in companies with a
Fund primarily in equity securities. market capitalization of $1 billion or less. The
Fund usually holds 75 to 130 securities, which
include common stocks, preferred stocks and
convertible securities like warrants, rights and
convertible debt
INTERNATIONAL FUNDS
Nations International Value Fund Long-term capital appreciation by o at least 65% of its assets in foreign companies
investing primarily in equity securities anywhere in the world that have a market
of foreign issuers, including emerging capitalization of more than $1 billion at
markets countries. the time of investment. The Fund typically
invests in at least three countries other
than the United States at any one time
o primarily in common stocks, preferred
stocks, convertible securities, either
directly or indirectly through closed-end
investment companies and depositary receipts
Nations International Equity Fund Long-term capital growth by investing Nations International Equity Master Portfolio. The
primarily in equity securities of non- Master Portfolio invests:
United States companies in Europe, o at least 65% of its assets in established
Australia, the Far East and other regions, companies located in at least three countries
including developing countries. other than the United States. The investment
managers select countries, including emerging
market or developing countries, that they
believe have the potential for growth
o primarily in equity securities, which may
include equity interests in foreign investment
funds or trusts, convertible securities, real
estate investment trust securities and
depositary receipts
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
The Fund's investment objective What the Fund invests in
------------------------------------------- ---------------------------------------------------
<S> <C> <C>
FIXED INCOME FUNDS
Nations Short-Term Income Fund High current income o at least 65% of its total assets in investment
consistent with minimal fluctuations of grade fixed income securities. The portfolio
principal. management team may choose unrated
securities if it believes they are of comparable
quality to investment grade securities at the
time of investment
o securities are principally corporate debt
securities, including bonds, notes and
debentures, mortgage-related securities issued
by governments, asset-backed securities and
U.S. government obligations
Nations Strategic Fixed Income Total return by investing in investment o at least 65% of its assets in investment grade
Fund grade fixed income securities. fixed income securities. The portfolio
management team may choose unrated securities
if it believes they are of comparable quality
to investment grade securities at the time of
investment
o securities are principally corporate debt
securities, including bonds, notes and
debentures, U.S. government obligations,
foreign debt securities denominated in
U.S. dollars, mortgage-related
securities issued by governments,
asset-backed securities and municipal
securities
Nations Diversified Income Fund Total return with an emphasis on current o at least 65% of its assets in investment grade
income by investing in a diversified debt securities, including corporate debt
portfolio of fixed income securities. securities, U.S. government obligations,
foreign debt securities denominated in U.S.
dollars or foreign currencies, and
mortgage-related securities issued by
governments and non-government issuers
o up to 35% of its assets in lower-quality fixed
income securities ("junk bonds" or "high
yield bonds") rated "B" or better by Moody's
or S&P. The portfolio management team may
choose unrated securities if it believes they
are of comparable quality at the time of
investment
MONEY MARKET FUND
Nations Prime Fund Maximization of current income to o money market instruments, including
the extent consistent with the preservation commercial paper, bank obligations, short-term
of capital and the maintenance of liquidity. debt securities, guaranteed investment
contracts, short-term taxable municipal
securities, repurchase agreements secured by
first-tier securities or U.S. government
obligations
</TABLE>
24
<PAGE>
[GRAPHIC]
Other important information
[GRAPHIC]
YOU'LL FIND SPECIFIC INFORMATION ABOUT EACH PORTFOLIO'S PRINCIPAL
INVESTMENTS, STRATEGIES AND RISKS IN THE DESCRIPTIONS STARTING ON
PAGE 5.
The following are some other risks and information you should consider before
you invest:
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment
objective and certain investment policies of any Portfolio can be
changed without shareholder approval. Other investment policies may
be changed only with shareholder approval.
o HOLDING OTHER KINDS OF INVESTMENTS - The Portfolios may hold
investments that aren't part of their principal investment
strategies. Please refer to the SAI for more information. The
portfolio managers or management team can also choose not to invest
in specific securities described in this prospectus and in the SAI.
o FOREIGN INVESTMENT RISK - Funds that invest in FOREIGN SECURITIES may
be affected by changes in currency exchange rates and the costs of
converting currencies; the implementation of the Euro; foreign
government controls on foreign investment, repatriation of capital,
and currency and exchange; foreign taxes; inadequate supervision and
regulation of some foreign markets; difficulties selling some
investments, which may increase volatility; different settlement
practices or delayed settlements in some markets; difficulty getting
complete or accurate information about foreign companies; less strict
accounting, auditing and financial reporting standards than those in
the U.S.; political, economic or social instability; and difficulty
enforcing legal rights outside the U.S.
o INVESTING DEFENSIVELY - A Portfolio may temporarily hold up to 100%
of its assets in Nations Prime Fund, a money market fund, to try to
protect it during a market or economic downturn or because of
political or other conditions. A Portfolio may not achieve its
investment objective while it is investing defensively.
o PORTFOLIO TURNOVER - A Portfolio or Fund that replaces -- or turns
over -- more than 100% of its investments in a year is considered to
trade frequently. Frequent trading can result in larger distributions
of short-term CAPITAL GAINS to shareholders. These gains are taxable
at higher rates than long-term capital gains. Frequent trading can
also mean higher brokerage and other transaction costs, which could
reduce the Portfolio's returns. The Portfolios generally buy
securities for capital appreciation, investment income, or both, and
don't engage in short-term trading. You'll find the portfolio
turnover rate for each Portfolio in FINANCIAL HIGHLIGHTS.
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
25
<PAGE>
All of the Portfolio's primary service providers have confirmed that they
have been working to make the necessary changes to their systems, and that
they expect them to be adapted in time. There is no guarantee, however,
that their computer systems will be ready by the year 2000. If their
computer systems are not ready in time, there could be a negative effect on
Portfolio operations.
A Portfolio's performance could also be affected if the Funds it holds
decrease in value because of year 2000 issues. Funds that invest in foreign
securities may be at greater risk because the computer systems of foreign
issuers, governments or other entities may not be ready for the year 2000.
26
<PAGE>
[GRAPHIC]
How the Portfolios are managed
[GRAPHIC]
BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in the
Nations Funds family, including the LifeGoal Portfolios described in this
prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation. Nations
Funds pays BAAI an annual fee for its investment advisory services. The fee
is calculated daily based on the average net assets of each Portfolio and
is paid monthly. BAAI uses part of this money to pay investment
sub-advisers for the services they provide to each Portfolio. BAAI has also
agreed to pay all other Portfolio expenses, except taxes, brokerage fees
and commissions, extraordinary expenses, and any distribution (12b-1),
shareholder servicing or shareholder administration fees.
The following chart shows the maximum advisory fee BAAI can receive, along
with the actual advisory fees it received during the Portfolios' last
fiscal year, after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee fiscal year
<S> <C> <C>
Nations LifeGoal Growth Portfolio 0.25% 0.25%
Nations LifeGoal Balanced Growth Portfolio 0.25% 0.25%
Nations LifeGoal Income and Growth Portfolio 0.25% 0.25%
</TABLE>
27
<PAGE>
INVESTMENT SUB-ADVISERS
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Portfolios. TradeStreet functions under the supervision of BAAI and the
Boards of Directors of Nations Funds.
[GRAPHIC]
TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned
subsidiary of Bank of America. Its management expertise covers all major
domestic asset classes, including EQUITY and FIXED INCOME SECURITIES, and
MONEY MARKET INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in
the Nations Funds family. TradeStreet generally takes a team approach to
investment management. Each team or individual portfolio manager has access
to the latest technology and analytical resources.
TradeStreet is the investment sub-adviser to all of the LifeGoal
Portfolios. Timothy P. Beyer and C. Thomas Clapp are co-portfolio managers,
responsible for making the day-to-day investment decisions for each
Portfolio.
MR. BEYER is a member of TradeStreet's Value Management Team. In this role,
he manages many separate accounts and assists in the teams management of
Nations Value Fund. Before joining TradeStreet in 1995, he was an equity
analyst for NationsBank's Investment Management Group and a corporate bond
analyst with NationsBank. He has a BS in Finance from East Carolina
University and is a Chartered Financial Analyst. He also serves on the
Council of Examiners for the Association of Investment Management and
Research, and is a member of the North Carolina Society of Financial
Analysts.
MR. CLAPP is chief equity investment officer at TradeStreet, and previously
was director of its Equity Management Group. Before joining TradeStreet in
1995, he was senior vice president and director of research for
NationsBank's Investment Management Group, and senior portfolio manager
with Royal Insurance Group. He began working in the investment community in
1984. He has a BA in Economics from the University of North Carolina at
Chapel Hill and an MBA from the University of South Carolina. He is a
Chartered Financial Analyst, and a member of the Association for Investment
Management and Research and the North Carolina Society of Financial
Analysts.
28
<PAGE>
TradeStreet is also the investment sub-adviser to the Nations Funds that
appear in the table below. The table tells you which internal TradeStreet
asset management team is responsible for making the day-to-day investment
decisions for each Fund.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Value Fund Value Management Team
Nations Small Company Growth Fund Strategic Growth Management Team
Nations Short-Term Income Fund Fixed Income Management Team
Nations Strategic Fixed Income Fund Fixed Income Management Team
Nations Diversified Income Fund Fixed Income Management Team
Nations Prime Fund Taxable Money Market Management Team
</TABLE>
[GRAPHIC]
MARSICO CAPITAL
MANAGEMENT, LLC
1200 17TH STREET
SUITE 1300
DENVER, COLORADO 80202
MARSICO CAPITAL MANAGEMENT, LLC
Marsico Capital is a full service investment advisory firm founded by
Thomas F. Marsico in September 1997. It is a registered investment adviser,
specializing in large capitalization stocks, and currently has $65 billion
in assets under management.
Marsico Management Holdings, LLC, a wholly-owned subsidiary of Bank of
America Corporation, indirectly owns 50% of the equity of Marsico Capital.
Marsico Capital is the investment sub-adviser to Nations Marsico Focused
Equities Master Portfolio.
THOMAS F. MARSICO, Chairman and Chief Executive Officer of Marsico Capital,
is the portfolio manager responsible for making the day-to-day investment
decisions for the Master Portfolio. Mr. Marsico was an executive vice
president and portfolio manager at Janus Capital Corporation from 1988
until he formed Marsico Capital in September 1997. He has more than 20
years of experience as a securities analyst and portfolio manager.
[GRAPHIC]
BANK OF AMERICA INVESTMENT
MANAGEMENT
100 NORTH BROADWAY
ST. LOUIS, MISSOURI 63102
BANK OF AMERICA INVESTMENT MANAGEMENT
BAIM, a division of Bank of America, is the investment sub-adviser to
Nations Strategic Equity Fund.
The Fund is managed by MICHAEL E. KENNEALLY, president and chief investment
officer of BAIM since 1997. He has managed the Fund since its inception on
October 2, 1998. Before joining BAIM, Mr. Kenneally was managing director
at Boatmen's Trust Company, in charge of fundamental and quantitative
research, small-capitalization, passive and international equity
investment. He holds a bachelor's degree in economic and an MBA in finance
from the University of Missouri.
29
<PAGE>
[GRAPHIC]
BRANDES INVESTMENT
PARTNERS, L.P.
12750 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
BRANDES INVESTMENT PARTNERS, L.P.
Founded in 1974, Brandes is an investment advisory firm with 46 investment
professionals who manage more than $30 billion in assets. Brandes uses a
value-oriented approach to managing international investments, seeking to
build wealth by buying high quality, undervalued stocks.
Brandes is the investment sub-adviser to Nations International Value Fund.
Brandes' Large Cap Investment Committee is responsible for making the
day-to-day investment decisions for the Fund.
[GRAPHIC]
CHICAGO EQUITY PARTNERS
CORPORATION
231 SOUTH LASALLE
CHICAGO, ILLINOIS 60697
CHICAGO EQUITY PARTNERS CORPORATION
Chicago Equity is a registered investment adviser and a wholly-owned
subsidiary of Bank of America. Chicago Equity is the investment sub-adviser
to Nations Blue Chip Master Portfolio.
Chicago Equity's Equity Management Team is responsible for making the
day-to-day investment decisions for Nations Blue Chip Master Portfolio.
[GRAPHIC]
GARTMORE GLOBAL PARTNERS
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
GARTMORE GLOBAL PARTNERS
Gartmore is a global asset manager dedicated to serving the needs of U.S.
based investors. Gartmore was formed in 1995 as a registered investment
adviser and manages more than $1 billion in assets.
Gartmore is a joint venture structured as a general partnership between NB
Partner Corp., a wholly-owned subsidiary of Bank of America, and Gartmore
U.S. Limited, an indirect, wholly-owned subsidiary of Gartmore Investment
Management plc, a UK holding company for a leading UK-based international
fund management group of companies.
Gartmore follows a growth philosophy, which is reflected in its active
management of market allocation and stock selection.
Gartmore is one of three investment sub-advisers to Nations International
Equity Master Portfolio.
Gartmore's portion of Nations International Equity Master Portfolio is
co-managed by six portfolio managers:
CHRISTOPHER PALMER has been responsible since May 1999 for investments in
developing countries, and has been the principal portfolio manager of
Nations Emerging Markets Fund since that time. He joined Gartmore in 1995
and is a senior investment manager on the Gartmore Emerging Markets Team.
Before he joined Gartmore, Mr. Palmer worked for Unifund, S.A., a private
investment bank, in its Mexico City and Hong Kong offices, and managed
global derivatives, credit and counterparty credit risk as vice president
in the Institutional Credit Department of Bear Stearns & Co. He graduated
from Colgate University in 1986 with a BA Honors degree in History and
completed an MBA in Finance at New York University in 1988. Mr. Palmer was
awarded the CFA designation by the Association of Investment Management and
Research in 1993.
30
<PAGE>
SEOK TEOH has been responsible since June 1998 for investments in Asia. Ms.
Teoh has been with Gartmore since 1990 as the London based manager of its
Far East Team. Previously, she managed four equity funds for Rothschild
Asset Management in Tokyo and Singapore, and was also responsible for
Singaporean and Malaysian equity sales at Overseas Union Bank Securities in
Singapore. Ms. Teoh is native to Singapore and is fluent in Mandarin and
Cantonese. She received an Economics degree from the University of Durham.
JOHN STEWART has shared responsibility with Nick Reid for investments in
Japan since August 1999. He is also senior investment manager for the
Gartmore Japanese Equities Team and is responsible for managing specialist
institutional portfolios and providing input to the global asset allocation
team in London. Mr. Stewart joined Gartmore in 1992, after starting his
career at the London office of Prudential Portfolio Managers. He graduated
from Loughborough University in 1991 with a BS Honors degree in Banking and
Finance. Mr. Stewart is also a member of the Institute of Investment
Management and Research, and the Chartered Institute of Bankers.
NICK REID has shared responsibility with John Stewart for investments in
Japan since August 1999. He has been investment manager for the Gartmore
Japanese Equities Team since he joined Gartmore in 1994 and has specific
responsibility for managing retail funds. Before he joined Gartmore, Mr.
Reid was a United Kingdom Smaller Companies Analyst with Panmure Gordon and
a fund manager covering Japanese and other Asian markets with Refuge
Assurance. He graduated from Cambridge University in 1989 with an honors
degree in History. Mr. Reid is also an associate member of the Institute of
Investment Management and Research.
STEPHEN JONES has been responsible for investments in Europe since 1998. He
is also head of Gartmore European Equities. Mr. Jones joined Gartmore in
1994 and was appointed head of the European equity team in 1995. He began
his career at The Prudential in 1984, and became a European equities
investment manager in 1987, focusing on France, Belgium and Switzerland. He
graduated from Manchester University in 1984 with an honors degree in
Economics.
STEPHEN WATSON has been responsible since June 1998 for allocating assets
among the various regions, and for determining investments in regions not
covered by the other portfolio managers. He was the sole portfolio manager
of Nations International Equity Fund from February 1995 to June 1998. Mr.
Watson joined Gartmore in 1993 as a global fund manager, and is the chief
investment officer of Gartmore GlobalPartners and a member of Gartmore's
global policy group. Before joining Gartmore, he was a director and global
fund manager with James Capel Fund Managers, London, as well as client
service manager for international clients. He was in Capel-Cure Myers'
portfolio management division from 1980 to 1987, and began his career in
1976 with Samuel Motagu. He is a member of the Securities Institute.
31
<PAGE>
[GRAPHIC]
INVESCO GLOBAL ASSET
MANAGEMENT (N.A), INC.
1315 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309
INVESCO GLOBAL ASSET MANAGEMENT (N.A), INC.
INVESCO is a division of INVESCO Global, a publicly traded investment
management firm located in London, England, and a wholly-owned subsidiary
of AMVESCAP PLC, a publicly traded UK financial holding company, which is
also located in London.
INVESCO is one of three investment sub-advisers to Nations International
Equity Master Portfolio. INVESCO's International Equity Portfolio
Management Team is responsible for making the day-to-day investment
decisions for its portion of the Master Portfolio.
[GRAPHIC]
PUTNAM INVESTMENT
MANAGEMENT, INC.
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
PUTNAM INVESTMENT MANAGEMENT, INC.
Putnam is a wholly-owned subsidiary of Putnam Investments, Inc., which,
except for shares held by employees, is owned by Marsh & McLennan
Companies.
Putnam is one of three investment sub-advisers to Nations International
Equity Master Portfolio. Putnam's Core International Equity Group is
responsible for making the day-to-day investment decisions for its portion
of the Master Portfolio.
[GRAPHIC]
STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
OTHER SERVICE PROVIDERS
The Portfolios are distributed and co-administered by Stephens Inc., a
registered broker/dealer. Stephens does not receive any fees for the
administrative services it provides to the Portfolios. Stephens may pay
commissions, distribution (12b-1) and shareholder servicing fees, and/or
other compensation to companies for selling shares and providing services
to investors.
BAAI is also co-administrator of the Portfolios, and assists in overseeing
the administrative operations of the Portfolios.
[GRAPHIC]
FIRST DATA INVESTOR
SERVICES GROUP, INC.
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Portfolio's shares. Its responsibilities include processing
purchases, sales and exchanges, calculating and paying distributions,
keeping shareholder records, preparing account statements and providing
customer service.
32
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC]
WE'VE USED THE TERM, INVESTMENT PROFESSIONAL, TO REFER TO THE
PERSON WHO HAS ASSISTED YOU WITH BUYING NATIONS FUNDS. SELLING
AGENT or SERVICING AGENT (SOMETIMES REFERRED TO AS A SELLING AGENT)
MEANS THE COMPANY THAT EMPLOYS YOUR INVESTMENT PROFESSIONAL.
SELLING AND SERVICING AGENTS INCLUDE BANKS, BROKERAGE FIRMS, MUTUAL
FUND DEALERS AND OTHER FINANCIAL INSTITUTIONS, INCLUDING AFFILIATES
OF BANK OF AMERICA.
[GRAPHIC]
FOR MORE INFORMATION ABOUT HOW TO CHOOSE A SHARE CLASS, CONTACT
YOUR INVESTMENT PROFESSIONAL OR CALL US AT 1.800.321.7854.
[GRAPHIC]
BEFORE YOU INVEST, PLEASE NOTE THAT OVER TIME, DISTRIBUTION (12B-1)
AND SHAREHOLDER SERVICING FEES WILL INCREASE THE COST OF YOUR
INVESTMENT, AND MAY COST YOU MORE THAN ANY SALES CHARGES YOU MAY
PAY. FOR MORE INFORMATION, SEE HOW SELLING AND SERVICING AGENTS ARE
PAID.
[GRAPHIC]
Choosing a share class
Before you can invest in the Portfolios, you'll need to choose a share
class. There are three classes of shares for each Portfolio offered by this
prospectus. Each class has its own sales charges and fees. The table below
compares the charges and fees of the share classes.
<TABLE>
<CAPTION>
Investor A Investor B Investor C
Shares Shares Shares
<S> <C> <C> <C>
Maximum amount you can buy no limit $250,000 no limit
Maximum front-end sales charge 5.75% none none
Maximum deferred sales charge none(1) 5.00%(2) 1.00%(3)
Redemption fee none(4) none none
Maximum annual 0.25% 0.75% 0.75%
distribution and distribution distribution distribution
shareholder servicing fees (12b-1)/service (12b-1) fee (12b-1) fee
fee 0.25% 0.25%
service fee service fee
Conversion feature none yes none
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen months
of buying them. Different charges may apply to purchases made prior to
August 1, 1999. Please see page 35 for details.
(2) This charge decreases over time. Please see page 36 for details.
Different charges apply to Investor B Shares bought before January 1, 1996
and after July 31, 1997. Please see page 36 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 37 for details.
(4) A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998 and
sell them within 18 months of buying them. The fee is paid to the
Portfolio. Please see page 35 for details.
The share class you choose will depend on how much you're investing, how
long you're planning to stay invested, and how you prefer to pay the sales
charge.
The total cost of your investment over the time you expect to hold your
shares will be affected by the distribution (12b-1) and shareholder
servicing fees, as well as by the amount of any front-end sales charge or
contingent deferred sales charge (CDSC) that applies, and when you're
required to pay the charge. You should think about these things carefully
before you invest.
Investor A Shares have a front-end sales charge, which is deducted when you
buy your shares. This means that a smaller amount is invested in the
Portfolios, unless you qualify for a waiver or reduction of the sales
charge. However, Investor A Shares have lower ongoing distribution (12b-1)
and/or shareholder servicing fees than Investor B and Investor C Shares.
This means that Investor A Shares can be expected to pay relatively higher
dividends per share.
33
<PAGE>
Investor B Shares have limits on how much you can invest. When you buy
Investor B or Investor C Shares, the full amount is invested in the
Portfolios. However, you may pay a CDSC when you sell your shares. Over
time, Investor B and Investor C Shares can incur distribution (12b-1) and
shareholder servicing fees that are equal to or more than the front-end
sales charge, and the distribution (12b-1) and shareholder servicing fees
you would pay for Investor A Shares. Although the full amount of your
purchase is invested in the Portfolios, any positive investment return on
this money may be partially or fully offset by the expected higher annual
expenses of Investor B and Investor C Shares. You should also consider the
conversion feature for Investor B Shares, which is described in ABOUT
INVESTOR B SHARES.
[GRAPHIC]
THE OFFERING PRICE PER SHARE IS THE NET ASSET VALUE PER SHARE PLUS
ANY SALES CHARGE THAT APPLIES.
THE NET ASSET VALUE PER SHARE IS THE PRICE OF A SHARE CALCULATED BY
A PORTFOLIO EVERY BUSINESS DAY.
[GRAPHIC]
ABOUT INVESTOR A SHARES
There is no limit to the amount you can invest in Investor A Shares.
You generally will pay a front-end sales charge when you buy your
shares, or in some cases, a CDSC when you sell your shares.
FRONT-END SALES CHARGE
You'll pay a front-end sales charge when you buy Investor A Shares,
unless:
o you qualify for a waiver of the sales charge. You can find out if
you qualify for a waiver in the section WHEN YOU MIGHT NOT HAVE TO
PAY A SALES CHARGE
o you're reinvesting distributions
The sales charge you'll pay depends on the amount you're investing --
the larger the investment, the smaller the sales charge.
<TABLE>
<CAPTION>
Amount retained
Sales charge Sales charge by selling agents
as a % of the as a % of the as a % of the
offering price net asset value offering price
Amount you bought per share per share per share
<S> <C> <C> <C>
$ 0-$49,999 5.75% 6.10% 5.00%
$ 50,000-$99,999 4.50% 4.71% 3.75%
$ 100,000-$249,999 3.50% 3.63% 2.75%
$ 250,000-$499,999 2.50% 2.56% 2.00%
$ 500,000-$999,999 2.00% 2.04% 1.75%
$1,000,000 or more 0.00% 0.00% 1.00%(1)
</TABLE>
(1) 1.00% on the first $3,000,000, 0.50% on the next $47,000,000,
0.25% on amounts over $50,000,000. Stephens pays the amount retained
by selling agents on investments of $1,000,000 or more, but may be
reimbursed when a CDSC is deducted if the shares are sold within
eighteen months from the time they were bought. Please see HOW SELLING
AND SERVICING AGENTS ARE PAID for more information.
34
<PAGE>
CONTINGENT DEFERRED SALES CHARGE
If you own or buy $1,000,000 or more of Investor A Shares, there are
two situations when you'll pay a CDSC:
o If you bought your shares before August 1, 1999, and you sell them:
o during the first year you own them, you'll pay a CDSC of 1.00%
o during the second year you own them, you'll pay a CDSC of 0.50%
o If you buy your shares on or after August 1, 1999 and sell them
within 18 months of buying them, you'll pay a CDSC of 1.00%.
The CDSC is calculated from the day your purchase is accepted (the
TRADE DATE). We deduct the CDSC from the market value or purchase
price of the shares, whichever is lower.
You won't pay a CDSC on any increase in net asset value since you
bought your shares, or on any shares you receive from reinvested
distributions. We'll sell any shares that aren't subject to the CDSC
first. We'll then sell shares that result in the lowest CDSC.
REDEMPTION FEE
There are two situations when we'll charge a 1% redemption fee on the
sale of Investor A Shares:
o if you bought $1,000,000 or more Investor A Shares between July 31,
1997 and November 15, 1998 and sell them within 18 months of buying
them
o if an employee benefit plan made its initial investment in Investor
A Shares between July 31, 1997 and November 15, 1998 and sold those
shares within 18 months of buying them because the plan sold all of
its Nations Funds holdings
This fee is deducted from the amount sold and is paid to the
Portfolio. The Portfolio can reduce or cancel the fee at any time.
[GRAPHIC]
ABOUT INVESTOR B SHARES
You can buy up to $250,000 of Investor B Shares at a time. You don't
pay a sales charge when you buy Investor B Shares, but you may have to
pay a CDSC when you sell them.
CONTINGENT DEFERRED SALES CHARGE
You'll pay a CDSC when you sell your Investor B Shares, unless:
o you bought the shares on or after January 1, 1996 and before August
1, 1997
o you received the shares from reinvested distributions
o you qualify for a waiver of the CDSC. You can find out how to
qualify for a waiver on page 40
The CDSC you pay depends on when you bought your shares, how much you
bought in some cases, and how long you held them.
35
<PAGE>
<TABLE>
<CAPTION>
If you sell your shares
during the following year: You'll pay a CDSC of:
- ---------------------------------- ---------------------------------------------------------------------------
Shares
you bought
Shares on or after Shares
you bought Shares you bought between 1/1/1996 you bought
after 8/1/1997 and 11/15/1998 and before before
11/15/1998 in the following amounts: 8/1/1997 1/1/1996
------------ ------------------------------------ ------------- -----------
$250,000- $500,000-
$0-$249,999 $499,999 $999,999
<S> <C> <C> <C> <C> <C> <C>
the first year you own them 5.0% 5.0% 3.0% 2.0% none 5.0%
the second year you own them 4.0% 4.0% 2.0% 1.0% none 4.0%
the third year you own them 3.0% 3.0% 1.0% none none 3.0%
the fourth year you own them 3.0% 3.0% none none none 2.0%
the fifth year you own them 2.0% 2.0% none none none 2.0%
the sixth year you own them 1.0% 1.0% none none none 1.0%
after six years of owning them none none none none none none
</TABLE>
The CDSC is calculated from the trade date of your purchase. We deduct
the CDSC from the market value or purchase price of the shares,
whichever is lower. We'll sell any shares that aren't subject to the
CDSC first. We'll then sell shares that result in the lowest CDSC.
Your selling agent receives compensation when you buy Investor B
Shares. Please see HOW SELLING AND SERVICING AGENTS ARE PAID for more
information.
ABOUT THE CONVERSION FEATURE
Investor B Shares generally convert automatically to Investor A Shares
according to the following schedule:
<TABLE>
<CAPTION>
Will convert to Investor A Shares
Investor B Shares you bought after you've owned them for
after November 15, 1998 eight years
<S> <C>
between August 1, 1997
and November 15, 1998
$0-$249,000 nine years
$250,000-$499,999 six years
$500,000-$999,999 five years
before August 1, 1997 nine years
</TABLE>
The conversion feature allows you to benefit from the lower operating
costs of Investor A Shares, which can help increase total returns.
Here's how the conversion works:
o We won't convert your shares if you tell your investment
professional, selling agent or the transfer agent within 90 days
before the conversion date that you don't want your shares to be
converted. Remember, it's in your best interest to convert your
shares because Investor A Shares have lower expenses.
o Shares are converted at the end of the month in which they become
eligible for conversion. Any shares you received from reinvested
distributions on these shares will convert to Investor A Shares at
the same time.
36
<PAGE>
o You'll receive the same dollar value of Investor A Shares as the
Investor B Shares that were converted. No sales charge or other
charges apply.
o Investor B Shares that you received from an exchange of Investor B
Shares of another Nations Fund will convert based on the day you
bought the original shares. Your conversion date may be later if you
exchanged to or from a Nations Funds Money Market Fund.
o Conversions are free from federal tax.
[GRAPHIC]
ABOUT INVESTOR C SHARES
There is no limit to the amount you can invest in Investor C Shares.
You don't pay a sales charge when you buy Investor C Shares, but you
may pay a CDSC when you sell them.
CONTINGENT DEFERRED SALES CHARGE
You'll pay a CDSC of 1.00% when you sell Investor C Shares within one
year of buying them, unless:
o you received the shares from reinvested distributions
o you qualify for a waiver of the CDSC. You can find out how to
qualify for a waiver on page 40
The CDSC is calculated from the trade date of your purchase. We deduct
the CDSC from the market value or purchase price of the shares,
whichever is lower. We'll sell any shares that aren't subject to the
CDSC first. We'll then sell shares that result in the lowest CDSC.
Your selling agent receives compensation when you buy Investor C
Shares. Please see HOW SELLING AND SERVICING AGENTS ARE PAID for more
information.
[GRAPHIC]
PLEASE CONTACT YOUR INVESTMENT PROFESSIONAL FOR MORE INFORMATION
ABOUT REDUCTIONS AND WAIVERS OF SALES CHARGES.
YOU SHOULD TELL YOUR INVESTMENT PROFESSIONAL THAT YOU MAY QUALIFY
FOR A REDUCTION OR A WAIVER BEFORE BUYING SHARES.
WE CAN CHANGE OR CANCEL THESE TERMS AT ANY TIME. ANY CHANGE OR
CANCELLATION APPLIES ONLY TO FUTURE PURCHASES.
WHEN YOU MIGHT NOT HAVE TO PAY A SALES CHARGE
FRONT-END SALES CHARGES
(Investor A Shares)
There are three ways you can lower the front-end sales charge you pay
on Investor A Shares:
o COMBINE PURCHASES YOU'VE ALREADY MADE
Rights of accumulation allow you to combine the value of Investor A,
Investor B and Investor C Shares you already own with Investor A
Shares you're buying to calculate the sales charge. The sales charge
is based on the total value of the shares you already own, or the
original purchase cost, whichever is higher, plus the value of the
shares you're buying. Index Funds and Money Market Funds, except
Investor B and Investor C Shares of Nations Reserves Money Market
Funds, don't qualify for rights of accumulation.
37
<PAGE>
o COMBINE PURCHASES YOU PLAN TO MAKE By signing a letter of intent,
you can combine the value of shares you already own with the value
of shares you plan to buy over a 13-month period to calculate the
sales charge.
o You can choose to start the 13-month period up to 90 days before you
sign the letter of intent.
o Each purchase you make will receive the sales charge that applies to
the total amount you plan to buy.
o If you don't buy as much as you planned within the period, you must
pay the difference between the charges you've paid and the charges
that actually apply to the shares you've bought.
o Your first purchase must be at least 5% of the minimum amount for
the sales charge level that applies to the total amount you plan to
buy.
o If the purchase you've made later qualifies for a reduced sales
charge through the 90-day backdating provisions, we'll make an
adjustment for the lower charge when the letter of intent expires.
Any adjustment will be used to buy additional shares at the reduced
sales charge.
o COMBINE PURCHASES WITH FAMILY MEMBERS You can receive a quantity
discount by combining purchases of Investor A Shares that you, your
spouse and children under age 21 make on the same day. Some
distributions or payments from the dissolution of certain qualified
plans also qualify for the quantity discount. Index Funds and Money
Market Funds, except Investor B and Investor C Shares of Nations
Reserves Money Market Funds, don't qualify.
The following investors can buy Investor A Shares without paying a
front-end sales charge:
o full-time employees and retired employees of Bank of America
Corporation (and its predecessors), its affiliates and subsidiaries
and the immediate families of these people
o banks, trust companies and thrift institutions, acting as
fiduciaries
o individuals receiving a distribution from a Bank of America trust or
other fiduciary account may use the proceeds of that distribution to
buy Investor A Shares without paying a front-end sales charge, as
long as the proceeds are invested through a trust account
established with certain trustees and invested in the Portfolios
within 90 days
o Nations Funds' Trustees, Directors and employees of its investment
sub-advisers
o registered broker/dealers that have entered into a Nations Funds
dealer agreement with Stephens may buy Investor A Shares without
paying a front-end sales charge for their investment account only
38
<PAGE>
o registered personnel and employees of these broker/dealers may buy
Investor A Shares without paying a front-end sales charge according
to the internal policies and procedures of their employer as long as
these purchases are made for their own investment purposes
o employees or partners of any service provider to the Portfolios
o investors who buy through accounts established with certain
fee-based investment advisers or financial planners, including
Nations Funds Personal Investment Planner accounts, wrap fee
accounts and other managed agency/asset allocation accounts
o shareholders of certain Funds that reorganized into the Nations
Funds who were entitled to buy shares at net asset value
The following plans can buy Investor A Shares without paying a
front-end sales charge:
o pension, profit-sharing or other employee benefit plans established
under Section 401 or Section 457 of the Internal Revenue Code of
1986, as amended (the tax code)
o employee benefit plans created according to Section 403(b) of the
tax code and sponsored by a non-profit organization qualified under
Section 501(c)(3) of the tax code. To qualify for the waiver, the
plan must:
o have at least $500,000 invested in Investor A Shares of Nations
Funds (except Money Market Funds), or
o sign a letter of intent to buy at least $500,000 of Investor A
Shares of Nations Funds (except Money Market Funds), or
o be an employer-sponsored plan with at least 100 eligible
participants, or
o be a participant in an alliance program that has signed an agreement
with the Portfolio or a selling agent
You can also buy Investor A Shares without paying a sales charge if
you buy the shares within 120 days of selling the same Portfolio. This
is called the reinstatement privilege. You can invest up to the amount
of the sale proceeds. We'll credit your account with any CDSC paid
when you sold the shares. The reinstatement privilege does not apply
to any shares you bought through a previous reinstatement. First Data,
Stephens or their agents must receive your written request within 120
days after you sell your shares.
Stephens may pay selling agents up to 1.00% of the net asset value of
Investor A Shares bought without a sales charge. Stephens may be
reimbursed through any CDSC that applies.
39
<PAGE>
CONTINGENT DEFERRED SALES CHARGES
(Investor A, Investor B and Investor C Shares)
You won't pay a CDSC on the following transactions:
o shares sold following the death or disability (as defined in the tax
code) of a shareholder, including a registered joint owner
o the following retirement plan distributions:
o lump-sum or other distributions from a qualified corporate or
self-employed retirement plan following the retirement (or following
attainment of age 59 1/2 in the case of a "key employee" of a "top
heavy" plan)
o distributions from an IRA or Custodial Account under Section
403(b)(7) of the tax code, following attainment of age 59 1/2
o a tax-free return of an excess contribution to an IRA
o distributions from a qualified retirement plan that aren't subject
to the 10% additional federal withdrawal tax under Section 72(t)(2)
of the tax code
o payments made to pay medical expenses which exceed 7.5% of income,
and distributions made to pay for insurance by an individual who has
separated from employment and who has received unemployment
compensation under a federal or state program for at least 12 weeks
o shares sold under our right to liquidate a shareholder's account,
including instances where the aggregate net asset value of Investor
A, Investor B or Investor C Shares held in the account is less than
the minimum account size
o withdrawals made under the Automatic Withdrawal Plan described in
BUYING, SELLING AND EXCHANGING SHARES, if the total withdrawals of
Investor A, Investor B or Investor C Shares made in a year are less
than 12% of the total value of those shares in your account. A CDSC
may only apply to Investor A Shares if you bought more than
$1,000,000
We'll also waive the CDSC on the sale of Investor A or Investor C
Shares bought before September 30, 1994 by current or retired
employees of Bank of America and its affiliates, or by current or
former trustees or directors of the Nations Funds or other management
companies managed by Bank of America.
You won't pay a CDSC on the sale of Investor B or Investor C Shares if
you reinvest any of the proceeds in the same Portfolio within 120 days
of the sale. This is called the reinstatement privilege. You can
invest up to the amount of the sale proceeds. We'll credit your
account with any CDSC paid when you sold the shares. The reinstatement
privilege does not apply to any shares you bought through a previous
reinstatement. First Data, Stephens or their agents must receive your
written request within 120 days after you sell your shares.
40
<PAGE>
[GRAPHIC]
WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC]
BUYING, SELLING AND EXCHANGING SHARES
You can invest in the Portfolios through your selling agent or directly
from Nations Funds.
We encourage you to consult with an investment professional who can open an
account for you with a selling agent and help you with your investment
decisions. Once you have an account, you can buy, sell and exchange shares
by contacting your investment professional or selling agent. They will look
after any paperwork that's needed to complete a transaction and send your
order to us.
You should also ask your selling agent about its limits, fees and policies
for buying, selling and exchanging shares, which may be different from
those described here, and about its related programs or services.
The table on the next page summarizes some key information about buying,
selling and exchanging shares. You'll find sales charges and other fees
that apply to these transactions in CHOOSING A SHARE CLASS.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. Please contact your
investment professional, or call us at 1.800.321.7854 if you have any
questions or you need help placing an order.
41
<PAGE>
<TABLE>
<CAPTION>
Ways to
buy, sell or How much you can buy,
exchange sell or exchange Other things to know
------------------ -------------------------------------------- ----------------------------------------
<S> <C> <C> <C>
Buying shares In a lump sum minimum initial investment: There is no limit to the amount you can
o $1,000 for regular accounts invest in Investor A and C Shares. You
o $500 for traditional and Roth IRA can invest up to $250,000 in Investor B
accounts Shares at a time.
o $250 for certain fee-based accounts
o no minimum for certain retirement
plan accounts like 401(k) plans and
SEP accounts, but other restrictions apply
minimum additional investment:
Using our minimum initial investment: You can buy shares monthly, twice a
Systematic o $100 for all accounts month or quarterly, using automatic
Investment Plan o $100 transfers from your bank account.
minimum additional investment:
o $50
- ------------------------------------------------------------------------------------------------------------------------------------
Selling shares In a lump sum o you can sell up to $50,000 of your We'll deduct any CDSC from the amount
shares by telephone, otherwise there you're selling and send you or your
are no limits to the amount you can sell selling agent the balance, usually
o other restrictions may apply to within three business days of
wihdrawls from retirement plan accounts receiving your order.
If you paid for your shares with a
check that wasn't certified, we'll
hold the sale proceeds when you sell
those shares for at least 15 days
after the trade date of the purchase,
or until the check has cleared.
Using our o minimum $25 per withdrawal Your account balance must be at least
Automatic $10,000 to set up the plan. You can
Withdrawal Plan make withdrawls monthly, twice a
month or quarterly. We'll send your
money by check or deposit it directly
to your bank account. No CDSC is
deducted if you withdraw 12% or less
of the value of your shares in a
class.
- ------------------------------------------------------------------------------------------------------------------------------------
Exchanging shares In a lump sum o minimum $1,000 per exchange You can exchange your Investor A
Shares for Investor A shares of any
other Portfolio or Nations Fund,
except Index Funds. You won't pay a
front-end sales charge, CDSC or
redemption fee on the shares you're
exchanging.
You can exchange your Investor B
Shares for:
o Investor B Shares of any other
Portfolio or Nations Fund, except
Nations Funds Money Market Funds
o Investor C Shares of Nations Funds
Money Market Funds (before October
1, 1999)
o Investor B Shares of Nations
Reserves Money Market Funds (on or
after October 1, 1999) You won't
pay a CDSC on the shares you're
exchanging. You can exchange your
Investor C Shares for:
o Investor C Shares of any other
Portfolio or Nations Fund, except
Nations Funds Money Market Funds
o Daily Shares of Nations Funds Money
Market Funds (before October 1,
1999)
o Investor C Shares of Nations
Reserves Money Market Funds (on or
after October 1, 1999)
If you received Investor C Shares of
a Portfolio from an exchange of
Investor A Shares of a Managed Index
Fund, you can also exchange these
shares for Investor A Shares of an
Index Fund. You won't pay a CDSC on
the shares you're exchanging.
Using our o minimum $25 per exchange This feature is not available for
Automatic Investor B Shares. You must already
Exchange Feature have an investment in the Portfolios
or Funds you want to exchange. You
can make exchanges monthly or
quarterly.
</TABLE>
42
<PAGE>
[GRAPHIC]
A BUSINESS DAY IS ANY DAY THAT THE NEW YORK STOCK EXCHANGE (NYSE)
IS OPEN. A BUSINESS DAY ENDS AT THE CLOSE OF REGULAR TRADING ON THE
NYSE, USUALLY AT 4:00 P.M. EASTERN TIME. IF THE NYSE CLOSES EARLY,
THE BUSINESS DAY ENDS AS OF THE TIME THE NYSE CLOSES.
THE NYSE IS CLOSED ON WEEKENDS AND ON THE FOLLOWING NATIONAL
HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER KING, JR. DAY, PRESIDENTS'
DAY, GOOD FRIDAY, MEMORIAL DAY, INDEPENDENCE DAY, LABOR DAY,
THANKSGIVING DAY AND CHRISTMAS DAY.
HOW SHARES ARE PRICED
All transactions are based on the price of a Portfolio's shares -- or its
net asset value per share. We calculate net asset value per share for each
class of each Portfolio at the end of each business day. The net asset
value per share of a Portfolio is based on the net asset value per share of
the Nations Funds the Portfolio invests in.
We calculate the net asset value for each class of a Fund by determining
the value of the Fund's assets in the class and then subtracting its
liabilities. Next, we divide this amount by the number of shares that
investors are holding in the class.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of
the securities it holds. The prices reported on stock exchanges and
securities markets around the world are usually used to value securities in
a Fund. If prices aren't readily available, we'll base the price of a
security on its fair market value. We use the amortized cost method, which
approximates market value, to value short-term investments maturing in 60
days or less. International markets may be open on days when U.S. markets
are closed. The value of foreign securities owned by a Fund could change on
days when Fund shares may not be bought or sold.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days.
Orders received by Stephens, First Data or their agents before the end of a
business day (usually 4:00 p.m. Eastern time, unless the NYSE closes early)
will receive that day's net asset value per share. Orders received after
the end of a business day will receive the next business day's net asset
value per share. The business day that applies to your order is also called
the TRADE DATE. We may refuse any order to buy or exchange shares. If this
happens, we'll return any money we've received to your selling agent.
TELEPHONE ORDERS
You can place orders to buy, sell or exchange by telephone
if you complete the telephone authorization section of our account
application and send it to us.
Here's how telephone orders work:
o If you sign up for telephone orders after you open your account, you
must have your signature guaranteed.
o Telephone orders may not be as secure as written orders. You may be
responsible for any loss resulting from a telephone order.
o We'll take reasonable steps to confirm that telephone instructions
are genuine. For example, we require proof of your identification
before we will act on instructions received by telephone and may
record telephone conversations. If we and our service providers
don't take these steps, we may be liable for any losses from
unauthorized or fraudulent instructions.
o Telephone orders may be difficult to complete during periods of
significant economic or market change.
43
<PAGE>
[GRAPHIC]
THE OFFERING PRICE PER SHARE IS THE NET ASSET VALUE PER SHARE PLUS
ANY SALES CHARGE THAT APPLIES.
THE NET ASSET VALUE PER SHARE IS THE PRICE OF A SHARE CALCULATED BY
A PORTFOLIO EVERY BUSINESS DAY.
[GRAPHIC]
BUYING SHARES
Here are some general rules for buying shares:
o You buy Investor A Shares at the offering price per share. You buy
Investor B and Investor C Shares at net asset value per share.
o If we don't receive your money within three business days of
receiving your order, we'll refuse the order.
o Selling agents are responsible for sending orders to us and ensuring
we receive your money on time.
o Shares you buy are recorded on the books of the Portfolio. We don't
issue certificates unless you ask for them in writing, and we don't
issue certificates for fractions of shares.
MINIMUM INITIAL INVESTMENT
The minimum initial amount you can buy is usually $1,000.
If you're buying shares through one of the following accounts or
plans, the minimum initial amount you can buy is:
o $500 for traditional and Roth individual retirement accounts (IRAs)
o $250 for accounts set up with some fee-based investment advisers or
financial planners, including wrap fee accounts and other managed
accounts
o $100 using our Systematic Investment Plan
o There is no minimum for 401(k) plans, simplified employee pension
plans (SEPs), salary reduction-simplified employee pension plans
(SAR-SEPs), Savings Incentives Match Plans for Employees (SIMPLE
IRAs), salary reduction-IRAs (SAR-IRAs) or other similar kinds of
accounts. However, if the value of your account falls below $1,000
for 401(k) plans or $500 for the other plans within one year after
you open your account, we may sell your shares. We'll give you 60
days notice in writing if we're going to do this
MINIMUM ADDITIONAL INVESTMENT
You can make additional purchases of $100, or $50 if you use our
Systematic Investment Plan.
44
<PAGE>
[GRAPHIC]
FOR MORE INFORMATION
ABOUT TELEPHONE ORDERS,
SEE PAGE 43.
SYSTEMATIC INVESTMENT PLAN
You can make regular purchases of $50 or more using automatic transfers
from your bank account to the Portfolios you choose. You can contact your
investment professional or us to set up the plan.
Here's how the plan works:
o You can buy shares twice a month, monthly or quarterly.
o You can choose to have us transfer your money on or about the 15th
or the last day of the month.
o Some exceptions may apply to employees of Bank of America and its
affiliates, and to plans set up before August 1, 1997. For details,
please contact your investment professional.
[GRAPHIC]
SELLING SHARES
Here are some general rules for selling shares:
o We'll deduct any CDSC from the amount you're selling and send you
the balance.
o If you're selling your shares through a selling agent, we'll
normally send the sale proceeds by federal funds wire within three
business days after Stephens, First Data or their agents receive
your order. Your selling agent is responsible for depositing the
sale proceeds to your account on time.
o If you're selling your shares directly through us, we'll send the
sale proceeds by mail or wire them to your bank account within three
business days after the Portfolio receives your order.
o You can sell up to $50,000 of shares by telephone if you qualify for
telephone orders.
o If you paid for your shares with a check that wasn't certified,
we'll hold the sale proceeds when you sell those shares for at least
15 days after the trade date of the purchase, or until the check has
cleared.
o If you hold any shares in certificate form, you must sign the
certificates (or send a signed stock power with them) and send them
to First Data. Your signature must be guaranteed unless you've made
other arrangements with us. We may ask for any other information we
need to prove that the order is properly authorized.
o Under certain circumstances allowed under the Investment Company Act
of 1940 (1940 Act), we can pay you in securities or other property
when you sell your shares.
o We can delay payment of the sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information about these restrictions, please contact your retirement
plan administrator.
45
<PAGE>
We may sell your shares:
o if the value of your account falls below $500. We'll give you 60
days notice in writing if we're going to do this
o if your selling agent tells us to sell your shares under
arrangements made between the selling agent and its customers
o under certain other circumstances allowed under the 1940 Act
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan lets you withdraw $25 or more every month,
every quarter or every year. You can contact your investment professional
or us to set up the plan.
Here's how the plan works:
o Your account balance must be at least $10,000 to set up the plan.
o If you set up the plan after you've opened your account, your
signature must be guaranteed.
o You can choose to have us transfer your money on or about the 15th
or the 25th of the month.
o You won't pay a CDSC on Investor A, Investor B or Investor C Shares
if you withdraw 12% or less of the value of those shares in a year.
Otherwise, we'll deduct any CDSC from the withdrawals.
o We'll send you a check or deposit the money directly to your bank
account.
o You can cancel the plan by giving your selling agent or us 30 days
notice in writing.
It's important to remember that if you withdraw more than your investment
in the Portfolio is earning, you'll eventually use up your original
investment.
46
<PAGE>
[GRAPHIC]
YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE PORTFOLIO OR FUND YOU'RE EXCHANGING INTO. PLEASE
READ ITS PROSPECTUS CAREFULLY.
[GRAPHIC]
EXCHANGING SHARES
You can sell shares of a Portfolio to buy shares of another Portfolio
or Nations Fund. This is called an exchange. You might want to do this
if your investment goals or tolerance for risk changes.
Here's how exchanges work:
o You must exchange at least $1,000, or $25 if you use our Automatic
Exchange Feature.
o The rules for buying shares of a Portfolio or Fund, including any
minimum investment requirements, apply to exchanges into that
Portfolio or Fund.
o You may only make an exchange into a Portfolio or Fund that is
legally sold in your state of residence.
o You generally may only make an exchange into a Portfolio or Fund
that is accepting investments.
o We may limit the number of exchanges you can make within a specified
period of time.
o We may change or cancel your right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
o You cannot exchange any shares you own in certificate form until
First Data has received the certificate and deposited the shares to
your account.
EXCHANGING INVESTOR A SHARES
You can exchange Investor A Shares of a Portfolio for Investor A
Shares of any other Portfolio or Nations Fund, except Index Funds.
Here are some rules for exchanging Investor A Shares:
o You won't pay a front-end sales charge on the shares of the
Portfolio or Fund you're exchanging.
o You won't pay a CDSC on the shares you're exchanging. Any CDSC will
be deducted later on when you sell the shares you received from the
exchange. The CDSC at that time will be based on the period from
when you bought the original shares until when you sold the shares
you received from the exchange.
o You won't pay a redemption fee on the shares you're exchanging.
Any redemption fee will be deducted later on when you sell the
shares you received from the exchange. Any redemption fee will be
paid to the original Portfolio or Fund.
47
<PAGE>
EXCHANGING INVESTOR B SHARES
You can exchange Investor B Shares of a Portfolio for:
o Investor B Shares of any other Portfolio or Nations Fund, except
Nations Funds Money Market Funds
o Investor B Shares of Nations Reserves Money Market Funds
You won't pay a CDSC on the shares you're exchanging. Any CDSC will be
deducted later on when you sell the shares you received from the
exchange. The CDSC will be based on the period from when you bought
the original shares until you sold the shares you received from the
exchange.
If you received Investor C Shares of a Nations Funds Money Market Fund
from an exchange of Investor B Shares of a Fund before October 1,
1999, a CDSC may apply when you sell your Investor C Shares. The CDSC
will be based on the period from when you bought the original shares
until you exchanged them.
EXCHANGING INVESTOR C SHARES
You can exchange Investor C Shares of a Portfolio for:
o Investor C Shares of any other Portfolio or Nations Fund, except
Nations Funds Money Market Funds
o Investor C Shares of Nations Reserves Money Market Funds
If you received Investor C Shares of a Portfolio from an exchange of
Investor A Shares of a Managed Index Fund, you can also exchange these
shares for Investor A Shares of an Index Fund.
You won't pay a CDSC on the shares you're exchanging. Any CDSC will be
deducted later on when you sell the shares you received from the
exchange. The CDSC will be based on the period from when you bought
the original shares until you sold the shares you received from the
exchange.
If you received Daily Shares of a Nations Funds Money Market Fund
through an exchange of Investor C Shares of a Portfolio before October
1, 1999, a CDSC may apply when you sell your Daily Shares. The CDSC
will be based on the period from when you bought the original shares
until you exchanged them.
48
<PAGE>
AUTOMATIC EXCHANGE FEATURE
The Automatic Exchange Feature lets you exchange $25 or more of
Investor A or Investor C Shares every month or every quarter. You can
contact your investment professional or us to set up the plan.
Here's how automatic exchanges work:
o Send your request to First Data in writing or call 1.800.321.7854.
o You must already have an investment in the Portfolios or Funds you
want to exchange.
o You can choose to have us transfer your money on or about the 15th
or the last day of the month in which the exchange is scheduled to
occur.
o The rules for making exchanges apply to automatic exchanges.
49
<PAGE>
[GRAPHIC]
HOW SELLING AND SERVICING AGENTS ARE PAID
Your selling and servicing agents usually receive compensation based on
your investment in the Portfolios. The kind and amount of the compensation
depends on the share class you invest in. Selling agents typically pay a
portion of the compensation they receive to their investment professionals.
COMMISSIONS
Your selling agent may receive an up-front commission (reallowance) when
you buy shares of a Portfolio. The amount of this commission depends on
which share class you choose:
o up to 5.00% of the offering price per share of Investor A Shares. The
commission is paid from the sales charge we deduct when you buy your
shares
o up to 4.00% of the net asset value per share of Investor B Shares. The
commission is not deducted from your purchase -- we pay your selling
agent directly
o up to 1.00% of the net asset value per share of Investor C Shares. The
commission is not deducted from your purchase -- we pay your selling
agent directly
If you buy Investor B or Investor C Shares you will be subject to higher
distribution (12b-1) and shareholder servicing fees and may be subject to a
CDSC when you sell your shares.
[GRAPHIC]
THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU
IS ALSO SOMETIMES REFERRED TO AS A SELLING AGENT.
THE DISTRIBUTION FEE IS OFTEN REFERRED TO AS A "12B-1" FEE BECAUSE
IT'S PAID THROUGH A PLAN APPROVED UNDER RULE 12B-1 UNDER THE 1940
ACT.
YOUR SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO
YOUR ACCOUNT.
DISTRIBUTION (12B-1) AND SHAREHOLDER SERVICING FEES
Stephens and selling and servicing agents may be compensated for selling
shares and providing services to investors under distribution and
shareholder servicing plans.
The amount of the fee depends on the class of shares you own:
<TABLE>
<CAPTION>
Maximum annual distribution (12b-1)
and shareholder servicing fees
(as an annual % of average daily net assets)
<S> <C>
Investor A Shares 0.25% combined distribution (12b-1) and shareholder servicing fee
Investor B Shares 0.75% distribution (12b-1) fee, 0.25% shareholder servicing fee
Investor C Shares 0.75% distribution (12b-1) fee, 0.25% shareholder servicing fee
</TABLE>
Fees are calculated daily and deducted monthly. Because these fees are paid
out of the Portfolios' assets on an ongoing basis they will increase the
cost of your investment over time, and may cost you more than any sales
charges you may pay.
The Portfolios pay these fees to Stephens and to eligible selling and
servicing agents for as long as the plans continue. We may reduce or
discontinue payments at any time.
50
<PAGE>
OTHER COMPENSATION
Selling and servicing agents may also receive:
o a bonus, incentive or other compensation relating to the sale, promotion
and marketing of the Portfolios
o additional amounts on all sales of shares:
o up to 1.00% of the offering price per share of Investor A Shares
o up to 1.00% of the net asset value per share of Investor B Shares
o up to 1.00% of the net asset value per share of Investor C Shares
o non-cash compensation like trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other entertainment,
opportunities to participate in golf or other outings and gift
certificates for meals or merchandise
This compensation, which is not paid by the Portfolios, is discretionary
and may be available only to selected selling and servicing agents. For
example, Stephens sometimes sponsors promotions involving Banc of America
Investments, Inc., an affiliate of BAAI, and certain other selling or
servicing agents. Selected selling and servicing agents also may receive
compensation for opening a minimum number of accounts.
BAAI also may pay amounts from its own assets to Stephens or to selling or
servicing agents for services they provide.
51
<PAGE>
[GRAPHIC]
THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
PORTFOLIO -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF COMPOUNDING
HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE OF YOUR
INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL EARN MORE
MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC]
DISTRIBUTIONS AND TAXES
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends
paid on COMMON STOCKS.
o A fund can also have CAPITAL GAIN if the value of its investments
increases. If a fund sells an investment at a gain, the gain is realized.
If a fund continues to hold the investment, any gain is unrealized.
A mutual fund is not subject to income tax as long as it distributes its
net investment income and realized capital gain to its shareholders. The
Portfolios intend to pay out a sufficient amount of their income and
capital gain to their shareholders so the Portfolios won't have to pay any
income tax. When a Portfolio makes this kind of a payment, it's split
equally among all shares, and is called a distribution.
All of the Portfolios distribute net investment income quarterly, and any
net realized capital gain at least once a year.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE
(daily dividend Funds) or the TRADE DATE (all other Funds) of the purchase
up to and including the day before the shares are sold.
Different share classes of a Portfolio usually pay different distribution
amounts, because each class has different expenses. Each time a
distribution is made, the net asset value per share of the share class is
reduced by the amount of the distribution.
We'll automatically reinvest distributions in additional shares of the same
Portfolio unless you tell us you want to receive your distributions in
cash. You can do this by writing to us at the address on the back cover or
by calling us at 1.800.321.7854.
We generally pay cash distributions within five business days after the end
of the month, quarter or year in which the distribution was made. If you
sell all of your shares, we'll pay any distribution that applies to those
shares in cash within five business days after the sale was made.
If you buy shares of a Portfolio shortly before it makes a distribution,
you will, in effect, receive part of your purchase back in the
distribution, which is subject to tax. Similarly, if you buy shares of a
Portfolio that holds securities with unrealized capital gain, you will, in
effect, receive part of your purchase back if and when the Portfolio sells
those securities and distributes the gain. This distribution is also
subject to tax. Some Portfolios have built up, or have the potential to
build up, high levels of unrealized capital gain.
52
<PAGE>
[GRAPHIC]
THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE PORTFOLIOS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC]
FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions that come from net investment income and net short-term
capital gain (generally the excess of net short-term capital gain over net
long-term capital loss) generally are taxable to you as ordinary income.
Distributions that come from net capital gain (generally the excess of net
long-term capital gain over net short-term capital loss), generally are
taxable to you as net capital gain.
In general, all distributions are taxable to you when paid, whether they
are paid in cash or automatically reinvested in additional shares of the
Portfolio. However, any distributions declared in October, November or
December of one year and distributed in January of the following year will
be taxable as if they had been paid to you on December 31 of the first
year.
We'll send you a notice every year that tells you how much you've received
in distributions during the year and their federal tax status. Foreign,
state and local taxes may also apply to these distributions.
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions
and redemption proceeds paid to you (including amounts deemed to be paid
for "in kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on
your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a
correct TIN.
Amounts we withhold are applied to your federal income tax liability. You
may receive a refund from the IRS if the withholding tax results in an
overpayment of taxes.
We're also normally required by federal law to withhold tax on
distributions paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
Your redemptions (including redemptions "in kind") and exchanges of
Portfolio shares will usually result in a taxable capital gain or loss to
you, depending on the amount you receive for your shares (or are deemed to
receive in the case of exchanges) and the amount you paid (or are deemed to
have paid) for them.
53
<PAGE>
[GRAPHIC]
Financial highlights
The financial highlights table is designed to help you understand how
the Portfolios have performed for the past five years. Certain
information reflects financial results for a single Portfolio share.
The total investment return line indicates how much an investment in
the Portfolio would have earned, assuming all dividends and
distributions had been reinvested.
This information has been audited by PricewaterhouseCoopers LLP. The
independent accountant's report and Nations Funds financial statements
are incorporated by reference into the SAI. Please see the back cover
to find out how you can get a copy.
54
<PAGE>
LIFEGOAL GROWTH PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Period ended
INVESTOR A SHARES 3/31/99 03/31/98 03/31/97*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of year $12.50 $ 10.15 $ 10.06
Net investment income/(loss) 0.04 0.05 (a) 0.12
Net realized and unrealized gain on investments 0.30 2.89 0.09
Net increase in net assets resulting from investment
operations 0.34 2.94 0.21
DISTRIBUTIONS:
Distributions from net investment income -- (0.01) (0.12)
Distributions in excess of net investment income (0.08) (0.37) --
Distributions from net realized capital gains (0.60) (0.21) --
Total distributions (0.68) (0.59) (0.12)
Net asset value, end of year $12.16 $ 12.50 $ 10.15
TOTAL RETURN++ 2.87% 29.68% 2.05%
======================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) $3,404 $1,526 $ 681
Ratio of operating expenses to average net
assets+++ 0.50% 0.50% 0.50%+
Ratio of net investment income to average net
assets 0.21% 0.40% 0.86%+
Portfolio turnover rate 159% 69% 25%
</TABLE>
* LifeGoal Growth Portfolio Investor A Shares commenced investment
operations on October 2, 1996. Shares were offered to the public on
October 15, 1996.
+ 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 share
method, which more appropriately represents the per share data for the
period.
LIFEGOAL GROWTH PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year ended Period ended
INVESTOR B SHARES 3/31/99 03/31/98*
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of year $12.49 $11.98
Net investment income/(loss) (0.06) (0.02)(a)
Net realized and unrealized gain on investments 0.31 0.99
Net increase in net assets resulting from investment
operations 0.25 0.97
DISTRIBUTIONS:
Distributions from net investment income -- (0.01)
Distributions in excess of net investment income (0.01) (0.24)
Distributions from net realized capital gains (0.60) (0.21)
Total distributions (0.61) (0.46)
Net asset value, end of year $12.13 $12.49
TOTAL RETURN++ 2.14% 8.55%
=====================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) $8,531 $5,829
Ratio of operating expenses to average net
assets+++ 1.25% 1.25%+
Ratio of net investment income/(loss) to average
net assets (0.54)% (0.35)%+
Portfolio turnover rate 159% 69%
</TABLE>
* LifeGoal Growth Portfolio Investor B Shares commenced investment
operations on August 12, 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.
55
<PAGE>
LIFEGOAL GROWTH PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Period ended
INVESTOR C SHARES 3/31/99 03/31/98 03/31/97*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $12.46 $10.15 $10.06
Net investment income/(loss) (0.05) (0.02)(a) 0.11
Net realized and unrealized gain on investments 0.30 2.89 0.09
Net increase in net assets resulting from investment
operations 0.25 2.87 0.20
DISTRIBUTIONS:
Distributions from net investment income -- (0.01) (0.11)
Distributions in excess of net investment income (0.02) (0.34) --
Distributions from net realized capital gains (0.60) (0.21) --
Total distributions (0.62) (0.56) (0.11)
Net asset value, end of period $12.09 $12.46 $ 10.15
TOTAL RETURN++ 2.07% 28.89% 2.01%
====================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 473 $ 342 $ 82
Ratio of operating expenses to average net
assets+++ 1.25% 1.09% 0.75%+
Ratio of net investment income/(loss) to average
net assets (0.54)% (0.19)% 0.61%+
Portfolio turnover rate 159% 69% 25%
</TABLE>
* LifeGoal Growth Portfolio Investor C Shares commenced investment
operations on October 2, 1996. Shares were offered to the public on
October 15, 1996.
+ 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 share
method, which more appropriately represents the per share data for the
period.
LIFEGOAL BALANCED GROWTH
PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Period ended
INVESTOR A SHARES 3/31/99 03/31/98 03/31/97*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.94 $ 9.95 $ 10.05
Net investment income 0.25 0.28(a) 0.19
Net realized and unrealized loss/gain on
investments 0.21 1.79 (0.10)
Net increase/(decrease) in net assets resulting from
investment operations 0.46 2.07 0.09
DISTRIBUTIONS:
Distributions from net investment income (0.25) (0.27) (0.19)
Distributions in excess of net investment income -- (0.31) --
Distributions from net realized capital gains (0.33) (0.50) --
Total distributions (0.58) (1.08) (0.19)
Net asset value, end of period $ 10.82 $ 10.94 $ 9.95
TOTAL RETURN++ 4.44% 21.76% 0.86%
==================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,308 $ 489 $ 94
Ratio of operating expenses to average net
assets+++ 0.50% 0.50% 0.50%+
Ratio of net investment income to average net
assets 2.52% 2.62% 3.69%+
Portfolio turnover rate 121% 94% 1%
</TABLE>
* LifeGoal Balanced Growth Portfolio Investor A Shares commenced
investment operations on October 2, 1996. Shares were offered to the
public on October 15, 1996.
+ 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 share
method, which more appropriately represents the per share data for the
period.
56
<PAGE>
LIFEGOAL BALANCED GROWTH
PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year ended Period ended
INVESTOR B SHARES 3/31/99 03/31/98*
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of year $ 10.92 $ 10.88
Net investment income 0.17 0.11(a)
Net realized and unrealized gain/(loss) on
investments 0.22 0.87
Net increase/(decrease) in net assets resulting from
investment operations 0.39 0.98
DISTRIBUTIONS:
Distributions from net investment income (0.16) (0.20)
Distributions in excess of net investment income -- (0.24)
Distributions from net realized capital gains (0.33) (0.50)
Total distributions (0.49) (0.94)
Net asset value, end of year $ 10.82 $ 10.92
TOTAL RETURN++ 3.78% 9.70%
================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) $ 8,925 $4,917
Ratio of operating expenses to average net
assets+++ 1.25% 1.25%+
Ratio of net investment income to average net
assets 1.77% 1.87%+
Portfolio turnover rate 121% 94%
</TABLE>
* LifeGoal Balanced Growth Portfolio Investor B Shares commenced
investment operations on August 13, 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 share
method, which more appropriately represents the per share data for the
period.
LIFEGOAL BALANCED GROWTH
PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Period ended
INVESTOR C SHARES 3/31/99 03/31/98 03/31/97*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.92 $ 9.95 $ 10.05
Net investment income 0.20 0.23(a) 0.19
Net realized and unrealized gain/(loss) on
investments 0.26 1.78 (0.10)
Net increase/(decrease) in net assets resulting from
investment operations 0.46 2.01 0.09
DISTRIBUTIONS:
Distributions from net investment income (0.13) (0.25) (0.19)
Distributions in excess of net investment income -- (0.29) --
Distributions from net realized capital gains (0.33) (0.50) --
Total distributions (0.46) (1.04) (0.19)
Net asset value, end of period $ 10.92 $ 10.92 $ 9.95
TOTAL RETURN++ 4.43% 21.10% 0.85%
========================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 266 $ 737 $ 18
Ratio of operating expenses to average net
assets+++ 1.25% 1.09% 0.75%+
Ratio of net investment income to average net
assets 1.77% 2.03% 3.44%+
Portfolio turnover rate 121% 94% 1%
</TABLE>
* LifeGoal Balanced Growth Portfolio Investor C Shares commenced
investment operations on October 2, 1996. Shares were offered to the
public on October 15, 1996.
+ 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 share
method, which more appropriately represents the per share data for the
period.
57
<PAGE>
LIFEGOAL INCOME AND GROWTH
PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Period ended
INVESTOR A SHARES 3/31/99 03/31/98 03/31/97*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of year $ 10.71 $ 9.97 $ 10.03
Net investment income 0.36 0.41(a) 0.31
Net realized and unrealized gain/loss on
investments 0.35 0.89 (0.06)
Net increase in net assets resulting from investment
operations 0.71 1.30 0.25
DISTRIBUTIONS:
Distributions from net investment income (0.33) (0.38) (0.31)
Distributions in excess of net investment income -- (0.11) --
Distributions from net realized capital gains (0.20) (0.07) --
Total distributions (0.53) (0.56) (0.31)
Net asset value, end of period $ 10.89 $ 10.71 $ 9.97
TOTAL RETURN++ 6.92% 13.38% 2.54%
==================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,347 $ 126 $ 131
Ratio of operating expenses to average net
assets+++ 0.50% 0.50% 0.50%+
Ratio of net investment income to average net
assets 3.74% 3.92% 6.09%+
Portfolio turnover rate 107% 64% 2%
</TABLE>
* LifeGoal Income and Growth Portfolio Investor A Shares commenced
investment operations on October 2, 1996. Shares were offered to the
public on October 15, 1996.
+ 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 share
method, which more appropriately represents the per share data for the
period.
LIFEGOAL INCOME AND GROWTH
PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year ended Period ended
INVESTOR B SHARES 3/31/99 03/31/98*
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of year $ 10.70 $ 10.51
Net investment income 0.28 0.19(a)
Net realized and unrealized gain/(loss) on
investments 0.35 0.36
Net increase in net assets resulting from investment
operations 0.63 0.55
DISTRIBUTIONS:
Distributions from net investment income (0.24) (0.22)
Distributions in excess of net investment income -- (0.07)
Distributions from net realized capital gains (0.20) (0.07)
Total distributions (0.44) (0.36)
Net asset value, end of period $ 10.89 $ 10.70
TOTAL RETURN++ 6.16% 5.33%
====================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 4,806 $ 1,212
Ratio of operating expenses to average net
assets+++ 1.25% 1.25%+
Ratio of net investment income to average net
assets 2.99% 3.17%+
Portfolio turnover rate 107% 64%
</TABLE>
* 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 share
method, which more appropriately represents the per share data for the
period.
58
<PAGE>
LIFEGOAL INCOME AND GROWTH
PORTFOLIO FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Period ended
INVESTOR C SHARES 3/31/99 03/31/98 03/31/97*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.70 $ 9.97 $ 10.03
Net investment income 0.31 0.36(a) 0.31
Net realized and unrealized gain/(loss) on
investments 0.31 0.89 (0.06)
Net increase in net assets resulting from investment
operations 0.62 1.25 0.25
DISTRIBUTIONS:
Distributions from net investment income (0.22) (0.35) (0.31)
Distributions in excess of net investment income -- (0.10) --
Distributions from net realized capital gains (0.20) (0.07) --
Total distributions (0.42) (0.52) (0.31)
Net asset value, end of period $ 10.90 $ 10.70 $ 9.97
TOTAL RETURN++ 6.02% 12.83% 2.54%
===================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 100 $ 87 $ 1
Ratio of operating expenses to average net
assets+++ 1.25% 1.09% 0.75%+
Ratio of net investment income to average net
assets 2.99% 3.33% 5.84%+
Portfolio turnover rate 107% 64% 2%
</TABLE>
* LifeGoal Income and Growth Portfolio Investor C Shares commenced
investment operations on October 2, 1996. Shares were offered to the
public on October 15, 1996.
+ 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 share
method, which more appropriately represents the per share data for the
period.
59
<PAGE>
[GRAPHIC]
Terms used in this prospectus
ASSET-BACKED SECURITY - a debt security that gives you an interest in a
pool of assets that is collateralized or "backed" by one or more kinds
of assets, including real property, receivables or mortgages, generally
issued by banks, credit card companies or other lenders. Some
securities may be issued or guaranteed by the U.S. government or its
agencies, authorities or instrumentalities. Asset-backed securities
typically make periodic payments, which may be interest or a
combination of interest and a portion of the principal of the
underlying assets.
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the
debt securities held by a Fund reach maturity. In general, the longer
the average dollar-weighted maturity, the more a Fund's share price
will fluctuate in response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a
security and its selling price. You realize a capital gain when you
sell a security for more than you paid for it. You realize a capital
loss when you sell a security for less than you paid for it.
CASH EQUIVALENTS - short-term, interest-bearing instruments, including
obligations issued or guaranteed by the U.S. government, its agencies
and instrumentalities, bank obligations, asset-backed securities,
foreign government securities and commercial paper issued by U.S. and
foreign issuers which, at the time of investment, is rated at least
Prime-2 by Moody's Investor Services, Inc. (Moody's), A-2 by S&P, or
F-1 by Fitch IBCA (Fitch).
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a
company. Common stock typically allows you to vote at shareholder
meetings and to share in the company's profits by receiving dividends.
CONVERTIBLE DEBT - a debt security that can be exchanged for common
stock (or another type of security) on a specified basis and date.
CONVERTIBLE SECURITY - a security that can be exchanged for common
stock (or another type of security) at a specified rate. Convertible
securities include convertible debt, rights and warrants.
CORPORATE OBLIGATION - a money market instrument issued by a
corporation or commercial bank.
60
<PAGE>
DEBT SECURITY - when you invest in a debt security, you are typically
lending your money to a governmental body or company (the issuer) to
help fund their operations or major projects. The issuer pays interest
at a specified rate on a specified date or dates, and repays the
principal when the security matures. Short-term debt securities include
money market instruments such as treasury bills. Long-term debt
securities include fixed income securities such as government and
corporate bonds, and mortgage-backed and asset-backed securities.
DEPOSITARY RECEIPTS - evidence of the deposit of a security with a
custodian bank. American Depositary Receipts (ADRs), for example, are
certificates traded in U.S. markets representing an interest of a
foreign company. They were created to make it possible for foreign
issuers to meet U.S. security registration requirements. Other examples
include ADSs, GDRs and EDRs.
DIVIDEND YIELD - rate of return of dividends paid on a common or
preferred stock. It equals the amount of the annual dividend on a stock
expressed as a percentage of the stock's current market value.
DURATION - a measure used to estimate a security's or portfolio's
sensitivity to changes in interest rates. For example, if interest
rates rise by one percentage point, the share price of a fund with a
duration of five years would decline by about 5%. If interest rates
fall by one percentage point, the fund's share price would rise by
about 5%.
EQUITY SECURITY - an investment that gives you an equity ownership
right in a company. Equity securities (or "equities") include common
and preferred stock, rights and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt
security that is an eligible investment for money market funds and has
the highest short-term rating from a nationally recognized statistical
rating organization (NRSRO), or if unrated, is determined by the fund's
portfolio management team to be of comparable quality, or is a money
market fund issued by a registered investment company, or is a
government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
FOREIGN SECURITY - a debt or equity security issued by a foreign
company or government.
FUNDAMENTAL ANALYSIS - a method of securities analysis that tries to
evaluate the intrinsic, or "true," value of a particular stock. It
includes a study of the overall economy, industry conditions and the
financial condition and management of a company.
FUTURES - a contract to buy or sell an asset or an index of securities
at a specified price on a specified future date. The price is set
through a futures exchange.
61
<PAGE>
INVESTMENT GRADE - a debt security that has been given a medium to high
credit rating (Baa or higher by Moody's, BBB or higher by S&P or a
comparable rating by other NRSROs) based on the issuer's ability to pay
interest and repay principal on time. The portfolio management team may
consider an unrated debt security to be investment grade if the team
believes it is of comparable quality. Please see the SAI for more
information about credit ratings.
LEHMAN AGGREGATE BOND INDEX - an index made up of the Lehman
Government/Corporate Index, the Asset-Backed Securities Index and the
Mortgage-Backed Securities Index. These indexes include U.S. government
agency and U.S. Treasury securities, corporate bonds and
mortgage-backed securities. All dividends are reinvested.
LIQUIDITY - a measurement of how easily a security can be bought or
sold at a price that is close to its market value.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered
to mature in 13 months or less. Money market instruments include U.S.
Treasury obligations, U.S. government obligations, certificates of
deposit, bankers' acceptances, commercial paper, repurchase agreements
and certain municipal securities.
MORTGAGE-BACKED SECURITY OR MORTGAGE-RELATED SECURITY - a debt security
that gives you an interest in, and is backed by, a pool of residential
mortgages issued by the U.S. government or by financial institutions.
The underlying mortgages may be guaranteed by the U.S. government or
one of its agencies, authorities or instrumentalities. Mortgage-backed
securities typically make monthly payments, which are a combination of
interest and a portion of the principal of the underlying mortgages.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or
local governments or governmental authorities to pay for public
projects and services. "General obligations" are typically backed by
the issuer's full taxing and revenue-raising powers. "Revenue
securities" depend on the income earned by a specific project or
authority, like road or bridge tolls, user fees for water or revenues
from a utility. Interest income is exempt from federal income taxes and
is generally exempt from state taxes if you live in the state that
issued the security. If you live in the municipality that issued the
security, interest income may also be exempt from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or
kinds of issuers than other kinds of funds. Non-diversified funds tend
to have greater price swings than more diversified funds because events
affecting one or more of its securities may have a disproportionately
large effect on the fund.
PREFERRED STOCK - a type of equity security that gives you a limited
ownership right in a company, with certain preferences or priority over
common stock. Preferred stock generally pays a fixed annual dividend.
If the company goes bankrupt, preferred shareholders generally receive
their share of the company's remaining assets before common
shareholders and after bondholders and other creditors.
62
<PAGE>
QUANTITATIVE ANALYSIS - an analysis of financial information about a
company or security to identify securities that have the potential for
growth or are otherwise suitable for a fund to buy.
REAL ESTATE INVESTMENT TRUST (REIT) - a portfolio of real estate
investments which may include office buildings, apartment complexes,
hotels and shopping malls, and real-estate-related loans or interests.
REPURCHASE AGREEMENT - a short-term (often overnight) investment
arrangement. The investor agrees to buy certain securities from the
borrower and the borrower promises to buy them back at a specified date
and price. The difference between the purchase price paid by the
investor and the repurchase price paid by the borrower represents the
investor's return. Repurchase agreements are popular because they
provide very low-risk return and can virtually eliminate credit
difficulties.
RIGHT - a temporary privilege allowing investors who already own a
common stock to buy additional shares directly from the company at a
specified price or formula.
S&P 500(1) - Standard & Poor's 500 Composite Stock Price Index, an
unmanaged index of 500 widely held common stocks. It is not available
for investment.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt
security that is an eligible investment for money market funds, but is
not a first-tier security.
SENIOR SECURITY - a debt security that allows holders to receive their
share of a company's remaining assets in a bankruptcy before other
bondholders, creditors, and common and preferred shareholders.
SETTLEMENT DATE - The date on which an order is settled either by
payment or delivery of securities.
TRADE DATE - the effective date of a purchase, sale or exchange
transaction, or other instructions sent to us. The trade date is
determined by the day and time we receive the order or instructions in
a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
WARRANT - a certificate that gives you the right to buy common shares
at a specified price within a specified period of time.
(1) S&P has not reviewed any stock included in the S&P 500 for its
investment merit. S&P determines and calculates its index independently
of the Funds and is not a sponsor or affiliate of the Funds. S&P gives
no information and makes no statements about the suitability of
investing in the Funds or the ability of its index to track stock
market performance. S&P makes no guarantees about the index, any data
included in it and the suitability of the index or its data for any
purpose. "Standard and Poor's" and "S&P 500" are trademarks of The
McGraw-Hill Companies, Inc.
63
<PAGE>
[GRAPHIC]
Where to find more information
You'll find more information about the LifeGoal Portfolios in the
following documents:
[GRAPHIC]
ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Portfolio
investments and performance, the financial statements and the auditor's
reports. The annual report also includes a discussion about the market
conditions and investment strategies that had a significant effect on
each Portfolio's performance during the period covered.
[GRAPHIC]
STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Portfolios and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other information
about the Portfolios and make shareholder inquiries by contacting
Nations Funds:
By telephone: 1.800.321.7854
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee for
this service. You can also download them from the SEC's website or visit
the Public Reference Section and copy the documents while you're there.
Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file number:
[GRAPHIC]
Nations LifeGoal Funds, Inc. 811-07745
NF-LGPROIX-11/99
<PAGE>
NATIONS LIFEGOAL FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
NATIONS LIFEGOAL GROWTH PORTFOLIO
NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO
NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO
INVESTOR A, INVESTOR B, INVESTOR C SHARES AND PRIMARY A AND PRIMARY B SHARES
AUGUST 1, 1999, AS SUPPLEMENTED ON NOVEMBER 15, 1999
This Statement of Additional Information ("SAI") provides supplementary
information pertaining to shares representing interests in the above listed
three investment portfolios of Nations LifeGoal Funds, Inc. (individually, a
"LifeGoal Portfolio" and collectively, the "LifeGoal Portfolios"). This SAI is
not a prospectus and should be read only in conjunction with the current
prospectuses for the aforementioned LifeGoal Portfolios related to the class or
series of shares in which one is interested, dated November 15, 1999, for the
Investor A, Investor B, Investor C, Primary A and Primary B Shares (each a
"Prospectus"). All terms used in this SAI that are defined in the Prospectuses
will have the same meanings assigned in the Prospectuses. Copies of these
Prospectuses may be obtained without charge by writing Nations Funds c/o
Stephens Inc., One Bank of America Plaza, 33rd Floor, Charlotte, North Carolina
28255, or by calling Nations Funds at 1-800-982-2271.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
HISTORY OF THE COMPANY....................................................................... 1
DESCRIPTION OF THE COMPANY AND THE LIFEGOAL PORTFOLIOS ...................................... 1
General.............................................................................. 1
Investment Limitations .............................................................. 2
ADDITIONAL INFORMATION ABOUT THE UNDERLYING NATIONS FUNDS.................................... 4
Permissible Fund Investments......................................................... 4
Asset-Backed Securities.............................................................. 8
Borrowings........................................................................... 12
Commercial Instruments............................................................... 12
Combined Transactions................................................................ 13
Convertible Securities............................................................... 13
Corporate Debt Securities............................................................ 14
Custodial Receipts................................................................... 14
Currency Swaps....................................................................... 15
Delayed Delivery Transactions........................................................ 15
Dollar Roll Transactions ............................................................ 15
Equity Swap Contracts ............................................................... 16
Foreign Currency Transactions ....................................................... 16
Futures, Options and Other Derivative
Instruments.................................................................... 17
Risk Factors Associated with Futures and Options Transactions........................ 23
Guaranteed Investment Contracts...................................................... 33
Insured Municipal Securities ........................................................ 33
Interest Rate Transactions .......................................................... 33
Lower Rated Debt Securities.......................................................... 34
Municipal Securities ................................................................ 35
Options on Currencies................................................................ 38
Other Investment Companies........................................................... 38
Participation Interests and Company Receipts......................................... 38
Real Estate Investment Trusts........................................................ 39
Repurchase Agreements ............................................................... 39
Reverse Repurchase Agreements ....................................................... 39
Securities Lending................................................................... 39
Short Sales.......................................................................... 40
Special Situations................................................................... 40
Stand-by Commitments ................................................................ 40
Stripped Securities.................................................................. 41
U.S. and Foreign Bank Obligations.................................................... 41
U.S. Government Obligations.......................................................... 42
Use of Segregated and Other Special Accounts......................................... 42
Variable and Floating Rate Instruments .............................................. 43
Warrants............................................................................. 44
When-Issued Purchases and Forward Commitments ...................................... 44
Portfolio Turnover................................................................... 44
Investment Risks..................................................................... 44
MANAGEMENT OF THE COMPANY.................................................................... 45
Compensation Table................................................................... 49
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT ADVISORY, ADMINISTRATION, CUSTODY, TRANSFER AGENCY,
OTHER SERVICE PROVIDERS, SHAREHOLDER SERVICING AND
DISTRIBUTION ARRANGEMENTS.................................................................... 51
Investment Advisory and Sub-Adviser of the LifeGoal Portfolios....................... 51
Investment Advisory and Sub-Adviser of the Underlying Nations Funds.................. 54
Administrator, Co-Administrator and Sub-Administrator................................ 58
Distributor.......................................................................... 60
Distribution Plans and Shareholder Servicing Arrangements for Investor Shares........ 61
Information Applicable to Investor A, Investor B and Investor C Shares............... 64
Shareholder Administration Plan (Primary B Shares)................................... 64
Expenses............................................................................. 67
Transfer Agents and Custodian........................................................ 68
Independent Accountant and Reports................................................... 68
Counsel.............................................................................. 68
DESCRIPTION OF SHARES........................................................................ 68
Net Asset Value Determination........................................................ 70
Exchanges............................................................................ 71
Dividends and Distributions.......................................................... 71
ADDITIONAL INFORMATION CONCERNING TAXES...................................................... 72
General.............................................................................. 72
Excise Tax .......................................................................... 72
Taxation of Investments of a Regulated Investment Company............................ 73
Capital Gain Distribution............................................................ 74
Disposition of Fund Shares........................................................... 74
Federal Income Tax Rates............................................................. 75
Backup Withholding................................................................... 75
Corporate Shareholders and Dividends Received Deduction.............................. 75
Foreign Shareholders................................................................. 76
New Regulations...................................................................... 76
Foreign Taxes........................................................................ 76
Other Matters........................................................................ 76
SECURITY HOLDERS............................................................................. 76
ADDITIONAL INFORMATION ON PERFORMANCE........................................................ 79
Yield Calculations................................................................... 79
Total Return Calculations............................................................ 80
SCHEDULE A - Description of Ratings........................................................... A-1
</TABLE>
ii
<PAGE>
HISTORY OF THE COMPANY
----------------------
Nations LifeGoal Funds, Inc. (the "Company") is a diversified open-end
management investment company organized as a corporation under the laws of the
State of Maryland on July 3, 1996. The Company offers shares of common stock
which represent interests in one of three separate LifeGoal Portfolios. This SAI
relates to the following LifeGoal Portfolios of the Company: LifeGoal Growth
Portfolio, LifeGoal Balanced Growth Portfolio and LifeGoal Income and Growth
Portfolio. Each LifeGoal Portfolio offers the following separate classes of
shares: Primary A Shares, Primary B Shares, Investor A Shares, Investor B and
Investor C Shares. The Company has a fiscal year end of March 31st.
DESCRIPTION OF THE COMPANY AND THE LIFEGOAL PORTFOLIOS
------------------------------------------------------
GENERAL
This SAI relates to the shares of LifeGoal Growth Portfolio, LifeGoal
Balanced Growth Portfolio and LifeGoal Income and Growth Portfolio. The Primary
A and Primary B Shares are collectively referred to herein as "Primary Shares"
and the Investor A, Investor B and Investor C Shares are collectively referred
to as "Investor Shares." Banc of America Advisors, Inc. ("BAAI") is the
investment adviser to the LifeGoal Portfolios. TradeStreet Investment
Associates, Inc. ("TradeStreet") is investment sub-adviser. As used herein the
"Adviser" shall mean BAAI and/or TradeStreet as the context may require.
Each LifeGoal Portfolio may (i) own more than 3% of the total
outstanding stock of a registered investment company which is a member of the
Nations Funds Family, (ii) invest more than 5% of its assets in any one such
investment company, and (iii) invest more than 10% of it assets, collectively,
in registered investment companies which are members of the Nations Funds
Family. Each LifeGoal Portfolio will concentrate more than 25% of its assets in
the mutual fund industry. However, each of the underlying mutual funds in which
the LifeGoal Portfolios will invest will not concentrate 25% or more of its
total assets in any one industry.
Shares of each LifeGoal Portfolio of the Company are redeemable at the
net asset value (less, in the case of Investor B and Investor C Shares, any
applicable contingent deferred sales charge ("CDSC")) thereof at the option of
the holders thereof or in certain circumstances at the option of the Company.
For information concerning the methods of redemption and the rights of share
ownership, consult the Prospectuses under the caption "Buying, Selling and
Exchanging Shares."
As used in this SAI and in the Prospectuses, the term "majority of the
outstanding shares" of the Company, a particular LifeGoal Portfolio or a
particular class of shares of a LifeGoal Portfolio means, respectively, the vote
of the lesser of (i) 67% or more of the shares of the Company, LifeGoal
Portfolio or class (as appropriate) present at a meeting of shareholders, if the
holders of more than 50% of the outstanding shares entitled to vote, are present
or represented by proxy, or (ii) more than 50% of the outstanding shares of the
Company, LifeGoal Portfolio or class.
The Board of Directors may classify or reclassify any unissued shares
of the Company into shares of any class, classes or LifeGoal Portfolio in
addition to those already authorized by setting or changing in any one or more
respects, from time to time, prior to the issuance of such shares, the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption, of such shares and, pursuant to such classification or
reclassification to increase or decrease the number of authorized shares of any
LifeGoal Portfolio or class. Any such classification or reclassification will
comply with the provisions of the Investment Company Act of 1940 (the "1940
Act"). Fractional shares shall have the same rights as full shares to the extent
of their proportionate interest.
As of August 1, 1999, Bank of America National Trust & Savings
Association ("Bank of America") and its affiliates possessed or shared power to
dispose or vote with respect to more than 25% of the outstanding shares of the
Company and therefore could be considered to be a controlling person of the
Company for purposes of the 1940 Act. For more detailed information concerning
the percentage of each class or series of shares over which Bank of
1
<PAGE>
America and its affiliates possessed or shared power to dispose or vote as of a
certain date, see the discussion on Certain Record Holders.
Information concerning each LifeGoal Portfolio's investment objective
is set forth in each of the Prospectuses. There can be no assurance that the
LifeGoal Funds will achieve their objectives. The principal features of the
LifeGoal Funds' investment programs and the primary risks associated with those
investment programs are discussed in the Prospectuses. The principal features
and certain risks of the underlying Nations Funds also are discussed in the
Prospectuses.
Under extraordinary circumstances, the LifeGoal Portfolios may invest
100% of their assets in Nations Prime Fund. Such circumstances that would prompt
a shift in the allocation of assets for defensive purposes by the Adviser
include concerns about a precipitous decline in the net asset value of any of
the underlying Nations Funds or similar volatility in the Nasdaq National
Market, New York Stock Exchange or American Stock Exchange. The designation of
circumstances as sufficiently extraordinary to permit this defensive investing
is within the Adviser's discretion.
Although each LifeGoal Portfolio intends to invest substantially all of
its assets in underlying Nations Funds, each LifeGoal Portfolio reserves the
right to invest assets not so invested in government securities, repurchase
agreements and money market instruments.
INVESTMENT LIMITATIONS
Each LifeGoal Portfolio is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of the LifeGoal Fund's outstanding shares.
Under the 1940 Act, such approval requires the affirmative vote, at a
meeting of shareholders of a LifeGoal Portfolio, of (i) at least 67% of the
shares of the LifeGoal Portfolio present at the meeting, if the holders of more
than 50% of the outstanding shares of the LifeGoal Portfolio are present in
person or by represented proxy; or (ii) more than 50% of the outstanding shares
of the LifeGoal Portfolio, whichever is less.
The LifeGoal Portfolios may not:
1. Borrow money or issue senior securities as defined in the 1940 Act except
that (a) a Portfolio may borrow money from banks for temporary or emergency
purposes in amounts up to one-third of the value of such Portfolio's total
assets at the time of borrowing, provided that borrowings in excess of 5% of
the value of such Portfolio's total assets will be repaid prior to the
purchase of additional portfolio securities by such Portfolio, (b) a
Portfolio may enter into commitments to purchase securities in accordance
with the Portfolio's investment program, including delayed delivery and
when-issued securities, which commitments may be considered the issuance of
senior securities, and (c) a Portfolio may issue multiple classes of shares
in accordance with SEC regulations or exemptions under the 1940 Act. The
purchase or sale of futures contracts and related options shall not be
considered to involve the borrowing of money or issuance of senior
securities.
2. Purchase any securities on margin (except for such short-term credits as
are necessary for the clearance of purchases and sales of portfolio
securities) or sell any securities short (except against the box.) For
purposes of this restriction, the deposit or payment by the Portfolio of
initial or maintenance margin connection with futures contracts and related
options and options on securities is not considered to be the purchase of a
security on margin.
3. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and the later disposition of such securities
in accordance with the Portfolio's investment program may be deemed an
underwriting. This restriction shall not limit a Fund's ability to invest in
securities issued by other registered investment companies.
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4. Invest in real estate or real estate limited partnership interests. (Each
Portfolio may, however, purchase and sell securities secured by real estate
or interests therein or issued by issuers which invest in real estate or
interests therein.) This restriction does not apply to real estate limited
partnerships listed on a national stock exchange (e.g., the New York Stock
Exchange).
5. Purchase or sell commodity contracts except that each Portfolio may, to
the extent appropriate under its investment policies, purchase publicly
traded securities of companies engaging in whole or in part in such
activities, may enter into futures contracts and related options, may engage
in transactions on a when-issued or forward commitment basis, and may enter
into forward currency contracts in accordance with its investment policies.
6. Make loans, except that a Portfolio may purchase and hold debt
instruments (whether such instruments are part of a public offering or
privately placed), may enter into repurchase agreements and may lend
portfolio securities in accordance with its investment policies.
7. The LifeGoal Portfolios will be diversified and each Portfolio may not
purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or
securities of other investment companies) if, immediately after such
purchase, more than 5% of the value of such Portfolio's total assets would
be invested in the securities of such issuer, except that up to 25% of the
value of the Portfolio's total assets may be invested without regard to
these limitations and with respect to 75% of such Portfolio's assets, such
Portfolio will not hold more than 10% of the voting securities of any
issuer.
8. Each LifeGoal Portfolio will concentrate its investments in the
securities of other investment companies.
In addition, certain non-fundamental investment restrictions are also
applicable to the LifeGoal Portfolio, including the following:
1. No Portfolio of the Company will purchase or retain the securities of any
issuer if the officers, or directors of the Company, its advisers, or
managers owning beneficially more than one half of one percent of the
securities of each issuer together own beneficially more than five
percent of such securities.
2. No Portfolio of the Company will purchase securities of unseasoned
issuers, including their predecessors, that have been in operation for
less than three years, if by reason thereof the value of such Portfolio's
investment in such classes of securities would exceed 5% of such
Portfolio's total assets. For purposes of this limitation, issuers
include predecessors, sponsors, controlling persons, general partners,
guarantors and originators of underlying assets which have less than
three years of continuous operation or relevant business experience.
3. No Portfolio will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total
assets except that: (a) this restriction shall not apply to standby
commitments, (b) this restriction shall not apply to a Portfolio's
transactions in futures contracts and related options, and (c) a
Portfolio may obtain short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities.
4. No Portfolio will invest in warrants, valued at the lower of cost or
market, in excess of 5% of the value of such Portfolio's assets, and no
more than 2% of the value of the Portfolio's net assets may be invested
in warrants that are not listed on principal domestic or foreign
exchanges (for purposes of this undertaking, warrants acquired by a
Portfolio in units or attached to securities will be deemed to have no
value).
5. No Portfolio of the Company will purchase securities of companies for the
purpose of exercising control.
6. No Portfolio of the Company will invest more than 15% of the value of its
net assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, time deposits with
maturities in excess of seven days, restricted securities, and other
securities which are not readily marketable. For purposes of this
restriction, illiquid securities shall not include securities which may
be resold under Rule
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144A under the Securities Act of 1933 that the Board of Directors, or its
delegate, determines to be liquid, based upon the trading markets for the
specific security.
7. No Portfolio of the Company will mortgage, pledge or hypothecate any
assets except to secure permitted borrowings and then only in an amount
up to one-third of the value of the Portfolio's total assets at the time
of borrowing. For purposes of this limitation, collateral arrangements
with respect to the writing of options, futures contracts, options on
futures contracts, and collateral arrangements with respect to initial
and variation margin are not considered to be a mortgage, pledge or
hypothecation of assets.
8. No Portfolio of the Company will purchase oil, gas or mineral leases or
other interests (a Portfolio may, however, purchase and sell the
securities of companies engaged in the exploration, development,
production, refining, transporting and marketing of oil, gas or
minerals).
Notwithstanding the foregoing restrictions, the underlying mutual funds
in which LifeGoal Portfolios may invest have adopted their own investment
restrictions which may be more or less restrictive than those listed above,
thereby allowing a LifeGoal Portfolio to participate in certain investment
strategies indirectly that are prohibited under the fundamental and
non-fundamental investment restrictions listed above and in a LifeGoal Portfolio
Prospectus. The investment restrictions of these underlying mutual funds are set
forth in their respective statements of additional information.
ADDITIONAL INFORMATION ABOUT THE UNDERLYING NATIONS FUNDS
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PERMISSIBLE FUND INVESTMENTS
In addition to the principal investment strategies for each underlying
Nations Fund (each a "Fund"), which are outlined in the Funds' prospectuses,
each Fund also may invest in other types of securities in percentages of less
than 10% of its total assets (unless otherwise indicated, E.G., most Funds may
invest in money market instruments without limit during temporary defensive
periods). These types of securities are listed below for each portfolio and then
are described in more detail after this sub-section.
THE EQUITY FUNDS
Value Fund: In addition to the types of securities described in its
Prospectus, the Fund may invest in: U.S. Treasury bills, notes and bonds and
other instruments issued directly by the U.S. Government ("U.S. Treasury
Obligations"), other obligations issued or guaranteed as to payment of principal
and interest by the U.S. Government, its agencies and instrumentalities
(together with U.S. Treasury Obligations, "U.S. Government Obligations");
investment grade debt securities of domestic companies; various money market
instruments and repurchase agreements.
Small Company Growth Fund: In addition to the types of securities
described in the Fund's Prospectus, the Fund may invest in: debt securities,
unless the Fund assumes a temporary defensive position. Debt securities, if any,
purchased by the Fund will be rated "AA" or above by S&P or "Aa" or above by
Moody's or, if unrated, determined by the Adviser to be of comparable quality.
For temporary defensive purposes, the Fund may invest up to 100% of its assets
in debt securities, including short-term and intermediate-term obligations of
corporations, the U.S. and foreign governments and international organizations
such as the World Bank, and money market instruments. The Fund may invest in
common stocks (including convertible into common stocks) of foreign issuers and
rights to purchase common stock, options and futures contracts on securities,
securities indexes and foreign currencies, securities lending, forward foreign
exchange contracts and repurchase agreements.
Disciplined Equity Fund: In addition to the types of securities
described in the Fund's Prospectus, the Fund may invest in: a broad range of
equity and debt instruments, including preferred stocks, securities (debt and
preferred stock) convertible into common stock, warrants and rights to purchase
common stocks, options, U.S. government and corporate debt securities and
various money market instruments. The Fund's investments in debt securities,
including convertible securities, will be limited to securities rated investment
grade (E.G., securities rated in one of the top four investment categories by an
NRSRO or, if not rated, are of equivalent quality as determined by the
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Adviser). For temporary defensive purposes if market conditions warrant, the
Fund may invest without limitation in preferred stocks, investment grade debt
instruments, money market instruments and repurchase agreements.
Capital Growth Fund: In addition to the types of securities described
in the Fund's Prospectus, the Fund may invest in: preferred stocks, securities
(debt and preferred stock) convertible into common stock, warrants and rights to
purchase common stocks, other types of securities having common stock
characteristics and various money market instruments, including repurchase
agreements. The Fund may invest in foreign securities, including common stocks
(including convertible into common stocks) of foreign issuers and rights to
purchase common stock, options and futures contracts on securities, securities
indexes and foreign currencies, securities lending, forward foreign exchange
contracts.
Nations Marsico Focused Equities Fund: In addition to the types of
securities described in the Fund's Prospectuses, this Fund may invest in:
preferred stock, warrants, convertible securities and debt securities; zero
coupon, pay- in-kind and step coupon securities, and may invest without limit in
indexed/structured securities. The Fund also may invest its assets in
high-yield/high-risk securities, such as lower grade debt securities, high-grade
commercial paper, certificates of deposit, and repurchase agreements, and may
invest in short-term debt securities as a means of receiving a return on idle
cash.
The Fund may hold cash or cash equivalents and invest without limit in
U.S. Government Obligations and short-term debt securities or money market
instruments when the Adviser: (i) believes that market conditions are not
favorable for profitable investing; (ii) is unable to local favorable
opportunities; or (iii) determines that a temporary defensive position is
advisable or necessary to meet anticipated redemption requests. In other words,
the Fund does not always stay fully invested in stocks and bonds. The Fund also
may use options, futures, forward currency contracts and other types of
derivatives for hedging purposes or for non-hedging purposes such as seeking to
enhance return. The Fund also may purchase securities on a when-issued, delayed
delivery or forward commitment basis.
Blue Chip Fund: In addition to the types of securities described in the
Fund's Prospectus, the Blue Chip Master Portfolio (in which the Fund invests all
of its assets) may invest in cash equivalents, which include the following
short-term interest rate bearing instruments--obligations issued or guaranteed
by the U.S. Government, its agencies and instrumentalities (some of which may be
subject to repurchase agreements), certificates of deposit, bankers'
acceptances, time deposits and other interest-bearing deposits issued by
domestic and foreign banks and foreign branches of U.S. banks, foreign
government securities and commercial papers issued by U.S. and foreign issuers
which is rated at the time of purchase at least Prime-2 by Moody's or A-2 by
S&P, Duff & Phelps and Fitch IBCA. For a description of ratings, see Appendix A
to this SAI. The Master Portfolio also may invest in certain specified
derivative securities including: exchange-traded options, over-the-counter
options executed with primary dealers, including long calls and puts and covered
calls to enhance return; and CFTC-approved U.S. and foreign exchange-traded
financial futures and options thereon for market exposure risk-management. The
Master Portfolio also may lend its portfolios securities to qualified
institutional investors and may invest in repurchase agreements, restricted,
private placement and other illiquid securities. It also may invest in real
estate investment trust securities, securities issued by other investment
companies, consistent with the Master Portfolio's investment objective and
policies.
General: Notwithstanding that each Equity Fund may invest in each type
of security listed above in percentages of less that 10% of that Fund's total
assets, each Equity Fund (except Nations Marsico Focused Equities Fund) may
invest up to 20% of its assets in foreign securities. While each Equity Fund
reserves the right to so invest, investing in foreign securities is not
considered a principal investment strategy of the Equity Funds. In addition each
Equity Fund discussed above also may invest in certain specified derivative
securities including: exchange-traded options; over-the-counter options executed
with primary dealers, including long calls and puts and covered calls to enhance
return; and U.S. and foreign exchange-traded financial futures approved by the
Commodity Futures Trading Commission ("CFTC") and options thereon for market
exposure risk management. Each Equity Fund may lend its portfolio securities to
qualified institutional investors and may invest in repurchase agreements,
restricted, private placement and other illiquid securities. Each Equity Fund
also may invest in real estate investment trust securities. In addition, each
Equity Fund may invest in securities issued by other investment companies,
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consistent with the Fund's investment objective and policies and repurchase
agreements. The Nations Marsico Focused Equities Fund may invest in forward
foreign exchange contracts.
THE INTERNATIONAL FUNDS
International Equity Fund: In addition to the types of securities
described in the Fund's Prospectus, the Fund may invest in: real estate
investment trust securities and, for temporary defensive purposes, substantially
all of its assets in U.S. financial markets or U.S. dollar-denominated
instruments. The Fund also may invest in convertible securities, preferred
stocks, bonds, notes and other fixed-income securities, including Eurodollar and
foreign government securities.
International Value Fund: In addition to the types of securities
described in the Fund's Prospectus, the Fund may invest in: short-term debt
instruments; purchase and write covered call options on specific portfolio
securities and may purchase and write put and call options on foreign stock
indices listed on foreign and domestic exchanges options and futures contracts
on securities, securities lending, forward foreign exchange contracts and
repurchase agreements. The Fund also may invest in ADRs, GDRs, EDRs and ADSs and
invest in foreign currency exchange contracts to convert foreign currencies to
and from the U.S. dollar and to hedge against changes in foreign currency
exchange rates.
General: Each Fund also may invest in certain specified derivative
securities including: exchange-traded options; over-the-counter options executed
with primary dealers, including long calls and puts and covered calls to enhance
return; and U.S. and foreign exchange-traded financial futures approved by the
CFTC and options thereon for market exposure risk management. Each Fund may lend
its portfolio securities to qualified institutional investors and may invest in
repurchase agreements, restricted, private placement and other illiquid
securities. Each International Fund also may invest in real estate investment
trust securities. In addition, each International Fund may invest in securities
issued by other investment companies, consistent with the Fund's investment
objective and policies and repurchase agreements. Each Fund also may invest in
forward foreign exchange contracts.
FIXED-INCOME FUNDS
Short-Term Income Fund: In addition to the types of securities
described in the Fund's Prospectus, the Fund may invest in: foreign securities,
dollar-denominated debt obligations of foreign issuers, including foreign
corporations and foreign governments, real estate investment trust securities,
municipal securities rated by one nationally recognized statistical rating
organization ("NRSRO"), or if not so rated, determined by the Adviser to be of
comparable quality to instruments so rated, high quality money market
instruments, repurchase agreements and cash.
Strategic Fixed Income Fund: In addition to the types of securities
described in the Fund's Prospectus, the Fund may invest in: foreign securities,
corporate convertible and non-convertible debt obligations, including bonds,
notes and debentures rated investment grade at the time of purchase by one of
the NRSROs, or if not so rated, determined by the Adviser to be of comparable
quality to instruments so rated.; dollar-denominated debt obligations of foreign
issuers, including foreign corporations and foreign governments;
mortgage-related securities of governmental issuers or of private issuers,
including mortgage pass-through certificates, CMOs, an real estate investment
trust securities. The Fund also may invest in "high quality" money market
instruments, repurchase agreements and cash. Such obligations may include those
issued by foreign banks and foreign branches of U.S. banks.
Diversified Income Fund: In addition to the types of securities
described in the Fund's Prospectus, the Fund may invest in: foreign securities,
asset-backed securities and municipal securities rated by one of the NRSROs, or
if not so rated, determined by the Adviser to be of comparable quality. The Fund
also may invest in "high quality" money market instruments, repurchase
agreements and cash. Such obligations may include those issued by foreign banks
and foreign branches of U.S. banks.
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General: Each of the Fixed Income 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 term calls and puts and covered calls, and
U.S. and foreign exchange-traded financial futures and options thereon approved
by the CFTC for market exposure risk management. Each of the Funds also may lend
their portfolio securities to qualified institutional investors and may invest
in repurchase agreements, restricted, private placement and other illiquid
securities. Each of the Funds may engage in reverse repurchase agreements and in
dollar roll transactions. Additionally, each Fund may purchase securities issued
by other investment companies, consistent with the Funds' investment objectives
and policies. The Funds also may invest in instruments issued by trusts or
certain partnerships including pass-through certificates representing
participations in, or debt instruments backed by, the securities and other
assets owned by such trusts and partnerships.
MONEY MARKET FUND
Prime Fund: In addition to the types of securities described in the
Prospectus, the Fund may lend its portfolios securities to qualified
institutional investors and may invest in reverse repurchase agreements. The
Fund may also invest in securities issued by other investment companies that
invest in securities consistent with the Fund's investment objective and
policies.
Additional information on the particular types of securities in which
certain Funds may invest in is set forth below.
ASSET-BACKED SECURITIES
IN GENERAL. Asset-backed securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset-backed
securities consist of both mortgage- and non-mortgage-backed securities.
Interests in pools of these assets may differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal paid at maturity or specified call dates. Conversely,
asset-backed securities provide periodic payments which may consist of both
interest and principal payments.
The life of an asset-backed security varies depending upon the rate of
the prepayment of the underlying debt instruments. The rate of such prepayments
will be a function of current market interest rates, and other economic and
demographic factors. For example, falling interest rates generally result in an
increase in the rate of prepayments of mortgage loans while rising interest
rates generally decrease the rate of prepayments. An acceleration in prepayments
in response to sharply falling interest rates will shorten the security's
average maturity and limit the potential appreciation in the security's value
relative to a conventional debt security. Consequently, asset-backed securities
may not be as effective in locking in high, long-term yields. Conversely, in
periods of sharply rising rates, prepayments are generally slow, increasing the
security's average life and its potential for price depreciation.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities represent an
ownership interest in a pool of mortgage loans.
Mortgage pass-through securities may represent participation interests
in pools of residential mortgage loans originated by U.S. governmental or
private lenders and guaranteed, to the extent provided in such securities, by
the U.S. Government or one of its agencies, authorities or instrumentalities.
Such securities, which are ownership interests in the underlying mortgage loans,
differ from conventional debt securities, which provide for periodic payment of
interest in fixed amounts (usually semi-annually) and principal payments at
maturity or on specified call dates. Mortgage pass-through securities provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans.
The guaranteed mortgage pass-through securities in which a Fund may
invest may include those issued or guaranteed by Government National Mortgage
Association ("Ginnie Mae" or "GNMA"), Federal National Mortgage
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Association ("Fannie Mae" or "FNMA") or Federal Home Loan Mortgage Corporation
("Freddie Mac" or "FHLMC"). Such Certificates are mortgage-backed securities
which represent a partial ownership interest in a pool of mortgage loans issued
by lenders such as mortgage bankers, commercial banks and savings and loan
associations. Such mortgage loans may have fixed or adjustable rates of
interest.
The average life of a mortgage-backed security is likely to be
substantially less than the original maturity of the mortgage pools underlying
the securities. Prepayments of principal by mortgagors and mortgage foreclosures
will usually result in the return of the greater part of principal invested far
in advance of the maturity of the mortgages in the pool.
The yield which will be earned on mortgage-backed securities may vary
from their coupon rates for the following reasons: (i) Certificates may be
issued at a premium or discount, rather than at par; (ii) Certificates may trade
in the secondary market at a premium or discount after issuance; (iii) interest
is earned and compounded monthly, which has the effect of raising the effective
yield earned on the Certificates; and (iv) the actual yield of each Certificate
is affected by the prepayment of mortgages included in the mortgage pool
underlying the Certificates and the rate at which principal so prepaid is
reinvested. In addition, prepayment of mortgages included in the mortgage pool
underlying a GNMA Certificate purchased at a premium may result in a loss to the
Fund.
Mortgage-backed securities issued by private issuers, whether or not
such obligations are subject to guarantees by the private issuer, may entail
greater risk than obligations directly or indirectly guaranteed by the U.S.
Government.
Collateralized mortgage obligations or "CMOs" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities (collateral
collectively hereinafter referred to as "Mortgage Assets"). Multi-class
pass-through securities are interests in a trust composed of Mortgage Assets and
all references herein to CMOs will include multi-class pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the funds to pay debt service on the CMOs
or make scheduled distribution on the multi-class pass-through securities.
Moreover, principal prepayments on the Mortgage Assets may cause the
CMOs to be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of the premium if any has
been paid. Interest is paid or accrues on all classes of the CMOs on a monthly,
quarterly or semiannual basis.
The principal and interest payments on the Mortgage Assets may be
allocated among the various classes of CMOs in several ways. Typically, payments
of principal, including any prepayments, on the underlying mortgages are applied
to the classes in the order of their respective stated maturities or final
distribution dates, so that no payment of principal is made on CMOs of a class
until all CMOs of other classes having earlier stated maturities or final
distribution dates have been paid in full.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class
mortgage securities. A Fund will only invest in SMBS that are obligations backed
by the full faith and credit of the U.S. Government. SMBS are usually structured
with two classes that receive different proportions of the interest and
principal distributions from a pool of mortgage assets. A Fund will only invest
in SMBS whose mortgage assets are U.S. Government obligations.
A common type of SMBS will be structured so that one class receives
some of the interest and most of the principal from the mortgage assets, while
the other class receives most of the interest and the remainder of the
principal. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, a Fund may fail to fully recoup its initial investment
in these securities. The market value of any class which consists primarily or
entirely of principal payments generally is unusually volatile in response to
changes in interest rates.
The average life of mortgage-backed securities varies with the
maturities of the underlying mortgage instruments. The average life is likely to
be substantially less than the original maturity of the mortgage pools
underlying the securities as the result of mortgage prepayments, mortgage
refinancings, or foreclosures. The rate of mortgage prepayments, and hence the
average life of the certificates, will be a function of the level of interest
rates,
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general economic conditions, the location and age of the mortgage and other
social and demographic conditions. Such prepayments are passed through to the
registered holder with the regular monthly payments of principal and interest
and have the effect of reducing future payments. Estimated average life will be
determined by the Adviser and used for the purpose of determining the average
weighted maturity and duration of the Funds.
ADDITIONAL INFORMATION ON MORTGAGE-BACKED SECURITIES.
-----------------------------------------------------
Mortgage-backed securities represent an ownership interest in a pool of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. The mortgagor's monthly
payments to his/her lending institution are "passed-through" to an investor.
Most issuers or poolers provide guarantees of payments, regardless of whether or
not the mortgagor actually makes the payment. The guarantees made by issuers or
poolers are supported by various forms of credit collateral, guarantees or
insurance, including individual loan, title, pool and hazard insurance purchased
by the issuer. There can be no assurance that the private issuers or poolers can
meet their obligations under the policies. Mortgage-backed securities issued by
private issuers or poolers, whether or not such securities are subject to
guarantees, may entail greater risk than securities directly or indirectly
guaranteed by the U.S. Government.
Interests in pools of mortgage-backed securities differ from other
forms of debt securities, which normally provide for periodic payment of
interest in fixed amounts with principal payments at maturity or specified call
dates. Instead, these securities provide a monthly payment which consists of
both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on their
residential mortgage loans, net of any fees paid. Additional payments are caused
by repayments resulting from the sale of the underlying residential property,
refinancing or foreclosure net of fees or costs which may be incurred. Some
mortgage-backed securities are described as "modified pass-through." These
securities entitle the holders to receive all interest and principal payments
owed on the mortgages in the pool, net of certain fees, regardless of whether or
not the mortgagors actually make the payments.
Residential mortgage loans are pooled by the FHLMC. FHLMC is a
corporate instrumentality of the U.S. Government and was created by Congress in
1970 for the purpose of increasing the availability of mortgage credit for
residential housing. Its stock is owned by the twelve Federal Home Loan Banks.
FHLMC issues Participation Certificates ("PC's"), which represent interests in
mortgages from FHLMC's national portfolio. FHLMC guarantees the timely payment
of interest and ultimate collection of principal.
FNMA is a Government sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases residential mortgages from a list of
approved sellers/servicers which include state and federally-chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA.
The principal Government guarantor of mortgage-backed securities is the
GNMA. GNMA is a wholly-owned U.S. Government corporation within the Department
of Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of principal and
interest on securities issued by approved institutions and backed by pools of
FHA-insured or VA-guaranteed mortgages.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Pools
created by such non-governmental issuers generally offer a higher rate of
interest than Government and Government-related pools because there are no
direct or indirect Government guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance purchased by the issuer. The insurance and guarantees are
issued by Governmental entities, private insurers, and the mortgage poolers.
There can be no assurance that the private insurers or mortgage poolers can meet
their obligations under the policies.
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The Fund expects that Governmental or private entities may create
mortgage loan pools offering pass-through investments in addition to those
described above. The mortgages underlying these securities may be alternative
mortgage instruments, that is, mortgage instruments whose principal or interest
payment may vary or whose terms to maturity may be shorter than previously
customary. As new types of mortgage-backed securities are developed and offered
to investors, certain Funds will, consistent with their investment objective and
policies, consider making investments in such new types of securities.
Underlying Mortgages
- --------------------
Pools consist of whole mortgage loans or participations in loans. The
majority of these loans are made to purchasers of 1-4 family homes. The terms
and characteristics of the mortgage instruments are generally uniform within a
pool but may vary among pools. For example, in addition to fixed-rate,
fixed-term mortgages, a Fund may purchase pools of variable-rate mortgages
(VRM), growing equity mortgages (GEM), graduated payment mortgages (GPM) and
other types where the principal and interest payment procedures vary. VRM's are
mortgages which reset the mortgage's interest rate periodically with changes in
open market interest rates. To the extent that the Fund is actually invested in
VRM's, the Fund's interest income will vary with changes in the applicable
interest rate on pools of VRM's. GPM and GEM pools maintain constant interest
rates, with varying levels of principal repayment over the life of the mortgage.
These different interest and principal payment procedures should not impact the
Fund's net asset value since the prices at which these securities are valued
will reflect the payment procedures.
All poolers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Poolers also establish
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, some mortgages included in pools are insured through
private mortgage insurance companies.
Average Life
- ------------
The average life of pass-through pools varies with the maturities of
the underlying mortgage instruments. In addition, a pool's term may be shortened
by unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage, and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not possible
to accurately predict the average life of a particular pool. For pools of
fixed-rated 30-year mortgages, common industry practice is to assume that
prepayments will result in a 12-year average life. Pools of mortgages with other
maturities or different characteristics will have varying assumptions for
average life.
Returns on Mortgage-Backed Securities
- -------------------------------------
Yields on mortgage-backed pass-through securities are typically quoted
based on the maturity of the underlying instruments and the associated average
life assumption. Actual prepayment experience may cause the yield to differ from
the assumed average life yield.
Reinvestment of prepayments may occur at higher or lower interest rates
than the original investment, thus affecting the yields of the Fund. The
compounding effect from reinvestments of monthly payments received by the Fund
will increase its yield to shareholders, compared to bonds that pay interest
semi-annually.
NON-MORTGAGE ASSET-BACKED SECURITIES. Non-mortgage asset-backed
securities include interests in pools of receivables, such as motor vehicle
installment purchase obligations and credit card receivables. Such securities
are generally issued as pass-through certificates, which represent undivided
fractional ownership interests in the underlying pools of assets. Such
securities also may be debt instruments, which are also known as collateralized
obligations and are generally issued as the debt of a special purpose entity
organized solely for the purpose of owning such assets and issuing such debt.
Such securities also may include instruments issued by certain trusts,
partnerships
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or other special purpose issuers, including pass-through certificates
representing participations in, or debt instruments backed by, the securities
and other assets owned by such issuers.
Non-mortgage-backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities.
The purchase of non-mortgage-backed securities raises considerations
peculiar to the financing of the instruments underlying such securities. For
example, most organizations that issue asset-backed securities relating to motor
vehicle installment purchase obligations perfect their interests in their
respective obligations only by filing a financing statement and by having the
servicer of the obligations, which is usually the originator, take custody
thereof. In such circumstances, if the servicer were to sell the same
obligations to another party, in violation of its duty not to do so, there is a
risk that such party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. Also, although most such
obligations grant a security interest in the motor vehicle being financed, in
most states the security interest in a motor vehicle must be noted on the
certificate of title to perfect such security interest against competing claims
of other parties. Due to the larger number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the obligations
underlying the asset-backed securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
the asset-backed securities. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on those securities. In addition, various state and Federal laws give
the motor vehicle owner the right to assert against the holder of the owner's
obligation certain defenses such owner would have against the seller of the
motor vehicle. The assertion of such defenses could reduce payments on the
related asset-backed securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and Federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances owed on the credit card,
thereby reducing the amounts paid on such receivables. In addition, unlike most
other asset-backed securities, credit card receivables are unsecured obligations
of the card holder.
While the market for asset-backed securities is becoming increasingly
liquid, the market for mortgage-backed securities issued by certain private
organizations and non-mortgage-backed securities is not as well developed. As
stated above, the Adviser intends to limit its purchases of mortgage-backed
securities issued by certain private organizations and non-mortgage-backed
securities to securities that are readily marketable at the time of purchase.
BORROWINGS
NFT, NFI and NFP participate in an uncommitted line of credit provided
by The Bank of New York under a line of credit agreement (the "Agreement").
Advances under the Agreement are taken primarily for temporary or emergency
purposes, including the meeting of redemption requests that otherwise might
require the untimely disposition of securities. Interest on borrowings is
payable at the federal funds rate plus .50% on an annualized basis. The
Agreement requires, among other things, that each participating Fund maintain a
ratio of no less than 4 to 1 net assets (not including funds borrowed pursuant
to the Agreement) to the aggregate amount of indebtedness pursuant to the
Agreement. Specific borrowings by a Fund under the Agreement over the last
fiscal year, if any, can by found in the Funds' Annual Reports for the year
ended March 31, 1999.
COMMERCIAL INSTRUMENTS
Commercial Instruments consist of short-term U.S. dollar-denominated
obligations issued by domestic corporations or issued in the U.S. by foreign
corporations and foreign commercial banks. The Prime Fund will limit purchases
of commercial instruments to instruments which: (a) if rated by at least two
NRSROs, are rated in the highest rating category for short-term debt obligations
given by such organizations, or if only rated by one such organization, are
rated in the highest rating category for short-term debt obligations given by
such organization; or (b) if not rated, are (i) comparable in priority and
security to a class of short-term instruments of the same issuer that
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has such rating(s), or (ii) of comparable quality to such instruments as
determined by NFI's Board of Directors on the advice of the Adviser.
Investments by a Fund in commercial paper will consist of issues rated
in a manner consistent with such Fund's investment policies and objectives. In
addition, the Funds may acquire unrated commercial paper and corporate bonds
that are determined by the Adviser at the time of purchase to be of comparable
quality to rated instruments that may be acquired by such Funds as previously
described.
Variable-rate master demand notes are unsecured instruments that permit
the indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. While some of these notes are not rated by credit rating
agencies, issuers of variable rate master demand notes must satisfy the Adviser
that similar criteria to that set forth above with respect to the issuers of
commercial paper purchasable by the Prime Fund are met. Variable-rate
instruments acquired by a Fund will be rated at a level consistent with such
Fund's investment objective and policies of high quality as determined by a
major rating agency or, if not rated, will be of comparable quality as
determined by the Adviser. See also the discussion of variable- and
floating-rate instruments in this SAI.
Variable- and floating-rate instruments are unsecured instruments that
permit the indebtedness thereunder to vary. While there may be no active
secondary market with respect to a particular variable or floating rate
instrument purchased by a Fund, a Fund may, from time to time as specified in
the instrument, demand payment of the principal or may resell the instrument to
a third party. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of an instrument if the issuer defaulted on its
payment obligation or during periods when a Fund is not entitled to exercise its
demand rights, and a Fund could, for these or other reasons, suffer a loss. A
Fund may invest in variable and floating rate instruments only when the Adviser
deems the investment to involve minimal credit risk. If such instruments are not
rated, the Adviser will consider the earning power, cash flows, and other
liquidity ratios of the issuers of such instruments and will continuously
monitor their financial status to meet payment on demand. In determining average
weighted portfolio maturity, an instrument will be deemed to have a maturity
equal to the longer of the period remaining to the next interest rate adjustment
or the demand notice period specified in the instrument.
Certain Funds also may purchase short-term participation interests in
loans extended by banks to companies, provided that both such banks and such
companies meet the quality standards set forth above. In purchasing a loan
participation or assignment, the Fund acquires some or all of the interest of a
bank or other lending institution in a loan to a corporate borrower. Many such
loans are secured and most impose restrictive covenants which must be met by the
borrower and which are generally more stringent than the covenants available in
publicly traded debt securities. However, interests in some loans may not be
secured, and the Fund will be exposed to a risk of loss if the borrower
defaults. Loan participations also may be purchased by the Fund when the
borrowing company is already in default. In purchasing a loan participation, the
Fund may have less protection under the federal securities laws than it has in
purchasing traditional types of securities. The Fund's ability to assert its
rights against the borrower will also depend on the particular terms of the loan
agreement among the parties.
COMBINED TRANSACTIONS
Certain Funds may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple forward foreign
currency exchange contracts and any combination of futures, options and forward
foreign currency exchange contracts ("component" transactions), instead of a
single transaction, as part of a single hedging strategy when, in the opinion of
the Adviser, it is in the best interest of a Fund to do so and where underlying
hedging strategies are permitted by a Fund's investment policies. A combined
transaction, while part of a single hedging strategy, may contain elements of
risk that are present in each of its component transactions.
CONVERTIBLE SECURITIES
Certain Funds may invest in convertible securities, such as bonds,
notes, debentures, preferred stocks and other securities that may be converted
into common stock. All convertible securities purchased by the Fund will be
rated in the top two categories by an NRSRO or, if unrated, determined by the
Adviser to be of comparable quality.
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Investments in convertible securities can provide income through interest and
dividend payments, as well as, an opportunity for capital appreciation by virtue
of their conversion or exchange features.
The convertible securities in which a Fund may invest include
fixed-income and zero coupon debt securities, and preferred stock that may be
converted or exchanged at a stated or determinable exchange ratio into
underlying shares of common stock. The exchange ratio for any particular
convertible security may be adjusted from time to time due to stock splits,
dividends, spin-offs, other corporate distributions or scheduled changes in the
exchange ratio. Convertible debt securities and convertible preferred stocks,
until converted, have general characteristics similar to both debt and equity
securities. Although to a lesser extent than with debt securities, generally,
the market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion exchange feature, the market value of
convertible securities typically changes as the market value of the underlying
common stock changes, and, therefore, also tends to follow movements in the
general market for equity securities. A unique feature of convertible securities
is that as the market price of the underlying common stock declines, convertible
securities tend to trade increasingly on a yield basis, and so may not
experience market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock increases, the price
of a convertible security tends to rise as a reflection of the value of the
underlying common stock, although typically not as much as the price of the
underlying common stock. While no securities investments are without risk,
investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.
As debt securities, convertible securities are investments which
provide for a stream of income or, in the case of zero coupon securities,
accretion of income with generally higher yields than common stocks. Of course,
like all debt securities, there can be no assurance of income or principal
payments because the issuers of the convertible securities may default on their
obligations. Convertible securities generally offer lower yields than
non-convertible securities of similar quality because of their conversion
exchange features. Convertible securities generally are subordinated to other
similar debt securities but not to non-convertible securities of the same
issuer. Convertible bonds, as corporate debt obligations, are senior in right of
payment to all equity securities, and convertible preferred stock is senior to
common stock, of the same issuer. However, convertible bonds and convertible
preferred stock typically have lower coupon rates than similar non-convertible
securities. Convertible securities may be issued as fixed income obligations
that pay current income or as zero coupon notes and bonds, including Liquid
Yield Option Notes ("LYONs"). Zero coupon securities pay no cash income and are
sold at substantial discounts from their value at maturity. When held to
maturity, their entire income, which consists of accretion of discount, comes
from the difference between the issue price and their value at maturity. Zero
coupon convertible securities offer the opportunity for capital appreciation
because increases (or decreases) in the market value of such securities closely
follow the movements in the market value of the underlying common stock. Zero
coupon convertible securities generally are expected to be less volatile than
the underlying common stocks because they usually are issued with short
maturities (15 years or less) and are issued with options and/or redemption
features exercisable by the holder of the obligation entitling the holder to
redeem the obligation and receive a defined cash payment.
CORPORATE DEBT SECURITIES
Certain Funds may invest in corporate debt securities of domestic
issuers of all types and maturities, such as bonds, debentures, notes and
commercial paper. Corporate debt securities may involve equity features, such as
conversion or exchange rights or warrants for the acquisition of stock of the
same or a different issuer, participation based on revenue, sales or profit, or
the purchase of common stock or warrants in a unit transaction (where corporate
debt obligations and common stock are offered as a unit). Each Fund may also
invest in corporate debt securities of foreign issuers.
The corporate debt securities in which the Funds will invest will be
rated investment grade by at least one NRSRO (E.G., BBB or above by Standard &
Poor's Corporation ("S&P") or Baa or above by Moody's Investors Services, Inc.
("Moody's")). Commercial paper purchased by the Funds will be rated in the top
two categories by a NRSRO. Corporate debt securities that are not rated may be
purchased by such Funds if they are determined by the Adviser to be of
comparable quality under the direction of the Board of Directors of the Company.
If the rating of any corporate debt security held by a Fund falls below such
ratings or if the Adviser determines that an unrated corporate debt security is
no longer of comparable quality, then such security shall be disposed of in an
orderly
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manner as quickly as possible. A description of these ratings is attached as
Schedule A to this Statement of Additional Information.
CUSTODIAL RECEIPTS
Certain Funds may also acquire custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Government notes or bonds. Such notes and bonds are held in custody by a
bank on behalf of the owners. These custodial receipts are known by various
names, including "Treasury Receipts," "Treasury Investors Growth Receipts" and
"Certificates of Accrual on Treasury Securities." Although custodial receipts
are not considered U.S. Government securities, they are indirectly issued or
guaranteed as to principal and interest by the U.S. Government, its agencies,
authorities or instrumentalities. Custodial receipts will be treated as illiquid
securities.
CURRENCY SWAPS
Certain Funds also may enter into currency swaps for hedging purposes
and to seek to increase total return. In as much as swaps are entered into for
good faith hedging purposes or are offset by a segregated account as described
below, the Fund and the Adviser believe that swaps do not constitute senior
securities as defined in the 1940 Act and, accordingly, will not treat them as
being subject to the Fund's borrowing restrictions. The net amount of the
excess, if any, of the Fund's obligations over its entitlement with respect to
each currency swap will be accrued on a daily basis and an amount of cash or
liquid high grade debt securities (i.e., securities rated in one of the top
three ratings categories by an NRSRO, or, if unrated, deemed by the Adviser to
be of comparable credit quality) having an aggregate net asset value at least
equal to such accrued excess will be maintained in a segregated account by the
Fund's custodian. The Fund will not enter into any currency swap unless the
credit quality of the unsecured senior debt or the claims-paying ability of the
other party thereto is considered to be investment grade by the Adviser.
DELAYED DELIVERY TRANSACTIONS
In a delayed delivery transaction, the Fund relies on the other party
to complete the transaction. If the transaction is not completed, the Fund may
miss a price or yield considered to be advantageous. In delayed delivery
transactions, delivery of the securities occurs beyond normal settlement
periods, but a Fund would not pay for such securities or start earning interest
on them until they are delivered. However, when a Fund purchases securities on
such a delayed delivery basis, it immediately assumes the risk of ownership,
including the risk of price fluctuation. Failure by a counterparty to deliver a
security purchased on a delayed delivery basis may result in a loss or missed
opportunity to make an alternative investment. Depending upon market conditions,
a Fund's delayed delivery purchase commitments could cause its net asset value
to be more volatile, because such securities may increase the amount by which
the Fund's total assets, including the value of when-issued and delayed delivery
securities held by the Fund, exceed its net assets.
DOLLAR ROLL TRANSACTIONS
Certain Funds may enter into "dollar roll" transactions, which consist
of the sale by a Fund to a bank or broker/dealer (the "counterparty") of GNMA
certificates or other mortgage-backed securities together with a commitment to
purchase from the counterparty similar, but not identical, securities at a
future date, at the same price. The counterparty receives all principal and
interest payments, including prepayments, made on the security while it is the
holder. A Fund receives a fee from the counterparty as consideration for
entering into the commitment to purchase. Dollar rolls may be renewed over a
period of several months with a different repurchase price and a cash settlement
made at each renewal without physical delivery of securities. Moreover, the
transaction may be preceded by a firm commitment agreement pursuant to which the
Fund agrees to buy a security on a future date. If the broker/dealer to whom a
Fund sells the security becomes insolvent, the Fund's right to purchase or
repurchase the security may be restricted; the value of the security may change
adversely over the term of the dollar roll; the security that the Fund is
required to repurchase may be worth less than the security that the Fund
originally held, and the return earned by the Fund with the proceeds of a dollar
roll may not exceed transaction costs.
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The entry into dollar rolls involves potential risks of loss that are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, the Fund's right to purchase
from the counterparty might be restricted. Additionally, the value of such
securities may change adversely before the Fund is able to purchase them.
Similarly, the Fund may be required to purchase securities in connection with a
dollar roll at a higher price than may otherwise be available on the open
market. Since, as noted above, the counterparty is required to deliver a
similar, but not identical security to the Fund, the security that the Fund is
required to buy under the dollar roll may be worth less than an identical
security. Finally, there can be no assurance that the Fund's use of the cash
that it receives from a dollar roll will provide a return that exceeds borrowing
costs.
EQUITY SWAP CONTRACTS
Certain Funds may from time to time enter into equity swap contracts.
The counterparty to an equity swap contract will typically be a bank, investment
banking firm or broker/dealer. For example, the counterparty will generally
agree to pay a Fund the amount, if any, by which the notional amount of the
Equity Swap Contract would have increased in value had it been invested in the
stocks comprising the S&P 500 Index in proportion to the composition of the
Index, plus the dividends that would have been received on those stocks. A Fund
will agree to pay to the counterparty a floating rate of interest (typically the
London Inter Bank Offered Rate) on the notional amount of the Equity Swap
Contract plus the amount, if any, by which that notional amount would have
decreased in value had it been invested in such stocks. Therefore, the return to
a Fund on any Equity Swap Contract should be the gain or loss on the notional
amount plus dividends on the stocks comprising the S&P 500 Index less the
interest paid by the Fund on the notional amount. A Fund will only enter into
Equity Swap Contracts on a net basis, i.e., the two parties' obligations are
netted out, with the Fund paying or receiving, as the case may be, only the net
amount of any payments. Payments under the Equity Swap Contracts may be made at
the conclusion of the contract or periodically during its term.
If there is a default by the counterparty to an Equity Swap Contract, a
Fund will be limited to contractual remedies pursuant to the agreements related
to the transaction. There is no assurance that Equity Swap Contract
counterparties will be able to meet their obligations pursuant to Equity Swap
Contracts or that, in the event of default, a Fund will succeed in pursuing
contractual remedies. A Fund thus assumes the risk that it may be delayed in or
prevented from obtaining payments owed to it pursuant to Equity Swap Contracts.
A Fund will closely monitor the credit of Equity Swap Contract counterparties in
order to minimize this risk.
Certain Funds may from time to time enter into the opposite side of
Equity Swap Contracts (i.e., where a Fund is obligated to pay the increase (net
of interest) or receive the decrease (plus interest) on the contract to reduce
the amount of the Fund's equity market exposure consistent with the Fund's
objective. These positions are sometimes referred to as Reverse Equity Swap
Contracts.
Equity Swap Contracts will not be used to leverage a Fund. A Fund will
not enter into any Equity Swap Contract or Reverse Equity Swap Contract unless,
at the time of entering into such transaction, the unsecured senior debt of the
counterparty is rated at least A by Moody's or S&P. Since the SEC considers
Equity Swap Contracts and Reverse Equity Swap Contracts to be illiquid
securities, a Fund will not invest in Equity Swap Contracts or Reverse Equity
Swap Contracts if the total value of such investments together with that of all
other illiquid securities which a Fund owns would exceed any limitation imposed
by the SEC Staff.
The Adviser does not believe that a Fund's obligations under Equity
Swap Contracts or Reverse Equity Swap Contracts are senior securities and,
accordingly, the Fund will not treat them as being subject to its borrowing
restrictions. However, the net amount of the excess, if any, of a Fund's
obligations over its respective entitlements with respect to each Equity Swap
Contract and each Reverse Equity Swap Contract will be accrued on a daily basis
and an amount of cash, U.S. Government securities or other liquid high quality
debt securities having an aggregate market value at least equal to the accrued
excess will be maintained in a segregated account by the Fund's custodian.
FOREIGN CURRENCY TRANSACTIONS
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Certain Funds may invest in foreign currency transactions. Foreign
securities involve currency risks. The U.S. dollar value of a foreign security
tends to decrease when the value of the U.S. dollar rises against the foreign
currency in which the security is denominated, and tends to increase when the
value of the U.S. dollar falls against such currency. A Fund may purchase or
sell forward foreign currency exchange contracts ("forward contracts") to
attempt to minimize the risk to the Fund from adverse changes in the
relationship between the U.S. dollar and foreign currencies. A Fund may also
purchase and sell foreign currency futures contracts and related options (see
"Purchase and Sale of Currency Futures Contracts and Related Options"). A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date that is individually negotiated and privately
traded by currency traders and their customers.
Forward foreign currency exchange contracts establish an exchange rate
at a future date. These contracts are transferable in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward foreign currency exchange contract generally has no
deposit requirement, and is traded at a net price without commission. A Fund
will direct its custodian to segregate high grade liquid assets in an amount at
least equal to its obligations under each forward foreign currency exchange
contract. Neither spot transactions nor forward foreign currency exchange
contracts eliminate fluctuations in the prices of a Fund's portfolio securities
or in foreign exchange rates, or prevent loss if the prices of these securities
should decline.
A Fund may enter into a forward contract, for example, when it enters
into a contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security (a
"transaction hedge"). In addition, when the Adviser believes that a foreign
currency may suffer a substantial decline against the U.S. dollar, it may enter
into a forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency, or when the Adviser believes that the U.S. dollar may
suffer a substantial decline against the foreign currency, it may enter into a
forward purchase contract to buy that foreign currency for a fixed dollar amount
(a "position hedge").
A Fund may, however, enter into a forward contract to sell a different
foreign currency for a fixed U.S. dollar amount where the Adviser believes that
the U.S. dollar value of the currency to be sold pursuant to the forward
contract will fall whenever there is a decline in the U.S. dollar value of the
currency in which the fund securities are denominated (a "cross-hedge").
Foreign currency hedging transactions are an attempt to protect a Fund
against changes in foreign currency exchange rates between the trade and
settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. The precise matching of the forward
contract amount and the value of the securities involved will not generally be
possible because the future value of these securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and date it matures.
The Fund's custodian will segregate cash, U.S. Government securities or
other high-quality debt securities having a value equal to the aggregate amount
of the Fund's commitments under forward contracts entered into with respect to
position hedges and cross-hedges. If the value of the segregated securities
declines, additional cash or securities will be segregated on a daily basis so
that the value of the segregated securities will equal the amount of the Fund's
commitments with respect to such contracts. As an alternative to segregating all
or part of such securities, the Fund may purchase a call option permitting the
Fund to purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the forward contract price or the Fund may
purchase a put option permitting the Fund to sell the amount of foreign currency
subject to a forward purchase contract at a price as high or higher than the
forward contract price.
The Funds are dollar-denominated mutual funds and therefore
consideration is given to hedging part or all of the portfolio back to U.S.
dollars from international currencies. All decisions to hedge are based upon an
analysis of the relative value of the U.S. dollar on an international purchasing
power parity basis (purchasing power parity is
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a method for determining the relative purchasing power of different currencies
by comparing the amount of each currency required to purchase a typical bundle
of goods and services to domestic markets) and an estimation of short-term
interest rate differentials (which affect both the direction of currency
movements and also the cost of hedging).
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
FUTURES CONTRACTS IN GENERAL. A futures contract is an agreement
between two parties for the future delivery of fixed income securities or equity
securities or for the payment or acceptance of a cash settlement in the case of
futures contracts on an index of fixed income or equity securities. A "sale" of
a futures contract means the contractual obligation to deliver the securities at
a specified price on a specified date, or to make the cash settlement called for
by the contract. Futures contracts have been designed by exchanges which have
been designated "contract markets" by the CFTC and must be executed through a
brokerage firm, known as a futures commission merchant, which is a member of the
relevant contract market. Futures contracts trade on these markets, and the
exchanges, through their clearing organizations, guarantee that the contracts
will be performed as between the clearing members of the exchange. Presently,
futures contracts are based on such debt securities as long-term U.S. Treasury
Bonds, Treasury Notes, GNMA modified pass-through mortgage-backed securities,
three-month U.S. Treasury Bills, bank certificates of deposit, and on indices of
municipal, corporate and government bonds.
While futures contracts based on securities do provide for the delivery
and acceptance of securities, such deliveries and acceptances are seldom made.
Generally, a futures contract is terminated by entering into an offsetting
transaction. A Fund will incur brokerage fees when it purchases and sells
futures contracts. At the time such a purchase or sale is made, a Fund must
provide cash or money market securities as a deposit known as "margin." The
initial deposit required will vary, but may be as low as 2% or less of a
contract's face value. Daily thereafter, the futures contract is valued through
a process known as "marking to market," and a Fund that engages in futures
transactions may receive or be required to pay "variation margin" as the futures
contract becomes more or less valuable. At the time of delivery of securities
pursuant to a futures contract based on securities, adjustments are made to
recognize differences in value arising from the delivery of securities with a
different interest rate than the specific security that provides the standard
for the contract. In some (but not many) cases, securities called for by a
futures contract may not have been issued when the contract was written.
Futures contracts on indices of securities are settled through the
making and acceptance of cash settlements based on changes in value of the
underlying rate or index between the time the contract is entered into and the
time it is liquidated.
FUTURES CONTRACTS ON FIXED INCOME SECURITIES AND RELATED INDICES. As
noted in their respective Prospectuses, certain Funds may enter into
transactions in futures contracts for the purpose of hedging a relevant portion
of their portfolios. A Fund may enter into transactions in futures contracts
that are based on U.S. Government obligations, including any index of government
obligations that may be available for trading. Such transactions will be entered
into where movements in the value of the securities or index underlying a
futures contract can be expected to correlate closely with movements in the
value of securities held in a Fund. For example, a Fund may sell futures
contracts in anticipation of a general rise in the level of interest rates,
which would result in a decline in the value of its fixed income securities. If
the expected rise in interest rates occurs, the Fund may realize gain on its
futures position, which should offset all or part of the decline in value of
fixed income fund securities. A Fund could protect against such decline by
selling fixed income securities, but such a strategy would involve higher
transaction costs than the sale of futures contracts and, if interest rates
again declined, the Fund would be unable to take advantage of the resulting
market advance without purchases of additional securities.
The purpose of the purchase or sale of a futures contract on government
securities and indices of government securities, in the case of the
above-referenced Funds, which hold or intend to acquire long-term debt
securities, is to protect a Fund from fluctuations in interest rates without
actually buying or selling long-term debt securities. For example, if long-term
bonds are held by a Fund, and interest rates were expected to increase, the Fund
might enter into futures contracts for the sale of debt securities. Such a sale
would have much the same effect as selling an equivalent value of the long-term
bonds held by the Fund. If interest rates did increase, the value of the
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debt securities in the Fund would decline, but the value of the futures
contracts to the Fund would increase at approximately the same rate thereby
keeping the net asset value of the Fund from declining as much as it otherwise
would have. When a Fund is not fully invested and a decline in interest rates is
anticipated, which would increase the cost of fixed income securities that the
Fund intends to acquire, it may purchase futures contracts. In the event that
the projected decline in interest rates occurs, the increased cost of the
securities acquired by the Fund should be offset, in whole or part, by gain on
the futures contracts by entering into offsetting transactions on the contract
market on which the initial purchase was effected. In a substantial majority of
transactions involving futures contracts on fixed income securities, a Fund will
purchase the securities upon termination of the long futures positions, but
under unusual market conditions, a long futures position may be terminated
without a corresponding purchase of securities.
Similarly, when it is expected that interest rates may decline, futures
contracts on fixed income securities and indices of government securities may be
purchased for the purpose of hedging against anticipated purchases of long-term
bonds at higher prices. Since the fluctuations in the value of such futures
contracts should be similar to that of long-term bonds, a Fund could take
advantage of the anticipated rise in the value of long-term bonds without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Fund's cash reserves could then be used to
buy long-term bonds in the cash market. Similar results could be accomplished by
selling bonds with long maturities and investing in bonds with short maturities
when interest rates are expected to increase. However, since the futures market
is more liquid than the cash market, the use of these futures contracts as an
investment technique allows a Fund to act in anticipation of such an interest
rate decline without having to sell its portfolio securities. To the extent a
Fund enters into futures contracts for this purpose, the segregated assets
maintained by a Fund will consist of cash, cash equivalents or high quality debt
securities of the Fund in an amount equal to the difference between the
fluctuating market value of such futures contract and the aggregate value of the
initial deposit and variation margin payments made by the Fund with respect to
such futures contracts.
STOCK INDEX FUTURES CONTRACTS. Certain Funds may sell stock index
futures contracts in order to offset a decrease in market value of its
securities that might otherwise result from a market decline. A Fund may do so
either to hedge the value of its portfolio as a whole, or to protect against
declines, occurring prior to sales of securities, in the value of securities to
be sold. Conversely, a Fund may purchase stock index futures contracts in order
to protect against anticipated increases in the cost of securities to be
acquired.
In addition, a Fund may utilize stock index futures contracts in
anticipation of changes in the composition of its portfolio. For example, in the
event that a Fund expects to narrow the range of industry groups represented in
its portfolio, it may, prior to making purchases of the actual securities,
establish a long futures position based on a more restricted index, such as an
index comprised of securities of a particular industry group. As such securities
are acquired, a Fund's futures positions would be closed out. A Fund may also
sell futures contracts in connection with this strategy, in order to protect
against the possibility that the value of the securities to be sold as part of
the restructuring of its portfolio will decline prior to the time of sale.
OPTIONS ON FUTURES CONTRACTS. An option on a futures contract gives the
purchaser (the "holder") the right, but not the obligation, to purchase a
position in the underlying futures contract (i.e., a purchase of such futures
contract) in the case of an option to purchase (a "call" option), or a "short"
position in the underlying futures contract (i.e., a sale of such futures
contract) in the case of an option to sell (a "put" option), at a fixed price
(the "strike price") up to a stated expiration date. The holder pays a
non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchase of the option assumes is equal to the
premium plus related transaction costs, although this entire amount may be lost.
Upon exercise of the option by the holder, the exchange clearing corporation
establishes a corresponding long position in the case of a put option. In the
event that an option is exercised, the parties will be subject to all the risks
associated with the trading of futures contracts, such as payment of variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.
OPTIONS ON FUTURES CONTRACTS ON FIXED INCOME SECURITIES AND RELATED
INDICES. Certain Funds may purchase put options on futures contracts in which
such Funds are permitted to invest for the purpose of hedging a relevant portion
of their portfolios against an anticipated decline in the values of portfolio
securities resulting from
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increases in interest rates, and may purchase call options on such futures
contracts as a hedge against an interest rate decline when they are not fully
invested. A Fund would write options on these futures contracts primarily for
the purpose of terminating existing positions.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS, OPTIONS ON STOCK INDICES AND
OPTIONS ON EQUITY SECURITIES. Certain Funds may purchase put options on stock
index futures contracts, stock indices or equity securities for the purpose of
hedging the relevant portion of their portfolio securities against an
anticipated market-wide decline or against declines in the values of individual
portfolio securities, and they may purchase call options on such futures
contracts as a hedge against a market advance when they are not fully invested.
A Fund would write options on such futures contracts primarily for the purpose
of terminating existing positions. In general, options on stock indices will be
employed in lieu of options on stock index futures contracts only where they
present an opportunity to hedge at lower cost. With respect to options on equity
securities, a Fund may, under certain circumstances, purchase a combination of
call options on such securities and U.S. Treasury bills. The Adviser believes
that such a combination may more closely parallel movements in the value of the
security underlying the call option than would the option itself.
Further, while a Fund generally would not write options on individual
portfolio securities, it may do so under limited circumstances known as
"targeted sales" and "targeted buys," which involve the writing of call or put
options in an attempt to purchase or sell portfolio securities at specific
desired prices. A Fund would receive a fee, or a "premium," for the writing of
the option. For example, where the Fund seeks to sell portfolio securities at a
"targeted" price, it may write a call option at that price. In the event that
the market rises above the exercise price, it would receive its "targeted"
price, upon the exercise of the option, as well as the premium income. Also,
where it seeks to buy portfolio securities at a "targeted" price, it may write a
put option at that price for which it will receive the premium income. In the
event that the market declines below the exercise price, a Fund would pay its
"targeted" price upon the exercise of the option. In the event that the market
does not move in the direction or to the extent anticipated, however, the
targeted sale or buy might not be successful and a Fund could sustain a loss on
the transaction that may not be offset by the premium received. In addition, a
Fund may be required to forego the benefit of an intervening increase or decline
in value of the underlying security.
OPTIONS AND FUTURES STRATEGIES. The Adviser may seek to increase the
current return of certain Funds by writing covered call or put options. In
addition, through the writing and purchase of options and the purchase and sale
of U.S. and certain foreign stock index futures contracts, interest rate futures
contracts, foreign currency futures contracts and related options on such
futures contracts, the Adviser may at times seek to hedge against a decline in
the value of securities included in the Fund or an increase in the price of
securities that it plans to purchase for the Fund. Expenses and loss incurred as
a result of such hedging strategies will reduce the Fund's current return. A
Fund's investment in foreign stock index futures contracts and foreign interest
rate futures contracts, and related options on such futures contracts, are
limited to only those contracts and related options that have been approved by
the CFTC for investment by U.S. investors. Additionally, with respect to a
Fund's investment in foreign options, unless such options are specifically
authorized for investment by order of the CFTC or meet the definition of trade
options as set forth in CFTC Rule 32.4, a Fund will not make these investments.
The ability of a Fund to engage in the options and futures strategies
described below will depend on the availability of liquid markets in such
instruments. Markets in options and futures with respect to stock indices,
foreign government securities and foreign currencies are relatively new and
still developing. It is impossible to predict the amount of trading interest
that may exist in various types of options or futures. Therefore, no assurance
can be given that a Fund will be able to utilize these instruments effectively
for the purposes stated below. Furthermore, a Fund's ability to engage in
options and futures transactions may be limited by tax considerations. Although
a Fund will only engage in options and futures transactions for limited
purposes, these activities will involve certain risks which are described below
under "Risk Factors Associated with Futures and Options Transactions." A Fund
will not engage in options and futures transactions for leveraging purposes.
WRITING COVERED OPTIONS ON SECURITIES. Certain Funds may write covered
call options and covered put options on securities in which it is permitted to
invest from time to time as the Adviser determines is appropriate in seeking to
attain its objective. Call options written by a Fund give the holder the right
to buy the underlying
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securities from a Fund at a stated exercise price; put options give the holder
the right to sell the underlying security to the Fund at a stated price.
A Fund may write only covered options, which means that, so long as the
Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, a Fund will
maintain in a separate account cash or short-term U.S. Government securities
with a value equal to or greater than the exercise price of the underlying
securities. A Fund may also write combinations of covered puts and calls on the
same underlying security.
A Fund will receive a premium from writing a put or call option, which
increases the Fund's return in the event the option expires unexercised or is
closed out at a profit. The amount of the premium will reflect, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option, the term of the option and the volatility of the
market price of the underlying security. By writing a call option, a Fund limits
its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, the Fund assumes the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
value, resulting in a potential capital loss if the purchase price exceeds the
market value plus the amount of the premium received, unless the security
subsequently appreciates in value.
A Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. A Fund will realize a
profit or loss from such transaction if the cost of such transaction is less or
more than the premium received from the writing of the option. In the case of a
put option, any loss so incurred may be partially or entirely offset by the
premium received from a simultaneous or subsequent sale of a different put
option. Because increases in the market price of a call option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option is likely to be offset in whole
or in part by unrealized appreciation of the underlying security owned by a
Fund.
PURCHASING PUT AND CALL OPTIONS ON SECURITIES. A Fund may purchase put
options to protect its portfolio holdings in an underlying security against a
decline in market value. Such hedge protection is provided during the life of
the put option since a Fund, as holder of the put option, is able to sell the
underlying security at the put exercise price regardless of any decline in the
underlying security's market price. In order for a put option to be profitable,
the market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs. By using put options
in this manner, a Fund will reduce any profit it might otherwise have realized
in its underlying security by the premium paid for the put option and by
transaction costs.
A Fund may also purchase call options to hedge against an increase in
prices of securities that it wants ultimately to buy. Such hedge protection is
provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. By using call options in this manner, a Fund will reduce any
profit it might have realized had it bought the underlying security at the time
it purchased the call option by the premium paid for the call option and by
transaction costs.
PURCHASE AND SALE OF OPTIONS AND FUTURES ON STOCK INDICES. A Fund may
purchase and sell options on non-U.S. stock indices and stock index futures as a
hedge against movements in the equity markets.
Options on stock indices are similar to options on specific securities
except that, rather than the right to take or make delivery of the specific
security at a specific price, an option on a stock index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of that stock index is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the exercise
price of the option expressed in dollars multiplied by a specified multiple. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Unlike options on specific securities, all settlements
of options on stock indices are in cash and gain or
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loss depends on general movements in the stocks included in the index rather
than price movements in particular stocks. A stock index futures contract is an
agreement in which one party agrees to deliver to the other an amount of cash
equal to a specific amount multiplied by the difference between the value of a
specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made. No physical delivery of securities is
made.
If the Adviser expects general stock market prices to rise, a Fund
might purchase a call option on a stock index or a futures contract on that
index as a hedge against an increase in prices of particular equity securities
it wants ultimately to buy. If in fact the stock index does rise, the price of
the particular equity securities intended to be purchased may also increase, but
that increase would be offset in part by the increase in the value of a Fund's
index option or futures contract resulting from the increase in the index. If,
on the other hand, the Adviser expects general stock market prices to decline, a
Fund might purchase a put option or sell a futures contract on the index. If
that index does in fact decline, the value of some or all of the equity
securities in a Fund may also be expected to decline, but that decrease would be
offset in part by the increase in the value of the Fund's position in such put
option or futures contract.
PURCHASE AND SALE OF INTEREST RATE FUTURES. A Fund may purchase and
sell interest rate futures contracts on foreign government securities including,
but not limited to, debt securities of the governments and central banks of
France, Germany, Denmark and Japan for the purpose of hedging fixed income and
interest sensitive securities against the adverse effects of anticipated
movements in interest rates.
A Fund may sell interest rate futures contracts in anticipation of an
increase in the general level of interest rates. Generally, as interest rates
rise, the market value of the fixed income securities held by a Fund will fall,
thus reducing the net asset value of the Fund. This interest rate risk can be
reduced without employing futures as a hedge by selling long-term fixed income
securities and either reinvesting the proceeds in securities with shorter
maturities or by holding assets in cash. This strategy, however, entails
increased transaction costs to a Fund in the form of dealer spreads and
brokerage commissions.
The sale of interest rate futures contracts provides an alternative
means of hedging against rising interest rates. As rates increase, the value of
a Fund's short position in the futures contracts will also tend to increase,
thus offsetting all or a portion of the depreciation in the market value of a
Fund's investments that are being hedged. While a Fund will incur commission
expenses in selling and closing out futures positions (which is done by taking
an opposite position which operates to terminate the position in the futures
contract), commissions on futures transactions are lower than transaction costs
incurred in the purchase and sale of portfolio securities.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS AND INTEREST RATE FUTURES
CONTRACTS. A Fund may purchase and write call and put options on non-U.S. stock
index and interest rate futures contracts. A Fund may use such options on
futures contracts in connection with its hedging strategies in lieu of
purchasing and writing options directly on the underlying securities or stock
indices or purchasing and selling the underlying futures. For example, a Fund
may purchase put options or write call options on stock index futures, or
interest rate futures, rather than selling futures contracts, in anticipation of
a decline in general stock market prices or rise in interest rates,
respectively, or purchase call options or write put options on stock index or
interest rate futures, rather than purchasing such futures, to hedge against
possible increases in the price of equity securities or debt securities,
respectively, which the Fund intends to purchase.
PURCHASE AND SALE OF CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. In
order to hedge its portfolio and to protect it against possible variations in
foreign exchange rates pending the settlement of securities transactions, a Fund
may buy or sell currency futures contracts and related options. If a fall in
exchange rates for a particular currency is anticipated, a Fund may sell a
currency futures contract or a call option thereon or purchase a put option on
such futures contract as a hedge. If it is anticipated that exchange rates will
rise, a Fund may purchase a currency futures contract or a call option thereon
or sell (write) a put option to protect against an increase in the price of
securities denominated in a particular currency a Fund intends to purchase.
These futures contracts and related options thereon will be used only as a hedge
against anticipated currency rate changes, and all options on currency futures
written by a Fund will be covered.
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A currency futures contract sale creates an obligation by a Fund, as
seller, to deliver the amount of currency called for in the contract at a
specified future time for a special price. A currency futures contract purchase
creates an obligation by a Fund, as purchaser, to take delivery of an amount of
currency at a specified future time at a specified price. Although the terms of
currency futures contracts specify actual delivery or receipt, in most instances
the contracts are closed out before the settlement date without the making or
taking of delivery of the currency. Closing out of a currency futures contract
is effected by entering into an offsetting purchase or sale transaction. Unlike
a currency futures contract, which requires the parties to buy and sell currency
on a set date, an option on a currency futures contract entitles its holder to
decide on or before a future date whether to enter into such a contract. If the
holder decides not to enter into the contract, the premium paid for the option
is fixed at the point of sale.
The Fund will write (sell) only covered put and call options on
currency futures. This means that a Fund will provide for its obligations upon
exercise of the option by segregating sufficient cash or short-term obligations
or by holding an offsetting position in the option or underlying currency
future, or a combination of the foregoing. A Fund will, so long as it is
obligated as the writer of a call option on currency futures, own on a
contract-for-contract basis an equal long position in currency futures with the
same delivery date or a call option on stock index futures with the difference,
if any, between the market value of the call written and the market value of the
call or long currency futures purchased maintained by a Fund in cash, Treasury
bills, or other high grade short-term obligations in a segregated account with
its custodian. If at the close of business on any day the market value of the
call purchased by a Fund falls below 100% of the market value of the call
written by the Fund, a Fund will so segregate an amount of cash, Treasury bills
or other high grade short-term obligations equal in value to the difference.
Alternatively, a Fund may cover the call option through segregating with the
custodian an amount of the particular foreign currency equal to the amount of
foreign currency per futures contract option times the number of options written
by a Fund. In the case of put options on currency futures written by the Fund,
the Fund will hold the aggregate exercise price in cash, Treasury bills, or
other high grade short-term obligations in a segregated account with its
custodian, or own put options on currency futures or short currency futures,
with the difference, if any, between the market value of the put written and the
market value of the puts purchased or the currency futures sold maintained by a
Fund in cash, Treasury bills or other high grade short-term obligations in a
segregated account with its custodian. If at the close of business on any day
the market value of the put options purchased or the currency futures by a Fund
falls below 100% of the market value of the put options written by the Fund, a
Fund will so segregate an amount of cash, Treasury bills or other high grade
short-term obligations equal in value to the difference.
If other methods of providing appropriate cover are developed, a Fund
reserves the right to employ them to the extent consistent with applicable
regulatory and exchange requirements. In connection with transactions in stock
index options, stock index futures, interest rate futures, foreign currency
futures and related options on such futures, a Fund will be required to deposit
as "initial margin" an amount of cash or short-term government securities equal
to from 5% to 8% of the contract amount. Thereafter, subsequent payments
(referred to as "variation margin") are made to and from the broker to reflect
changes in the value of the futures contract.
LIMITATIONS ON PURCHASE OF OPTIONS. The staff of the SEC has taken the
position that purchased over-the-counter options and assets used to cover
written over-the-counter options are illiquid and, therefore, together with
other illiquid securities, cannot exceed 15% of a Fund's assets. The Adviser
intends to limit a Fund's writing of over-the-counter options in accordance with
the following procedure. Each Fund intends to write over-the-counter options
only with primary U.S. Government securities dealers recognized by the Federal
Reserve Bank of New York. Also, the contracts which a Fund has in place with
such primary dealers will provide that the Fund has the absolute right to
repurchase an option it writes at any time at a price which represents the fair
market value, as determined in good faith through negotiation between the
parties, but which in no event will exceed a price determined pursuant to a
formula in the contract. Although the specific formula may vary between
contracts with different primary dealers, the formula will generally be based on
a multiple of the premium received by a Fund for writing the option, plus the
amount, if any, of the option's intrinsic value (i.e., the amount that the
option is in-the-money). The formula also may include a factor to account for
the difference between the price of the security and the strike price of the
option if the option is written out-of-the-money. A Fund will treat all or a
part of the formula price as illiquid for purposes of any limitation on illiquid
securities imposed by the SEC staff.
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Risk Factors Associated with Futures and Options Transactions
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The effective use of options and futures strategies depends on, among
other things, a Fund's ability to terminate options and futures positions at
times when its the Adviser deems it desirable to do so. Although a Fund will not
enter into an option or futures position unless the Adviser believes that a
liquid secondary market exists for such option or future, there is no assurance
that a Fund will be able to effect closing transactions at any particular time
or at an acceptable price. A Fund generally expects that its options and futures
transactions will be conducted on recognized U.S. and foreign securities and
commodity exchanges. In certain instances, however, a Fund may purchase and sell
options in the over-the-counter market. A Fund's ability to terminate option
positions established in the over-the-counter market may be more limited than in
the case of exchange-traded options and may also involve the risk that
securities dealers participating in such transactions would fail to meet their
obligations to the Fund.
Options and futures markets can be highly volatile and transactions of
this type carry a high risk of loss. Moreover, a relatively small adverse market
movement with respect to these types of transactions may result not only in loss
of the original investment but also in unquantifiable further loss exceeding any
margin deposited.
The use of options and futures involves the risk of imperfect
correlation between movements in options and futures prices and movements in the
price of securities which are the subject of the hedge. Such correlation,
particularly with respect to options on stock indices and stock index futures,
is imperfect, and such risk increases as the composition of a Fund diverges from
the composition of the relevant index. The successful use of these strategies
also depends on the ability of the Adviser to correctly forecast interest rate
movements, currency rate movements and general stock market price movements.
In addition to certain risk factors described above, the following sets
forth certain information regarding the potential risks associated with the
Funds' futures and options transactions.
RISK OF IMPERFECT CORRELATION. A Fund's ability effectively to hedge
all or a portion of its portfolio through transactions in futures, options on
futures or options on stock indices depends on the degree to which movements in
the value of the securities or index underlying such hedging instrument
correlate with movements in the value of the relevant portion of the Fund's
securities. If the values of the securities being hedged do not move in the same
amount or direction as the underlying security or index, the hedging strategy
for a Fund might not be successful and the Fund could sustain loss on its
hedging transactions which would not be offset by gain on its portfolio. It is
also possible that there may be a negative correlation between the security or
index underlying a futures or option contract and the portfolio securities being
hedged, which could result in losses both on the hedging transaction and the
fund securities. In such instances, a Fund's overall return could be less than
if the hedging transactions had not been undertaken. Stock index futures or
options based on a narrower index of securities may present greater risk than
options or futures based on a broad market index, as a narrower index is more
susceptible to rapid and extreme fluctuations resulting from changes in the
value of a small number of securities. A Fund would, however, effect
transactions in such futures or options only for hedging purposes.
The trading of futures and options on indices involves the additional
risk of imperfect correlation between movements in the futures or option price
and the value of the underlying index. The anticipated spread between the prices
may be distorted due to differences in the nature of the markets, such as
differences in margin requirements, the liquidity of such markets and the
participation of speculators in the futures and options market. The purchase of
an option on a futures contract also involves the risk that changes in the value
of underlying futures contract will not be fully reflected in the value of the
option purchased. The risk of imperfect correlation, however, generally tends to
diminish as the maturity date of the futures contract or termination date of the
option approaches. The risk incurred in purchasing an option on a futures
contract is limited to the amount of the premium plus related transaction costs,
although it may be necessary under certain circumstances to exercise the option
and enter into the underlying futures contract in order to realize a profit.
Under certain extreme market conditions, it is possible that a Fund will not be
able to establish hedging positions, or that any hedging strategy adopted will
be insufficient to completely protect the Fund.
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A Fund will purchase or sell futures contracts or options only if, in
the Adviser's judgment, there is expected to be a sufficient degree of
correlation between movements in the value of such instruments and changes in
the value of the relevant portion of the Fund's portfolio for the hedge to be
effective. There can be no assurance that the Adviser's judgment will be
accurate.
POTENTIAL LACK OF A LIQUID SECONDARY MARKET. The ordinary spreads
between prices in the cash and futures markets, due to differences in the
natures of those markets, are subject to distortions. First, all participants in
the futures market are subject to initial deposit and variation margin
requirements. This could require a Fund to post additional cash or cash
equivalents as the value of the position fluctuates. Further, rather than
meeting additional variation margin requirements, investors may close futures
contracts through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the liquidity of the
futures or options market may be lacking. Prior to exercise or expiration, a
futures or option position may be terminated only by entering into a closing
purchase or sale transaction, which requires a secondary market on the exchange
on which the position was originally established. While a Fund will establish a
futures or option position only if there appears to be a liquid secondary market
therefor, there can be no assurance that such a market will exist for any
particular futures or option contract at any specific time. In such event, it
may not be possible to close out a position held by a Fund, which could require
the Fund to purchase or sell the instrument underlying the position, make or
receive a cash settlement, or meet ongoing variation margin requirements. The
inability to close out futures or option positions also could have an adverse
impact on a Fund's ability effectively to hedge its securities, or the relevant
portion thereof.
The liquidity of a secondary market in a futures contract or an option
on a futures contract may be adversely affected by "daily price fluctuation
limits" established by the exchanges, which limit the amount of fluctuation in
the price of a contract during a single trading day and prohibit trading beyond
such limits once they have been reached. The trading of futures and options
contracts also is subject to the risk of trading halts, suspensions, exchange or
clearing house equipment failures, government intervention, insolvency of the
brokerage firm or clearing house or other disruptions of normal trading
activity, which could at times make it difficult or impossible to liquidate
existing positions or to recover excess variation margin payments.
RISK OF PREDICTING INTEREST RATE MOVEMENTS. Investments in futures
contracts on fixed income securities and related indices involve the risk that
if the Adviser's investment judgment concerning the general direction of
interest rates is incorrect, a Fund's overall performance may be poorer than if
it had not entered into any such contract. For example, if a Fund has been
hedged against the possibility of an increase in interest rates which would
adversely affect the price of bonds held in its portfolio and interest rates
decrease instead, the Fund will lose part or all of the benefit of the increased
value of its bonds which have been hedged because it will have offsetting losses
in its futures positions. In addition, in such situations, if a Fund has
insufficient cash, it may have to sell bonds from its portfolio to meet daily
variation margin requirements, possibly at a time when it may be disadvantageous
to do so. Such sale of bonds may be, but will not necessarily be, at increased
prices which reflect the rising market.
TRADING AND POSITION LIMITS. Each contract market on which futures and
option contracts are traded has established a number of limitations governing
the maximum number of positions which may be held by a trader, whether acting
alone or in concert with others. The Adviser does not believe that these trading
and position limits will have an adverse impact on the hedging strategies
regarding the Funds' investments.
REGULATIONS ON THE USE OF FUTURES AND OPTIONS CONTRACTS. Regulations of
the CFTC require that the Funds enter into transactions in futures contracts and
options thereon for hedging purposes only, in order to assure that they are not
deemed to be a "commodity pool" under such regulations. In particular, CFTC
regulations require that all short futures positions be entered into for the
purpose of hedging the value of investment securities held by a Fund, and that
all long futures positions either constitute bona fide hedging transactions, as
defined in such regulations, or have a total value not in excess of an amount
determined by reference to certain cash and securities positions maintained for
the Fund, and accrued profits on such positions. In addition, a Fund may not
purchase or sell such instruments if, immediately thereafter, the sum of the
amount of initial margin deposits on its existing futures positions and premiums
paid for options on futures contracts would exceed 5% of the market value of the
Fund's total assets.
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When a Fund purchases a futures contract, an amount of cash or cash
equivalents or high quality debt securities will be segregated with the Fund's
custodian so that the amount so segregated, plus the initial deposit and
variation margin held in the account of its broker, will at all times equal the
value of the futures contract, thereby insuring that the use of such futures is
unleveraged.
The Funds' ability to engage in the hedging transactions described
herein may be limited by the current federal income tax requirement that a Fund
derive less than 30% of its gross income from the sale or other disposition of
stock or securities held for less than three months. The Funds may also further
limit their ability to engage in such transactions in response to the policies
and concerns of various Federal and state regulatory agencies. Such policies may
be changed by vote of the Board of Directors/Trustees.
Additional Information on Futures and Options
---------------------------------------------
As stated in the Prospectus, each Non-Money Market Fund, may enter into
futures contracts and options for hedging purposes. Such transactions are
described in this Schedule. During the current fiscal year, each of these Funds
intends to limit its transactions in futures contracts and options so that not
more than 5% of the Fund's net assets are at risk. Furthermore, in no event
would any Fund purchase or sell futures contracts, or related options thereon,
for hedging purposes if, immediately thereafter, the aggregate initial margin
that is required to be posted by the Fund under the rules of the exchange on
which the futures contract (or futures option) is traded, plus any premiums paid
by the Fund on its open futures options positions, exceeds 5% of the Fund's
total assets, after taking into account any unrealized profits and unrealized
loss on the Fund's open contracts and excluding the amount that a futures option
is "in-the-money" at the time of purchase. (An option to buy a futures contract
is "in-the-money" if the value of the contract that is subject to the option
exceeds the exercise price; an option to sell a futures contract is
"in-the-money" if the exercise Price exceeds the value of the contract that is
subject of the option.)
I. Interest Rate Futures Contracts.
--------------------------------
Use of Interest Rate Futures Contracts. Bond prices are established in
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures market have tended to move generally in the aggregate
in concert with the cash market prices and have maintained fairly predictable
relationships. Accordingly, a Fund may use interest rate futures as a defense,
or hedge, against anticipated interest rate changes and not for speculation. As
described below, this would include the use of futures contract sales to protect
against expected increases in interest rates and futures contract purchases to
offset the impact of interest rate declines.
A Fund presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Fund, through using futures contracts.
Description of Interest Rates Futures Contracts. An interest rate
futures contract sale would create an obligation by a Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase would
create an obligation by the Fund, as purchaser, to take delivery of the specific
type of financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until at or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before the settlement date without the making or taking of delivery of
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securities. Closing out a futures contract sale is effected by the Fund's
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
in the sale exceeds the price in the offsetting purchase, the Fund is paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly, the
closing out of a futures contract purchase is effected by the Fund's entering
into a futures contract sale. If the offsetting sale price exceeds the purchase
price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment on
the floors of several exchanges - principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. A Fund would deal
only in standardized contracts on recognized changes. Each exchange guarantees
performance under contract provisions through a clearing corporation, a
nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various
financial instruments including long-term United States Treasury Bonds and
Notes; GNMA modified pass-through mortgage-backed securities; three-month United
States Treasury Bills; and ninety-day commercial paper. The Funds may trade in
any futures contract for which there exists a public market, including, without
limitation, the foregoing instruments.
Examples of Futures Contract Sale. A Fund would engage in an interest
rate futures contract sale to maintain the income advantage from continued
holding of a long-term bond while endeavoring to avoid part or all of the loss
in market value that would otherwise accompany a decline in long-term securities
prices. Assume that the market value of a certain security in a Fund tends to
move in concert with the futures market prices of long-term United States
Treasury bonds ("Treasury Bonds"). The Adviser wishes to fix the current market
value of this portfolio security until some point in the future. Assume the
portfolio security has a market value of 100, and the Adviser believes that,
because of an anticipated rise in interest rates, the value will decline to 95.
The Fund might enter into futures contract sales of Treasury bonds for an
equivalent of 98. If the market value of the portfolio securities does indeed
decline from 100 to 95, the equivalent futures market price for the Treasury
bonds might also decline from 98 to 93.
In that case, the five-point loss in the market value of the portfolio
security would be offset by the five-point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.
The Adviser could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by the
loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above example
might incur a loss of 2 points (which might be reduced by an offsetting
transaction prior to the settlement date). In each transaction, transaction
expenses would also be incurred.
Examples of Future Contract Purchase. A Fund would engage in an
interest rate futures contract purchase when it is not fully invested in
long-term bonds but wishes to defer for a time the purchase of long-term bonds
in light of the availability of advantageous interim investments, e.g.,
shorter-term securities whose yields are greater than those available on
long-term bonds. The Fund's basic motivation would be to maintain for a time the
income advantage from investing in the short-term securities; the Fund would be
endeavoring at the same time to eliminate the effect of all or part of an
expected increase in market price of the long-term bonds that the Fund may
purchase.
For example, assume that the market price of a long-term bond that the
Fund may purchase, currently yielding 10%, tends to move in concert with futures
market prices of Treasury bonds. The Adviser wishes to fix the current market
price (and thus 10% yield) of the long-term bond until the time (four months
away in this example)
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when it may purchase the bond. Assume the long-term bond has a market price of
100, and the Adviser believes that, because of an anticipated fall in interest
rates, the price will have risen to 105 (and the yield will have dropped to
about 9-1/2%) in four months. The Fund might enter into futures contracts
purchases of Treasury bonds for an equivalent price of 98. At the same time, the
Fund would assign a pool of investments in short-term securities that are either
maturing in four months or earmarked for sale in four months, for purchase of
the long-term bond at an assumed market price of 100. Assume these short-term
securities are yielding 15%. If the market price of the long-term bond does
indeed rise from 100 to 105, the equivalent futures market price for Treasury
bonds might also rise from 98 to 103. In that case, the 5-point increase in the
price that the Fund pays for the long-term bond would be offset by the 5-point
gain realized by closing out the futures contract Purchase.
The Adviser could be wrong in its forecast of interest rates; long-term
interest rates might rise to above 10%; and the equivalent futures market price
could fall below 98. If short-term rates at the same time fall to 10% or below,
it is possible that the Fund would continue with its purchase program for
long-term bonds. The market price of available long-term bonds would have
decreased. The benefit of this price decrease, and thus yield increase, will be
reduced by the loss realized on closing out the futures contract purchase.
If, however, short-term rates remained above available long-term rates,
it is possible that the Fund would discontinue its purchase program for
long-term bonds. The yield on short-term securities in the portfolio, including
those originally in the pool assigned to the particular long-term bond, would
remain higher than yields on long-term bonds. The benefit of this continued
incremental income will be reduced by the loss realized on closing out the
futures contract purchase.
In each transaction, expenses also would be incurred.
II. Index Futures Contracts.
------------------------
A stock or bond index assigns relative values to the stocks or bonds
included in the index, and the index fluctuates with changes in the market
values of the stocks or bonds included. Some stock index futures contracts are
based on broad market indices, such as the Standard & Poor's 500 or the New York
Stock Exchange Composite Index. In contract, certain exchanges offer futures
contracts on narrower market indices, such as the Standard & Poor's 100, the
Bond Buyer Municipal Bond Index, an index composed of 40 term revenue and
general obligation bonds, or indices based on an industry or market segment,
such as oil and gas stocks. Futures contracts are traded on organized exchanges
regulated by the Commodity Futures Trading Commission. Transactions on such
exchanges are cleared through a clearing corporation, which guarantees the
performance of the parties to each contract.
A Fund will sell index futures contracts in order to offset a decrease
in market value of its portfolio securities that might otherwise result from a
market decline. The Fund may do so either to hedge the value of its portfolio as
a whole, or to protect against declines, occurring prior to sales of securities,
in the value of the securities to be sold. Conversely, a Fund will purchase
index futures contracts in anticipation of purchases of securities. In a
substantial majority of these transactions, the Fund will purchase such
securities upon termination of the long futures position, but a long futures
position may be terminated without a corresponding purchase of securities.
In addition, a Fund may utilize index futures contracts in anticipation
of changes in the composition of its portfolio holdings. For example, in the
event that a Fund expects to narrow the range of industry groups represented in
its holdings it may, prior to making purchases of the actual securities,
establish a long futures position based on a more restricted index, such as an
index comprised of securities of a particular industry group. A Fund also may
sell futures contracts in connection with this strategy, in order to protect
against the possibility that the value of the securities to be sold as part of
the restructuring of the portfolio will decline prior to the time of sale.
The following are examples of transactions in stock index futures (net
of commissions and premiums, if any).
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ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price
Portfolio Futures
-Day Hedge is Placed
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures = $62,500/
Contract
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 130
Actual Cost = $65,000 Value of Futures = $65,000/
Increase in Purchase Contract
Price = $2,500 Gain on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future Hedge
Objective: Protect Against Declining (Value of the Portfolio)
Factors
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index - 1.0
Portfolio Futures
-Day Hedge is Placed
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio-Own Buy 16 Index Futures at 120
Stock with Value = $960,000 Value of Futures = $960,000
Loss in Portfolio Gain on Futures = $40,000
Value = $40 000
IF, HOWEVER, THE MARKET MOVED IN THE OPPOSITE DIRECTION, THAT IS, MARKET
VALUE DECREASED AND THE FUND HAD ENTERED INTO AN ANTICIPATORY PURCHASE HEDGE, OR
MARKET VALUE INCREASED AND THE FUND HAD HEDGED ITS STOCK PORTFOLIO, THE RESULTS
OF THE FUND'S TRANSACTIONS IN STOCK INDEX FUTURES WOULD BE AS SET FORTH BELOW.
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ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price
Portfolio Futures
-Day Hedge is Placed
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures = $62,500/
Contract
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 120
Actual Cost = $60,000 Value of Futures = $60,000/
Decrease in Purchase Contract
Price = $2,500 Loss on Futures = $2,500
Contract
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index - 1.0
Portfolio Futures
-Day Hedge is Placed
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio-Own Buy 16 Index Futures at 130
Stock with Value = $1,040,000 Value of Futures = $1,040,000
Gain in Portfolio = $40,000 Loss of Futures = $40,000
Value = $40,000
III. Margin Payments
Unlike when a Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract. Initially,
the Fund will be required to deposit with the broker or in a segregated account
with the Fund's Custodian an amount of cash or cash equivalents, the value, of
which may vary but is generally equal to 10% or less of the value of the
contract. This amount is known as initial margin. The nature of initial margin
in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the customer to finance the transactions. Rather, the initial margin is
in the nature of a performance bond or good faith deposit on the contract which
is returned to the Fund upon termination of the futures contract assuming all
contractual obligations have been satisfied. Subsequent
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payments, called variation margin, to and from the broker, will be made on a
daily basis as the price of the underlying security or index fluctuates making
the long and short positions in the futures contract more or less valuable, a
process known as marking to the market. For example, when a Fund has purchased
a futures contract and the price of the contract has risen in response to a rise
in the underlying instruments, that position will have increased in value and
the Fund will be entitled to receive from the broker a variation margin payment
equal to that increase in value. Conversely, where a Fund has purchased a
futures contract and the price of the futures contract has declined in response
to a decrease in the underlying instruments, the position would be less
valuable, the Fund would be required to make a variation margin payment to the
broker. At any time prior to expiration of the futures contract, the Adviser may
elect to close the position by taking an opposite position, subject to the
availability of a secondary market, which will operate to terminate the Fund's
position in the futures contract. A final determination of variation margin is
then made, additional cash is required to be paid by or released to the Fund,
and the Fund realizes a loss or gain.
IV. Risks of Transactions in Futures Contracts
There are several risks in connection with the use of futures by a Fund
as a hedging device. One risk arises because of the imperfect correlation
between movements in the price of the future and movements in the price of the
securities which are the subject of the hedge. The price of the future may move
more than or less than the price of the securities being hedged. If the price of
the future moves less than the price of the securities which are the subject of
the hedge, the hedge will not be fully effective but, if the price of securities
being hedged has moved in an unfavorable direction, the Fund would be in a
better position than if it had not hedged at Al. If the price of the securities
being hedged has moved in a favorable direction, this advance will be partially
offset by the loss on the future. If the price of the future moves more than the
price of the hedged securities, the Fund involved will experience either a loss
or gain on the future which will not be completely offset by movements in the
price of the securities which are the subject of the hedge.
To compensate for the imperfect correlation of movements in the price
of securities being hedged and movements in the price of futures contracts, a
Fund may buy or sell futures contracts in a greater dollar amount than the
dollar amount of securities being hedged if the volatility over a particular
time period of the prices of such securities has been greater than the
volatility over such time period of the future, or if otherwise deemed to be
appropriate by the Adviser. Conversely, a Fund may buy or sell fewer futures
contracts if the volatility over a particular time period of the prices of the
securities being hedged is less than the volatility over such time period of the
futures contract being used, or if otherwise deemed to be appropriate by the
Adviser. It also is possible that, where a Fund has sold futures to hedge its
portfolio against a decline in the market, the market may advance, and the value
of securities held by the Fund may decline. If this occurred, the Fund would
lose money on the future and also experience a decline in value in its portfolio
securities.
Where futures are purchased to hedge against a possible increase in the
price of securities before a Fund is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline instead; if the Fund then concludes not to invest in
securities or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the futures
contract that is not offset by a reduction in the price of securities purchased.
In instances involving the purchase of futures contracts by a Fund, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Fund's Custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
securities being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
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delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of Price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the Adviser still may not
result in a successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be possible to
close a futures investment position, and in the event of adverse price
movements, a Fund would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have been used to
hedge portfolio securities, such securities will not be sold until the futures
contract can be terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset loss on the futures
contract. However, as described above, there is no guarantee that the price of
the securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market in
a futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions.
Successful use of futures by a Fund also is subject to the Adviser's
ability to predict correctly movements in the direction of the market. For
example, if a Fund has hedged against the possibility of a decline in the market
adversely affecting securities held in its portfolio and securities prices
increase instead, the Fund will lose part or all of the benefit to the increased
value of its securities which it has hedged because it will have offsetting loss
in its futures positions. In addition, in such situations, if the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. A Fund may have to sell
securities at a time when it may be disadvantageous to do so.
V. Options on Futures Contracts.
The Funds may purchase options on the futures contracts described
above. A futures option gives the holder, in return for the premium paid, the
right to buy (call) from or sell (put) to the writer of the option a futures
contract at a specified price at any time during the period of the option. Upon
exercise, the writer of the option is obligated to pay the difference between
the cash value of the futures contract and the exercise price. Like the buyer or
seller of a futures contract, the holder, or writer, of an option has the right
to terminate its position prior to the scheduled expiration of the option by
selling, or purchasing, an option of the same series, at which time the person
entering into the closing transaction will realize a gain or loss.
Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the purchase
of an option also entails the risk that changes in the value of the underlying
futures contract will not be fully reflected in the value of the option
purchased. Depending on the pricing of the option compared to either the futures
contract upon which it is based, or upon the price of the securities being
hedged, an option may or may not be less risky than ownership of the futures
contract or such securities. In general, the market prices of options can be
expected to be more volatile than the market prices on the underlying futures
contract. Compared to the purchase or sale of futures contracts, however, the
purchase of call or put options on futures contracts may frequently involve less
potential risk to a Fund because the maximum amount at risk is the premium paid
for the options (plus transaction costs).
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Although permitted by their fundamental investment policies, the Funds do not
currently intend to write future options, and will not do so in the future
absent any necessary regulatory approvals.
Accounting Treatment.
---------------------
Accounting for futures contracts and options will be in accordance with
generally accepted accounting principles.
GUARANTEED INVESTMENT CONTRACTS
Guaranteed investment contracts, investment contracts or funding
agreements (each referred to as a "GIC") are investment instruments issued by
highly rated insurance companies. Pursuant to such contracts, a Fund may make
cash contributions to a deposit fund of the insurance company's general or
separate accounts. The insurance company then credits to a Fund guaranteed
interest. The insurance company may assess periodic charges against a GIC for
expense and service costs allocable to it, and the charges will be deducted from
the value of the deposit fund. The purchase price paid for a GIC generally
becomes part of the general assets of the issuer, and the contract is paid from
the general assets of the issuer.
A Fund will only purchase GICs from issuers which, at the time of
purchase, meet quality and credit standards established by the Adviser.
Generally, GICs are not assignable or transferable without the permission of the
issuing insurance companies, and an active secondary market in GICs does not
currently exist. Also, a Fund may not receive the principal amount of a GIC from
the insurance company on seven days' notice or less, at which point the GIC may
be considered to be an illiquid investment.
A Money Market Fund will acquire GlCs so that they, together with other
instruments in such Fund's portfolio which are not readily marketable, will not
exceed applicable limitations on such Fund's investments in illiquid securities.
A Money Market Fund will restrict its investments in GlCs to those having a term
of 397 days or less. In determining average weighted portfolio maturity, a GIC
will be deemed to have a maturity equal to the period of time remaining under
the next readjustment of the guaranteed interest rate.
INSURED MUNICIPAL SECURITIES
Certain of the Municipal Securities held by the Funds may be insured at
the time of issuance as to the timely payment of principal and interest. The
insurance policies will usually be obtained by the issuer of the Municipal
Securities at the time of its original issuance. In the event that the issuer
defaults with respect to interest or principal payments, the insurer will be
notified and will be required to make payment to the bondholders. There is,
however, no guarantee that the insurer will meet its obligations. In addition,
such insurance will not protect against market fluctuations caused by changes in
interest rates and other factors.
INTEREST RATE TRANSACTIONS
Among the strategic transactions into which certain Funds may enter are
interest rate swaps and the purchase or sale of related caps and floors. The
Funds expect to enter into these transactions primarily to preserve a return or
spread on a particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management technique or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. A Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by a Fund
with another party of their respective commitments to pay or receive interest,
e.g. an exchange of floating rate payments for fixed rate payments with respect
to a notional amount of principal. A currency swap is an agreement to exchange
cash flows on a notional amount of two or more currencies based on the relative
value differential among them and an index swap is an agreement to swap cash
flows on a notional amount based on changes in the values of the reference
indices. The purchase of a cap entitles the purchaser to receive payments on a
notional principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount.
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A Fund will usually enter into swaps on a net basis, I.E., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. In as much as these swaps, caps and
floors are entered into for good faith hedging purposes, the Adviser and the
Fund believe such obligations do not constitute senior securities under the 1940
Act and, accordingly, will not treat them as being subject to its borrowing
restrictions. A Fund will not enter into any swap, cap and floor transaction
unless, at the time of entering into such transaction, the unsecured long-term
debt of the counterparty, combined with any credit enhancements, is rated at
least "A" by Standard & Poor's Corporation or Moody's Investors Service, Inc. or
has an equivalent rating from a NRSRO or is determined to be of equivalent
credit quality by the Adviser. If there is a default by the counterparty, the
Fund may have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps and floors are more recent innovations
for which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
With respect to swaps, a Fund will accrue the net amount of the excess,
if any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high grade securities
having a value equal to the accrued excess. Caps and floors require segregation
of assets with a value equal to the Fund's net obligation, if any.
LOWER RATED DEBT SECURITIES
The yields on lower rated debt and comparable unrated fixed-income
securities generally are higher than the yields available on higher-rated
securities. However, investments in lower rated debt and comparable unrated
securities generally involve greater volatility of price and risk of loss of
income and principal, including the probability of default by or bankruptcy of
the issuers of such securities. Lower rated debt and comparable unrated
securities (a) will likely have some quality and protective characteristics
that, in the judgment of the rating organization, are outweighed by large
uncertainties or major risk exposures to adverse conditions and (b) are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. Accordingly,
it is possible that these types of factors could, in certain instances, reduce
the value of securities held in a Fund's portfolio, with a commensurate effect
on the value of the Fund's shares. Therefore, an investment in the Fund should
not be considered as a complete investment program and may not be appropriate
for all investors.
The market prices of lower rated securities may fluctuate more than
higher rated securities and may decline significantly in periods of general
economic difficulty which may follow periods of rising interest rates. During an
economic downturn or a prolonged period of rising interest rates, the ability of
issuers of lower quality debt to service their payment obligations, meet
projected goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower rated securities, the
Adviser will try to minimize the risks inherent in investing in lower rated debt
securities by engaging in credit analysis, diversification, and attention to
current developments and trends affecting interest rates and economic
conditions. The Adviser will attempt to identify those issuers of high-yielding
securities whose financial condition is adequate to meet future obligations,
have improved, or are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated
securities, but they may not be attractive to as may buyers. Each Fund's
policies regarding lower rated debt securities is not fundamental and may be
changed at any time without shareholder approval.
While the market values of lower rated debt and comparable unrated
securities tend to react less to fluctuations in interest rate levels than the
market values of higher-rated securities, the market values of certain lower
rated debt and comparable unrated securities also tend to be more sensitive to
individual corporate developments and changes in economic conditions than
higher-rated securities. In addition, lower rated debt securities and comparable
unrated securities generally present a higher degree of credit risk. Issuers of
lower rated debt and comparable
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unrated securities often are highly leveraged and may not have more traditional
methods of financing available to them so that their ability to service their
debt obligations during an economic downturn or during sustained periods of
rising interest rates may be impaired. The risk of loss due to default by such
issuers is significantly greater because lower rated debt and comparable unrated
securities generally are unsecured and frequently are subordinated to the prior
payment of senior indebtedness. A Fund may incur additional expenses to the
extent that it is required to seek recovery upon a default in the payment of
principal or interest on its portfolio holdings. The existence of limited
markets for lower rated debt and comparable unrated securities may diminish a
Fund's ability to (a) obtain accurate market quotations for purposes of valuing
such securities and calculating its net asset value and (b) sell the securities
at fair value either to meet redemption requests or to respond to changes in the
economy or in financial markets.
Fixed-income securities, including lower rated debt securities and
comparable unrated securities, frequently have call or buy-back features that
permit their issuers to call or repurchase the securities from their holders,
such as a Fund. If an issuer exercises these rights during periods of declining
interest rates, a Fund may have to replace the security with a lower yielding
security, thus resulting in a decreased return to a Fund.
The market for certain lower rated debt and comparable unrated
securities is relatively new and has not weathered a major economic recession.
The effect that such a recession might have on such securities is not known. Any
such recession, however, could disrupt severely the market for such securities
and adversely affect the value of such securities. Any such economic downturn
also could adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon.
MUNICIPAL SECURITIES
GENERALLY. The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which created
the issuer.
Municipal securities may include variable- or floating- rate
instruments issued by industrial development authorities and other governmental
entities. While there may not be an active secondary market with respect to a
particular instrument purchased by a Fund, a Fund may demand payment of the
principal and accrued interest on the instrument or may resell it to a third
party as specified in the instruments. The absence of an active secondary
market, however, could make it difficult for a Fund to dispose of the instrument
if the issuer defaulted on its payment obligation or during periods the Fund is
not entitled to exercise its demand rights, and the Fund could, for these or
other reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments
purchased by a Fund will be determined by the Adviser to be of comparable
quality at the time of purchase to instruments rated "high quality" by any major
rating service. Where necessary to ensure that an instrument is of comparable
"high quality," a Fund will require that an issuer's obligation to pay the
principal of the note may be backed by an unconditional bank letter or line of
credit, guarantee, or commitment to lend.
Municipal securities may include participations in privately arranged
loans to municipal borrowers, some of which may be referred to as "municipal
leases." Generally such loans are unrated, in which case they will be
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determined by the Adviser to be of comparable quality at the time of purchase to
rated instruments that may be acquired by a Fund. Frequently, privately arranged
loans have variable interest rates and may be backed by a bank letter of credit.
In other cases, they may be unsecured or may be secured by assets not easily
liquidated. Moreover, such loans in most cases are not backed by the taxing
authority of the issuers and may have limited marketability or may be marketable
only by virtue of a provision requiring repayment following demand by the
lender. Such loans made by a Fund may have a demand provision permitting the
Fund to require payment within seven days. Participations in such loans,
however, may not have such a demand provision and may not be otherwise
marketable.
Although lease obligations do not constitute general obligations of the
municipality for which the municipality's taxing power is pledged, a lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate, and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide that
the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. In addition to the "non-appropriation" risk, these securities
represent a relatively new type of financing that has not yet developed the
depth of marketability associated with more conventional bonds. In the case of a
"non-appropriation" lease, the Funds' ability to recover under the lease in the
event of non-appropriation or default will be limited solely to the repossession
of the leased property in the event foreclosure might prove difficult.
The Funds will not invest more than 5% of their total investment assets
in lease obligations that contain "non-appropriation" clauses where (1) the
nature of the leased equipment or property is such that its ownership or use is
essential to a governmental function of the municipality, (2) the lease payments
will commence amortization of principal at an early date resulting in an average
life of seven years or less for the lease obligation, (3) appropriate covenants
will be obtained from the municipal obligor prohibiting the substitution or
purchase of similar equipment if lease payments are not appropriated, (4) the
lease obligor has maintained good market acceptability in the past, (5) the
investment is of a size that will be attractive to institutional investors, and
(6) the underlying leased equipment has elements of probability and/or use that
enhance its marketability in the event foreclosure on the underlying equipment
were ever required. The Funds have not imposed any percentage limitations with
respect to their investment in lease obligations not subject to the
"non-appropriation" risk. To the extent municipal leases are illiquid, they will
be subject to each Fund's limitation on investments in illiquid securities.
Recovery of an investment in any such loan that is illiquid and payable on
demand may depend on the ability of the municipal borrower to meet an obligation
for full repayment of principal and payment of accrued interest within the
demand period, normally seven days or less (unless a Fund determines that a
particular loan issue, unlike most such loans, has a readily available market).
As it deems appropriate, the Adviser will establish procedures to monitor the
credit standing of each such municipal borrower, including its ability to meet
contractual payment obligations.
In evaluating the credit quality of a municipal lease obligation and
determining whether such lease obligation will be considered "liquid," the
Adviser for each Fund will consider: (1) whether the lease can be canceled; (2)
what assurance there is that the assets represented by the lease can be sold;
(3) the strength of the lessee's general credit (e.g., its debt, administrative,
economic, and financial characteristics); (4) the likelihood that the
municipality will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to the operations of the
municipality (e.g., the potential for an "event of non-appropriation"); and (5)
the legal recourse in the event of failure to appropriate.
Municipal securities may include units of participation in trusts
holding pools of tax-exempt leases. Municipal participation interests may be
purchased from financial institutions, and give the purchaser an undivided
interest in one or more underlying municipal security. To the extent that
municipal participation interests are considered to be "illiquid securities,"
such instruments are subject to each Fund's limitation on the purchase of
illiquid securities. Municipal leases and participating interests therein, which
may take the form of a lease or an installment sales contract, are issued by
state and local governments and authorities to acquire a wide variety of
equipment and facilities. Interest payments on qualifying leases are exempt from
Federal income taxes.
In addition, certain of the Funds may acquire "stand-by commitments"
from banks or broker/dealers with respect to municipal securities held in their
portfolios. Under a stand-by commitment, a dealer would agree to purchase at a
Fund's option specified Municipal Securities at a specified price. The Funds
will acquire stand-by
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commitments solely to facilitate portfolio liquidity and do not intend to
exercise their rights thereunder for trading purposes.
Although the Funds do not presently intend to do so on a regular basis,
each may invest more than 25% of its total assets in municipal securities the
interest on which is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by the Adviser. To the extent that
more than 25% of a Fund's total assets are invested in Municipal Securities that
are payable from the revenues of similar projects, a Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if its assets were not so concentrated.
There are, of course, variations in the quality of Municipal
Securities, both within a particular classification and between classifications,
and the yields on Municipal Securities depend upon a variety of factors,
including general money market conditions, the financial condition of the
issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation, and the rating of the
issue. The ratings of NRSROs represent their opinions as to the quality of
Municipal Securities. It should be emphasized, however, that these ratings are
general and are not absolute standards of quality, and Municipal Securities with
the same maturity, interest rate, and rating may have different yields while
Municipal Securities of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to its purchase by a Fund, an issue
of Municipal Securities may cease to be rated, or its rating may be reduced
below the minimum rating required for purchase by that Fund. The Adviser will
consider such an event in determining whether a Fund should continue to hold the
obligation.
Opinions relating to the validity of Municipal Securities and to the
exemption of interest thereon from regular Federal income tax or state income
tax are rendered by counsel to the issuer or bond counsel at the time of
issuance. Neither the Funds nor the Adviser will review the proceedings relating
to the issuance of Municipal Securities or the bases for opinions relating to
the validity of such issuance.
The payment of principal and interest on most securities purchased by a
Fund will depend upon the ability of the issuers to meet their obligations. Each
state, each of their political subdivisions, municipalities, and public
authorities, as well as the District of Columbia, Puerto Rico, Guam, and the
Virgin Islands are a separate "issuer" as that term is used in the Prospectuses
and this SAI. The non-governmental user of facilities financed by private
activity bonds is also considered to be an "issuer." An issuer's obligations
under its Municipal Securities are subject to the provisions of bankruptcy,
insolvency, and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Code, and laws, if any, which may be enacted by
Federal or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. The power or
ability of an issuer to meet its obligations for the payment of interest on and
principal of its Municipal Securities may be materially adversely affected by
litigation or other conditions.
Although the Municipal Income Fund and the State Municipal Bond Funds
invest primarily in Municipal Securities with long-term maturities, the
Intermediate Municipal Bond Fund and the State Intermediate Municipal Bond Funds
invest primarily in Municipal Securities with intermediate-term maturities, they
may also purchase short-term General Obligation Notes, Tax Anticipation Notes,
Bond Anticipation Notes, Revenue Anticipation Notes, Tax-Exempt Commercial
Paper, Construction Loan Notes, and other forms of short-term loans. Such
instruments are issued with a short-term maturity in anticipation of the receipt
of tax funds, the proceeds of bond placements, or other revenues. The State
Intermediate Municipal Bond Funds may also invest in long-term tax-exempt
instruments.
Certain types of Municipal Securities (private activity bonds) have
been or are issued to obtain funds to provide, among other things, privately
operated housing facilities, pollution control facilities, convention or trade
show facilities, mass transit, airport, port or parking facilities, and certain
local facilities for water supply, gas, electricity, or sewage or solid waste
disposal. Private activity bonds are also issued for privately held or publicly
owned corporations in the financing of commercial or industrial facilities. Most
governments are authorized to issue
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private activity bonds for such purposes in order to encourage corporations to
locate within their communities. The principal and interest on these obligations
may be payable from the general revenues of the users of such facilities.
From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the Federal income tax exemption for
interest on Municipal Securities. Moreover, with respect to Municipal Securities
issued by Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee,
Texas, or Virginia issuers, NFT cannot predict which legislation, if any, may be
proposed in the state legislatures or which proposals, if any, might be enacted.
Such proposals, while pending or if enacted, might materially and adversely
affect the availability of Municipal Securities generally, or Florida, Georgia,
Maryland, North Carolina, South Carolina, Tennessee, Texas, or Virginia
Municipal Securities specifically, for investment by one of these Funds and the
liquidity and value of such portfolios. In such an event, a Fund impacted would
re-evaluate its investment objective and policies and consider possible changes
in its structure or possible dissolution.
OPTIONS ON CURRENCIES
Certain Funds may purchase and sell options on currencies to hedge the
value of securities the Fund holds or intends to buy. Options on foreign
currencies may be traded on U.S. and foreign exchanges or over-the-counter.
OTHER INVESTMENT COMPANIES
In seeking to attain their investment objectives, certain Funds may
invest in securities issued by other investment companies within the limits
prescribed by the 1940 Act. Each Fund currently intends to limit its investments
so that, as determined immediately after a securities purchase is made: (a) not
more than 5% of the value of its total assets will be invested in the securities
of any one investment company; (b) not more than 10% of the value of its total
assets will be invested in the aggregate in securities of investment companies
as a group; and (c) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund or by the Company as a whole. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including Advisory fees. These expenses would be in addition to the Advisory and
other expenses that a Fund bears in connection with its own operations. The
Adviser has agreed to remit to the respective investing Fund fees payable to it
under its respective Investment Advisory Agreement with an affiliated money
market Fund to the extent such fees are based upon the investing Fund's assets
invested in shares of the affiliated money market fund.
PARTICIPATION INTERESTS AND COMPANY RECEIPTS
The Government Bond Fund also may purchase from domestic financial
institutions and trusts created by such institutions participation interests and
trust receipts in high quality debt securities. A participation interest or
receipt gives the Fund an undivided interest in the security in the proportion
that the Fund's participation interest or receipt bears to the total principal
amount of the security. As to certain instruments for which the Fund will be
able to demand payment, the Fund intends to exercise its right to do so only
upon a default under the terms of the security, as needed to provide liquidity
or to maintain or improve the quality of its investment portfolio. It is
possible that a participation interest or trust receipt may be deemed to be an
extension of credit by the Fund to the issuing financial institution rather than
to the obligor of the underlying security and may not be directly entitled to
the protection of any collateral security provided by the obligor. In such
event, the ability of the Fund to obtain repayment could depend on the issuing
financial institution.
Participation interests and trust receipts may have fixed, floating or
variable rates of interest, and will have remaining maturities of thirteen
months or less (as defined by the SEC). If a participation interest or trust
receipt is unrated, the Adviser will have determined that the interest or
receipt is of comparable quality to those instruments in which the Fund may
invest pursuant to guidelines approved by the Board of Directors. For certain
participation interests or trust receipts the Fund will have the right to demand
payment, on not more than 30 days' notice, for all or any part of the Fund's
participation interest or trust receipt in the securities involved, plus accrued
interest.
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REAL ESTATE INVESTMENT TRUSTS
A real estate investment trust ("REIT") is a managed portfolio of real
estate investments which may include office buildings, apartment complexes,
hotels and shopping malls. An equity REIT holds equity positions in real estate,
and it seeks to provide its shareholders with income from the leasing of its
properties, and with capital gain from any sales of properties. A mortgage REIT
specializes in lending money to developers of properties, and passes any
interest income it may earn to its shareholders.
REITs may be affected by changes in the value of the underlying
property owned or financed by the REIT, while Mortgage REITs also may be
affected by the quality of credit extended. Both equity and mortgage REITs are
dependent upon management skill and may not be diversified. REITs also may be
subject to heavy cash flow dependency, defaults by borrowers, self-liquidation,
and the possibility of failing to qualify for tax-free pass-through of income
under the Internal Revenue Code of 1986, as amended.
REPURCHASE AGREEMENTS
The repurchase price under any repurchase agreements described in the
Prospectuses generally equals the price paid by a Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement). Securities subject
to repurchase agreements will be held by a Company's custodian in a segregated
account or in the Federal Reserve/Treasury book-entry system. Repurchase
agreements are considered to be loans by such Company under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS
At the time a Fund enters into a reverse repurchase agreement, it may
establish a segregated account with its custodian bank in which it will maintain
cash, U.S. Government securities or other liquid high grade debt obligations
equal in value to its obligations in respect of reverse repurchase agreements.
Reverse repurchase agreements involve the risk that the market value of the
securities the Funds are obligated to repurchase under the agreement may decline
below the repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Funds' use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Funds'
obligation to repurchase the securities. Reverse repurchase agreements are
speculative techniques involving leverage, and are subject to asset coverage
requirements if the Funds do not establish and maintain a segregated account (as
described above). In addition, some or all of the proceeds received by a Fund
from the sale of a portfolio instrument may be applied to the purchase of a
repurchase agreement. To the extent the proceeds are used in this fashion and a
common broker/dealer is the counterparty on both the reverse repurchase
agreement and the repurchase agreement, the arrangement might be recharacterized
as a swap transaction. Under the requirements of the 1940 Act, the Funds are
required to maintain an asset coverage (including the proceeds of the
borrowings) of at least 300% of all borrowings. Depending on market conditions,
the Funds' asset coverage and other factors at the time of a reverse repurchase,
the Funds may not establish a segregated account when the Adviser believes it is
not in the best interests of the Funds to do so. In this case, such reverse
repurchase agreements will be considered borrowings subject to the asset
coverage described above.
SECURITIES LENDING
To increase return on portfolio securities, certain Funds may lend
their portfolio securities to broker/dealers and other institutional investors
pursuant to agreements requiring that the loans be continuously secured by
collateral equal at all times in value to at least the market value of the
securities loaned. Collateral for such loans may include cash, securities of the
U.S. Government, its agencies or instrumentalities, an irrevocable letter of
credit issued by (i) a U.S. bank that has total assets exceeding $1 billion and
that is a member of the Federal Deposit Insurance Corporation, or (ii) a foreign
bank that is one of the 75 largest foreign commercial banks in terms of total
assets, or any combination thereof. Such loans will not be made if, as a result,
the aggregate of all outstanding loans of the Fund involved exceeds 33% of the
value of its total assets which may include cash collateral received for
securities loaned. There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even a
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loss of rights in the collateral should the borrower of the securities fail
financially. However, loans are made only to borrowers deemed by the Adviser to
be of good standing and when, in its judgment, the income to be earned from the
loan justifies the attendant risks. Pursuant to the securities loan agreement a
Fund is able to terminate the securities loan upon notice of not more than five
business days and thereby secure the return to the Fund of securities identical
to the transferred securities upon termination of the loan.
SHORT SALES
Certain Funds may from time to time enter into short sales
transactions. A Fund will not make short sales of securities nor maintain a
short position unless at all times when a short position is open, such Fund owns
an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities of
the same issue as, and equal in amount to, the securities sold short. This is a
technique known as selling short "against the box." Such short sales will be
used by a Fund for the purpose of deferring recognition of gain or loss for
federal income tax purposes.
SPECIAL SITUATIONS
Certain Funds may invest in "special situations." A special situation
arises when, in the opinion of the Adviser, the securities of a particular
company will, within a reasonably estimable period of time, be accorded market
recognition at an appreciated value solely by reason of a development applicable
to that company, and regardless of general business conditions or movements of
the market as a whole. Developments creating special situations might include,
among others: liquidations, reorganizations, recapitalizations, mergers,
material litigation, technical breakthroughs and new management or management
policies. Although large and well known companies may be involved, special
situations more often involve comparatively small or unseasoned companies.
Investments in unseasoned companies and special situations often involve much
greater risk than is inherent in ordinary investment securities.
STAND-BY COMMITMENTS
Certain Funds may acquire "stand-by commitments" with respect to
Municipal Securities held in their portfolios. Under a "stand-by commitment," a
dealer agrees to purchase from a Fund, at a Fund's option, specified Municipal
Securities at a specified price. Stand-by commitments are exercisable by a Fund
at any time before the maturity of the underlying Municipal Securities, and may
be sold, transferred, or assigned by a Fund only with the underlying
instruments.
The amount payable to a Tax-Free Bond Fund upon its exercise of a
stand-by commitment will normally be (i) the Fund's acquisition cost of the
Municipal Securities (excluding any accrued interest which a Tax-Free Bond Fund
paid on their acquisition), less any amortized market premium or plus any
amortized market or original issue discount during the period a Tax-Free Bond
Fund owned the securities, plus (ii) all interest accrued on the securities
since the last interest payment date during that period. Under normal market
conditions, in determining net asset value a Tax-Free Bond Fund values the
underlying Municipal Securities on an amortized cost basis. Accordingly, the
amount payable by a dealer upon exercise of a stand-by commitment will normally
be substantially the same as the portfolio value of the underlying Municipal
Securities.
A Fund's right to exercise stand-by commitments will be unconditional
and unqualified. A stand-by commitment will not be transferable by a Fund,
although the Fund could sell the underlying Municipal Securities to a third
party at any time. Until a Fund exercises its stand-by commitment, it owns the
securities in its portfolio which are subject to the stand-by commitment.
The Funds expect that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, a Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for the security being acquired
which will be subject to the commitment (thus reducing the yield to maturity
otherwise available for the same security). When a Fund pays any consideration
directly or indirectly for a stand-by commitment, its cost will be reflected as
unrealized depreciation
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for the period during which the commitment is held by that Fund. The Tax-Free
Bond Funds will not acquire a stand-by commitment unless immediately after the
acquisition not more than 5% of the Funds' total assets will be subject to a
demand feature, or in stand-by commitments, with the same institution.
Each Fund intends to enter into stand-by commitments only with banks
and broker/dealers which, in the Adviser's opinion, present minimal credit
risks. In evaluating the credit worthiness of the issuer of a stand-by
commitment, the Adviser will review periodically the issuer's assets,
liabilities, contingent claims, and other relevant financial information.
The Funds would acquire stand-by commitments solely to facilitate
portfolio liquidity and do not intend to exercise their rights thereunder for
trading purposes. Stand-by commitments acquired by a Fund will be valued at zero
in determining net asset value. A Fund's reliance upon the credit of these
dealers, banks, and broker/dealers will be secured by the value of the
underlying Municipal Securities that are subject to the commitment. Thus, the
risk of loss to the Fund in connection with a "stand-by commitment" will not be
qualitatively different from the risk of loss faced by a person that is holding
securities pending settlement after having agreed to sell the securities in the
ordinary course of business.
STRIPPED SECURITIES
Certain Funds may purchase stripped securities issued or guaranteed by
the U.S. Government, where the principal and interest components are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities program ("STRIPS"). Under STRIPS, the principal and interest
components are individually numbered and separately issued by the U.S. Treasury
at the request of depository financial institutions, which then trade the
component parts independently.
In addition, the Fund may purchase stripped mortgage-backed securities
("SMBS") issued by the U.S. Government (or a U.S. Government agency or
instrumentality) or by private issuers such as banks and other institutions. If
the underlying obligations experience greater than anticipated prepayments of
principal, the Fund may fail to fully recover its initial investment. The market
value of the class consisting entirely of principal payments can be extremely
volatile in response to changes in interest rates. The yields on a class of SMBS
that receives all or most of the interest are generally higher than prevailing
market yields on other mortgage-backed obligations because their cash flow
patterns are also volatile and there is a greater risk that the initial
investment will not be full recovered. SMBS issued by the U.S. Government (or a
U.S. Government agency or instrumentality) may be considered liquid under
guidelines established by the Company's Board of Directors if they can be
disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of the Fund's per share net asset value.
Although stripped securities may not pay interest to holders prior to
maturity, Federal income tax regulations require a Fund to recognize as interest
income a portion of the bond's discount each year. This income must then be
distributed to shareholders along with other income earned by the Fund. To the
extent that any shareholders in the Fund elect to receive their dividends in
cash rather than reinvest such dividends in additional Fund shares, cash to make
these distributions will have to be provided from the assets of the Fund or
other sources such as proceeds of sales of Fund shares and/or sales of portfolio
securities. In such cases, the Fund will not be able to purchase additional
income producing securities with cash used to make such distributions and its
current income may ultimately be reduced as a result.
U.S. AND FOREIGN BANK OBLIGATIONS
These obligations include negotiable certificates of deposit, banker's
acceptances and fixed time deposits. Each Fund limits its investments in
domestic bank obligations to banks having total assets in excess of $1 billion
and subject to regulation by the U.S. Government. Each Fund may also invest in
certificates of deposit issued by members of the Federal Deposit Insurance
Corporation ("FDIC") having total assets of less than $1 billion, provided that
the Fund will at no time own more than $100,000 principal amount of certificates
of deposit (or any higher principal amount which in the future may be fully
covered by FDIC insurance) of any one of those issuers. Fixed
40
<PAGE>
time deposits are obligations which are payable at a stated maturity date and
bear a fixed rate of interest. Generally, fixed time deposits may be withdrawn
on demand by a Fund, but they may be subject to early withdrawal penalties which
vary depending upon market conditions and the remaining maturity of the
obligation. Although fixed time deposits do not have a market, there are no
contractual restrictions on a Fund's right to transfer a beneficial interest in
the deposit to a third party.
Each Fund limits its investments in foreign bank obligations (i.e.,
obligations of foreign branches and subsidiaries of domestic banks, and domestic
and foreign branches and agencies of foreign banks) to obligations of banks
which at the time of investment are branches or subsidiaries of domestic banks
which meet the criteria in the preceding paragraphs or are branches or agencies
of foreign banks which (i) have more than $10 billion, or the equivalent in
other currencies, in total assets; (ii) in terms of assets are among the 75
largest foreign banks in the world; (iii) have branches or agencies in the
United States; and (iv) in the opinion of the Adviser, pursuant to the
established by the Board of Directors of the Company, are of an investment
quality comparable to obligations of domestic banks which may be purchased by a
Fund. These obligations may be general obligations of the parent bank in
addition to the issuing branch or subsidiary, but the parent bank's obligations
may be limited by the terms of the specific obligation or by governmental
regulation. Each Fund also limits its investments in foreign bank obligations to
banks, branches and subsidiaries located in Western Europe (United Kingdom,
France, Germany, Belgium, The Netherlands, Italy and Switzerland), Scandinavia
(Denmark and Sweden), Australia, Japan, the Cayman Islands, the Bahamas and
Canada. Each Fund will limit its investment in securities of foreign banks to
not more than 20% of total assets at the time of investment.
Each Fund may also make interest-bearing savings deposits in commercial
and savings banks in amounts not in excess of 5% of the total assets of the
Fund.
U.S. GOVERNMENT OBLIGATIONS
Each Fund may invest in U.S. Government obligations. Examples of the
types of U.S. Government obligations that may be held by the Funds include, in
addition to U.S. Treasury bonds, notes and bills, the obligations of the Federal
Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association,
Federal National Mortgage Association, General Services Administration, Student
Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks, Tennessee Valley
Authority, Resolution Funding Corporation and Maritime Administration.
Obligations guaranteed as to principal or interest by the U.S. Government, its
agencies, authorities or instrumentalities are deemed to include: (a) securities
for which the payment of principal and interest is backed by an irrevocable
letter of credit issued by the U.S. Government, its agencies, authorities or
instrumentalities and (b) participations in loans made to foreign governments or
their agencies that are so guaranteed. The secondary market for certain of these
participations is limited. If such participations are illiquid they will not be
purchased.
U.S. Government obligations include principal and interest components
of securities issued or guaranteed by the U.S. Treasury if the components are
traded independently under the Separate Trading of Registered Interest and
Principal of Securities program. Obligations issued or guaranteed as to
principal or interest by the U.S. Government, its agencies, authorities or
instrumentalities may also be acquired in the form of custodial receipts. These
receipts evidence ownership of future interest payments, principal payments or
both on certain notes or bonds issued by the U.S. Government, its agencies,
authorities or instrumentalities.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Options, futures and forward foreign currency contracts that obligate a
Fund to provide cash, securities or currencies to complete such transactions
will entail that Fund to either segregate assets in an account with, or on the
books of, the Company's custodian, or otherwise "covering" the transaction as
described below. For example, a call option written by a Fund will require the
Fund to hold the securities subject to the call (or securities convertible into
the needed securities without additional consideration) or liquid assets
sufficient to meet the obligation by
41
<PAGE>
purchasing and delivering the securities if the call is exercised. A call option
written on an index will require that Fund to have portfolio securities that
correlate with the index. A put option written by a Fund also will require that
Fund to have available assets sufficient to purchase the securities the Fund
would be obligated to buy if the put is exercised.
A forward foreign currency contract that obligates a Fund to provide
currencies will require the Fund to hold currencies or liquid securities
denominated in a foreign currency which will equal the Fund's obligations.
Such a contract requiring the purchase of currencies also requires segregation.
Unless a segregated account consists of the securities, cash or
currencies that are the subject of the obligation, a Fund will hold cash, U.S.
Government securities and other high grade liquid debt obligations in a
segregated account. These assets cannot be transferred while the obligation is
outstanding unless replaced with other suitable assets. In the case of an
index-based transaction, a Fund could own securities substantially replicating
the movement of the particular index.
In the case of a futures contract, a Fund must deposit initial margin
and variation margin, as often as daily, if the position moves adversely,
sufficient to meet its obligation to purchase or provide securities or
currencies, or to pay the amount owed at the expiration of an index-based
futures contract. Similarly, options on futures contracts require a Fund to
deposit margin to the extent necessary to meet the Fund's commitments.
In lieu of such assets, such transactions may be covered by other means
consistent with applicable regulatory policies. A Fund may enter into
off-setting transactions so that its combined position, coupled with any
segregated assets, equals its net outstanding obligation in related options and
hedging transactions. For example, a Fund could purchase a put option if the
strike price of that option is the same or higher than the strike price of a put
option sold by that Fund. Moreover, instead of segregating assets if a Fund held
a futures or forward contract, it could purchase a put option on the same
futures or forward contract with a strike price as high or higher than the price
of the contract held. Of course, the off-setting transaction must terminate at
the time of or after the primary transaction.
VARIABLE- AND FLOATING-RATE INSTRUMENTS
Certain Funds may purchase variable-rate and floating rate obligations.
If such instrument is not rated, the Adviser will consider the earning power,
cash flows, and other liquidity ratios of the issuers and guarantors of such
obligations and, if the obligation is subject to a demand feature, will monitor
their financial status to meet payment on demand. In determining average
weighted portfolio maturity, a variable-rate demand instrument issued or
guaranteed by the U.S. Government or an agency or instrumentality thereof will
be deemed to have a maturity equal to the period remaining until the obligations
next interest rate adjustment. Other variable-rate obligations will be deemed to
have a maturity equal to the longer of the period remaining to the next interest
rate adjustment or the time a Fund can recover payment of principal as specified
in the instrument. Variable-rate demand notes held by a Money Market Fund may
have maturities of more than 397 days, provided (i) the Fund is entitled to
payment principal on not more than 30 days' notice, or at specified intervals
not exceeding 397 days (upon not more than 30 days' notice), and (ii) the rate
of interest on such note is adjusted automatically at periodic intervals which
may extend up to 397 days.
The variable- and-floating rate demand instruments that the Funds may
purchase include participations in Municipal Securities purchased from and owned
by financial institutions, primarily banks. Participation interests provide a
Fund with a specified undivided interest (up to 100%) in the underlying
obligation and the right to demand payment of the unpaid principal balance plus
accrued interest on the participation interest from the institution upon a
specified number of days' notice, not to exceed 30 days. Each participation
interest is backed by an irrevocable letter of credit or guarantee of a bank
that the Adviser has determined meets the prescribed quality standards for the
Funds. The bank typically retains fees out of the interest paid on the
obligation for servicing the obligation, providing the letter of credit, and
issuing the repurchase commitment.
42
<PAGE>
WARRANTS
Certain Funds are permitted to invest in warrants. Warrants are
privileges issued by corporations enabling the owner to subscribe to and
purchase a specified number of shares of the corporation at a specified price
during a specified period of time. The prices of warrants do not necessarily
correlate with the prices of the underlying securities. The purchase of warrants
involves the risk that the purchaser could lose the purchase value of the
warrant if the right to subscribe to additional shares is not exercised prior to
the warrant's expiration. Also, the purchase of warrants involves the risk that
the effective price paid for the warrant added to the subscription price of the
related security may exceed the value of the subscribed security's market price
such as when there is no movement in the level of the underlying security.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS
A Fund may agree to purchase securities on a when-issued basis or enter
into a forward commitment to purchase securities. When a Fund engages in these
transactions, its custodian will segregate cash, U.S. government securities or
other high quality debt obligations equal to the amount of the commitment.
Normally, the custodian will segregate portfolio securities to satisfy a
purchase commitment, and in such a case a Fund may be required subsequently to
segregate additional assets in order to ensure that the value of the segregated
assets remains equal to the amount of the Fund's commitment. Because a Fund will
segregate cash or liquid assets to satisfy its purchase commitments in the
manner described, the Fund's liquidity and ability to manage its portfolio might
be adversely affected in the event its commitments to purchase when-issued
securities ever exceeded 25% of the value of its assets. In the case of a
forward commitment to sell portfolio securities, the Fund's custodian will hold
the portfolio securities themselves in a segregated account while the commitment
is outstanding.
A Fund will make commitments to purchase securities on a when-issued
basis or to purchase or sell securities on a forward commitment basis only with
the intention of completing the transaction and actually purchasing or selling
the securities. If deemed advisable as a matter of investment strategy, however,
a Fund may dispose of or renegotiate a commitment after it is entered into, and
may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases the Fund may
realize a capital gain or loss.
When a Fund engages in when-issued and forward commitment transactions,
it relies on the other party to consummate the trade. Failure of such party to
do so may result in the Fund's incurring a loss or missing an opportunity to
obtain a price considered to be advantageous.
The value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their value, is taken into account when determining the net asset value of a
Fund starting on the date the Fund agrees to purchase the securities. The Fund
does not earn dividends on the securities it has committed to purchase until
they are paid for and delivered on the settlement date. When the Fund makes a
forward commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets. Fluctuations in the value of the
underlying securities are not reflected in the Fund's net asset value as long as
the commitment remains in effect.
PORTFOLIO TURNOVER
Generally, the Equity Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. If a Fund's annual portfolio turnover rate exceeds 100%, it may
result in higher brokerage costs and possible tax consequences for the Portfolio
and its shareholders. For the Funds' portfolio turnover rates, see the
"Financial Highlights" in the Prospectus.
INVESTMENT RISKS
In addition to the risks identified in certain of the securities
descriptions above, there also are general investment risks associated with an
investment in any of the Funds.
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<PAGE>
Investments by a Fund in common stocks and other equity securities are
subject to stock market risks. The value of the stocks that the Fund holds, like
the broader stock market, may decline over short or even extended periods. The
U.S. stock market tends to be cyclical, with periods when stock prices generally
rise and periods when prices generally decline. As of the date of this
Prospectus, the stock market, as measured by the S&P 500 Index and other
commonly used indexes, was trading at or close to record levels. There can be no
guarantee that these levels will continue.
The Nations Marsico Focused Equities Fund, as a non-diversified fund,
may invest in fewer issuers than diversified funds such as the Nations Marsico
Growth & Income Fund. Therefore, appreciation or depreciation of an investment
in a single issuer could have a greater impact on the Fund's net asset value.
The Fund reserves the right to become a diversified fund by limiting the
investments in which more than 5% of its total assets are invested.
The value of a Fund's investments in debt securities, including U.S.
Government Obligations, will tend to decrease when interest rates rise and
increase when interest rates fall. In general, longer-term debt instruments tend
to fluctuate in value more than shorter-term debt instruments in response to
interest rate movements. In addition, debt securities that are not backed by the
United States Government are subject to credit risk, which is the risk that the
issuer may not be able to pay principal and/or interest when due. In addition,
obligations with the lowest investment grade rating (E.G., "BBB" by Standard &
Poor's Corporation ("S&P") or "Baa" by Moody's Investors Service, Inc.
("Moody's")) have speculative characteristics and changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade debt
obligations. Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum rating required
for purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. Unrated obligations may
be acquired by the Fund if they are determined by the Adviser to be of
comparable quality at the time of purchase to rated obligations that may be
acquired.
Certain of the Funds' investments constitute derivative securities,
which are securities whose value is derived, at least in part, from an
underlying index or reference rate. There are certain types of derivative
securities that can, under certain circumstances, significantly increase a
purchaser's exposure to market or other risks. The Adviser, however, only
purchases derivative securities in circumstances where it believes such
purchases are consistent with such Fund's investment objective and do not unduly
increase the Fund's exposure to market or other risks. For additional risk
information regarding the Funds' investments in particular instruments, see
"Appendix A -- Fund Securities."
Certain of the Funds may invest in securities of smaller and newer issuers.
Investments in such companies may present greater opportunities for capital
appreciation because of high potential earnings growth, but also present greater
risks than investments in more established companies with longer operating
histories and greater financial capacity.
MANAGEMENT OF THE COMPANY
The business and affairs of the Company are managed under the direction
of its Board of Directors. This SAI contains the names of and general background
information concerning each Director.
The Company and the Adviser have adopted codes of ethics which contain
policies on personal securities transactions by "access persons," including
portfolio managers and investment analysts. These policies substantially comply
in all material respects with the recommendations set forth in the May 9, 1994
Report of the Advisory Group on Personal Investing of the Investment Company
Institute.
The directors and executive officers of the Company and their principal
occupations during the last five years are set forth below. The address of each,
unless otherwise indicated, is 111 Center Street, Little Rock, Arkansas 72201.
Those Directors who are "interested persons" of the Company (as defined in the
1940 Act) are indicated by an asterisk (*).
44
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS
POSITION WITH AND CURRENT
NAME ADDRESS AND AGE THE COMPANY DIRECTORSHIPS
- -------------------- ------------- ---------------------
<S> <C> <C>
Edmund L. Benson, III, 62 Director Director, President and Treasurer, Saunders &
Saunders & Benson, Inc. Benson, Inc. (Insurance), Insurance Managers,
1510 Willow Lawn Drive Inc. (insurance); Trustee, Nations Reserves,
Suite 216 Master Investment Trust, Nations Annuity Trust
Richmond, VA 23230 and Nations Fund Trust; Director, Nations
Fund, Inc., Nations LifeGoal Funds, Inc., and
Nations Fund Portfolios, Inc.
James Ermer, 56 Director Retired Executive Vice President, Corporate
11511 Compass Point Drive Development and Planning - Land America
Ft. Meyers, FL 33908 (title insurance); Senior Vice President, Finance
- CSX Corporation (transportation and natural
resources); Director - National Mine Service
(mining supplies), Lawyers Title Corporation
(title insurance), Nations Fund, Inc., Nations
Fund Portfolios, Inc. and Nations LifeGoal
Funds, Inc.; Trustee - Nations Reserves,
Nations Fund Trust, Nations Annuity Trust and
Nations Master Investment Trust.
William H. Grigg, 66 Director Chairman Emeritus since July 1997, Chairman
Duke Power Co. and Chief Executive Officer from April 1994 to
16092A Reap Road July 1997 - Duke Power Co.; Director - The
Albermarle, NC 28001 Shaw Group, Inc.; Director and Vice Chairman,
Aegis Insurance Services, Ltd. (a mutual
insurance company in Bermuda); Director-
Hatteras Income Securities, Inc., Nations
Government Income Term Trust 2003, Inc.,
Nations Government Income Term Trust 2004,
Inc., Nations Balanced Target Maturity Fund,
Inc., Nations Fund, Inc., Nations Fund
Portfolios, Inc. and Nations LifeGoal Funds,
Inc.; Trustee - Nations Reserves, Nations Fund
Trust, Nations Annuity Trust and Nations
Master Investment Trust.
Thomas F. Keller, 67 Director R.J. Reynolds Industries Professor of Business
Fuqua School of Business Administration and Former Dean - Fuqua
P.O. Box 90120 School of Business, Duke University; Director -
Duke University LADD Furniture, Inc. (furniture), Wendy's
Durham, NC 27708 International, Inc. (restaurant operating and
franchising), American Business Products, Inc.
(printing services), Dimon, Inc. (tobacco),
Biogen, Inc. (pharmaceutical biotechnology),
Hatteras Income Securities, Inc., Nations
Government Income Term Trust 2003, Inc.,
Nations Government Income Term Trust 2004,
Inc., Nations Balanced Target Maturity Fund,
Inc., Nations Fund, Inc., Nations Fund
Portfolios, Inc. and Nations LifeGoal Funds,
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS
POSITION WITH AND CURRENT
NAME ADDRESS AND AGE THE COMPANY DIRECTORSHIPS
- -------------------- ------------- ---------------------
<S> <C> <C>
Inc.; Trustee - The Mentor Funds, Mentor
Institutional Trust, Cash Reserve Trust, Nations
Reserves, Nations Fund Trust, Nations Annuity
Trust and Nations Master Investment Trust.
Carl E. Mundy, Jr., 64 Director President and CEO - USO from May 1996 to
USO World Headquarters present; Commandant - United States Marine
Washington Navy Yard Corps from July 1991 to July 1995; Director -
Building 198 Shering-Plough (pharmaceuticals and health
901 M Street, S.E. care products); General Dynamics Corporation
Washington, D.C. 20374-5096 (defense systems), Nations Fund, Inc., Nations
Fund Portfolios, Inc. and Nations LifeGoal
Funds, Inc.; Trustee - Nations Reserves,
Nations Fund Trust, Nations Annuity Trust and
Nations Master Investment Trust.
Dr. Cornelius J. Pings, 70* Director/Trustee President - Association of American
480 S. Orange Grove Blvd. Universities from February 1993 to June 1998;
Pasadena, CA 91105 Director - Farmers Group, Inc. (insurance
company), Nations Fund, Inc., Nations
LifeGoal Funds, Inc. and Nations Fund
Portfolios, Inc.; Trustee - Master Investment
Trust, Series I from 1995 to 1999, Master
Investment Trust, Series II from 1995 to 1997,
Nations Reserves, Nations Fund Trust, Nations
Annuity Trust and Nations Master Investment
Trust.; Director/Trustee and Chairman - Pacific
Horizon Funds, Inc. and Master Investment
Trust, Series I, from inception to May 1999;
Director - Time Horizon Funds and Pacific
Innovations Trust.
James B. Sommers*, 60 Director President - NationsBank Trust from January
237 Cherokee Road 1992 to September 1996; Executive Vice
Charlotte, NC 28207 President - NationsBank Corporation from
January 1992 to May 1997; Chairman - Central
Piedmont Community College Foundation;
Board of Commissioners, Charlotte/
Mecklenberg Hospital Authority; Director -
Nations Fund, Inc., Nations Fund Portfolios,
Inc. and Nations LifeGoal Funds,Inc.; Trustee -
Central Piedmont Community College; Mint
Museum of Art, Nations Reserves, Nations
Fund Trust, Nations Annuity Trust and Nations
Master Investment Trust.
A. Max Walker*, 77 President, Director and Independent Financial Consultant; Director and
4580 Windsor Gate Court Chairman of the Board Chairman of the Board - Hatteras Income
Atlanta, GA 30342 Securities, Inc., Nations Government Income
Term Trust 2003, Inc., Nations Government
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS
POSITION WITH AND CURRENT
NAME ADDRESS AND AGE THE COMPANY DIRECTORSHIPS
- -------------------- ------------- ---------------------
<S> <C> <C>
Income Term Trust 2004, Inc., Nations
Balanced Target Maturity Fund, Inc.; President,
Director and Chairman of the Board - Nations
Fund, Inc., Nations LifeGoal Funds, Inc. and
Nations Fund Portfolios, Inc.; President,
Trustee and Chairman of the Board - Nations
Reserves, Nations Fund Trust, Nations Annuity
Trust and Nations Master Investment Trust.
Charles B. Walker, 60 Director Director-Ethyl Corporation (chemical
Albermarle Corporation manufacturing); Vice Chairman and Chief
Vice Chairman and CFO Financial Officer - Albemarle Corporation
330 South Fourth Street (chemical manufacturing); Director - Nations
Richmond, VA 23219 Fund, Inc., Nations Fund Portfolios, Inc. and
Nations LifeGoal Funds, Inc.; Trustee - Nations
Reserves, Nations Fund Trust, Nations Annuity
Trust and Nations Master Investment Trust.
Thomas S. Word, Jr.*, 61 Director Partner - McGuire, Woods, Battle & Boothe
McGuire, Woods, Battle & Boothe LLP LLP (law firm); Director - Vaughan-Bassett
One James Center Furniture Companies, Inc. (furniture), Nations
8th Floor Fund, Inc., Nations Fund Portfolios, Inc. and
Richmond, VA 23219 Nations LifeGoal Funds, Inc.; Trustee - Nations
Reserves, Nations Fund Trust, Nations Annuity
Trust and Nations Master Investment Trust.
Richard H. Blank, Jr., 42 Secretary and Treasurer Senior Vice President since 1998, Vice
Stephens Inc. President from 1994 to 1998 and Manager from
111 Center Street 1990 to 1994 - Mutual Fund Services, Stephens
Little Rock, AR 72201 Inc.; Secretary since September 1993 and
Treasurer since November 1998 - Nations Fund,
Inc., Nations Fund Portfolios, Inc., Nations
LifeGoal Funds, Inc., Nations Reserves,
Nations Fund Trust, Nations Annuity Trust and
Nations Master Investment Trust.
Michael W. Nolte, 38 Assistant Secretary Assistant Secretary - Nations Fund Trust,
Stephens Inc. Nations Fund, Inc., Nations Reserves, Nations
Fund Portfolios, Inc., Nations LifeGoal Funds,
Inc., Nations Annuity Trust and Nations Master
Investment Trust.
James E. Banks, 43 Assistant Secretary Assistant Secretary - Nations Fund Trust,
Stephens Inc. Nations Fund, Inc., Nations Reserves, Nations
Fund Portfolios, Inc., Nations LifeGoal Funds,
Inc., Nations Annuity Trust and Nations Master
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS
POSITION WITH AND CURRENT
NAME ADDRESS AND AGE THE COMPANY DIRECTORSHIPS
- -------------------- ------------- ---------------------
<S> <C> <C>
Investment Trust.
</TABLE>
Mr. Blank serves as Secretary, Treasurer, and Chief Operating Officer
to other investment companies for which Stephens Inc. serves as administrator.
Each Director of the Company is also a Director of Nations Fund, Inc.,
Nations LifeGoal Funds, Inc. Nations Fund Portfolios, Inc. and a Trustee of
Nations Fund Trust, Nations Annuity Trust, Nations Master Investment Trust and
Nations Reserves, each an open-end registered investment company that is part of
the Nations Funds Family. Richard H. Blank, Jr., Michael W. Nolte and James E.
Banks, Jr. are also officers of Nations Fund, Inc., Nations Fund Trust, Nations
Fund Portfolios, Inc., Nations LifeGoal Funds, Inc., Nations Annuity Trust and
Nations Master Investment Trust and Nations Reserves.
As of the date of this SAI, the directors and officers of the Company
as a group owned less than 1% of the outstanding shares of each of the LifeGoal
Portfolios.
The Company has adopted a Code of Ethics which, among other things,
prohibits each access person of the Company from purchasing or selling
securities when such person knows or should have known that, at the time of the
transaction, the security (i) was being considered for purchase or sale by a
LifeGoal Portfolio, or (ii) was being purchased or sold by a LifeGoal Portfolio.
For purposes of the Code of Ethics, an access person means (i) a Director or
officer of the Company, (ii) any employee of the Company (or any company in a
control relationship with the Company) who, in the course of his/her regular
duties, obtains information about, or makes recommendations with respect to, the
purchase or sale of securities by the Company, and (iii) any natural person in a
control relationship with the Company who obtains information concerning
recommendations made to the Company regarding the purchase or sale of
securities. Portfolio managers and other persons who assist in the investment
process are subject to additional restrictions, including a requirement that
they disgorge to the Company any profits realized on short-term trading (i.e.,
the purchase/sale or sale/purchase of securities within any 60-day period). The
above restrictions do not apply to purchases or sales of certain types of
securities, including mutual fund shares, money market instruments and certain
U.S. Government securities. To facilitate enforcement, the Code of Ethics
generally requires that the Company's access persons, other than its
"disinterested" Directors, submit reports to the Company's designated compliance
person regarding transactions involving securities which are eligible for
purchase by a Fund.
Director Compensation Through July 1, 1999
------------------------------------------
The Directors and officers of the LifeGoal Portfolios will receive
compensation from the LifeGoal Portfolios as follows: an annual retainer of
$1,000 ($3,000 for the Chairman of the Board), plus $500 per portfolio, and
meeting fees of $1,000 for in-person meetings and $500 for telephone meetings.
The Compensation Table below sets forth their aggregate compensation in such
capacity.
COMPENSATION TABLE
AGGREGATE
COMPENSATION TOTAL COMPENSATION
NAME OF PERSON FROM FROM REGISTRANT
POSITION (1) REGISTRANT (2) & FUND COMPLEX(3)(4)
-------------- -------------- --------------------
Edmund L. Benson, III $7,000 $77,377
Director
48
<PAGE>
AGGREGATE
COMPENSATION TOTAL COMPENSATION
NAME OF PERSON FROM FROM REGISTRANT
POSITION (1) REGISTRANT (2) & FUND COMPLEX(3)(4)
-------------- -------------- --------------------
James Ermer $5,000 $63,375
Director
William H. Grigg $7,000 $90,875
Director
Thomas F. Keller $7,000 $94,875
Director
A. Max Walker $9,000 $110,875
Chairman of the Board
Charles B. Walker $6,000 $71,375
Director
Thomas S. Word $7,000 $77,375
Director
Carl E. Mundy, Jr., $6,500 $74,377
Director
James B. Sommers $7,000 $73,375
Director
Dr. Cornelius Pings $ 0 $ 0
Director
Totals: $61,500 $735,879
(1) All directors receive reimbursements for expenses related to their
attendance at meetings of the Board of Directors. Officers of the Companies
receive no direct remuneration in such capacity from the Company.
(2) For the twelve-month period ending March 31, 1999, each Director
receives (i) an annual retainer of $1,000 ($3,000 for the Chairman of the Board)
plus $500 for each LifeGoal Portfolio, plus (ii) a fee of $1,000 for attendance
at each "in-person" meeting of the Board of Directors(or committee thereof) and
$500 for attendance at each other meeting of the Board of Directors (or
Committee thereof).
(3) Messrs. Grigg, Keller and A.M. Walker receive compensation from ten
investment companies that are deemed to be part of the Nations Funds "fund
complex," as that term is defined under Rule 14a-101 of the Securities Exchange
Act of 1934, as amended. Messrs. Benson, Ermer, C. Walker, Sommers, Mundy and
Word receive compensation from six investment companies deemed to be part of the
Nations Funds complex.
(4) Total compensation amounts include deferred compensation (including
interest) payable to or accrued for the following Directors/Trustees: Edmund L.
Benson, III $35,188; William H. Grigg $66,375; Thomas F. Keller
49
<PAGE>
$70,375; and Thomas S. Word $70,375. The LifeGoal Directors are not eligible for
deferred compensation from the company.
Director Compensation After July 1, 1999
----------------------------------------
The Board of Directors of the Company along with the Boards of
Directors/Trustees of the other open-end registered investment companies in the
Nations Funds family approved a new compensation structure for the Board
members, effective July 1, 1999. The new structure compensates the Board members
for their services to the Nations Funds family on a flat rate basis, and not on
a per registered investment company or per fund basis. The Nations Funds family
currently consists of Nations Fund Trust, Nations Fund, Inc., Nations Fund
Portfolios, Inc., Nations Reserves, Nations Annuity Trust, Nations LifeGoal
Funds, Inc. and Nations Master Investment Trust.
Under the new structure, each Board member would receive a base
retainer fee in the amount of $65,000 per year, in addition to $5,000 for each
in-person meeting attended; in addition to $1,000 for each telephonic meeting
attended. Each Board member would be compensated only for a maximum of six
in-person meetings per calendar year. In addition, the Chairman of the Boards,
currently A. Max Walker, would receive an additional fee of 20% of the base
retainer fee; the Chairman of the Audit Committees would receive an additional
fee of 10% of the base retainer fee. The members of the Nominating Committees
will receive additional compensation at the rate of $1,000 per meeting attended.
INVESTMENT ADVISORY, ADMINISTRATION, CUSTODY, TRANSFER AGENCY, OTHER SERVICE
- ----------------------------------------------------------------------------
PROVIDERS, SHAREHOLDER SERVICING AND DISTRIBUTION ARRANGEMENTS
--------------------------------------------------------------
INVESTMENT ADVISER AND SUB-ADVISER OF THE LIFEGOAL PORTFOLIOS
Banc of America Advisors, Inc. ("BAAI") serves as investment adviser to
the LifeGoal Portfolios pursuant to an Investment Advisory Agreement. BAAI is a
wholly owned subsidiary of Bank of America, which in turn is a wholly owned
banking subsidiary of Bank of America Corporation, a bank holding company
organized as a Delaware corporation. BAAI has its principal offices at One Bank
of America Plaza, Charlotte, North Carolina 28255.
BAAI also serves as investment adviser to Nations Fund, Inc., Nations
Fund Portfolios, Inc., Nations Fund Trust, Nations Annuity Trust, Nations Master
Investment Trust and Nations Reserves, each a registered investment company that
is part of the Nations Funds Family. In addition, BAAI serves as the investment
adviser to Hatteras Income Securities, Inc., Nations Government Income Term
Trust 2003, Inc., Nations Government Income Term Trust 2004, Inc. and Nations
Balanced Target Maturity Fund, Inc., each a closed-end diversified management
investment company traded on the New York Stock Exchange.
The Investment Advisory Agreement was approved by the Company's Board
of Directors at the October 11, 1996 Meeting of the Board of Directors and by
the initial shareholder. It provides that BAAI may delegate its duties to a
sub-adviser. The Investment Advisory Agreement provides that in the absence of
willful misfeasance, bad faith, negligence or reckless disregard of obligations
or duties thereunder on the part of BAAI, or any of its officers, directors,
employees or agents, BAAI shall not be subject to liability to the Company or to
any shareholder of the Company for any act or omission in the course of, or
connected with, rendering services thereunder or for any loss that may be
sustained in the purchase, holding or sale of any security. BAAI will receive
fees for providing advisory services at the annual rate of .25% of the average
daily value of each LifeGoal Portfolio's net assets during the preceding month.
BAAI also has agreed to absorb all other expenses of the LifeGoal Portfolios
(except taxes, brokerage fees and commissions, extraordinary expenses, and any
applicable Rule 12b-1 fees, shareholder servicing fees and/or shareholder
administration fees). BAAI also is compensated for providing advisory services
to the underlying Nations Funds in which the LifeGoal Portfolios invest. The
Investment Advisory Agreement shall become effective with respect to a LifeGoal
Portfolio if and when approved by the Directors of the Company, and if so
approved, shall thereafter continue from year to year, provided that such
continuation of the Agreement is specifically approved at least annually by (a)
(i) the Company's Board of Directors or (ii) the vote of "a majority of the
outstanding voting securities" of a LifeGoal Portfolio (as defined in Section
2(a)(42) of the 1940 Act), and (b) the affirmative vote of a majority of the
Company's Directors who are not parties to such Agreement or "interested
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persons" (as defined in the 1940 Act) of a party to such Agreement (other than
as Directors of the Company), by votes cast in person at a meeting specifically
called for such purpose. The Investment Advisory Agreement will terminate
automatically in the event of its assignment, and is terminable with respect to
a LifeGoal Portfolio at any time without penalty by the Company (by vote of the
Board of Directors or by vote of a majority of the outstanding voting securities
of a LifeGoal Portfolio) or by BAAI on 60 days' written notice.
The dollar amount of investment advisory fees paid by each LifeGoal
Portfolio of the Company to BAAI and the dollar amount of advisory fees
voluntarily reduced by BAAI for the Company's fiscal period ended March 31,
1999, were as follows:
Advisory
Net Fees Expenses
Advisory Voluntarily Reimbursed
Fees Waived by Adviser
-------- ----------- ----------
LifeGoal Growth Portfolio $ 33,010 $ 0 $ 0
LifeGoal Balanced Growth Portfolio 49,521 0 0
LifeGoal Income and Growth Portfolio 17,390 0 0
The dollar amount of investment advisory fees paid by each LifeGoal
Portfolio of the Company to BAAI and the dollar amount of advisory fees
voluntarily reduced by BAAI for the Company's fiscal period ended March 31, 1998
were as follows:
Advisory
Net Fees Expenses
Advisory Voluntarily Reimbursed
Fees Waived by Adviser
-------- ----------- ----------
LifeGoal Growth Portfolio $ 10,146 $ 0 $ 0
LifeGoal Balanced Growth Portfolio 8,202 0 0
LifeGoal Income and Growth Portfolio 2,167 0 0
The dollar amount of investment advisory fees paid by each LifeGoal
Portfolio of the Company to BAAI and the dollar amount of advisory fees
voluntarily reduced by BAAI for the Company's fiscal period ended March 31, 1997
were as follows:
Advisory
Net Fees Expenses
Advisory Voluntarily Reimbursed
Fees Waived by Adviser
-------- ----------- ----------
LifeGoal Growth Portfolio $ 510 $ 0 $ 0
LifeGoal Balanced Growth Portfolio 551 0 0
LifeGoal Income and Growth Portfolio 91 0 0
TradeStreet, with principal offices at One Bank of America Plaza,
Charlotte, North Carolina serves as investment sub-adviser to the LifeGoal
Portfolios. TradeStreet is a wholly owned subsidiary of Bank of America.
TradeStreet provides investment management services to individuals, corporations
and institutions.
The Sub-Advisory Agreement was approved by the Company's Board of
Directors on October 11, 1996 and by the initial shareholder. It provides that
TradeStreet, subject to the supervision of BAAI and the Board of Directors of
the Company, will be primarily responsible for managing the assets of each
LifeGoal Portfolio.
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TradeStreet will receive fees for providing such services at the annual rate of
.05% of the average daily value of each LifeGoal Portfolio's net assets during
the preceding month. TradeStreet is also compensated for providing sub-advisory
services to most of the underlying Nations Funds in which the LifeGoal Portfolio
invest. The Sub-Advisory Agreement will continue in effect for an initial term
of two years from its effective date and continues in effect from year to year
thereafter only if such continuance is specifically approved at least annually
by the Company's Board of Directors and the affirmative vote of a majority of
the directors who are not parties to the Sub-Advisory Agreement or "interested
persons" of any such party by votes cast in person at a meeting called for such
purpose. The respective LifeGoal Portfolios, BAAI or TradeStreet may terminate
the Sub-Advisory Agreement, on 60 days' written notice without penalty. The
Sub-Advisory Agreement terminates automatically in the event of its
"assignment," as defined in the 1940 Act.
The dollar amount of investment advisory fees paid by BAAI on behalf of
each LifeGoal Portfolio to TradeStreet, as sub-adviser, and the dollar amount of
advisory fees voluntarily reduced by TradeStreet for the Company's fiscal year
ended March 31, 1999 were as follows:
Advisory
Net Fees Expenses
Advisory Voluntarily Reimbursed
Fees Waived by Adviser
-------- ----------- ----------
LifeGoal Growth Portfolio $ 8,210 $ 0 $ 0
LifeGoal Balanced Growth Portfolio $ 8,296 0 0
LifeGoal Income and Growth Portfolio $ 3,479 0 0
The dollar amount of investment advisory fees paid by BAAI on behalf of
each LifeGoal Portfolio to TradeStreet, as sub-adviser, and the dollar amount of
advisory fees voluntarily reduced by TradeStreet for the Company's fiscal year
ended March 31, 1998 were as follows:
Advisory
Net Fees Expenses
Advisory Voluntarily Reimbursed
Fees Waived by Adviser
-------- ----------- ----------
LifeGoal Growth Portfolio $2,031 $ 0 $ 0
LifeGoal Balanced Growth Portfolio 1,641 0 0
LifeGoal Income and Growth Portfolio 434 0 0
The dollar amount of investment advisory fees paid by BAAI on behalf of
each LifeGoal Portfolio to TradeStreet, as sub-adviser, and the dollar amount of
advisory fees voluntarily reduced by TradeStreet for the Company's fiscal year
ended March 31, 1997 from commencement of operations were as follows:
Advisory
Net Fees Expenses
Advisory Voluntarily Reimbursed
Fees Waived by Adviser
-------- ----------- ----------
LifeGoal Growth Portfolio $ 110 $ 0 $ 0
LifeGoal Balanced Growth Portfolio 119 0 0
LifeGoal Income and Growth Portfolio 20 0 0
Each Adviser has adopted a code of ethics which contain policies on
personal securities transactions by "access persons," including portfolio
managers and investment analysts. These codes comply in all material respects
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with the recommendations set forth in the May 9, 1994 Report of the Advisory
Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISER AND SUB-ADVISER OF THE UNDERLYING NATIONS FUNDS
BAAI serves as investment adviser to all of the underlying Nations
Funds, pursuant to Investment Advisory Agreements dated January 1, 1996, and
amended thereafter. Brandes serves as investment sub-adviser to the Nations
International Value Fund, pursuant to an Investment Sub-Advisory Agreement dated
as of April 8, 1998. Gartmore serves as investment sub-adviser to the Nations
Emerging Markets Fund and Nations Growth Fund, pursuant to Investment
Sub-Advisory Agreements dated January 1, 1996, and amended thereafter. Gartmore,
INVESCO Global Asset Management (N.A.), Inc. ("INVESCO") and Putnam Investment
Management, Inc. ("Putnam") are the co-investment sub-advisers to Nations
International Equity Fund, pursuant to Investment Sub-Advisory Agreements dated
as of April 15, 1999. Marsico Capital Management LLC ("Marsico") serves as
investment sub-adviser to the Nations Marsico Focused Equities Fund and Nations
Marsico Growth & Income Fund, pursuant to an Investment Sub-Advisory Agreement,
dated December 31, 1997. TradeStreet serves as investment sub-adviser to all the
other underlying Funds, pursuant to Investment Sub-Advisory Agreements, dated
January 1, 1996, and amended thereafter.
BAAI also serves as the investment adviser to the portfolios of Nations
Fund Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc., Nations Reserves,
Nations Annuity Trust, each a registered investment company that is part of the
Nations Funds Family. In addition, BAAI serves as the investment advisor to
Hatteras Income Securities, Inc., Nations Government Income Term Trust 2003,
Inc., Nations Government Income Term Trust 2004, Inc. and Nations Balanced
Target Maturity Fund, Inc., each a closed-end diversified management investment
company traded on the New York Stock Exchange. TradeStreet also serves as the
sub-investment adviser to Nations Reserves, Nations Annuity Trust, Hatteras
Income Securities, Inc., Nations Government Income Term Trust 2003, Inc.,
Nations Government Income Term Trust 2004, Inc. and Nations Balanced Target
Maturity Fund, Inc.
BAAI and TradeStreet are each wholly owned subsidiaries of Bank of
America, which in turn is a wholly owned banking subsidiary of Bank of America
Corporation, a bank holding company organized as a Delaware corporation.
Gartmore is a joint venture structured as a Delaware general partnership between
NB Partner Corp., a wholly owned subsidiary of Bank of America and Gartmore U.S.
Limited, an indirect wholly owned subsidiary of Gartmore Investment Management
plc, a publicly listed U.K. company. National Westminster Bank plc and
affiliated parties own 100% of the equity of Gartmore plc. Gartmore is a
registered investment adviser in the United States and a member of the
Investment Management Regulatory Organization Limited, a U.K. regulatory
authority. The respective principal offices of BAAI, TradeStreet and Gartmore
are located at One Bank of America Plaza, Charlotte, N.C. 28255. Marsico Capital
is located at 1200 17th Street, Suite 1300, Denver, CO 80202. Bank of America
owns 50% of Marsico Capital.
Brandes Investment Partners, Inc. owns a controlling interest in
Brandes Investment Partners, L.P. and serves as its General Partner. Charles
Brandes is the controlling shareholder of Brandes Investment Partners, Inc. The
principal offices of Brandes are located at 12750 High Bluff Drive, San Diego,
CA 92130.
Thomas F. Marsico is Chairman and Chief Executive Officer of Marsico
Capital and has voting control of the company. Prior to forming Marsico Capital
in September 1997, Mr. Marsico had 18 years of experience as a securities
analyst/portfolio manager.
For the services provided and expenses assumed pursuant to various
Investment Advisory Agreements, BAAI is entitled to receive advisory fees,
computed daily and paid monthly, at the annual rates of: .20% for the period of
the average daily net assets of Nations Prime Fund; .30% of the average daily
net assets of each of the Nations Short-Intermediate Government Fund, Nations
Short-Term Income Fund; .50% of the average daily net assets of each of the
Nations Diversified Income Fund and .40% of the average daily net assets of each
of the Nations Strategic Fixed Income Fund; .65% of the average daily net assets
of each of the Nations Value Fund, Nations Capital Growth Fund, Nations Emerging
Growth Fund and Nations Disciplined Equity Fund; .75% of the average daily net
assets of Nations Marsico Growth & Income Fund and Nations Marsico Focused
Equities Fund; .80% of the average daily net assets of Nations International
Equity Fund and International Growth Fund; 1.00% of
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the average daily net assets of Nations Emerging Markets Fund; .90% of the
average daily net assets of Nations Small Company Growth Fund and Nations
International Value Fund; and .40% of the average daily net assets of Nations
Managed Index Fund and Nations Managed SmallCap Index Fund.
For the services provided and expenses assumed pursuant to sub-advisory
agreements, TradeStreet is entitled to receive from BAAI sub-advisory fees
computed daily and paid monthly, at the annual rates of .055% of Nations Prime
Fund's average daily net assets; .20% of Nations Equity Income Fund's average
daily net assets; .25% of Nations Small Company Growth Fund's, Nations Value
Fund's, Nations Capital Growth Fund's, Nations Emerging Growth Fund's and
Nations Disciplined Equity Fund's average daily net assets; .15% of Nations
Short-Intermediate Government Fund's, Nations Short-Term Income Fund's, Nations
Diversified Income Fund's, and Nations Strategic Fixed Income Fund's average
daily net assets; and .10% of Nations Managed Index Fund's and Nations Managed
Small Cap Index Fund's average daily net assets.
For services provided and expenses assumed pursuant to a sub-advisory
agreement, Gartmore Global Partners is entitled to receive from BAAI
sub-advisory fees, computed daily and paid monthly at the annual rates of .70%
of Nations International Equity Fund's and Nations Pacific Growth Fund's average
daily net assets; and .85% of Nations Emerging Markets Fund's average daily net
assets.
For services provided and expenses assumed pursuant to a sub-advisory
agreement, Brandes is entitled to receive from BAAI sub-advisory fees, computed
daily and paid monthly at the annual rate of .50% of Nations International Value
Fund's average daily net assets.
For services provided and expenses assumed pursuant to a sub-advisory
agreement, Marsico Capital is entitled to receive from BAAI sub-advisory fees,
computed daily and paid monthly at the annual rates of .45% of Nations Marsico
Focused Equities Fund's and Nations Marsico Growth & Income Fund's average daily
net assets.
From time to time, BAAI (and/or TradeStreet, Gartmore, Brandes or
Marsico Capital) may waive or reimburse (either voluntarily or pursuant to
applicable state limitations) advisory fees or expenses payable by a Fund.
For the fiscal period from April 1, 1998 to March 31, 1999, after
waivers, Nations Fund Trust paid BAAI under the investment advisory agreement,
advisory fees at the indicated rates of the following Funds' average daily net
assets: Nations Value Fund -- .75%, Nations Capital Growth Fund -- .75%, Nations
Emerging Growth Fund -- .75%, Nations Disciplined Equity Fund -- .75%, Nations
Managed Index Fund -- .27%, Nations Managed SmallCap Index Fund -- .18%, Nations
Short-Intermediate Government Fund -- .40%, Nations Short-Term Income Fund
- --.30%, Nations Diversified Income Fund -- .50%, Nations Strategic Fixed Income
Fund -- .50%; Nations Marsico Focused Equities Fund -- .85% and Nations Marsico
Growth & Income Fund -- .85%.
For the fiscal period from April 1, 1998 to March 31, 1999, after
waivers, Nations Fund, Inc. paid BAAI under the investment advisory agreement,
advisory fees at the indicated rates of the following Funds' average daily net
assets: Nations Prime Fund -- .18%, Nations Equity Income Fund -- .64%, Nations
International Equity Fund -- .90%, Nations Small Company Growth Fund -- .73% and
Nations International Value Fund -- .91%.
For the fiscal period April 1, 1998 to March 31, 1999, after waivers,
Nations Portfolios paid BAAI under the investment advisory agreement, advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Emerging Markets Fund -- .90%.
For the fiscal period from April 1, 1997 to March 31, 1998, after
waivers, Nations Fund Trust paid BAAI under the investment advisory agreement,
advisory fees at the indicated rates of the following Funds' average daily net
assets: Nations Value Fund -- .75%, Nations Capital Growth Fund -- .75%, Nations
Emerging Growth Fund -- .75%, Nations Disciplined Equity Fund -- .75%, Nations
Managed Index Fund -- .22%, Nations Managed SmallCap Index Fund -- .00%, Nations
Short-Intermediate Government Fund -- .40%, Nations Short-Term Income Fund --
.30%, Nations Diversified Income Fund -- .50%, Nations Strategic Fixed Income
Fund -- .48%.
For the fiscal period from December 31, 1997 to March 31, 1998, after
waivers, Nations Fund Trust paid BAAI under the investment advisory agreement,
advisory fees at the indicated rates of the following Funds' average
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daily net assets: Nations Marsico Focused Equities Fund -- .85% and Nations
Marsico Growth & Income Fund -- .00%.
For the fiscal period from April 1, 1997 to March 31, 1998, after
waivers, Nations Fund, Inc. paid BAAI under the investment advisory agreement,
advisory fees at the indicated rates of the following Funds' average daily net
assets: Nations Prime Fund -- .17%, Nations Equity Income Fund -- .64%, Nations
International Equity Fund -- .90%, and Nations Small Company Growth Fund --
.70%.
For the fiscal period April 1, 1997 to March 31, 1998, after waivers,
Nations Portfolios paid BAAI under the investment advisory agreement, advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Emerging Markets Fund -- 1.10% and Nations Pacific Growth Fund -- .90%.
For the fiscal period from May 16, 1998 to March 31, 1999, after
waivers, the Emerald Funds paid Barnett Capital Advisors, Inc. ("Barnett"),
under a previous investment advisory agreement, advisory fees of .91% of the
Nations International Value Fund's average daily net assets (formally called the
Emerald International Equity Fund).
For the fiscal period from December 1, 1997 to May 15, 1998, after
waivers, the Emerald Funds paid Barnett Capital Advisors, Inc. ("Barnett"),
under a previous investment advisory agreement, advisory fees of .90% of the
Nations International Value Fund's average daily net assets (formally called the
Emerald International Equity Fund).
For the fiscal period from April 1, 1998 to March 31, 1999, after
waivers, BAAI paid TradeStreet under the investment sub-advisory agreements,
sub-advisory fees at the indicated rates of the following Funds' average daily
net assets: Nations Value Fund -- .25% Nations Capital Growth Fund -- .25%
Nations Emerging Growth Fund -- .25%, Nations Disciplined Equity Fund -- .25%,
Nations Managed Index Fund -- .10%, Nations Managed SmallCap Index Fund -- .10%,
Nations Short-Intermediate Government Fund -- .15%, Nations Short-Term Income
Fund -- .15%, Nations Diversified Income Fund -- .15%, Nations Strategic Fixed
Income Fund -- .15%, Nations Prime Fund .055%, Nations Equity Income Fund --
.20%, and Nations Small Company Growth Fund -- .25%.
For the fiscal period from April 1, 1998 to March 31, 1999, after
waivers, BAAI paid Gartmore under the investment sub-advisory agreements,
sub-advisory fees at the indicated rates of the following Funds' average daily
net assets: Nations Emerging Markets Fund -- .85% and Nations International
Equity Fund -- .70%.
For the fiscal period from May 16, 1998 to March 31, 1999, after
waivers, Barnett paid Brandes, under a previous investment sub-advisory
agreement, sub-advisory fees of .50% of the Nations International Value Fund.
For the fiscal period from April 1, 1998 to March 31, 1999, after
waivers, BAAI paid Marsico Capital under the investment sub-advisory agreement,
sub-advisory fees at the indicated rates of the following Funds' average daily
net assets: Nations Marsico Focused Equities Fund -- .45% and Nations Marsico
Growth & Income Fund -- .45%.
For the fiscal period from April 1, 1997 to March 31, 1998, after
waivers, BAAI paid TradeStreet under the investment sub-advisory agreements,
sub-advisory fees at the indicated rates of the following Funds' average daily
net assets: Nations Value Fund -- .25%, Nations Capital Growth Fund -- .25%,
Nations Emerging Growth Fund -- .25%, Nations Disciplined Equity Fund -- .25%,
Nations Managed Index Fund -- .10%, Nations Managed SmallCap Index Fund -- .10%,
Nations Short-Intermediate Government Fund -- .15%, Nations Short-Term Income
Fund -- .15%, Nations Diversified Income Fund -- .15%, Nations Strategic Fixed
Income Fund -- .15%, Nations Prime Fund .055%, Nations Equity Income Fund --
.20%, and Nations Small Company Growth Fund -- .25%.
For the fiscal period from April 1, 1997 to March 31, 1998, after
waivers, BAAI paid Gartmore under the investment sub-advisory agreements,
sub-advisory fees at the indicated rates of the following Funds' average daily
net assets: Nations Emerging Markets Fund -- .85%, Nations Pacific Growth Fund
- -- .70%, and Nations International Equity Fund -- .70%.
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For the fiscal period from December 1, 1997 to May 15, 1998, after
waivers, Barnett paid Brandes, under a previous investment sub-advisory
agreement, sub-advisory fees of .50% of the Nations International Value Fund.
For the fiscal period from December 31, 1997 to March 31, 1998, after
waivers, BAAI paid Marsico Capital under the investment sub-advisory agreement,
sub-advisory fees at the indicated rates of the following Funds' average daily
net assets: Nations Marsico Focused Equities Fund -- .45% and Nations Marsico
Growth & Income Fund -- .45%.
The Taxable Money Market Management Team of TradeStreet is responsible
for the day-to-day management of Nations Prime Fund.
The Fixed Income Management Team of TradeStreet is responsible for the
day-to-day management of Nations Short-Intermediate Government Fund, Nations
Short-Term Income Fund, Nations Diversified Income Fund and Nations Strategic
Fixed Income Fund.
The Structured Products Management Team of TradeStreet is responsible
for the day-to-day management of Nations Managed Index Fund and Nations Managed
SmallCap Index Fund and Nations Disciplined Equity Fund.
The Value Management Team of TradeStreet is responsible for the
day-to-day management of Nations Value Fund and Nations Equity Income Fund.
The Core Growth Management Team of TradeStreet is responsible for the
day-to-day management of Nations Capital Growth Fund.
The Strategic Growth Management Team of TradeStreet is responsible for
the day-to-day management of Nations Emerging Growth Fund and Nations Small
Company Growth Fund.
Philip Ehrmann is Co-Portfolio Manager of the Gartmore-managed portion
of the Nations International Equity Fund, responsible for the Fund's investments
in developing countries (since June 1998). Mr. Ehrmann is also Principal
Portfolio Manager of Nations Emerging Markets Fund (since 1995) and is Head of
the Gartmore Emerging Markets Team. Prior to joining Gartmore in 1995, Mr.
Ehrmann was the Director of Emerging Markets for Invesco in London. He began his
career in 1981 as an institutional stockbroker with Rowe & Pitman Inc. and also
spent a brief period with Prudential Bache Securities as an institutional
salesman before joining Invesco in 1984. Mr. Ehrmann graduated from the London
School of Economics with a degree in Economics, Industry and Trade.
Seok Teoh is Co-Portfolio Manager of the Gartmore-managed portion of
the Nations International Equity Fund, responsible for the Fund's investments in
Asia (since June 1998). Ms. Teoh is also Principal Portfolio Manager of Nations
Pacific Growth Fund (since that Fund's inception in June 1995). She has been
with Gartmore since 1990 as the London based manager of its Far East Team.
Previously Ms. Teoh managed four equity funds for Rothschild Asset Management in
Tokyo and in Singapore. She was also responsible for Singaporean and Malaysian
equity sales at Overseas Union Bank Securities in Singapore. Ms. Teoh, who is
native to Singapore, is fluent in Mandarin and Cantonese and received an
Economics degree from the University of Durham.
Mark Fawcett is Co-Portfolio Manager of the Gartmore-managed portion of
the Nations International Equity Fund, responsible for the Fund's investments in
Japan (since June 1998). He is also Senior Investment Manager for the Gartmore
Japanese Equities team. Mr. Fawcett joined Gartmore as an investment manager on
the Japanese Equity Team in 1991 and has specific responsibility for large stock
research. Before joining Gartmore in Tokyo he worked on the Far East desk of
Provident Mutual, a major London-based Life Assurance company, managing funds
invested in Japan. Mr. Fawcett graduated from Oxford University in 1986 with an
honors degree in Mathematics and Philosophy.
Stephens Jones is Co-Portfolio Manager of the Gartmore-managed portion
of the Nations International Equity Fund, responsible for the fund's investments
in Europe (since June 1998). He is also the Head of Gartmore European Equities.
Mr. Jones joined Gartmore as a senior investment manager in the European
Equities Team in 1994 and was appointed Head of the European Equity Team in
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1995. He began his career at the Prudential in 1984, spending a year as a
business analyst before becoming the personal assistant to the Group Chief
Executive. In 1987, he became a European equities investment manager focusing
primarily on France, Belgium and Switzerland. Mr. Jones graduated from
Manchester University in 1984 with an honors degree in Economics.
Stephen Watson is Co-Portfolio Manager for Nations International Equity
Fund, responsible for allocating the Fund's assets among the various regions in
which it invests, as well as determining the Fund's investments in regions not
covered by the other Co-Portfolio Managers (since June 1998). Mr. Watson had
been the sole Portfolio Manager of the Fund since February 1995. He joined
Gartmore as a Global Fund Manager in 1993 and currently holds the position of
Chief Investment Officer of Gartmore Global Partners and is a member of
Gartmore's Global Policy Group. Previously, Mr. Watson was a director and global
fund manager with James Capel Fund Managers, London, as well as Client Services
Manager for international clients. From 1980 to 1987 he was with Capel-Cure
Myers in their Portfolio Management Division. He began his career in 1976 when
he joined the investment division at Samuel Motagu. Mr. Watson is a member of
the Securities Institute.
INVESCO Global Asset Management (N.A.), Inc., with principal offices
located at 1315 Peachtree Street, N.E., Atlanta, Georgia 30309, was founded in
1997 as a division of INVESCO Global a publicly traded investment management
firm located in London, England, and a wholly owned subsidiary of AMVESCAP PLC,
a publicly traded UK financial holding company also located in London, England
that, through its subsidiaries, engages in international investment management.
The "management team" responsible for the day-to-day investment decisions for
INVESCO's managed portion of the assets of the International Equity Fund are:
John D. Rogers, CFA; W. Linsay Davidson; Michele T. Garren, CFA; Erik B.
Granade, CFA; Kent A. Stark; and Ingrid Baker, CFA.
Putnam Investment Management, Inc., with principal offices located at
One Post Office Square, Boston, Massachusetts 02109, is a wholly owned
subsidiary of Putnam Investments, Inc., an investment management firm founded in
1937 which, except for shares held by employees is owned by Marsh & McLennan
Companies, a publicly traded professional services firm that engages, through
its subsidiaries in the business of insurance brokerage, investment management
and consulting. The "management team" responsible for the day-to-day investment
decisions for Putnam's managed portion of the assets of the International Equity
Fund are: Omid Kamshad, CFA; Mark D. Pollard, Justin M. Scott and Paul C.
Warren.
Brandes' Investment Committee is responsible for the day-to-day
management of Nations International Value Fund.
Thomas F. Marsico is the Chief Executive Officer of Marsico Capital and
has been the Portfolio Manager of both Nations Marsico Focused Equities Fund and
Nations Marsico Growth & Income Fund since each Fund's respective inception.
Prior to forming Marsico Capital, Mr. Marsico was a portfolio manager with Janus
Funds for 11 years and was responsible for the day-to-day management of Janus
Twenty Fund and Janus Growth and Income Fund. Overall, Mr. Marsico had 18 years
of experience as a securities analyst/portfolio manager before becoming the
Portfolio Manager of Nations Marsico Focused Equities Fund and Nations Marsico
Growth & Income Fund.
ADMINISTRATOR, CO-ADMINISTRATOR AND SUB-ADMINISTRATOR
Stephens Inc. and BAAI (the "Co-Administrators") serve as
co-administrator of the Company.
The Co-Administrators serve under co-administration agreements
("Co-Administration Agreements"), which were approved by the Boards of Directors
on November 5-6, 1998. The Co-Administrators receive, as compensation for their
services rendered under the Co-Administration Agreements, administration fees,
computed daily and paid monthly, at the annual rate of: 0.10% of the money
market Funds; 0.12% of the fixed income and international Funds; and 0.13% of
the domestic equity Funds, of the average daily net assets of each such Fund.
Pursuant to the Co-Administration Agreement, Stephens has agreed to,
among other things, (i) maintain office facilities for the Funds, (ii) furnish
statistical and research data, data processing, clerical, and internal executive
and
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administrative services to each Company, (iii) furnish corporate secretarial
services to each Company, including coordinating the preparation and
distribution of materials for Board of Directors meetings, (iv) coordinate the
provision of legal advice to each Company with respect to regulatory matters,
(v) coordinate the preparation of reports to each Company's shareholders and the
SEC, including annual and semi-annual reports, (vi) coordinating the provision
of services to each Company by the Transfer Agent, Sub-Transfer Agent and the
Custodian, and (vii) generally assist in all aspects of each Company's
operations. Stephens bears all expenses incurred in connection with the
performance of its services.
Also, pursuant to the Co-Administration Agreement, BAAI has agreed to,
among other things, (i) provide accounting and bookkeeping services for the
Funds, (ii) compute each Fund's net asset value and net income, (iii) accumulate
information required for the Company's reports to shareholders and the SEC, (iv)
prepare and file each Company's federal and state tax returns, (v) perform
monthly compliance testing for the Company, and (vi) prepare and furnish the
Company monthly broker security transaction summaries and transaction listings
and performance information. BAAI bears all expenses incurred in connection with
the performance of its services.
The Co-Administration Agreement may be terminated by a vote of a
majority of the respective Board of Directors, by Stephens or by BAAI,
respectively, on 60 days' written notice without penalty. The Co-Administration
Agreements are not assignable without the written consent of the other party.
Furthermore, the Co-Administration Agreements provide that Stephens and BAAI
shall not be liable to the Funds or to their shareholders except in the case of
Stephens' or BAAI's, willful misfeasance, bad faith, gross negligence or
reckless disregard of duty.
BNY serves as sub-administrator for the Funds pursuant to
sub-administration agreements. Pursuant to their terms, BNY assists Stephens and
BAAI in supervising, coordinating and monitoring various aspects of the Funds'
administrative operations. For providing such services, BNY is entitled to
receive a monthly fee which is paid by BAAI from the management fees they
receive from the Funds.
The Company had, under the previous agreements, retained Stephens, Inc.
("Administrator") as the administrator and First Data Investors Services Group,
Inc. (the "Co-Administrator") as the co-administrator of the LifeGoal
Portfolios.
Under the previous agreements, the Administrator and Co-Administrator
served under an administration agreement ("Administration Agreement") and
co-administration agreement ("Co-Administration Agreement"), respectively, each
of which was approved by the Board of Directors on July 10, 1996. The
Administrator received, as compensation for its services rendered under the
Administration Agreement and as agent for the Co-Administrator for the services
it provided under the Co-Administration Agreement, an administrative fee of
$10,000 per year per underlying fund in the LifeGoal Portfolio, which was
absorbed by BAAI.
Pursuant to the previous Administration Agreement, the Administrator
had agreed to, among other things, (i) maintain office facilities for the
LifeGoal Portfolios, (ii) furnish statistical and research data, data
processing, clerical, and internal executive and administrative services to the
Company, (iii) furnish corporate secretarial services to the Company, including
coordinating the preparation and distribution of materials for Board of
Directors meetings, (iv) coordinate the provision of legal advice to the Company
with respect to regulatory matters, (v) coordinate the preparation of reports to
the Company's shareholders and the SEC, including annual and semi-annual
reports, (vi) coordinate the provision of services to the Company by the
Co-Administrator, the Transfer Agents and the Custodians, and (vii) generally
assist in all aspects of the Company's operations. Additionally, the
Administrator is authorized to receive, as agent for the Co-Administrator, the
fees payable to the Co-Administrator by the Company for its services rendered
under the Co-Administration Agreement. The Administrator bears all expenses
incurred in connection with the performance of its services.
Pursuant to the Co-Administration Agreement, the Co-Administrator has
agreed to, among other things, (i) provide accounting and bookkeeping services
for the LifeGoal Portfolios, (ii) compute each Portfolio's net asset value and
net income, (iii) accumulate information required for the Company's reports to
shareholders and the SEC, (iv) prepare and file the Company's federal and state
tax returns, (v) perform monthly compliance testing for the Company, and (vi)
prepare and furnish the Company monthly broker security transaction summaries
and transaction
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<PAGE>
listings and performance information The Co-Administrator bears all expenses
incurred in connection with the performance of its services.
Under the previous administration agreement, Stephens (the previous
administrator for the LifeGoal Portfolios) received no compensation from the
LifeGoal Portfolios for serving as Administrator for the periods ended March 31,
1999, March 31, 1998 and March 31, 1997.
Under the previous co-administration agreement, the dollar amount of
combined Co-Administration fees paid to First Data Investor Services Group, Inc.
(the former co-administrator for the LifeGoal Portfolios), being absorbed by
BAAI as stated above, for the periods ending February 11, 1999 was as follows:
Net
Co-Administration Co-Administration Fees
Fees Voluntarily Waived
----------------- ----------------------
LifeGoal Growth Portfolio $ 20,000 $ 0
LifeGoal Balanced Growth Portfolio 20,000 0
LifeGoal Income and Growth Portfolio 20,000 0
Under the previous co-administration agreement, the dollar amount of
combined Co-Administration fees paid to First Data Investor Services Group, Inc.
(the former co-administrator for the LifeGoal Portfolios), being absorbed by
BAAI as stated above, for the periods ended March 31, 1998 and March 31, 1997
was as follows:
Net
Co-Administration Co-Administration Fees
Fees Voluntarily Waived
----------------- ----------------------
LifeGoal Growth Portfolio $ 4,959 $ 0
LifeGoal Balanced Growth Portfolio 4,959 0
LifeGoal Income and Growth Portfolio 4,959 0
DISTRIBUTOR
Stephens Inc. (the "Distributor") serves as the principal underwriter
and distributor of the shares of the LifeGoal Portfolios.
At a meeting held on July 10, 1996, the Board of Directors selected
Stephens Inc. as Distributor, and approved a distribution agreement
("Distribution Agreement") with the Distributor. Pursuant to the Distribution
Agreement, the Distributor, as agent, sells shares of the LifeGoal Portfolios on
a continuous basis and transmits purchase and redemption orders that its
receives to the Company or the Transfer Agent (as defined under the caption
"Transfer Agents and Custodian"). Additionally, the Distributor has agreed to
use appropriate efforts to solicit orders for the sale of shares and to
undertake such advertising and promotion as it believes appropriate in
connection with such solicitation. Pursuant to the Distribution Agreement, the
Distributor, at its own expense, finances those activities which are primarily
intended to result in the sale of shares of the LifeGoal Portfolios, including,
but not limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing of prospectuses to other than existing shareholders, and
the printing and mailing of sales literature. The Distributor, however, may be
reimbursed for all or a portion of such expenses to the extent permitted by a
distribution plan adopted by the Company pursuant to Rule 12b-1 under the 1940
Act.
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<PAGE>
The Distribution Agreement will continue year to year as long as such
continuance is approved at least annually by (i) the Board of Directors or a
vote of the majority (as defined in the 1940 Act) of the outstanding voting
securities of a LifeGoal Portfolio and (ii) a majority of the directors who are
not parties to the Distribution Agreement or "interested persons" of any such
party by a vote cast in person at a meeting called for such purpose. The
Distribution Agreement is not assignable and is terminable with respect to a
Portfolio, without penalty, on 60 days' notice by the Board of Directors, the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of such LifeGoal Portfolio, or by the Distributor.
DISTRIBUTION PLANS AND SHAREHOLDER SERVICING ARRANGEMENTS FOR INVESTOR SHARES
INVESTOR A SHARES
-----------------
The Company has adopted a Shareholder Servicing and Distribution Plan
(the "Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act with respect
to each LifeGoal Portfolio's Investor A Shares. The Investor A Plan provides
that each LifeGoal Portfolio may pay the Distributor or banks, broker/dealers or
other financial institutions that offer shares of the Fund and that have entered
into a Sales Support Agreement with the Distributor ("Selling Agents") or a
Shareholder Servicing Agreement with the Company ("Servicing Agents"), up to
0.25% (on an annualized basis) of the average daily net asset value of such
LifeGoal Portfolio.
Payments under the Investor A Plan may be made to the Distributor for
reimbursements of distribution-related expenses actually incurred by the
Distributor, including, but not limited to, expenses of organizing and
conducting sales seminars, printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other than existing
shareholders, preparation and distribution of advertising material and sales
literature and costs of administering the Investor A Plan, or to Servicing
Agents that have entered into a Shareholder Servicing Agreement with the Company
for providing shareholder support services to their customers ("Customers")
which hold of record or beneficially Investor A Shares of a Fund. Such
shareholder support services provided by Servicing Agents to holders of Investor
A Shares of the LifeGoal Portfolios may include (i) aggregating and processing
purchase and redemption requests for Investor A Shares from their Customers and
transmitting promptly net purchase and redemption orders to the Company's
distributor or transfer agent; (ii) providing their Customers with a service
that invests the assets of their accounts in Investor A Shares pursuant to
specific or pre-authorized instructions; (iii) processing dividend and
distribution payments from the Company on behalf of their Customers; (iv)
providing information periodically to their Customers showing their positions in
Investor A Shares; (v) arranging for bank wires; (vi) responding to their
Customers' inquiries concerning their investment in Investor A Shares; (vii)
providing subaccounting with respect to Investor A Shares beneficially owned by
their Customers or the information necessary for subaccounting; (viii) if
required by law, forwarding shareholder communications from the Company (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to their Customers; (ix) forwarding to
their Customers proxy statements and proxies containing any proposals regarding
the Shareholder Servicing Agreement; (x) providing general shareholder liaison
services; and (xi) providing such other similar services as the Company may
reasonably request to the extent the Selling Agent is permitted to do so under
applicable statutes, rules or regulations.
Expenses incurred by the Distributor pursuant to the Investor A Plan in
any given year may exceed the sum of the fees received under the Investor A
Plan. Any such excess may be recovered by the Distributor in future years so
long as the Investor A Plan is in effect. If the Investor A Plan were terminated
or not continued, a LifeGoal Portfolio would not be contractually obligated to
pay the Distributor for any expenses not previously reimbursed by the LifeGoal
Portfolio.
For the fiscal periods ended March 31, 1999, March 31, 1998 and March
31, 1997, no 12b-1 fees or CDSC's were paid to the Distributor in connection
with Investor A Shares of the Portfolios.
INVESTOR B SHARES
-----------------
The Directors of the Company have approved a Distribution Plan in
accordance with Rule 12b-1 under the 1940 Act for the Investor B Shares of the
LifeGoal Portfolios (the "Investor B Plan"). Pursuant to the Investor B Plan,
each Portfolio may pay the Distributor for certain expenses that are incurred in
connection with the distribution
60
<PAGE>
of shares. Payments under the Investor B Plan will be calculated daily and paid
monthly at a rate set from time to time by the Board of Directors provided that
the annual rate may not exceed 0.75% of the average daily net asset value of
Investor B Shares of a Portfolio. Payments to the Distributor pursuant to the
Investor B Plan will be used (i) to compensate Selling Agents for providing
sales support assistance relating to Investor B Shares, (ii) for promotional
activities intended to result in the sale of Investor B Shares such as to pay
for the preparation, printing and distribution of prospectuses to other than
current shareholders, and (iii) to compensate Selling Agents for providing sales
support services with respect to their Customers who are, from time to time,
beneficial and record holders of Investor B Shares. Currently, substantially all
fees paid pursuant to the Investor B Plan are paid to compensate Selling Agents
for providing the services described in (i) and (iii) above, with any remaining
amounts being used by the Distributor to partially defray other expenses
incurred by the Distributor in distributing Investor B Shares. Fees received by
the Distributor pursuant to the Investor B Plan will not be used to pay any
interest expenses, carrying charges or other financing costs (except to the
extent permitted by the SEC) and will not be used to pay any general and
administrative expenses of the Distributor.
Pursuant to the Investor B Plan, the Distributor may enter into Sales
Support Agreements with Selling Agents for providing sales support services to
their Customers who are the record or beneficial owners of Investor B Shares of
the LifeGoal Portfolios. Such Selling Agents will be compensated at the annual
rate of up to 0.75% of the average daily net asset value of the Investor B
Shares of the LifeGoal Portfolios held of record or beneficially by such
Customers. The sales support services provided by Selling Agents may include
providing distribution assistance and promotional activities intended to result
in the sales of shares such as paying for the preparation, printing and
distribution of prospectuses to other than current shareholders.
Fees paid pursuant to the Investor B Plan are accrued daily and paid
monthly, and are charged as expenses of the relevant shares of a LifeGoal
Portfolio as accrued. Expenses incurred by the Distributor pursuant to the
Investor B Plan in any given year may exceed the sum of the fees received under
the Investor B Plan and payments received pursuant to contingent deferred sales
charges. Any such excess may be recovered by the Distributor in future years so
long as the Investor B Plan is in effect. If the Investor B Plan were terminated
or not continued, a LifeGoal Portfolio would not be contractually obligated to
pay the Distributor for any expenses not previously reimbursed by the LifeGoal
Portfolio or recovered through contingent deferred sales charges.
In addition, the Directors have approved a Shareholder Servicing Plan
("Servicing Plan") with respect to the Investor B Shares of the LifeGoal
Portfolios (the "Investor B Servicing Plan"). Pursuant to the Investor B
Servicing Plan, each LifeGoal Portfolio may pay banks, broker/dealers or other
financial institutions that have entered into a Shareholder Servicing Agreement
with Nations Fund ("Servicing Agents") for certain expenses that are incurred by
the Servicing Agents in connection with shareholder support services that are
provided by the Servicing Agents. Payments under the Investor B Servicing Plan
will be calculated daily and paid monthly at a rate set from time to time by the
Board of Directors, provided that the annual rate may not exceed 0.25% of the
average daily net asset value of the LifeGoal Portfolios' Investor B Shares. The
shareholder services provided by the Servicing Agents may include (i)
aggregating and processing purchase and redemption requests for such Investor B
Shares from Customers and transmitting promptly net purchase and redemption
orders to the Company's distributor or transfer agent; (ii) providing Customers
with a service that invests the assets of their accounts in such Investor B
Shares pursuant to specific or pre-authorized instructions; (iii) processing
dividend and distribution payments from the Company on behalf of Customers; (iv)
providing information periodically to Customers showing their positions in such
Investor B Shares; (v) arranging for bank wires; (vi) responding to Customers'
inquiries concerning their investment in such Investor B Shares; (vii) providing
subaccounting with respect to such Investor B Shares beneficially owned by
Customers or providing the information necessary for subaccounting; (viii) if
required by law, forwarding shareholder communications from the Company (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to Customers; (ix) forwarding to
Customers proxy statements and proxies containing any proposals regarding the
Shareholder Servicing Agreement; (x) providing general shareholder liaison
services; and (xi) providing such other similar services as the Company may
reasonably request to the extent the Servicing Agent is permitted to do so under
applicable statutes, rules or regulations.
For the fiscal periods ended March 31, 1999, March 31, 1998 and March
31, 1997, no 12b-1 fees or CDSC's were paid to the Distributor in connection
with Investor B Shares of the Portfolios.
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<PAGE>
INVESTOR C SHARES
-----------------
The Directors of the Company have approved a Distribution Plan in
accordance with Rule 12b-1 under the 1940 Act for the Investor C Shares of the
LifeGoal Portfolios (the "Investor C Plan"). Pursuant to the Investor C Plan,
each Portfolio may pay the Distributor for certain expenses that are incurred in
connection with the distribution of shares. Payments under the Investor C Plan
will be calculated daily and paid monthly at a rate set from time to time by the
Board of Directors provided that the annual rate may not exceed 0.75% of the
average daily net asset value of Investor C Shares of a Portfolio. Payments to
the Distributor pursuant to the Investor C Plan will be used (i) to compensate
Selling Agents for providing sales support assistance relating to Investor C
Shares, (ii) for promotional activities intended to result in the sale of
Investor C Shares such as to pay for the preparation, printing and distribution
of prospectuses to other than current shareholders, and (iii) to compensate
Selling Agents for providing sales support services with respect to their
Customers who are, from time to time, beneficial and record holders of Investor
C Shares. Currently, substantially all fees paid pursuant to the Investor C Plan
are paid to compensate Selling Agents for providing the services described in
(i) and (iii) above, with any remaining amounts being used by the Distributor to
partially defray other expenses incurred by the Distributor in distributing
Investor C Shares. Fees received by the Distributor pursuant to the Investor C
Plan will not be used to pay any interest expenses, carrying charges or other
financing costs (except to the extent permitted by the SEC) and will not be used
to pay any general and administrative expenses of the Distributor.
Pursuant to the Investor C Plan, the Distributor may enter into Sales
Support Agreements with Selling Agents for providing sales support services to
their Customers who are the record or beneficial owners of Investor C Shares of
the LifeGoal Portfolios. Such Selling Agents will be compensated at the annual
rate of up to 0.75% of the average daily net asset value of the Investor C
Shares of the LifeGoal Portfolios held of record or beneficially by such
Customers. The sales support services provided by Selling Agents may include
providing distribution assistance and promotional activities intended to result
in the sales of shares such as paying for the preparation, printing and
distribution of prospectuses to other than current shareholders.
Fees paid pursuant to the Investor C Plan are accrued daily and paid
monthly, and are charged as expenses of the relevant shares of a Fund as
accrued. Expenses incurred by the Distributor pursuant to the Investor C Plan in
any given year may exceed the sum of the fees received under the Investor C Plan
and payments received pursuant to contingent deferred sales charges. Any such
excess may be recovered by the Distributor in future years so long as the
Investor C Plan is in effect. If the Investor C Plan were terminated or not
continued, a LifeGoal Portfolio would not be contractually obligated to pay the
Distributor for any expenses not previously reimbursed by the LifeGoal Portfolio
or recovered through contingent deferred sales charges.
In addition, the Directors have approved a Shareholder Servicing Plan
("Servicing Plan") with respect to the Investor C Shares of the LifeGoal
Portfolios (the "Investor C Servicing Plan"). Pursuant to the Investor C
Servicing Plan, each LifeGoal Portfolio may pay banks, broker/dealers or other
financial institutions that have entered into a Shareholder Servicing Agreement
with Nations Fund ("Servicing Agents") for certain expenses that are incurred by
the Servicing Agents in connection with shareholder support services that are
provided by the Servicing Agents. Payments under the Investor C Servicing Plan
will be calculated daily and paid monthly at a rate set from time to time by the
Board of Directors, provided that the annual rate may not exceed 0.25% of the
average daily net asset value of the LifeGoal Portfolios' Investor C Shares. The
shareholder services provided by the Servicing Agents may include (i)
aggregating and processing purchase and redemption requests for such Investor C
Shares from Customers and transmitting promptly net purchase and redemption
orders to the Company's distributor or transfer agent; (ii) providing Customers
with a service that invests the assets of their accounts in such Investor C
Shares pursuant to specific or pre-authorized instructions; (iii) processing
dividend and distribution payments from the Company on behalf of Customers; (iv)
providing information periodically to Customers showing their positions in such
Investor C Shares; (v) arranging for bank wires; (vi) responding to Customers'
inquiries concerning their investment in such Investor C Shares; (vii) providing
subaccounting with respect to such Investor C Shares beneficially owned by
Customers or providing the information necessary for subaccounting; (viii) if
required by law, forwarding shareholder communications from the Company (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to Customers; (ix) forwarding to
Customers proxy statements and proxies containing any proposals regarding the
Shareholder Servicing Agreement; (x)
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<PAGE>
providing general shareholder liaison services; and (xi) providing such other
similar services as the Company may reasonably request to the extent the
Servicing Agent is permitted to do so under applicable statutes, rules or
regulations.
For the fiscal periods ended March 31, 1999, March 31, 1998 and March
31, 1997, no 12b-1 fees or CDSC's were paid to the Distributor in connection
with Investor C Shares of the Portfolios.
INFORMATION APPLICABLE TO INVESTOR A, INVESTOR B AND INVESTOR C SHARES
The Investor A Plan, the Investor B Plan, the Investor B Servicing
Plan, the Investor C Plan and the Investor C Servicing Plan, (each a "Plan" and
collectively the "Plans") may only be used for the purposes specified above and
as stated in each such Plan. Compensation payable to Selling Agents or Servicing
Agents for shareholder support services under the Plans is subject to, among
other things, the National Association of Securities Dealers, Inc.'s ("NASD")
Conduct Rules governing receipt by NASD members of shareholder servicing plan
fees from registered investment companies (the "NASD Servicing Plan Rule"),
which became effective on July 7, 1993. Such compensation shall only be paid for
services determined to be permissible under the NASD Servicing Plan Rule.
Each Plan requires the officers of the Company or the Distributor to
provide the Board of Directors at least quarterly with a written report of the
amounts expended pursuant to the Plan and the purposes for which such
expenditures were made. The Board of Directors reviews these reports in
connection with their decisions with respect to the Plans.
As required by Rule 12b-1 under the 1940 Act, each Plan was approved by
the Board of Directors, including a majority of the directors who are not
"interested persons" (as defined in the 1940 Act) of the Company and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("Qualified Directors") on July 10, 1996 (except
for the Investor B Plan and Investor B Servicing Plan, approved on June 4,
1997). The Plans continue in effect as long as such continuance is specifically
approved at least annually by the Board of Directors, including a majority of
the Qualified Directors.
In approving the Plans in accordance with the requirements of Rule
12b-1, the directors considered various factors and determined that there is a
reasonable likelihood that each Plan will benefit the respective Investor A,
Investor B or Investor C Shares and the holders of such shares. The Plans have
been approved by the initial shareholder.
Each Plan may be terminated with respect to its shares by vote of a
majority of the Qualified Directors or by vote of a majority of holders of its
outstanding voting securities. Any change in a Plan that would increase
materially the distribution expenses paid by the Investor A, Investor B or
Investor C Shares requires shareholder approval; otherwise, each Plan may be
amended by the directors, including a majority of the Qualified Directors, by
vote cast in person at a meeting called for the purpose of voting upon such
amendment. The Investor B Servicing Plan and Investor C Servicing Plan may be
terminated by a vote of a majority of the Qualified Directors. As long as a Plan
is in effect, the selection or nomination of the Qualified Directors is
committed to the discretion of the Qualified Directors.
Conflict of interest restrictions may apply to the receipt by Selling,
and/or Servicing Agents of compensation from Nations Fund in connection with the
investment of fiduciary assets in Investor Shares. Selling and/or Servicing
Agents, including banks regulated by the Comptroller of the Currency, the
Federal Reserve Board, or the Federal Deposit Insurance Corporation, and
investment advisers and other money managers subject to the jurisdiction of the
SEC or the Department of Labor, are urged to consult their legal advisers before
investing such assets in Investor Shares.
SHAREHOLDER ADMINISTRATION PLAN (PRIMARY B SHARES)
As stated in the Prospectus describing the Primary B Shares, the
Company has a separate Shareholder Administration Plan (the "Administration
Plan") with respect to such shares. Pursuant to the Administration Plan, the
Company may enter into agreements ("Administration Agreements") with
broker/dealers, banks and other
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<PAGE>
financial institutions that are dealers of record or holders of record or which
have a servicing relationship with the beneficial owners of Primary B Shares
("Servicing Agents"). The Administration Plan provides that pursuant to the
Administration Agreements, Servicing Agents shall provide the shareholder
support services as set forth therein to their Customers who may from time to
time own of record or beneficially Primary B Shares in consideration for the
payment of up to 0.60% (on an annualized basis)of the net asset value of such
shares. Such services may include: (i)aggregating and processing purchase,
exchange and redemption requests for Primary B Shares from Customers and
transmitting promptly net purchase and redemption orders with the Distributor or
the transfer agents; (ii) providing Customers with a service that invests the
assets of their accounts in Primary B Shares pursuant to specific or
pre-authorized instructions; (iii) processing dividend and distribution payments
from the Company on behalf of Customers; (iv) providing information periodically
to Customers showing their positions in Primary B Shares; (v) arranging for bank
wires; (vi) responding to Customer inquiries concerning their investment in
Primary B Shares; (vii) providing sub-accounting with respect to Primary B
Shares beneficially owned by Customers or the information necessary for
sub-accounting; (viii) if required by law, forwarding shareholder communications
such as proxies, shareholder reports annual and semi-annual financial statements
and dividend, distribution and tax notices) to Customers; (ix) forwarding to
Customers proxy statements and proxies containing any proposals regarding an
Administration Agreement; (x) employee benefit plan recordkeeping,
administration, custody and trustee services; (xi) general shareholder liaison
services; and (xii) providing such other similar services as may reasonably be
requested to the extent permitted under applicable statutes, rules, or
regulations.
The Administration Plan also provides that in no event may the portion
of the shareholder administration fee that constitutes a "service fee," as the
term is defined in the NASD Servicing Plan Rule, exceed 0.25% of the average
daily net asset value of the Primary B Shares of a Portfolio. In addition, to
the extent any portion of the fees payable under the Plan is deemed to be for
services primarily intended to result in the sale of LifeGoal Portfolio Primary
B Shares, such fees are deemed approved and may be paid under the Administration
Plan. Accordingly, the Administration Plan has been approved and will be
operated pursuant to Rule 12b-1 under the 1940 Act. Such Plan shall continue in
effect as long as the Board of Directors, including a majority of the Qualified
Directors, specifically approves the Plan at least annually.
FEES PAID PURSUANT TO SHAREHOLDER SERVICING/DISTRIBUTION PLANS
INVESTOR A SHARES
<TABLE>
<CAPTION>
NET
NET FEES PAID (SHAREHOLDER NET
FEES PAID (12B-1 COMPONENT) SERVICING COMPONENT) FEES
FUND YEAR ENDED 3/31/99 YEAR ENDED 3/31/99 PAID
- ---- ------------------ ------------------ ----
<S> <C> <C> <C>
LifeGoal Growth Portfolio $6,124 $0 $6,124
LifeGoal Balanced Growth Portfolio 2,741 0 2,741
LifeGoal Income and Growth Portfolio 2,550 0 2,550
</TABLE>
FEES PAID PURSUANT TO DISTRIBUTION PLANS
INVESTOR B SHARES
<TABLE>
<CAPTION>
NET
NET FEES PAID (SHAREHOLDER NET
FEES PAID (12B-1 COMPONENT) SERVICING COMPONENT) FEES
FUND YEAR ENDED 3/31/99 YEAR ENDED 3/31/99 PAID
- ---- ------------------ ------------------ ----
<S> <C> <C> <C>
LifeGoal Growth Portfolio $58,303 $19,435 $77,738
LifeGoal Balanced Growth Portfolio 55,183 18,394 73,577
LifeGoal Income and Growth Portfolio 23,933 7,978 31,911
</TABLE>
FEES PAID PURSUANT TO DISTRIBUTION PLANS
INVESTOR C SHARES
64
<PAGE>
<TABLE>
<CAPTION>
NET
NET FEES PAID (SHAREHOLDER NET
FEES PAID (12B-1 COMPONENT) SERVICING COMPONENT) FEES
FUND YEAR ENDED 3/31/99 YEAR ENDED 3/31/99 PAID
- ---- ------------------ ------------------ ----
<S> <C> <C> <C>
LifeGoal Growth Portfolio $3,029 $1,010 $4,039
LifeGoal Balanced Growth Portfolio 2,036 679 2,715
LifeGoal Income and Growth Portfolio 612 204 816
</TABLE>
65
<PAGE>
FEES PAID PURSUANT TO THE ADMINISTRATION PLAN
PRIMARY B SHARES
NET ADMIN NET ADMIN
FEES PAID FEES WAIVED
YEAR ENDED YEAR ENDED
3/31/99 3/31/99
------- -------
LifeGoal Growth Portfolio $31 $0
LifeGoal Balanced Growth Portfolio 1,242 0
LifeGoal Income and Growth Portfolio 0 0
EXPENSES
The Administrator and/or Co-Administrator furnishes, without additional
cost to the Company, the services of the Treasurer and Secretary of the Company
and such other personnel (other than the personnel of the Adviser or
Sub-Adviser) as are required for the proper conduct of the Company's affairs.
The Distributor bears the incremental expenses of printing and distributing
prospectuses used by the Distributor or furnished by the Distributor to
investors in connection with the public offering of the Company's Shares and the
costs of any other promotional or sales literature, except that to the extent
permitted under the Plans relating to the Investor A, Investor B and Investor C
Shares of each LifeGoal Portfolio, sales-related expenses incurred by the
Distributor may be reimbursed by the Company.
The Company pays, or causes to be paid, all other expenses of the
Company, including without limitation: the fees of the Adviser, the Sub-Adviser,
the Administrator and Co-Administrator; the charges and expenses of any
registrar, any custodian or depository appointed by the Company for the
safekeeping of its cash, fund securities and other property, and any stock
transfer, dividend or accounting agent or agents appointed by the Company;
brokerage commissions chargeable to the Company in connection with fund
securities transactions to which the Company is a party; all taxes, including
securities issuance and transfer taxes; corporate fees payable by the Company to
federal, state or other governmental agencies; all costs and expenses in
connection with the registration and maintenance of registration of the Company
and its shares with the SEC and other jurisdictions (including filing fees,
legal fees and disbursements of counsel); the costs and expenses of typesetting
prospectuses and statements of additional information of the Company (including
supplements thereto) and periodic reports and of printing and distributing such
prospectuses and statements of additional information (including supplements
thereto) to the Company's shareholders; all expenses of shareholders' and
directors' meetings and of preparing, printing and mailing proxy statements and
reports to shareholders; fees and travel expenses of directors or director
members of any advisory board or committee; all expenses incident to the payment
of any dividend or distribution, whether in shares or cash; charges and expenses
of any outside service used for pricing of the Company's shares; fees and
expenses of legal counsel and of independent auditors in connection with any
matter relative to the Company; membership dues of industry associations;
interest payable on Company borrowings; postage and long-distance telephone
charges; insurance premiums on property or personnel (including officers and
directors) of the Company which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto); and all other charges and costs
of the Company's operation unless otherwise explicitly assumed by the Adviser
(and/or the Sub-Adviser), the Administrator or Co-Administrator. The Adviser,
under its investment advisory agreement with the LifeGoal Portfolios, has agreed
to absorb all expenses of the LifeGoal Portfolios, included those listed above,
except for taxes, brokerage fees and commissions, extraordinary expenses and any
applicable Rule 12b-1 fees, shareholder servicing fees and/or shareholder
administration fees.
Expenses of the Company which are not directly attributable to the
operations of any class of shares of LifeGoal Portfolio are pro-rated among all
classes of shares of LifeGoal Portfolios of the Company based upon the relative
net assets of each class or LifeGoal Portfolio. Expenses of the Company which
are not directly attributable to a specific class of shares but are directly
attributable to a specific LifeGoal Portfolio are prorated among all the classes
of shares of such LifeGoal Portfolio based upon the relative net assets of each
such class of shares. Expenses
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of the Company which are directly attributable to a class of shares are charged
against the income available for distribution as dividends to such class of
shares.
TRANSFER AGENTS AND CUSTODIANS
First Data Investors Services Group, Inc., a wholly owned subsidiary of
First Data Corporation, is located at One Exchange Place, 53 State Street,
Boston, Massachusetts 02109, and serves as transfer agent (the "Transfer Agent")
for the Company's Primary Shares and Investor Shares. Under a transfer agency
agreement, the Transfer Agent maintains shareholder account records for the
Company, handles certain communications between shareholders and the Company,
distributes dividends and distributions payable by the Company to shareholders,
produces statements with respect to account activity for the Company and its
shareholders for these services.
Bank of America serves as custodian (the "Custodian") for the portfolio
securities (and for shares of underlying Nations Funds) and cash of the LifeGoal
Portfolios. Except with respect to shares of underlying Nations Funds, the
Custodian maintains custody of the LifeGoal Portfolios' securities, cash and
other property, delivers securities against payment upon sale and pays for
securities against delivery upon purchase, makes payments on behalf of the
LifeGoal Portfolios for payments of dividends, distributions and redemptions,
endorses and collects on behalf of the LifeGoal Portfolios all checks, and
receives all dividends and other distributions made on securities owned by the
LifeGoal Portfolios. The Company maintains direct custody of the LifeGoal
Portfolios' shares of underlying Nations Funds.
INDEPENDENT ACCOUNTANTS AND REPORTS
The Board of Directors has selected PricewaterhouseCoopers LLP, 1177
Avenue of the Americas, New York, New York, 10036, as the Company's independent
accountant to audit the Company's books and review the Company's tax returns for
the LifeGoal Portfolios' fiscal year ending March 31, 2000.
The Annual Report for the fiscal period ended March 31, 1999, is hereby
incorporated by reference in this SAI. The Annual Report will be sent free of
charge with this SAI to any shareholder who requests this SAI.
COUNSEL
Morrison & Foerster LLP serves as legal counsel to the Company. Its
address is 2000 Pennsylvania Avenue, N.W., Washington, D.C. 20006.
Morrison & Foerster LLP, counsel to the Company and special counsel to
Bank of America has advised the Company and Bank of America that Bank of America
and its affiliates may perform the services contemplated by the Investment
Advisory Agreement and this Prospectus without violation of the Glass-Steagall
Act. Such counsel has pointed out, however, that there are no controlling
judicial or administrative interpretations or decisions and that future judicial
or administrative interpretations of, or decisions relating to, present federal
or state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such federal or state statutes, regulations and
judicial or administrative decisions or interpretations, could prevent such
entities from continuing to perform, in whole or in part, such services. If any
such entity were prohibited from performing any of such services, it is expected
that new agreements would be proposed or entered into with another entity or
entities qualified to perform such services.
DESCRIPTION OF SHARES
---------------------
The Company' Boards of Directors has authorized the issuance of the
classes of shares of the LifeGoal Portfolios indicated above and may, in the
future, authorize the creation of additional investment portfolios or classes of
shares.
The Board may classify or reclassify any unissued shares of the Company
into shares of any class, classes or Portfolio in addition to those already
authorized by setting or changing in any one or more respects, from time to
time, prior to the issuance of such shares, the preferences, conversion or other
rights, voting powers, restrictions,
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limitations as to dividends, qualifications, or terms or conditions of
redemption, of such shares and, pursuant to such classification or
reclassification to increase or decrease the number of authorized shares of any
LifeGoal Portfolio or class. Any such classification or reclassification will
comply with the provisions of the 1940 Act. Fractional shares shall have the
same rights as full shares to the extent of their proportionate interest.
All shares of a LifeGoal Portfolio have equal voting rights and will be
voted in the aggregate, and not by series, except where voting by a series is
required by law or where the matter involved only affects one series. For
example, a change in a LifeGoal Portfolio's LifeGoal Portfolio a mental
investment policy would be voted upon only by shareholders of the LifeGoal
Portfolio involved. Additionally, approval of an advisory contract is a matter
to be determined separately by LifeGoal Portfolio. Approval by the shareholders
of one LifeGoal Portfolio is effective as to that LifeGoal Portfolio whether or
not sufficient votes are received from the shareholders of the other LifeGoal
Portfolios to approve the proposal as to those Portfolios. As used in the
Prospectus and in this SAI, the term "majority," when referring to approvals to
be obtained from shareholders of a LifeGoal Portfolio, means the vote of the
lesser of (i) 67% of the shares of the LifeGoal Portfolio represented at a
meeting if the shareholders of more than 50% of the outstanding interests of the
LifeGoal Portfolio are present in person or by proxy, or (ii) more than 50% of
the outstanding shares of the LifeGoal Portfolio. The term "majority," when
referring to the approvals to be obtained from shareholders of a Company as a
whole, means the vote of the lesser of (i) 67% of the Company's shares
represented at a meeting if the shareholders of more than 50% of the Company's
outstanding shares are present in person or by proxy, or (ii) more than 50% of
the Company's outstanding shares. Shareholders are entitled to one votE for each
full share held and fractional votes for fractional shares held.
The Company may dispense with an annual meeting of shareholders in any
year in which it is not required to elect Directors under the 1940 Act. However,
the Company has undertaken to hold a special meeting of its shareholders for the
purpose of voting on the question of removal of a Board member, if requested in
writing by the shareholders of at least 10% of the Company's outstanding voting
shares, and to assist in communicating with other shareholders as required by
Section 16(c) of the 1940 Act.
Each share of a LifeGoal Portfolio represents an equal proportional
interest in the LifeGoal Portfolio with each other share and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
the LifeGoal Portfolio, as are declared in the discretion of the Board members.
In the event of the liquidation or dissolution of the Company, shareholders of
the Company's LifeGoal Portfolios are entitled to receive the assets
attributable to the LifeGoal Portfolio that are available for distribution, and
a distribution of any general assets not attributable to a particular LifeGoal
Portfolio that are available for distribution in such manner and on such basis
as the Board members in their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All shares,
when issued, will be fully paid and non-assessable by the Companies.
Net investment income for the LifeGoal Portfolios for dividend purposes
consists of (i) interest accrued and original issue discount earned on a
LifeGoal Portfolio's assets, (ii) plus the amortization of market discount and
minus the amortization of market premium on such assets, (iii) less accrued
expenses directly attributable to the LifeGoal Portfolio and the general
expenses of the Company prorated to a LifeGoal Portfolio on the basis of its
relative net assets, plus dividend or distribution income on a LifeGoal
Portfolio's assets.
Prior to purchasing shares in one of the LifeGoal Portfolios, the
impact of dividends or distributions which are expected to be or have been
declared, but not paid, should be carefully considered. Any dividend or
distribution declared shortly after a purchase of such shares prior to the
record date will have the effect of reducing the per share net asset value by
the per share amount of the dividend or distribution. All or a portion of such
dividend or distribution, although in effect a return of capital, may be subject
to tax.
Shareholders receiving a distribution in the form of additional shares
will be treated as receiving an amount equal to the fair market value of the
shares received, determined as of the reinvestment date.
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The LifeGoal Portfolios use the so-called "equalization accounting
method" to allocate a portion of earnings and profits to redemption proceeds.
This method permits a LifeGoal Portfolio to achieve more balanced distributions
for both continuing and departing shareholders. Continuing shareholders should
realize tax savings or deferrals through this method, and departing shareholders
will not have their tax obligations change. Although using this method will not
affect a LifeGoal Portfolio's total returns, it may reduce the amount that
otherwise would be distributable to continuing shareholders by reducing the
effect of redemptions on dividend and distribution amounts.
The following table provides the expected expense ratios for Primary A
Shares of each of the selected underlying Nations Funds appearing in each of the
underlyings Funds' prospectuses dated August 1, 1999 and August 20, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
(after fee waivers (before fee waivers
and/or expense and/or expense
LifeGoal Portfolio reimbursements) reimbursements)
- ---------------------------------------------------------------------------------------------------------------
Nations Disciplined Equity Fund .99% .99%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Capital Growth Fund .98% .98%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Value Fund .96% .96%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Small Company Growth Fund 1.15% 1.24%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Marsico Focused Equities Fund 1.06% 1.06%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Marsico Growth & Income Fund 1.25% 1.25%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Managed Index Fund .50% .75%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Emerging Growth Fund 1.00% 1.00%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Managed SmallCap Index Fund .50% .84%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations International Equity Fund 1.14% 1.14%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations International Value Fund 1.30% 1.40%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Emerging Markets Fund 1.99% 1.99%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Prime Fund .30% .34%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Strategic Fixed Income Fund .70% .70%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Diversified Income Fund .72% .82%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Short-Intermediate Government Fund .60% .60%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations Short-Term Income Fund .52% .62%
- ------------------------------------------------------------------ ----------------------- --------------------
Nations International Growth Fund 1.22% 1.22%
- ------------------------------------------------------------------ ----------------------- --------------------
</TABLE>
NET ASSET VALUE DETERMINATION
Shares of the common stock of each class of shares of each LifeGoal
Portfolio that are offered by the Prospectuses are sold at their respective net
asset value next determined after the receipt of the purchase order.
Shareholders may at any time redeem all or a portion of their shares at net
asset value next determined following receipt of a redemption order, less any
contingent deferred sales charge applicable to Investor C Shares.
The net asset value per share of each of the LifeGoal Portfolios is
determined at the times and in the manner described in the Prospectuses.
Portfolio securities of a LifeGoal Portfolio for which market
quotations are not readily available, if any, are valued at fair value as
determined in good faith by or under the supervision of the Company's officers
in a manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost, which approximates market value.
Generally, trading in U.S. Government securities and money market
instruments is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities, if any,
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used in computing the net asset value of the shares of a Portfolio are
determined as of such times. Occasionally, events affecting the value of such
securities may occur between the times at which they are determined and the
close of the New York Stock Exchange, which will not be reflected in the
computation of net asset value. If during such periods events occur which
materially affect the value of such securities, the securities will be valued at
their fair market value as determined in good faith by the directors.
EXCHANGES
By use of the exchange privilege, the holder of Investor Shares and/or
Primary Shares authorizes the transfer agent or the shareholder's financial
institution to rely on telephonic instructions from any person representing
himself to be the investor and reasonably believed to be genuine. The transfer
agent's or a financial institution's records of such instructions are binding.
Exchanges are taxable transactions for federal income tax purposes; therefore, a
shareholder will realize a capital gain or loss depending on whether the
Investor Shares and/or Primary Shares being exchanged have a value which is more
or less than their adjusted cost basis.
The Company may limit the number of times the exchange privilege may be
exercised by a shareholder within a specified period of time. Also, the exchange
privilege may be terminated or revised at any time by the Company upon such
notice as may be required by applicable regulatory agencies (presently sixty
days for termination or material revision), provided that the exchange privilege
may be terminated or materially revised without notice under certain unusual
circumstances.
The Prospectuses for the Investor Shares and Primary Shares of each
LifeGoal Portfolio describe the exchange privileges available to holders of such
Investor Shares and Primary Shares, respectively.
DIVIDENDS AND DISTRIBUTIONS
Each LifeGoal Portfolio anticipates distributing substantially all of
its investment company taxable income for each taxable year. Such distributions
will be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes.
A LifeGoal Portfolio may either retain or distribute to shareholders
its net capital gain for each taxable year. Each LifeGoal Portfolio currently
intends to distribute any such amounts. If net capital gain is distributed and
designated as a capital gain dividend, it will be taxable to shareholders as
long-term capital gain, regardless of the length of time the shareholder has
held his/her Shares or whether such gain was recognized by the LifeGoal
Portfolio prior to the date on which the shareholder acquired his/her shares.
Conversely, if a LifeGoal Portfolio elects to retain its net capital gain, the
LifeGoal Portfolio will be taxed thereon (except to the extent of any available
capital loss carryovers) at the applicable corporate tax rate. If a Portfolio
elects to retain its net capital gain, it is expected that the LifeGoal
Portfolio also will elect to have shareholders treated as if each received a
distribution of his or her pro rata share of such gain, with the result that
each shareholder will be required to report his or her pro rata share of such
gain on his or her tax return as long-term capital gain, will receive a
refundable tax credit for his or her share of tax paid by the LifeGoal Portfolio
on the gain and will increase the basis for his or her Shares by an amount equal
to the deemed distribution less the tax credit.
Dividends and distributions from net investment income, for each
LifeGoal Portfolio are declared and paid quarterly, and capital gain
distributions are declared and paid annually. The Investor A, Investor B,
Investor C and Primary B Shares of the LifeGoal Portfolios accrue additional
expense, not borne by the Primary A Shares, as a result of the applicable Rule
12b-1 Plan, Shareholder Servicing Plan and/or Shareholder Administration Plan.
Consequently, a separate calculation is made to arrive at the net asset value
per share and dividends of each class of shares of the LifeGoal Portfolios.
Net investment income for the LifeGoal Portfolios for dividend purposes
consists of (i) interest accrued and original issue discount earned on a
LifeGoal Portfolio's assets, (ii) less accrued expenses directly attributable to
the LifeGoal Portfolio and the general expenses of the Company prorated to a
LifeGoal Portfolio on the basis of its relative net assets, plus dividend or
distribution income on a LifeGoal Portfolio's assets.
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ADDITIONAL INFORMATION CONCERNING TAXES
---------------------------------------
The following information supplements and should be read in conjunction
with the Prospectus. The Prospectus of each LifeGoal Portfolio describes
generally the tax treatment of distributions by the LifeGoal Portfolios. This
section of the SAI includes additional information concerning Federal income
taxes.
GENERAL
Each LifeGoal Portfolio intends to qualify as a regulated investment
company under Subchapter M of the Code, as long as such qualification is in the
best interest of the LifeGoal Portfolio's shareholders. Each LifeGoal Portfolio
will be treated as a separate entity for Federal income tax purposes. Thus, the
provisions of the Code applicable to regulated investment companies generally
will be applied to each LifeGoal Portfolio, rather than to the Company as a
whole. In addition, net capital gain, net investment income, and operating
expenses will be determined separately for each LifeGoal Portfolio. As a
regulated investment company, each LifeGoal Portfolio will not be taxed on its
net investment income and capital gain distributed to its shareholders.
Qualification as a regulated investment company under the Code
requires, among other things, that each LifeGoal Portfolio derive at least 90%
of its annual gross income from dividends, interest, certain payments with
respect to securities loans, gain from the sale or other disposition of stock or
securities or foreign currencies (to the extent such currency gain are directly
related to the LifeGoal Portfolio's principal business of investing in stock or
securities) and other income (including but not limited to gain from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies. In addition, the Code requires that
each LifeGoal Portfolio diversify its holdings so that, at the end of each
quarter of the taxable year, (i) at least 50% of the market value of the
LifeGoal Portfolio's assets is represented by cash, government securities and
other securities limited in respect of any one issuer to an amount not greater
than 5% of the LifeGoal Portfolio's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. Government
obligations and the securities of other regulated investment companies), or in
two or more issuers which the LifeGoal Portfolio controls and which are
determined to be engaged in the same or similar trades or businesses.
The LifeGoal Portfolios also must distribute or be deemed to distribute
to their shareholders at least 90% of their net investment income (which, for
this purpose, includes net short-term capital gain) earned in each taxable year.
In general, these distributions must actually or be deemed to be made in the
taxable year. However, in certain circumstances, such distributions may be made
in the 12 months following the taxable year. Furthermore, distributions declared
in October, November or December of one taxable year and paid by January 31 of
the following taxable year will be treated as paid by December 31 of the first
taxable year. The LifeGoal Portfolios intend to pay out substantially all of
their net investment income and net realized capital gain (if any) for each
year.
In addition, a regulated investment company must, in general, derive
less than 30% of its gross income from the sale or other disposition of
securities or options thereon held for less than three months. However, this
restriction has been repealed with respect to a regulated investment company's
taxable years beginning after August 5, 1997.
As described above, the Code permits a LifeGoal Portfolio to invest
greater than 25% of the value of its assets in the securities of other regulated
investment companies, such as a Nations Fund. In this regard, each Nations Fund
also must meet the requirements set forth above for regulated investment
companies. Failure of a Nations Fund to qualify could cause a LifeGoal Portfolio
investing therein to fail to qualify as a regulated investment company.
EXCISE TAX
A 4% nondeductible excise tax will be imposed on each LifeGoal
Portfolio (other than to the extent of its tax-exempt interest income) to the
extent it does not meet certain minimum distribution requirements by the end of
each calendar year. Each LifeGoal Portfolio intends to actually or be deemed to
distribute substantially all of its net investment income and net capital gain
by the end of each calendar year and, thus, expects not to be subject to the
excise tax.
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TAXATION OF INVESTMENTS OF A REGULATED INVESTMENT COMPANY
Although the LifeGoal Portfolios may invest directly in portfolio
securities, the LifeGoal Portfolios intends to invest primarily in the
securities of an underlying Nations Fund. The following discussion regarding
investments of a regulated investment company therefore applies equally to
investments made by a LifeGoal Portfolio, and to investments made by a Nations
Fund.
Except as provided herein, gain and loss on the sale of portfolio
securities by a regulated investment company generally will be capital gain and
loss. Such gain and loss will ordinarily be long-term capital gain and loss if
the securities have been held by the regulated investment company for more than
one year at the time of disposition of the securities.
Gain recognized on the disposition of a debt obligation (including
tax-exempt obligations purchased after April 30, 1993) purchased by a regulated
investment company at a market discount (generally at a price less than its
principal amount) will be treated as ordinary income to the extent of the
portion of market discount which accrued, but was not previously recognized
pursuant to an available election, during the term the regulated investment
company held the debt obligation.
If an option granted by a regulated investment company lapses or is
terminated through a closing transaction, such as a repurchase by the regulated
investment company of the option from its holder, the regulated investment
company will realize a short-term capital gain or loss, depending on whether the
premium income is greater or less than the amount paid by the regulated
investment company in the closing transaction. Some realized capital loss may be
deferred if they result from a position which is part of a "straddle," discussed
below. If securities are sold by a regulated investment company pursuant to the
exercise of a call option written by it, the regulated investment company will
add the premium received to the sale price of the securities delivered in
determining the amount of gain or loss on the sale. If securities are purchased
by a regulated investment company pursuant to the exercise of a put option
written by it, such regulated investment company will subtract the premium
received from its cost basis in the securities purchased.
The amount of any gain or loss realized by a regulated investment
company on closing out a regulated futures contract will generally result in a
realized capital gain or loss for Federal income tax purposes. Regulated futures
contracts held at the end of each fiscal year will be required to be "marked to
market" for Federal income tax purposes pursuant to Section 1256 of the Code. In
this regard, they will be deemed to have been sold at market value. Sixty
percent (60%) of any net gain or loss recognized on these deemed sales, and
sixty percent (60%) of any net realized gain or loss from any actual sales,
generally will be treated as long-term capital gain or loss, and the remaining
forty percent (40%) of deemed and actual sales will be treated as short-term
capital gain or loss. Transactions that qualify as designated hedges are
excepted from the "mark-to-market" rule and the "60%/40%" rule.
Under Section 988 of the Code, a regulated investment company will
generally recognize ordinary income or loss to the extent gain or loss realized
on the disposition of portfolio securities is attributable to changes in foreign
currency exchange rates. In addition, gain or loss realized on the disposition
of a foreign currency forward contract, futures contract, option or similar
financial instrument, or of foreign currency itself, generally will be treated
as ordinary income or loss. The LifeGoal Portfolios will attempt to monitor
Section 988 transactions, where applicable, to avoid adverse Federal tax impact.
Offsetting positions held by a regulated investment company involving
certain financial forward, futures or options contracts may be considered, for
tax purposes, to constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax treatment
of "straddles" is governed by Section 1092 of the Code which, in certain
circumstances, overrides or modifies the provisions of Section 1256. If a
regulated investment company were treated as entering into "straddles" by
engaging in certain financial forward, futures or option contracts, such
straddles could be characterized as "mixed straddles" if the futures, forwards,
or options comprising a part of such straddles were governed by Section 1256 of
the Code. The regulated investment company may make one or more elections with
respect to "mixed straddles." Depending upon which election is
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made, if any, the results with respect to the regulated investment company may
differ. Generally, to the extent the straddle rules apply to positions
established by the regulated investment company, loss realized by the regulated
investment company may be deferred to the extent of unrealized gain in any
offsetting positions. Moreover, as a result of the straddle and the conversion
transaction rules, short-term capital loss on straddle positions may be
recharacterized as long-term capital loss, and long-term capital gain may be
characterized as short-term capital gain or ordinary income.
If a regulated investment company enters into a "constructive sale" of
any appreciated position in stock, a partnership interest, or certain debt
instruments, the regulated investment company must recognize gain (but not loss)
with respect to that position. For this purpose, a constructive sale occurs when
the regulated investment company enters into one of the following transactions
with respect to the same or substantially identical property: (i) a short sale;
(ii) an offsetting notional principal contract; or (iii) a futures or forward
contract.
If a regulated investment company purchases shares in a "passive
foreign investment company" ("PFIC"), the regulated investment company may be
subject to Federal income tax and an interest charge imposed by the Internal
Revenue Service ("IRS") upon certain distributions from the PFIC or the
regulated investment company's disposition of its PFIC shares. If a LifeGoal
Portfolio invests in a PFIC, the LifeGoal Portfolio intends to make an available
election to mark-to-market its interest in PFIC shares. Under the election, the
LifeGoal Portfolio will be treated as recognizing at the end of each taxable
year the difference, if any, between the fair market value of its interest in
the PFIC shares and its basis in such shares. In some circumstances, the
recognition of loss may be suspended. The LifeGoal Portfolio will adjust its
basis in the PFIC shares by the amount of income (or loss) recognized. Although
such income (or loss) will be taxable to the LifeGoal Portfolio as ordinary
income (or loss) notwithstanding any distributions by the PFIC, the LifeGoal
Portfolio will not be subject to Federal income tax or the interest charge with
respect to its interest in the PFIC under the election.
CAPITAL GAIN DISTRIBUTIONS
Distributions which are designated by a LifeGoal Portfolio as capital
gain distributions will be taxed to shareholders as long-term term capital gain
(to the extent such distributions equal or exceed the LifeGoal Portfolio's
actual net capital gain for the taxable year), regardless of how long a
shareholder has held LifeGoal Portfolio shares. Such distributions will be
designated as capital gain distributions in a written notice mailed by the
LifeGoal Portfolio to its shareholders not later than 60 days after the close of
the LifeGoal Portfolio's taxable year.
DISPOSITION OF FUND SHARES
A disposition of LifeGoal Portfolio shares pursuant to a redemption
(including a redemption in-kind) or an exchange ordinarily will result in a
taxable capital gain or loss, depending on the amount received for the shares
(or are deemed to receive in the case of an exchange) and the cost of the
shares.
If a shareholder exchanges or otherwise disposes of LifeGoal Portfolio
shares within 90 days of having acquired such shares and if, as a result of
having acquired those shares, the shareholder subsequently pays a reduced sales
charge on a new purchase of shares of the LifeGoal Portfolio or a different
regulated investment company, the sales charge previously incurred acquiring the
LifeGoal Portfolio's shares shall not be taken into account (to the extent such
previous sales charges do not exceed the reduction in sales charges on the new
purchase) for the purpose of determining the amount of gain or loss on the
disposition, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of shares
of the LifeGoal Portfolio will be disallowed to the extent that substantially
identical shares are acquired within the 61-day period beginning 30 days before
and ending 30 days after the shares are disposed of.
If a shareholder receives a capital gain distribution with respect to
any LifeGoal Portfolio share and such LifeGoal Portfolio share is held for six
months or less, then (unless otherwise disallowed) any loss on the sale or
exchange of that LifeGoal Portfolio share will be treated as a long-term capital
loss to the extent of the capital gain distribution. In addition, if a
shareholder holds LifeGoal Portfolio shares for six months or less, any loss on
the sale or exchange of those shares will be disallowed to the extent of the
amount of exempt-interest dividends received with
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respect to the shares. The Treasury Department is authorized to issue
regulations reducing the six-month holding requirement to a period of not less
than the greater of 31 days or the period between regular dividend distributions
where a LifeGoal Portfolio regularly distributes at least 90% of its net
tax-exempt interest, if any. No such regulations have been issued as of the date
of this SAI. The loss disallowance rules described in this paragraph do not
apply to loss realized under a periodic redemption plan.
FEDERAL INCOME TAX RATES
As of the printing of this SAI, the maximum individual tax rate
applicable to ordinary income is 39.6% (marginal tax rates may be higher for
some individuals to reduce or eliminate the benefit of exemptions and
deductions); the maximum individual marginal tax rate applicable to net capital
gain is 20%; and the maximum corporate tax rate applicable to ordinary income
and net capital gain is 35% (marginal tax rates may be higher for some
corporations to reduce or eliminate the benefit of lower marginal income tax
rates). Naturally, the amount of tax payable by an individual or corporation
will be affected by a combination of tax laws covering, for example, deductions,
credits, deferrals, exemptions, sources of income and other matters.
BACKUP WITHHOLDING
The Company may be required to withhold, subject to certain exemptions,
at a rate of 31% ("backup withholding") on dividends, capital gain
distributions, and redemption proceeds (including proceeds from exchanges and
redemptions in-kind) paid or credited to an individual LifeGoal Portfolio
shareholder, if the shareholder fails to certify that the Taxpayer
Identification Number ("TIN") provided is correct and that the shareholder is
not subject to backup withholding, or if the IRS notifies the Company that the
shareholder's TIN is incorrect or that the shareholder is subject to backup
withholding. Such tax withheld does not constitute any additional tax imposed on
the shareholder, and may be claimed as a tax payment on the shareholder's
federal income tax return. An investor must provide a valid TIN upon opening or
reopening an account. Failure to furnish a valid TIN to the Company also could
subject the investor to penalties imposed by the IRS.
CORPORATE SHAREHOLDERS AND DIVIDENDS RECEIVED DEDUCTION
Corporate shareholders of the LifeGoal Portfolios may be eligible for
the dividends-received deduction on distributions attributable to a Portfolio's
dividends received from domestic corporations, which, if received directly by
the corporate shareholder, would qualify for such deduction. A distribution by a
LifeGoal Portfolio attributable to dividends of a domestic corporation will only
qualify for the dividends-received deduction if (i) the corporate shareholder
generally holds the LifeGoal Portfolio shares upon which the distribution is
made for at least 46 days during the 90 day period beginning 45 days prior to
the date upon which the shareholder becomes entitled to the distribution; and
(ii) the LifeGoal Portfolio generally holds the shares of the domestic
corporation producing the dividend income for at least 46 days during the 90 day
period beginning 45 days prior to the date upon which the LifeGoal Portfolio
becomes entitled to such dividend income.
To the extent a LifeGoal Portfolio receives from a regulated investment
company dividends designated by such regulated investment company as other than
capital gain dividends, corporate shareholders of the LifeGoal Portfolio also
may be eligible for the dividends-received deduction. Like the requirements
described above, a distribution by a regulated investment company attributable
to dividends of a domestic corporation will only qualify for the
dividends-received deduction if (i) the corporate shareholder generally holds
the LifeGoal Portfolio shares upon which the distribution is made for at least
46 days during the 90 day period beginning 45 days prior to the date upon which
the shareholder becomes entitled to the distribution; (ii) the LifeGoal
Portfolio generally holds the shares of the regulated investment company
producing the dividend income for at least 46 days during the 90 day period
beginning 45 days prior to the date upon which the LifeGoal Portfolio becomes
entitled to such dividend income; and (iii) the regulated investment company
generally holds the shares of the domestic corporation producing the dividend
income for at least 46 days during the 90 day period beginning 45 days prior to
the date upon which the regulated investment company becomes entitled to such
dividend income.
74
<PAGE>
FOREIGN SHAREHOLDERS
Under the Code, distributions of net investment income by a LifeGoal
Portfolio to a nonresident alien individual, foreign trust (I.E., trust which a
U.S. court is able to exercise primary supervision over administration of that
trust and one or more U.S. persons have authority to control substantial
decisions of that trust), foreign estate (I.E., the income of which is not
subject to U.S. tax regardless of source), foreign corporation, or foreign
partnership (each, a "foreign shareholder") will be subject to U.S. withholding
tax (at a rate of 30% or a lower treaty rate, if applicable). Withholding will
not apply if a distribution paid by the LifeGoal Portfolio to a foreign
shareholder is "effectively connected" with a U.S. trade or business (or, if an
income tax treaty applies, is attributable to a U.S. permanent establishment of
the foreign shareholder), in which case the reporting and withholding
requirements applicable to U.S. persons will apply. Distributions of capital
gain are generally not subject to tax withholding.
NEW REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the backup withholding,
U.S. income tax withholding and information reporting rules applicable to
foreign shareholders. The New Regulations will generally be effective for
payments made after December 31, 1999, subject to certain transition rules.
Among other things, the New Regulations will permit the LifeGoal Portfolios to
estimate the portion of their distributions qualifying as capital gain
distributions for purposes of determining the portion of such distributions paid
to foreign shareholders which will be subject to U.S. income tax withholding.
Prospective investors are urged to consult their own tax advisors regarding the
New Regulations.
FOREIGN TAXES
Income and dividends received by a LifeGoal Portfolio from foreign
securities and gain realized by the LifeGoal Portfolio on the disposition of
foreign securities may be subject to withholding and other taxes imposed by
foreign countries. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. Although in some circumstances a
regulated investment company can elect to "pass through" foreign tax credits to
its shareholders, the LifeGoal Portfolios do not expect to be eligible to make
such an election.
OTHER MATTERS
Investors should be aware that the investments to be made by the
LifeGoal Portfolios may involve sophisticated tax rules that may result in
income or gain recognition by the LifeGoal Portfolios without corresponding
current cash receipts. Although the LifeGoal Portfolios will seek to avoid
significant noncash income, such noncash income could be recognized by the
LifeGoal Portfolios, in which case the LifeGoal Portfolios may distribute cash
derived from other sources in order to meet the minimum distribution
requirements described above.
The foregoing discussion and the discussions in the Prospectus
applicable to each shareholder address only some of the Federal tax
considerations generally affecting investments in the LifeGoal Portfolios. Each
investor is urged to consult his or her tax advisor regarding specific questions
as to Federal, state, local or foreign taxes.
SECURITY HOLDERS
----------------
The name, address and percentage of ownership of each person who is
known by the Registrant to have owned of record or beneficially five percent or
more of any of the LifeGoal Portfolios as of July 20, 1999 is:
<TABLE>
<CAPTION>
Class; Amount of
Shares Owned;
Type of Percentage Percentage
Fund Name and Address Ownership of Class of Fund
---- ---------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C>
Lifegoal Growth Bank of America, N.A. TTEE Primary A; 94.18%
Portfolio NB 401K Plan 385,712.705;
U/A DTD 01/01/1983
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
Class; Amount of
Shares Owned;
Type of Percentage Percentage
Fund Name and Address Ownership of Class of Fund
---- ---------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C>
P O Box 2518 record
Houston, TX 77252-2518
BNY Cust IRA FBO Primary B; 99.79%
Frank W Timpa 549.623; record
PO Box 612
Fort Myers, FL 33902-0000
NFSC FEBO # W52-011681 Investor A; 8.09%
NFSC/FMTC IRA Rollover 22,320.129;
FBO Betty J Dohrman beneficial
3229 SW 100th St
Augusta, KS 67010
Sidney C Adger TTEE for Investor A; 5.83%
Hawaiian Marine Imports Inc 16,067.746;
Employee Profit Sharing Plan beneficial
1234 N Post Oak Rd Ste 130
Houston, TX 77055
NFSC FEBO # W15-650463 Investor B; 6.41%
Elsie A Holton TTEE 40,394.455;
T Elsie A Holton Char Remainder beneficial
Tr, U/A 9/10/97
PO Box 1299
Charleston, SC 29402
State Street Bank & Trust Co Investor C; 50.86%
TTEE 32,466.025;
FBO Coastgear & Company beneficial
Attn: Kevin Smith
105 Rosemont Ave
Westwood, MA 02090
Steinberg Marital Trust Investor C; 5.18%
5177 Richmond #530 3,306.894;
Houston, TX 77056 beneficial
NFSC FEBO # W15-618381 Investor A; 5.06%
Madge Carrington Carmick 6,026.216;
327 Lamont Rd beneficial
Charleston, SC 29407
Lifegoal Income & Bank of America, N.A. TTEE Primary A; 99.10%
Growth Portfolio NB 401K Plan 521,282.555;
U/A DTD 01/01/1983 record
P O Box 2518
Houston, TX 77252-2518
Stephens Inc Primary B; 100%
Attn: Cindy Cole 1.169
111 Center Street
Little Rock, AR 72201
BNY Cust FBO Investor A; 14.91%
Marsha L Brewer 9,163.438;
Sep IRA Plan beneficial
9907 Floyd St
Overland Park, KS 66212
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
Class; Amount of
Shares Owned;
Type of Percentage Percentage
Fund Name and Address Ownership of Class of Fund
---- ---------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C>
BNY Cust FBO Investor A; 6.30%
Keith E Watson 3,872.620;
Sep IRA Plan beneficial
1064 Hemlock Dr
Windsor, CO 80550
BNY Cust FBO Investor A; 5.84%
Phyllis A Gaston 3,587.081;
Sep IRA Plan beneficial
27716 West Castlenton Rd
Langdon, KS 67583
BNY Cust FBO Investor A; 5.57%
Douglas E Simons 3,422.865;
Sep IRA Plan beneficial
RR1 Box 41
Atkinson, NE 68713
BNY Cust FBO Investor A; 5.37%
Laura L Myers 3,304.032;
Sep IRA Plan beneficial
2190 26000 Rd
Parsons, KS 67357
BNY Cust FBO Investor A; 5.17%
James A Bauer 3,179.998;
Sep IRA Plan beneficial
Rt 2 Box 6DE
Larned, KS 67550
NFSC FEBO # W69-005061 Investor B; 7.89%
Claire Eckstein 39,443.308;
Tod Sigrid Marcus beneficial
Tod Rosa Eckstein
465 Ocean Drive # 609
Miami, FL 33139
NFSC FEBO # W16-747378 Investor B; 5.67%
Jack Overcash 28,370.529;
Highway 21 North Box 539 beneficial
Mooresville, NC 28115
State Street Bank & Trust Co Investor C; 74.84%
TTEE 30,558.876;
FBO Coastgear & Company record
Attn: Kevin Smith
105 Rosemont Ave
Westwood, MA 02090
Donald R Atkins and Investor C; 13.39%
David R. Morgan TTEES 5,465.985;
Lyndon Steel 401K Profit beneficial
Sharing Pl
1947 Union Cross Road
Winston-Salem, NC 27107
James Hightower Art Hightower Investor C; 5.39%
and 2,199.453;
William Hightower TTEES FBO beneficial
Hightower Construction Co Inc
401K Profit Sharing Plan
P O Box 1369
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
Class; Amount of
Shares Owned;
Type of Percentage Percentage
Fund Name and Address Ownership of Class of Fund
---- ---------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C>
Goose Creek, SC 29445
Lifegoal Balanced Bank of America, N.A. TTEE Primary A; 95.15%
Growth Portfolio NB 401K Plan 989,368.874;
U/A DTD 01/01/1983 record
P O Box 2518
Houston, TX 77252-2518
BNY Cust Rollover IRA FBO Primary B; 84.04%
Michael Cardelino 21,851.715;
1712 Flatwood Drive beneficial
Flower Mound, TX 75028
BNY Cust Sep IRA FBO Primary B; 15.13%
Ronald E Ross 3,933.745;
4004 New Town Rd beneficial
Waxhaw, NC 28173-9759
NFSC FEBO # W38-750468 Investor B 6.14%
Baltimore C Foundation TTEE 54,751.869
Rosella M Wimmer Char Agreement
Remainder Tr, U/A 6/25/98
2 E Read St
Baltimore, MD 21202
</TABLE>
ADDITIONAL INFORMATION ON PERFORMANCE
-------------------------------------
Yield information and other performance information for the Company's
LifeGoal Portfolios may be obtained by calling the Company at (800) 321-7854.
From time to time, the yield and total return of a LifeGoal Portfolio's
Investor Shares and Primary Shares may be quoted in advertisements, shareholder
reports, and other communications to shareholders. Each LifeGoal Portfolio of
the Company also may quote information obtained from the Investment Company
Institute, national financial publications, trade journals and other industry
sources in its advertising materials and sales literature. Performance
information is available by calling 1-800-321-7854 with respect to Investor
Shares and 1-800-621-2192 with respect to Primary Shares.
The international investment philosophy of certain of the underlying
Nation Funds is based on the premise that significant opportunities exist
outside of the United States. In fact, two-thirds of the world's investment
opportunities are outside of the United States and foreign stock markets have
consistently outperformed the U.S. stock market. Adding foreign stocks to a
domestic portfolio can help reduce risk and lower portfolio volatility because
world markets do not move in sync. From time to time, the LifeGoal Portfolios
might point out these opportunities and the differences that exist through
investing in overseas countries in marketing materials that reference underlying
Nations Funds.
YIELD CALCULATIONS
The yield of the Primary Shares and Investor Shares of the LifeGoal
Portfolios is a measure of the net investment income per share (as defined)
earned over a 30-day period expressed as a percentage of the maximum offering
price of a share of such classes at the end of the period. Yield figures are
determined by dividing the net investment income per share earned during the
specified 30-day period by the maximum offering price per share on the last day
of the period, according to the following formula:
78
<PAGE>
Yield = 2[(a-b + 1)6 1]
---------------
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = average daily number of shares outstanding during the period
that were entitled to receive dividends
d = maximum offering price per share on the last day of the period
For purposes of yield quotation, income is calculated in accordance
with standardized methods applicable to all stock and bond mutual funds. In
general, interest income is reduced with respect to bonds trading at a premium
over their par value by subtracting a portion of the premium from income on a
daily basis, and is increased with respect to bonds trading at a discount by
adding a portion of the discount to daily income. Capital gain and loss are
excluded from the calculation.
Income calculated for the purposes of calculating a LifeGoal
Portfolio's yield differs from income as determined for other accounting
purposes. Because of the different accounting methods used, and because of the
compounding assumed in yield calculations, the yield quoted for a LifeGoal
Portfolio may differ from the rate of distributions a LifeGoal Portfolio paid
over the same period or the rate of income reported in the LifeGoal Portfolios'
financial statements.
TOTAL RETURN CALCULATIONS
Total return measures both the net investment income generated by, and
the effect of any realized or unrealized appreciation or depreciation of the
underlying investments in a Portfolio. The LifeGoal Portfolios' average annual
and cumulative total return figures are computed in accordance with the
standardized methods prescribed by the SEC.
Average annual total return figures are computed by determining the
average annual compounded rates of return over the periods indicated in the
advertisement, sales literature or shareholders' report that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period
This calculation (i) assumes all dividends and distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectuses, and (ii) deducts (a) the maximum sales charge from the
hypothetical initial $1,000 investment, and (b) all recurring fees, such as
advisory and administrative fees, charged as expenses to all shareholder
accounts.
Cumulative total return is computed by finding the cumulative
compounded rate of return over the period indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
CTR = (ERV-P) 100
-----------
P
Where: CTR = Cumulative total return
79
<PAGE>
ERV = ending redeemable value at the end of the period
of a hypothetical $1,000 payment made at the
beginning of such period
P = initial payment of $1,000.
This calculation (i) assumes all dividends and distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectuses, and (ii) deducts (a) the maximum sales charge from the
hypothetical initial $1,000 investment, and (b) all recurring fees, such as
advisory and administrative fees, charged as expenses to all shareholder
accounts.
For the year ended March 31, 1999, and since the Portfolios' inception,
the average annual total return for the LifeGoal Portfolios was as
follows:
Note: Earliest inception date for the LifeGoal Portfolios is October
15, 1996 and therefore five and ten year numbers are not available.
AVERAGE ANNUAL RETURNS
----------------------
1 Year Since
(as of 3/31/99) Inception
Including Including
Sales Charges Sales Charges
------------- -------------
LifeGoal Portfolio/Class
a) Growth Portfolio
Primary A Shares 3.04 13.52
Primary B Shares 2.58 13.24
Investor A Shares (3.02) 10.69
Investor B Shares (2.72) 4.15
Investor C Shares 1.10 12.71
b) Balanced Growth Portfolio
Primary A Shares 4.77 10.81
Primary B Shares 4.15 10.55
Investor A Shares -1.59 8.04
Investor B Shares -1.21 5.92
Investor C Shares 3.43 10.40
c) Income and Growth Portfolio
Primary A Shares 6.98 9.37
Investor A Shares 0.80 6.66
Investor B Shares 1.16 4.68
Investor C Shares 5.02 8.67
- ---------------------------------------------- ---------------- ---------------
For the period ended March 31, 1999, the aggregate total return for each
LifeGoal Portfolio of the Company was:
Note: Earliest inception date for the LifeGoal Portfolios is October 15,1996
and therefore five and ten year numbers are not available.
80
<PAGE>
<TABLE>
<CAPTION>
Inception Through 3/31/99 Inception Through 3/31/99
Without Sales Charges Including Sales Charges
<S> <C> <C>
d) Growth Portfolio
Primary A Shares 13.52 13.52
Primary B Shares 13.24 13.24
Investor A Shares 13.38 10.69
Investor B Shares 6.52 4.15
Investor C Shares 12.71 12.71
e) Balanced Growth Portfolio
Primary A Shares 10.81 10.81
Primary B Shares 10.55 10.55
Investor A Shares 10.66 8.04
Investor B Shares 8.26 5.92
Investor C Shares 10.40 10.40
f) Income and Growth Portfolio
Primary A Shares 9.37 9.37
Investor A Shares 9.25 6.66
Investor B Shares 7.02 4.68
Investor C Shares 8.67 8.67
</TABLE>
The Primary Shares and Investor Shares of the LifeGoal Portfolios also
may quote their distribution rates, which express the historical amount of
income dividends paid to their shareholders during a three-month period as a
percentage of the maximum offering price per share on the last day of such
period.
The performance figures of the LifeGoal Portfolios as described above
will vary from time to time depending upon market and economic conditions, the
composition of their portfolios and operating expenses. These factors should be
considered when comparing the performance figures of the LifeGoal Portfolios
with those of other investment companies and investment vehicles.
The LifeGoal Portfolios may quote information obtained from the
Investment Company Institute, national financial publications, trade journals
and other industry sources in its advertising and sales literature. In addition,
the LifeGoal Portfolios may compare the performance and yield of a class or
series of shares to those of other mutual funds with similar investment
objectives and to other relevant indices or to rankings prepared by independent
services or other financial or industry publications that monitor the
performance of mutual funds. For example, the performance and yield of a class
of shares in a LifeGoal Portfolio may be compared to data prepared by Lipper
Analytical Services, Inc. Performance and yield data as reported in national
financial publications such as Money Magazine, Forbes, Barron's, The Wall Street
Journal, and The New York Times, or in publications of a local or regional
nature, also may be used in comparing the performance of a class of shares in a
LifeGoal Portfolio.
81
<PAGE>
SCHEDULE A
DESCRIPTION OF RATINGS
The following summarizes the highest six ratings used by Standard & Poor's
Corporation ("S&P") for corporate and municipal bonds. The first four ratings
denote investment grade securities.
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and repay
principal.
AA - Debt rated AA is considered to have a very strong capacity to
pay interest and repay principal and differs from AAA issues only in
a small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for debt in this category than
for those in higher-rated categories.
BB, B - Bonds rated BB and B are regarded, on balance as
predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.
BB represents the lowest degree of speculation and B a higher degree
of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposure to adverse conditions.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories. The following summarizes the
highest six ratings used by Moody's Investors Service, Inc. ("Moody's") for
corporate and municipal bonds. The first four denote investment grade
securities.
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.
Baa - Bonds that are rated Baa are considered medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
A-1
<PAGE>
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very
moderate and thereby not as well safeguarded during both good times
and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bond which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small. Moody's applies numerical modifiers (1, 2 and 3)
with respect to corporate bonds rated Aa through B. The modifier 1
indicates that the bond being rated ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category. With regard to municipal
bonds, those bonds in the Aa, A and Baa groups which Moody's believes
possess the strongest investment attributes are designated by the
symbols Aa1, A1 or Baa1, respectively. The following summarizes the
highest four ratings used by Duff & Phelps Credit Rating Co. ("D&P")
for bonds, each of which denotes that the securities are investment
grade.
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly
more than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds that are rated A have protection factors which are average
but adequate. However, risk factors are more variable and greater in
periods of economic stress.
BBB - Bonds that are rated BBB have below average protection factors
but still are considered sufficient for prudent investment.
Considerable variability in risk exists during economic cycles.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may modified by the addition of a plus or minus sign to show relative
standing within these major categories. The following summarizes the highest
four ratings used by Fitch Investors Service, Inc. ("Fitch") for bonds, each of
which denotes that the securities are investment grade:
AAA - Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of
these issuers is generally rated F-1+.
A - Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB - Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have
adverse impact on these bonds, and therefore impair timely payment.
The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
A-2
<PAGE>
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable-rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the
best quality, enjoying strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high
quality, with ample margins of protection although not so large as in
the preceding group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics are given a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are D-1, D-2, and D-3. D&P
employs three designations, D-1+, D-1 and D-1-, within the highest rating
category. D-1+ indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of LifeGoal Funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." D-1 indicates very high
certainty of timely payment. Liquidity factors are excellent and supported by
good fundamental protection factors. Risk factors are considered to be minor.
D-1 indicates high certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D-2 indicates good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. D-3 indicates satisfactory liquidity and other protection factors which
qualify the issue as investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
The following summarizes the three highest rating categories used by Fitch for
short-term obligations, each of which denotes that the securities are investment
grade:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less
in degree than issues rated F-1+.
F-2 securities possess good credit quality. Issues carrying this
rating have a satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned the
F-1+ and F-1 ratings.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
A-3
<PAGE>
For commercial paper, D&P uses the short-term debt ratings described above.
For commercial paper, Fitch uses the short-term debt ratings described above.
Thomson BankWatch, Inc. ("BankWatch") ratings are based upon a qualitative and
quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries. BankWatch ratings do not
constitute a recommendation to buy or sell securities of any of these companies.
Further, BankWatch does not suggest specific investment criteria for individual
clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following are the four investment grade ratings used by
BankWatch for long-term debt:
AAA - The highest category; indicates ability to repay principal and
interest on a timely basis is extremely high.
AA - The second highest category; indicates a very strong ability to
repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category.
A - The third highest category; indicates the ability to repay
principal and interest is strong. Issues rated "A" could be more
vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
BBB - The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are,
however, more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 The highest category; indicates a very high likelihood
that principal and interest will be paid on a timely
basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as
for issues rated "TBW-1".
TBW-3 The lowest investment grade category; indicates that
while more susceptible to adverse developments (both
internal and external) than obligations with higher
ratings, capacity to service principal and interest in
a timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
The following summarizes the four highest long-term debt ratings used by IBCA
Limited and its affiliate, IBCA Inc. (collectively, "IBCA"):
A-4
<PAGE>
AAA - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and
interest is substantial such that adverse changes in business,
economic or financial conditions are unlikely to increase investment
risk significantly.
AA - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and
interest is substantial. Adverse changes in business, economic or
financial conditions may increase investment risk albeit not very
significantly.
A - Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial
conditions may lead to increased investment risk.
BBB - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic
or financial conditions are more likely to lead to increased
investment risk than for obligations in other categories.
A plus or minus sign may be appended to a rating below AAA to denote relative
status within major rating categories.
The following summarizes the three highest short-term debt ratings used by IBCA:
A-1+ Where issues possess a particularly strong credit feature.
A-1 Obligations supported by the highest capacity for timely
repayment.
A-2 Obligations supported by a good capacity for timely repayment.
A-5
<PAGE>
NATIONS LIFEGOAL FUNDS, INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
1-800-626-2275
FORM N-1A
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
All references to the "Registration Statement" in the following list of Exhibits refer to the
Registrant's Registration Statement on Form N-1A (File Nos. 333-09703; 811-07745)
- ---------------------- -------------------------------------------------------------------------------------
EXHIBIT LETTER DESCRIPTION
- ---------------------- -------------------------------------------------------------------------------------
(a) ARTICLES OF INCORPORATION:
(a)(1) Amended and Restated Articles of Incorporation, dated June 4, 1997, filed herewith.
(a)(2) Articles of Amendment, dated October 15, 1996, filed herewith.
- ---------------------- -------------------------------------------------------------------------------------
(b) BY-LAWS:
Bylaws, dated July 10, 1996, filed herewith.
- ---------------------- -------------------------------------------------------------------------------------
(c) INSTRUMENTS DEFINING RIGHTS OF SECURITIES HOLDERS:
Not Applicable
- ---------------------- -------------------------------------------------------------------------------------
(d) INVESTMENT ADVISORY CONTRACTS:
(d)(1) Investment Advisory Agreement between Banc of America Advisors, Inc. (formerly
NationsBanc Advisors, Inc.) ("BAAI") and the Registrant, dated October 15, 1996,
filed herewith.
(d)(2) Sub-Advisory Agreement among BAAI, TradeStreet Investment Associates, Inc.
("TradeStreet") and the Registrant, dated October 15, 1996, filed herewith.
- ---------------------- -------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ---------------------- -------------------------------------------------------------------------------------
EXHIBIT LETTER DESCRIPTION
- ---------------------- -------------------------------------------------------------------------------------
(e) UNDERWRITING CONTRACT:
Distribution Agreement between Stephens Inc. ("Stephens") and the Registrant, dated
October 15, 1996, filed herewith.
- ---------------------- -------------------------------------------------------------------------------------
(f) BONUS OR PROFIT SHARING CONTRACTS:
Not Applicable
- ---------------------- -------------------------------------------------------------------------------------
(g) CUSTODIAN AGREEMENT:
Custody Agreement between Bank of America, N.A. (formerly NationsBank of Texas,
N.A.) ("Bank of America") and the Registrant, dated October 15, 1996, filed
herewith.
- ---------------------- -------------------------------------------------------------------------------------
(h) OTHER MATERIAL CONTRACTS:
(h)(1) Co-Administration Agreement among BAAI, Stephens and the
Registrant, dated December 1, 1998, filed herewith.
(h)(2) Sub-Administration Agreement among BAAI, The Bank of New
York ("BNY") and the Registrant, dated December 1, 1998,
filed herewith.
(h)(3) Transfer Agency and Services Agreement between First Data Investor Services Group,
Inc. ("First Data") and the Nations Funds Family, dated June 1, 1995, Schedule G
dated August 19, 1999, filed herewith.
(h)(4) Adoption Agreement and Amendment to Transfer Agency and
Services Agreement, dated October 15, 1996, filed
herewith.
(h)(5) Shareholder Servicing Plan relating to Investor B Shares, filed herewith.
(h)(6) Shareholder Servicing Plan relating to Investor C Shares, filed herewith.
- ---------------------- -------------------------------------------------------------------------------------
(i) LEGAL OPINION
Not Applicable
- ---------------------- -------------------------------------------------------------------------------------
(j) OTHER OPINIONS
Consent of Independent Accountant--PricewaterhouseCoopers LLP, filed herewith.
- ---------------------- -------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ---------------------- -------------------------------------------------------------------------------------
EXHIBIT LETTER DESCRIPTION
- ---------------------- -------------------------------------------------------------------------------------
(k) OMITTED FINANCIAL STATEMENTS
Not Applicable
- ---------------------- -------------------------------------------------------------------------------------
(l) INITIAL CAPITAL AGREEMENTS:
Not Applicable
- ---------------------- -------------------------------------------------------------------------------------
(m) RULE 12B-1 PLANS:
(m)(1) Shareholder Administration Plan relating to Primary B Shares, filed herewith.
(m)(2) Shareholder Servicing and Distribution Plan relating to Investor A Shares, filed
herewith.
(m)(3) Distribution Plan relating to Investor B Shares, filed herewith.
(m)(4) Distribution Plan relating to Investor C Shares, filed herewith.
- ---------------------- -------------------------------------------------------------------------------------
(n) FINANCIAL DATA SCHEDULE:
Not Applicable
- ---------------------- -------------------------------------------------------------------------------------
(o) RULE 18F-3 PLAN:
Rule 18f-3 Multi-Class Plan, filed herewith.
- ---------------------- -------------------------------------------------------------------------------------
(p) Powers of Attorney for Edmund L. Benson, Charles B.
Walker, A. Max Walker, Thomas S. Word, Jr., William H.
Grigg, James Ermer, Thomas F. Keller, Carl E. Mundy, Jr.,
James B. Sommers, and Cornelius J. Pings, filed herewith.
- ---------------------- -------------------------------------------------------------------------------------
</TABLE>
ITEM 24. PERSONS CONTROLLED BY OF UNDER COMMON CONTROL WITH THE FUND
No person is controlled by or under common control with the
Registrant.
ITEM 25. INDEMNIFICATION
The following paragraphs of Article VIII of the Registrant's
Amended and Restated Articles of Incorporation provide:
(h) The Corporation shall indemnify (1) its Directors and
officers, whether serving the Corporation or at its request any other entity, to
the full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force,
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<PAGE>
including the advance of expenses under the procedures and to the full extent
permitted by law, and (2) its other employees and agents to such extent as shall
be authorized by the Board of Directors or the Corporation's Bylaws and be
permitted by law. The foregoing rights of indemnification shall not be exclusive
of any other rights to which those seeking indemnification may be entitled. The
Board of Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
amend from time to time such Bylaws, resolutions or contracts implementing such
provisions or such further indemnification arrangements as may be permitted by
law. No amendment of these Articles of Incorporation of the Corporation shall
limit or eliminate the right to indemnification provided hereunder with respect
to acts or omissions occurring prior to such amendment or repeal. Nothing
contained herein shall be construed to authorize the Corporation to indemnify
any Director or officer of the Corporation against any liability to the
Corporation or to any holders of securities of the Corporation to which he is
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office. Any
indemnification by the Corporation shall be consistent with the requirements of
law, including the 1940 Act.
(i) To the fullest extent permitted by Maryland statutory and
decisional law and the 1940 Act, as amended or interpreted, no Director or
officer of the Corporation shall be personally liable to the Corporation or its
stockholders for money damages; provided, however, that nothing herein shall be
construed to protect any Director or officer of the Corporation against any
liability to which such Director or officer would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office. No amendment, modification or
repeal of this Article VIII shall adversely affect any right or protection of a
Director or officer that exists at the time of such amendment, modification or
repeal.
Under the terms of Maryland Corporation Law and the Registrant's
Amended and Restated Articles of Incorporation and Bylaws provide for the
indemnification of Registrant's directors and employees. Indemnification of
Registrant's administrators, principal underwriter and distributor, custodian,
and transfer agent is provided for respectively, in the Registrant's:
1. Co-Administration Agreement with Stephens and BAAI;
2. Sub-Administration Agreement with BNY and BAAI;
3. Distribution Agreement with Stephens;
4. Custody Agreement with Bank of America; and
5. Transfer Agency and Registrar Agreement with First Data.
Promptly after receipt by an indemnified party above of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under such
subsection, notify the
C-4
<PAGE>
indemnifying party in writing of the commencement thereof; but the omission to
so notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under such subsection. In
case any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under such subsection for any legal expenses of other counsel or any other
expenses, in such case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation.
Registrant has obtained from a major insurance carrier a
directors' and officers' liability policy covering certain types of errors and
omissions. In no event will Registrant indemnify any of its directors, officers,
employees, or agents against any liability to which such person would otherwise
be subject by reason of his/her willful misfeasance, bad faith, gross negligence
in the performance of his/her duties, or by reason of his/her reckless disregard
of the duties involved in the conduct of his/her office or arising under his
agreement with Registrant. Registrant will comply with Rule 484 under the Act
and Release No. 11330 under the 1940 Act, in connection with any
indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "Act"), may be permitted to directors,
officers, and controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission ("SEC") such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of Registrant in the successful defense of any action, suit,
or proceeding) is asserted by such trustee, or controlling person in connection
with the securities being registered, Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
To the knowledge of the Registrant, none of the directors or
officers of BAAI, the adviser to the Registrant's portfolios, or TradeStreet,
the investment sub-adviser, except those set forth below, are or have been, at
any time during the past two calendar years, engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
directors and officers also hold various positions with, and engage in business
for, the company that owns all the outstanding stock (other than
C-5
<PAGE>
directors' qualifying shares) of BAAI or TradeStreet, respectively, or other
subsidiaries of Bank of America Corporation.
(a) BAAI performs investment advisory services for the Registrant and
certain other customers. BAAI is a wholly-owned subsidiary of Bank of America,
which in turn is a wholly-owned banking subsidiary of Bank of America
Corporation. Information with respect to each director and officer of the
investment adviser is incorporated by reference to Form ADV filed by BAAI with
the SEC pursuant to the Investment Advisers Act of 1940, as amended (the
"Advisers Act") (file no. 801-49874).
(b) TradeStreet performs investment sub-advisory services for the
Registrant and certain other customers. TradeStreet is a wholly-owned subsidiary
of Bank of America, which in turn is a wholly-owned banking subsidiary of Bank
of America Corporation. Information with respect to each director and officer of
the investment sub-adviser is incorporated by reference to Form ADV filed by
TradeStreet with the SEC pursuant to the Advisers Act (file no. 801-50372).
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Stephens, distributor for the Registrant, does not presently act as
investment adviser for any other registered investment companies, but does act
as principal underwriter for Nations Fund Trust, Nations Fund, Inc., Nations
Reserves, Nations Annuity Trust, Stagecoach Inc., Stagecoach Funds, Inc. and
Stagecoach Trust, and is the exclusive placement agent for Nations Master
Investment Trust, Life & Annuity Trust and Master Investment Portfolio, all of
which are registered open-end management investment companies, and has acted as
principal underwriter for the Liberty Term Trust, Inc., Nations Government
Income Term Trust 2003, Inc., Nations Government Income Term Trust 2004, Inc.
and the Managed Balanced Target Maturity Fund, Inc., closed-end management
investment companies.
(b) Information with respect to each director and officer of the principal
underwriter is incorporated by reference to Form ADV filed by Stephens with the
SEC pursuant to the Investment Company Act of 1940, as amended (the "1940 Act")
(file No. 501-15510).
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
(1) BAAI, One Bank of America Plaza, Charlotte, NC 28255 (records
relating to its function as investment adviser and
co-administrator).
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<PAGE>
(2) TradeStreet, One Bank of America Plaza, Charlotte, NC 28255
(records relating to its function as investment sub-adviser).
(3) Stephens, 111 Center Street, Little Rock, AR 72201 (records
relating to its function as principal underwriter, distributor and
co-administrator).
(4) Bank of America, One Bank of America Plaza, Charlotte, NC 28255
(records relating to its function as custodian).
(5) First Data, 101 Federal Street, Boston, MA 02110 (records relating
to its function as transfer agent).
(6) BNY, 90 Washington Street, New York, NY 10286 (records relating to
its function as sub-administrator).
ITEM 29. MANAGEMENT SERVICES
Not Applicable
ITEM 30. UNDERTAKINGS
Not Applicable
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Little
Rock, State of Arkansas on the 15th day of November, 1999.
NATIONS LIFEGOAL FUNDS, INC.
By: *
-----------------------------------
A. Max Walker
President and Chairman of the Board of Directors
By: /s/ Richard H. Blank, Jr.
-----------------------------------
Richard H. Blank, Jr.
*Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
* President and Chairman November 15, 1999
- ---------------------------------- of the Board of Directors
(A. Max Walker) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Treasurer November 15, 1999
- --------------------------------- Vice President
(Richard H. Blank, Jr.) (Principal Financial and Accounting Officer)
* Director November 15, 1999
- ----------------------------------
(Edmund L. Benson, III)
* Director November 15, 1999
- ----------------------------------
(James Ermer)
* Director November 15, 1999
- ----------------------------------
(William H. Grigg)
* Director November 15, 1999
- ----------------------------------
(Thomas F. Keller)
* Director November 15, 1999
- ----------------------------------
(Carl E. Mundy, Jr.)
* Director November 15, 1999
- ----------------------------------
(Cornelius J. Pings)
* Director November 15, 1999
- ----------------------------------
(Charles B. Walker)
* Director November 15, 1999
- ----------------------------------
(Thomas S. Word)
* Director November 15, 1999
- ----------------------------------
(James B. Sommers)
/s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
*Attorney-in-Fact
</TABLE>
<PAGE>
Nations LifeGoal Funds, Inc.
Exhibit Index
Exhibit No. Description
- ----------- -----------
EX-99.A1 Articles of Incorporation
EX-99.A2 Articles of Amendment
EX-99.B By-Laws
EX-99.D1 Investment Advisory Agreement
EX-99.D2 Sub-Advisory Agreement
EX-99.E Distribution Agreement
EX-99.G Custody Agreement
EX-99.H1 Co-Administration Agreement
EX-99.H2 Sub-Administration Agreement
EX-99.H3 Transfer Agency Agreement
EX-99.H4 Amendment to Transfer Agency Agreement
EX-99.H5 Shareholder Servicing Plan - Investor B Shares
EX-99.H6 Shareholder Servicing Plan - Investor C Shares
EX-99.I Morrison & Foerster LLP Opinion and Consent
EX-99.J Consent of Independent Accountants
EX-99.M1 Shareholder Administration Plan - Primary B Shares
EX-99.M2 Shareholder Servicing and Distribution Plan
EX-99.M3 Distribution Plan - Investor B Shares
EX-99.M4 Distribution Plan - Investor C Shares
EX-99.O Rule 18f-3 Plan
EX-99.P Powers of Attorney
EXHIBIT 99.A1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
NATIONS LIFEGOAL FUNDS, INC.
DATED JUNE 4, 1997
I.
WHEREAS, the Board of Directors of NATIONS LIFEGOAL FUNDS, INC. (the
"Corporation") approved the establishment of a new class of shares at a meeting
of the Board of Directors on June 4, 1997, and desires to amend the
Corporation's Articles of Incorporation as currently in effect (sometimes
referred to herein as the "Charter" or "Articles of Incorporation") to reflect
the establishment of such class; and
WHEREAS, the Board of Directors desires to restate the Corporation's
Charter as currently in effect; and
WHEREAS, a majority of the Corporation's entire Board of Directors
approved the amendment and restatement of the Charter and authorized the filing
of the amended and restated Charter in accordance with Section 2-609 of the
Corporations and Associations Article of the Annotated Code of Maryland (the
"Code") and no stock entitled to be voted on the amendment was outstanding or
subscribed for at the time of approval.
NOW THEREFORE, the undersigned hereby certifies to the Department of
Assessments and Taxation of the State of Maryland that:
FIRST: The Board of Directors, pursuant to a resolution duly adopted by
a majority of the Corporation's Board of Directors at a regular meeting of the
Board held on June 4, 1997, and in accordance with Sections 2-105 (c) and
2-208.1 of the Code, authorized the appropriate Officers of the Corporation to
take such action as necessary to increase the number of authorized shares of
common stock of the Corporation to one billion, five hundred million
(1,500,000,000) shares, all of which have a par value of one-tenth of one cent
($.001) per share, having an aggregate par value of one million, five hundred
thousand dollars ($1,500,000.00).
SECOND: The Board of Directors has duly classified three hundred
million (300,000,000) shares of the authorized, unissued and unclassified shares
of common stock of the Corporation into a newly established class, Investor B
shares, and has provided for the issuance of such shares, as set forth below:
THIRD: The following comprises the Corporation's Amended and Restated
Articles of Incorporation:
<PAGE>
INCORPORATOR
------------
Rita W. Morales, as incorporator, whose mailing address is 2000
Pennsylvania Avenue, N.W., Washington, D.C., 20006, being at least 18 years of
age, formed the corporation under and by virtue of the General Laws of the State
of Maryland, and such Articles of Incorporation were filed with the Maryland
Department of Assessments and Taxation on July 3, 1996.
II.
NAME
The name of the corporation is Nations LifeGoal Funds, Inc. (the "Corporation").
III.
PURPOSES AND POWERS
The purpose or purposes for which the Corporation is formed and the
business or objects to be transacted, carried on and promoted by it are:
(a) To conduct and carry on the business of an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act").
(b) To hold, invest and reinvest its assets in securities and other
investments including holding part or all of its assets in cash, including
foreign currencies.
(c) To issue and sell shares of its capital stock in such accounts and
on such terms and conditions and for such purposes and for such amount or kind
of consideration (including, without limitation, securities) now or hereafter
permitted by law.
(d) To redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the shareholders
of the Corporation) shares of its capital stock, in any manner and to the extent
now or hereafter permitted by law and by these Articles of Incorporation.
(e) To do any and all such acts or things and to exercise any and all
such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of the purposes stated in this Article.
The foregoing enumerated purposes and objects shall be in no way
limited or restricted by reference to, or inference from, the terms of any other
clause of this or any other Article of these Articles of Incorporation, and
shall each be regarded as independent; and they are intended to be
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<PAGE>
and shall be construed as powers as well as purposes and objects of the
Corporation and shall be in addition to, and not in limitation of, the general
powers of corporations under the laws of the State of Maryland.
IV.
PRINCIPAL OFFICE AND PLACE OF BUSINESS
The present address of the principal office of the Corporation in the
State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202.
V.
RESIDENT AGENT
The name and address of the Corporation's resident agent is The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. Said
resident agent is a Maryland corporation.
VI.
CAPITAL STOCK
(a) Immediately prior to the classification of the Investor B Shares,
the shares of the Corporation and its series were allocated as follows:
Series Number of Shares
------ ----------------
LifeGoal Growth Portfolio
Primary A 100,000,000
Primary B 100,000,000
Investor A 100,000,000
Investor C 100,000,000
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<PAGE>
LifeGoal Balanced Growth Portfolio
Primary A 100,000,000
Primary B 100,000,000
Investor A 100,000,000
Investor C 100,000,000
LifeGoal Income and Growth Portfolio
Primary A 100,000,000
Primary B 100,000,000
Investor A 100,000,000
Investor C 100,000,000
Unclassified 0
------------
TOTAL 1,200,000,000
Immediately after the classification of the Investor B Shares, the
total number of shares of capital stock which the Corporation is authorized to
issue is one billion five hundred million (1,500,000,000) shares of the par
value of $.001 per share allocated to the series as follows. (Such classes, and
any further classes from time to time created by the Board of Directors being
referred to individually herein as a "class").
Series Number of Shares
------ ----------------
LifeGoal Growth Portfolio
Primary A 100,000,000
Primary B 100,000,000
Investor A 100,000,000
Investor B 100,000,000
Investor C 100,000,000
LifeGoal Balanced Growth Portfolio
Primary A 100,000,000
Primary B 100,000,000
Investor A 100,000,000
Investor B 100,000,000
Investor C 100,000,000
LifeGoal Income and Growth Portfolio
Primary A 100,000,000
Primary B 100,000,000
Investor A 100,000,000
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<PAGE>
Investor B 100,000,000
Investor C 100,000,000
Unclassified 0
------------
TOTAL 1,500,000,000
The Board of Directors of the Corporation is hereby empowered to
increase or decrease, from time to time, the total number of shares of capital
stock or the number of shares of capital stock of any series or class that the
Corporation shall have authority to issue without any action by the
shareholders.
(b) Any fractional share shall carry proportionately all the rights of
a whole share, excepting any right to receive a certificate evidencing such
fractional share, but including the right to vote and the right to receive
dividends.
(c) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of these Amended and Restated
Articles of Incorporation and the Bylaws of the Corporation.
(d) As used in these Amended and Restated Articles of Incorporation, a
"series" of shares represents interests in the same assets, liabilities, income,
earnings and profits of the Corporation; each "class" of shares of a series
represents interests in the same underlying assets, liabilities, income,
earnings and profits, but may differ from other classes of such series with
respect to fees and expenses or such other matters as shall be established by
the Board of Directors. The Board of Directors shall have authority to classify
and reclassify any authorized but unissued shares of capital stock from time to
time by setting or changing in any one or more respects the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption of the capital
stock. Subject to the provisions of Section (e) of this Article VI and
applicable law, the power of the Board of Directors to classify or reclassify
any of the shares of capital stock shall include, without limitation, authority
to classify or reclassify any such stock into one or more series of capital
stock and to divide and classify shares of any series into one or more classes
of such series, by determining, fixing or altering one or more of the following:
1. The distinctive designation of such class
or series and the number of shares to constitute such class or
series; provided that, unless otherwise prohibited by the terms of
such class or series, the number of shares of any class or series
may be decreased by the Board of Directors in connection with any
classification or reclassification of unissued shares and the
number of shares of such class or series may be increased by the
Board of Directors in connection with any such classification or
reclassification, and any shares of any class or series which have
been redeemed, purchased or otherwise acquired by the Corporation
shall remain part of the authorized capital stock and be subject
to classification and reclassification as provided herein;
-5-
<PAGE>
2. Whether or not and, if so, the rates,
amounts and times at which, and the conditions under which,
dividends shall be payable on shares of such class or series;
3. Whether or not shares of such class or
series shall have voting rights in addition to any general voting
rights provided by law and these Articles of Incorporation of the
Corporation and, if so, the terms of such additional voting
rights;
4. The rights of the holders of shares of
such class or series upon the liquidation, dissolution or winding
up of the affairs of, or upon a distribution of the assets of, the
Corporation.
(e) Shares of capital stock of the Corporation shall have the following
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption:
1. Assets Belonging to a Series. All
consideration received by the Corporation for the issue or sale of
stock of any series of capital stock, together with all assets in
which such consideration is invested and reinvested, income,
earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to the
series of shares of capital stock with respect to which such
assets, payments or funds were received by the Corporation for all
purposes, subject only to the rights of creditors, and shall be so
handled upon the books of account of the Corporation. Such
consideration, assets, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from any reinvestment
of such proceeds in whatever form, are herein referred to as
"assets belonging to" such series. Any assets, income, earnings,
profits, and proceeds thereof, funds or payments which are not
readily attributable to any particular series shall be allocable
among any one or more of the series in such manner and on such
basis as the Board of Directors, in its sole discretion, shall
deem fair and equitable.
2. Liabilities Belonging to a Series. The
assets belonging to any series of capital stock shall be charged
with the liabilities in respect of such series and shall also be
charged with such series' share of the general liabilities of the
Corporation determined as hereinafter provided. The determination
of the Board of Directors shall be conclusive as to the amount of
such liabilities, including the amount of accrued expenses and
reserves; as to any allocation of the same to a given series; and
as to whether the same are allocable to one or more series. The
liabilities so allocated to a series are herein referred to as
"liabilities belonging to" such series. Any liabilities which are
not readily attributable to any particular series shall be
-6-
<PAGE>
allocable among any one or more of the series in such manner and
on such basis as the Board of Directors, in its sole discretion,
shall deem fair and equitable.
3. Dividends and Distributions. Shares of
each series of capital stock shall be entitled to such dividends
and distributions, in stock or in cash or both, as may be declared
from time to time by the Board of Directors, acting in its sole
discretion, with respect to such series, provided, however, that
dividends and distributions on shares of a series of capital stock
shall be paid only out of the lawfully available "assets belonging
to" such series as such phrase is defined in Section (e)(1) of
this Article VI.
4. Liquidating Dividends and Distributions.
In the event of the liquidation or dissolution of the Corporation,
shareholders of each series of capital stock shall be entitled to
receive, as a series, out of the assets of the Corporation
available for distribution to shareholders, but other than general
assets not belonging to any particular series of capital stock,
the assets belonging to such series; and the assets so
distributable to the shareholders of any series of capital stock
shall be distributed among such shareholders in proportion to the
number of shares of such series held by them and recorded on the
books of the Corporation. In the event that there are any general
assets not belonging to any particular series of capital stock and
available for distribution, such distribution shall be made to the
holders of stock of all series of capital stock in proportion to
the asset value of the respective series of capital stock
determined as hereinafter provided.
5. Voting. Each shareholder of each series
of capital stock shall be entitled to one vote for each share of
capital stock, irrespective of the class, then standing in his
name on the books of the Corporation, and on any matter submitted
to a vote of shareholders, all shares of capital stock then issued
and outstanding and entitled to vote shall be voted in the
aggregate and not by series except that: (i) when expressly
required by law, shares of capital stock shall be voted by
individual class or series and (ii) only shares of capital stock
of the respective series or class or classes affected by a matter
shall be entitled to vote on such matter. At all meetings of the
shareholders, the holders of one-third of the shares of capital
stock of the Corporation entitled to vote at the meeting, present
in person or by proxy, shall constitute a quorum for the
transaction of any business, except as otherwise provided by
statute or by these Articles of Incorporation. In the absence of a
quorum no business may be transacted, except that the holders of a
majority of the shares of capital stock present in person or by
proxy and entitled to vote may adjourn the meeting from time to
time, without notice other than announcement at the meeting except
as otherwise required by these Articles of Incorporation or the
Bylaws, until the holders of the requisite amount of shares of
capital stock shall be present. At any such adjourned meeting at
which a quorum may be present any business may be transacted which
might have been transacted at the meeting as originally called.
The absence from any meeting, in person or by proxy, of holders of
the number of shares of capital stock of the Corporation in excess
of the quorum which may be required
-7-
<PAGE>
by the laws of the State of Maryland, the 1940 Act, or other
applicable statute, these Articles of Incorporation or the Bylaws,
for action upon any given matter shall not prevent action at such
meeting upon any other matter or matters which may properly come
before the meeting, if there shall be present at the meeting, in
person or by proxy, holders of the number of shares of capital
stock of the Corporation required for action in respect of such
other matter or matters.
6. Redemption. To the extent the Corporation
has funds or other property legally available therefor, each
holder of shares of capital stock of the Corporation shall be
entitled to require the Corporation to redeem all or any part of
the shares standing in the name of such holder on the books of the
Corporation, at the redemption price of such shares as in effect
from time to time as may be determined by the Board of Directors
of the Corporation in accordance with the provisions hereof,
subject to the right of the Board of Directors of the Corporation
to suspend the right of redemption of shares of capital stock of
the Corporation or postpone the date of payment of such redemption
price in accordance with provisions of applicable law. Without
limiting the generality of the foregoing, the Corporation shall,
to the extent permitted by applicable law, have the right at any
time to redeem the shares owned by any holder of capital stock of
the Corporation if the value of such shares in the account of such
holder is less than the minimum initial investment amount
applicable to that account as set forth in the Corporation's
current registration statement under the 1940 Act, and subject to
such further terms and conditions as the Board of Directors of the
Corporation may from time to time adopt. The redemption price of
shares of capital stock of the Corporation shall, except as
otherwise provided in this Section (e)(6), be the net asset value
thereof as determined by, or pursuant to methods approved by, the
Board of Directors of the Corporation from time to time in
accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be specified in the
Corporation's current registration statement under the 1940 Act
for that class or series. Payment of the redemption price shall be
made in cash by the Corporation at such time and in such manner as
may be determined from time to time by the Board of Directors of
the Corporation unless, in the opinion of the Board of Directors,
which shall be conclusive, conditions exist which make payment
wholly in cash unwise or undesirable; in such event the
Corporation may make payment wholly or partly by securities or
other property included in the assets belonging or allocable to
the series of the shares redemption of which is being sought, the
value of which shall be determined as provided herein.
7. Conversion. Shares of a series or class
of capital stock of the Corporation shall be convertible into
shares of another series or class of capital stock of the
Corporation upon such terms and at such time as may be determined
from time to time by the Board of Directors of the Corporation and
described in the Corporation's then current registration statement
under the 1940 Act for that series or class.
-8-
<PAGE>
VII.
DIRECTORS
The number of Directors of the Corporation shall initially be eight
(8), which number may, from time to time be, increased or decreased pursuant to
the Bylaws of the Corporation, but shall never be less than the minimum number
permitted by the General Laws of the State of Maryland as now or hereafter in
force. The names of the Directors who will serve until the first shareholders
meeting or until their successors are elected and qualified are as follows:
A. Max Walker
Edmund L. Benson, III
James Ermer
William H. Grigg
Thomas F. Keller
Carl E. Mundy, Jr.
Charles B. Walker
Thomas S. Word, Jr.
VIII.
PROVISIONS FOR DEFINING, LIMITING AND REGULATING
CERTAIN POWERS OF THE CORPORATION AND OF THE
DIRECTORS AND SHAREHOLDERS
The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
Directors and shareholders:
(a) No holder of any stock or any other securities of the Corporation,
whether now or hereafter authorized, shall have any preemptive right to
subscribe for or purchase any stock or any other securities of the Corporation
other than such, if any, as the Board of Directors, in its sole discretion, may
determine and at such price or prices and upon such other terms as the Board of
Directors, in its sole discretion, may fix; and any stock or other securities
which the Board of Directors may determine to offer for subscription may, as the
Board of Directors in its sole discretion shall determine, be offered to the
holders of any class, series or type of stock or other securities at the time
outstanding to the exclusion of the holders of any or all other classes, series
or types of stock or other securities at the time outstanding.
(b) The Board of Directors of the Corporation shall have power from
time to time and in its sole discretion to determine, in accordance with sound
accounting practice, what constitutes annual or other net income, profits,
earnings, surplus or net assets; to fix and vary from time to time the amount to
be reserved as working capital, or determine that retained earnings or surplus
shall remain in the hands of the Corporation; to set apart out of any funds of
the Corporation such
-9-
<PAGE>
reserve or reserves in such amount or amounts and for such proper purpose or
purposes as it shall determine and to abolish any such reserve or any part
thereof; to distribute and pay distributions or dividends in stock, cash or
other securities or property, out of surplus or any other funds or amounts
legally available therefor, at such times and to the shareholders of record on
such dates as it may from to time determine; and to determine whether and to
what extent and at what times and places and under what conditions and
regulations the books, accounts and documents of the Corporation, or any of
them, shall be open to the inspection of shareholders, except as otherwise
provided by statute or by the Bylaws, and, except as so provided, no shareholder
shall have any right to inspect any book, account or document of the Corporation
unless authorized so to do by resolution of the Board of Directors.
(c) The Board of Directors of the Corporation may establish in its
absolute discretion the basis or method for determining the value of the assets
belonging to any series, and the net asset value of each share of capital stock
of each series and class for purposes of sales, redemptions, repurchases of
shares or otherwise.
(d) Any Director or officer, individually, or any firm of which any
Director or officer may be a member, or any corporation, trust or association of
which any Director or officer may be an officer or Director or in which any
Director or officer may be directly or indirectly interested as the holder of
any amount of its capital stock or otherwise, may be a party to, or may be
financially or otherwise interested in, any contract or transaction of the
Corporation; and any such Director or officer of the Corporation may be counted
in determining the existence of a quorum at the meeting of the Board of
Directors of the Corporation or a committee thereof which shall authorize any
such contract or transaction, and may vote thereat to authorize any such
contract or transaction, and such transaction or contract shall not as a result
be void or voidable provided either
(i) the fact of the common directorship or interest is
disclosed or known to: (a) the Board of Directors or the committee and
the Board or committee authorizes, approves, or ratifies the contract or
transaction by the affirmative vote of a majority of disinterested
Directors, even if the disinterested Directors constitute less than a
quorum; or (b) the shareholders entitled to vote, and the contract or
transaction is authorized, approved, or ratified by a majority of the
votes cast by the shareholders entitled to vote other than the votes of
shares owned of record or beneficially by the interested Director or
corporation, firm, or other entity; or
(ii) the contract or transaction is fair and reasonable to the
Corporation.
In furtherance and not in limitation of the foregoing, the Board of
Directors of the Corporation is expressly authorized to contract for management
services of any nature, with respect to the conduct of the business of the
Corporation with any entity, person or company, incorporated or unincorporated,
on such terms as the Board of Directors may deem desirable. Any such contract
may provide for the rendition of management services of any nature with respect
to the conduct of the business of the Corporation, and for the management or
direction of the business and activities of the Corporation to such extent as
the Board of Directors may
-10-
<PAGE>
determine, whether or not the contract involves delegation of functions usually
or customarily performed by the Board of Directors or officers of the
Corporation or of a corporation organized under the laws of Maryland. The Board
of Directors is further expressly authorized to contract with any person or
company on such terms as the Board of Directors may deem desirable for the
distribution of shares of the Corporation and to contract for other services,
including, without limitation, services as custodian of the Corporation's assets
and as transfer agent for the Corporation's shares, with any entity(ies),
person(s) or company(ies), incorporated or unincorporated, on such terms as the
Directors may deem desirable. Any entity, person or company which enters into
one or more of such contracts may also perform similar or identical services for
other investment companies and other persons and entities without restriction by
reason of the relationship with the Corporation unless the contract expressly
provides otherwise.
(e) Any contract, transaction, or act of the Corporation or of the
Board of Directors which shall be ratified by a majority of a quorum of the
shareholders having voting powers at any annual meeting, or at any special
meeting called for such purpose, shall so far as permitted by law be as valid
and as binding as though ratified by every shareholder of the Corporation.
(f) Unless the Bylaws otherwise provide, any officer or employee of the
Corporation (other than a Director) may be removed at any time with or without
cause by the Board of Directors or by any committee or superior officer upon
whom such power of removal may be conferred by the Bylaws or by authority of the
Board of Directors.
(g) Notwithstanding any provision of law requiring the authorization of
any action by a greater proportion than a majority of the total number of shares
of any series or class, or of all classes or series of capital stock, or by the
total number of such shares, such action shall be valid and effective if
authorized by the affirmative vote of the holders of a majority of the total
number of shares outstanding and entitled to vote thereon.
(h) The Corporation shall indemnify (1) its Directors and officers,
whether serving the Corporation or at its request any other entity, to the full
extent required or permitted by the General Laws of the State of Maryland now or
hereafter in force, including the advance of expenses under the procedures and
to the full extent permitted by law, and (2) its other employees and agents to
such extent as shall be authorized by the Board of Directors or the
Corporation's Bylaws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such Bylaws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of these
Amended and Restated Articles of Incorporation of the Corporation shall limit or
eliminate the right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal. Nothing contained
herein shall be construed to authorize the Corporation to indemnify any Director
or officer of the Corporation against any liability to the Corporation or to any
holders of securities of the Corporation to which he is subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his
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<PAGE>
office. Any indemnification by the Corporation shall be consistent with the
requirements of law, including the 1940 Act.
(i) To the fullest extent permitted by Maryland statutory and
decisional law and the 1940 Act, as amended or interpreted, no Director or
officer of the Corporation shall be personally liable to the Corporation or its
stockholders for money damages; provided, however, that nothing herein shall be
construed to protect any Director or officer of the Corporation against any
liability to which such Director or officer would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office. No amendment, modification or
repeal of this Article VIII shall adversely affect any right or protection of a
Director or officer that exists at the time of such amendment, modification or
repeal.
(j) In addition to the powers and authority hereinbefore, hereinafter
or by statute expressly conferred upon them, the Board of Directors may exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject, nevertheless, to the express provisions of the laws of
Maryland, of these Amended and Restated Articles of Incorporation and of the
Bylaws of the Corporation.
(k) The Corporation reserves the right from time to time to make any
amendments of its Articles of Incorporation which may now or hereafter be
authorized by law, including any amendments changing the terms or contract
rights, as expressly set forth in its Articles of Incorporation, of any of its
outstanding stock by classification, reclassification or otherwise but no such
amendment which changes such terms or contract rights of any of its outstanding
stock shall be valid unless such amendment shall have been authorized by not
less than a majority of the aggregate number of the votes entitled to be cast
thereon, by a vote at a meeting or in writing with or without a meeting.
(l) The Corporation shall not be required to hold an annual meeting of
shareholders in any year in which the laws of Maryland do not require that such
a meeting be held.
The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other Article of these Amended and Restated Articles of Incorporation of the
Corporation, or construed as or deemed by inference or otherwise in any manner
to exclude or limit any powers conferred upon the Board of Directors under the
General Laws of the State of Maryland now or hereafter in force.
IX.
DURATION OF THE CORPORATION
The duration of the Corporation shall be perpetual.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on the 4th day of June, 1997.
WITNESS: NATIONS LIFEGOAL FUNDS, INC.
/s/ Richard H. Blank, Jr. By: /s/ A. Max Walker
- --------------------------------- ---------------------
Richard H. Blank, Jr., Secretary A. Max Walker
THE UNDERSIGNED, President of the Corporation, who executed on behalf
of the Corporation Amended and Restated Articles of Incorporation, hereby
acknowledges in the name and on behalf of said Corporation the foregoing Amended
and Restated Articles of Incorporation to be the corporate act of said
Corporation and hereby certifies that the matters and facts set forth herein
with respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ A. Max Walker
-----------------------
A. Max Walker
-13-
EXHIBIT 99.A2
NATIONS LIFEGOAL FUNDS, INC.
ARTICLES OF AMENDMENT
RENAMING EXISTING SERIES OF CAPITAL STOCK
OF THE CORPORATION
Nations LifeGoal Funds, Inc., a Maryland corporation having its
principal office in Maryland at The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202 (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940.
SECOND: Pursuant to authority expressly vested in the Board of
Directors by the Articles of Incorporation of the Corporation (the "Charter")
and Section VI(d)(1) and Section VIII(k) thereto, and in accordance with
Sections 2-605 and 2-607 of the Corporations and Associations Article of the
Annotated Code of Maryland (the "Code"), and pursuant to resolutions duly
adopted on October 11-12, 1996, the Board of Directors of the Corporation has
taken the following actions, which are expressly limited to changes permitted by
Section 2-605(a)(4) of the Code to be made without action by the stockholders:
(1) renamed four hundred million (400,000,000) shares of the
Corporation's authorized, classified and designated shares, with a
par value of $.001 per share, currently classified and named as
shares of the "Nations Capital Accumulator Fund", as shares of the
"LifeGoal Growth Portfolio";
(2) renamed four hundred million (400,000,000) shares of the
Corporation's authorized, classified and designated shares, with a
par value of $.001 per share, currently classified and named as
shares of the "Nations Conservative Growth Fund", as shares of the
"LifeGoal Balanced Growth Portfolio";
(3) renamed four hundred million (400,000,000) shares of the
Corporation's authorized, classified and designated shares, with a
par value of $.001 per share, currently classified and named as
shares of the "Nations Income and Managed Growth Fund", as shares
of the "LifeGoal Income and Growth Portfolio";
<PAGE>
THIRD: The shares classified and renamed in Article SECOND hereto
shall have the same preferences, conversions and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption as each previously authorized and classified Series and
Class of the Corporation.
FOURTH: In connection with Article SECOND hereto, the Corporation
provides the following information:
Prior to the renaming, the number of shares of each Series and
Class of the Corporation was as follows:
Series Number of Shares
------ -----------------
Nations Capital Accumulator Fund
Primary A 100,000,000
Primary B 100,000,000
Investor A 100,000,000
Investor C 100,000,000
Nations Conservative Growth Fund
Primary A 100,000,000
Primary B 100,000,000
Investor A 100,000,000
Investor C 100,000,000
Nations Income and Managed Growth Fund
Primary A 100,000,000
Primary B 100,000,000
Investor A 100,000,000
Investor C 100,000,000
Unclassified 0
------------
TOTAL 1,200,000,000
FIFTH: After the renaming, the number of shares of each Series and
Class of the Corporation was as follows:
Series Number of Shares
------ ----------------
LifeGoal Growth Portfolio
Primary A 100,000,000
Primary B 100,000,000
Investor A 100,000,000
Investor C 100,000,000
2
<PAGE>
Series Number of Shares
------ ----------------
LifeGoal Balanced Growth Portfolio
Primary A 100,000,000
Primary B 100,000,000
Investor A 100,000,000
Investor C 100,000,000
LifeGoal Income and Growth Portfolio
Primary A 100,000,000
Primary B 100,000,000
Investor A 100,000,000
Investor C 100,000,000
Unclassified 0
------------
TOTAL 1,200,000,000
SIXTH: The total number of shares the Corporation is authorized to
issue remains at one billion, two hundred million (1,200,000,000) shares and the
aggregate par value of all shares having a par value remains at one million two
hundred thousand dollars ($1,200,000).
SEVENTH: The Board of Directors has duly authorized the filing of
these Articles of Amendment.
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf by its President and witnessed by its Secretary as
of the 15th day of October 1996.
WITNESS: NATIONS LIFEGOAL FUNDS, INC.
/s/Richard H. Blank, Jr. By: /s/ A. Max Walker
- ------------------------ -----------------------
Richard H. Blank, Jr. A. Max Walker
Secretary President
3
<PAGE>
THE UNDERSIGNED, President of Nations LifeGoal Funds, Inc., who
executed on behalf of the Corporation the Articles of Amendment of which this
Certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles of Amendment to be the corporate act of
said Corporation and hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury, and that the Board of
Directors of the Corporation has duly authorized the filing of these Articles of
Amendment.
/s/ A. Max Walker
--------------------------
A. Max Walker
President
4
EXHIBIT 99.B
BYLAWS
i
<PAGE>
I N D E X
----------
Section and Title Page
- ----------------- ----
Article I. SHAREHOLDERS
1.1 Annual Meetings ..........................................1
1.2 Special Meetings .........................................1
1.3 Place of Meetings ........................................1
1.4 Notice of Meetings .......................................1
1.5 Quorum....................................................2
1.6 Votes Required ...........................................2
1.7 Proxies...................................................2
1.8 List of Shareholders .....................................3
1.9 Voting....................................................3
1.10 Action by Shareholders Other than at a
Meeting...................................................3
Article II. BOARD OF DIRECTORS
2.1 Powers....................................................4
2.2 Number of Directors ......................................4
2.3 Election of Directors ....................................4
2.4 Regular Meetings .........................................4
2.5 Special Meetings .........................................4
2.6 Notice of Meetings .......................................5
2.7 Quorum....................................................5
2.8 Vacancies.................................................5
2.9 Compensation and Expenses ................................6
2.10 Action by Directors Other than at a Meeting ..............6
2.11 Audit Committee ..........................................6
2.12 Nominating Committee of Directors ........................7
2.13 Other Committees .........................................7
2.14 Holding of Meetings by Conference Telephone Call .........7
2.15 Qualification of Directors ...............................7
2
<PAGE>
Article III. OFFICERS
3.1 Executive Officers .........................................8
3.2 Chairman and Vice Chairman of the Board.....................8
3.3 President ..................................................8
3.4 Vice Presidents ............................................8
3.5 Chief Operating Officer ....................................9
3.6 Secretary and Assistant Secretaries ........................9
3.7 Treasurer and Assistant Treasurers .........................9
3.8 Subordinate Officers ......................................10
3.9 Removal....................................................10
Article IV. STOCK
4.1 Certificates ..............................................10
4.2 Transfers .................................................11
4.3 Stock Ledgers .............................................11
4.4 Record Dates ..............................................11
Article V. GENERAL PROVISIONS
5.1 Dividends .................................................11
5.2 Checks.....................................................12
5.3 Fiscal Year ...............................................12
5.4 Custodian .................................................12
5.5 Seal.......................................................12
5.6 Representation of Shares ..................................12
5.7 Prohibited Transactions ...................................12
5.8 Bonds......................................................13
5.9 Annual Statement of Affairs ...............................13
Article VI. AMENDMENT OF BYLAWS
ii
<PAGE>
BYLAWS
OF
NATIONS LIFEGOAL FUNDS, INC.
<PAGE>
BYLAWS
OF
NATIONS LIFEGOAL FUNDS, INC.
(the "Corporation")
ARTICLE I
SHAREHOLDERS
SECTION 1.1 ANNUAL MEETINGS. The Corporation is not required to
hold an annual meeting of shareholders in any year in which the election of
directors is not required to be acted upon by shareholders under the Investment
Company Act of 1940, as amended (the "1940 Act"). If such action is required to
be acted upon under the 1940 Act, then such meeting (or the first such meeting
in any year) shall be designated as the annual meeting of shareholders for that
year. Except as the Articles of Incorporation or statute provides otherwise, any
business may be considered at an annual meeting without the purpose of the
meeting having been specified in the notice. Failure to hold an annual meeting
does not invalidate the Corporation's existence or affect any otherwise valid
corporate acts.
SECTION 1.2 SPECIAL MEETINGS. At any time in the interval between
annual meetings, special meetings of the shareholders may be called by the
Chairman of the Board, if any, the President in the absence of the Chairman, the
Chief Operating Officer in the absence of the Chairman and the President, or by
a majority of the Board or by shareholders entitled to cast 10% in number of
votes by vote at a meeting or in writing with or without a meeting.
SECTION 1.3 PLACE OF MEETINGS. Meetings of the shareholders for
the election of Directors shall be held at such place either within or without
the State of Maryland or elsewhere in the United States as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting. Meetings of shareholders for any other purpose may be held at such time
and place, within the State of Maryland or elsewhere in the United States, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
SECTION 1.4 NOTICE OF MEETINGS. Not less than ten days nor more
than ninety days before the date of every shareholders' meeting, the Secretary
shall give to each shareholder entitled to vote at such meeting, written or
printed notice stating the time and place of the meeting and, if the meeting is
a special meeting or notice of the purpose is required by statute, the purpose
or purposes for which the meeting is called, either by mail or by presenting it
to the shareholder personally or by leaving it at the shareholder's residence or
usual place of business. If mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the shareholder at his address
as it appears on the records of the Corporation, with postage thereon prepaid.
Notwithstanding the foregoing provision, a waiver of notice in writing, signed
by the person or persons entitled to such notice and filed with the records of
the meeting, whether before or after the holding thereof, or actual attendance
at the meeting in person or by
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proxy, shall be deemed equivalent to the giving of such notice to such persons.
Any meeting of shareholders, annual or special, may adjourn from time to time to
reconvene at the same or some other place, and no notice need be given of any
such adjourned meeting other than by announcement at the meeting.
SECTION 1.5 QUORUM. At any meeting of shareholders the presence in
person or by proxy of shareholders entitled to cast one-third of the votes
thereat shall constitute a quorum; but this Section shall not affect any
requirement under statute or under the Articles for the vote necessary for the
adoption of any measure. In the absence of a quorum the shareholders present in
person or by proxy, by majority vote and without notice, may adjourn the meeting
from time to time until a quorum shall attend. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally called.
SECTION 1.6 VOTES REQUIRED. A majority of the votes cast at a
meeting of shareholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize action upon any matter which may properly come
before the meeting, unless more than a majority of votes cast is required by
statute or by the Articles and except that a plurality of all the votes cast at
a meeting at which a quorum is present is sufficient to elect a Director. Each
outstanding share of stock shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders and fractional shares shall be
entitled to corresponding fractions of one vote on such matters.
SECTION 1.7 PROXIES. A shareholder may vote the shares owned of
record by him either in person or by proxy executed in writing by the
shareholder or by the shareholder's duly authorized attorney-in-fact. No proxy
shall be valid after eleven months from its date, unless otherwise provided in
the proxy. Every proxy shall be in writing, subscribed by the shareholder or the
shareholder's duly authorized attorney, and dated, but need not be sealed,
witnessed or acknowledged.
SECTION 1.8 LIST OF SHAREHOLDERS. At each meeting of shareholders,
a full, true and complete list in alphabetical order of all shareholders
entitled to vote at such meeting, certifying the number and class or series of
shares held by each, shall be made available by the Secretary.
SECTION 1.9 VOTING. In all elections for Directors every
shareholder shall have the right to vote, in person or by proxy, the shares
owned of record by the shareholder, for as many persons as there are Directors
to be elected and for whose election the shareholder has a right to vote. At all
meetings of shareholders, unless the voting is conducted by inspectors, the
proxies and ballots shall be received, and all questions regarding the
qualification of voters and the validity of proxies and the acceptance or
rejection of votes shall be decided by the chairman of the meeting. If demanded
by shareholders, present in person or by proxy, entitled to cast 10% in number
of votes, or if ordered by the chairman, the vote upon any election or question
shall be taken by ballot. Upon like demand or order, the voting shall be
conducted by two inspectors in which event the proxies and ballots shall be
received, and all questions regarding the qualification of voters and the
validity of proxies and the acceptance or rejection of votes shall be
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decided, by such inspectors. Unless so demanded or ordered, no vote need be by
ballot, and voting need not be conducted by inspectors. Inspectors may be
elected by the shareholders at their annual meeting, to serve until the close of
the next annual meeting and their election may be held at the same time as the
election of Directors. In case of a failure to elect inspectors, or in case an
inspector shall fail to attend, or refuse or be unable to serve, the
shareholders at any meeting may choose an inspector or inspectors to act at such
meeting, and in default of such election the chairman of the meeting may appoint
an inspector or inspectors.
SECTION 1.10 ACTION BY SHAREHOLDERS OTHER THAN AT A MEETING. Any
action required or permitted to be taken at any meeting of shareholders may be
taken without a meeting, if a consent in writing, setting forth such action, is
signed by all the shareholders entitled to vote on the subject matter thereof
and any other shareholders entitled to notice of a meeting of shareholders (but
not to vote thereat) have waived in writing any rights which they may have to
dissent from such action, and such consent and waiver are filed with the records
of the Corporation.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1 POWERS. The Board may exercise all the powers of the
Corporation, except such as are by statute or the charter or these Bylaws
conferred upon or reserved to the shareholders. The Board shall keep full and
fair accounts of its transactions.
SECTION 2.2 NUMBER OF DIRECTORS. The number of Directors shall be
such number as shall be fixed from time to time by vote of a majority of the
Directors; provided, however, that the number of Directors shall in no event
exceed fifteen nor be reduced to fewer than two. The tenure of office of a
Director shall not be affected by any decrease in the number of Directors made
by the Board.
SECTION 2.3 ELECTION OF DIRECTORS. Until the first annual meeting
of shareholders and until successors or additional Directors are duly elected
and qualify, the Board shall consist of the persons named as such in the
charter. At the first annual meeting of shareholders and at each annual meeting
thereafter, the shareholders shall elect Directors to hold office until the next
succeeding annual meeting and until their successors are elected and qualify. At
any meeting of shareholders, duly called and at which a quorum is present, the
shareholders may, by the affirmative vote of the holders of a majority of the
votes entitled to be case thereon, remove any Director or Directors from office
and may elect a successor or successors to fill any resulting vacancies for the
unexpired terms of removed Directors.
SECTION 2.4 REGULAR MEETINGS. After each meeting of shareholders
at which a Board of Directors shall have been elected, the Board so elected
shall meet for the purpose of organization and the transaction of other
business. No notice of such first meeting shall be necessary if held immediately
after the adjournment, and at the site, of such meeting of
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shareholders. Other regular meetings of the Board shall be held without notice
on such dates and at such places within or without the State of Maryland as may
be designated from time to time by the Board.
SECTION 2.5 SPECIAL MEETINGS. Special meetings of the Board may be
called at any time by the Chairman of the Board, the President, the Chief
Operating Officer, or the Secretary of the Corporation, or by a majority of the
Board by vote at a meeting, or in writing with or without a meeting. Such
special meetings shall be held at such place or places within or without the
State of Maryland as may be designated from time to time by the Board. In the
absence of such designation such meetings shall be held at such places as may be
designated in the Notice of Meeting.
SECTION 2.6 NOTICE OF MEETINGS. Except as provided in Section 2.4,
notice of the place, day, and hour of all meetings shall be given to each
Director two days (or more) before the meeting, by delivering the same
personally, or by sending the same by telegraph or telefacsimile, or by leaving
the same at the Director's residence or usual place of business, or, in the
alternative, by mailing such notice three days (or more) before the meeting,
postage prepaid, and addressed to the Director at the Director's last known
business or residence post office address, according to the records of the
Corporation. Unless required by these Bylaws or by resolution of the Board, no
notice of any meeting of the Board need state the business to be transacted
thereat. No notice of any meeting of the Board need be given to any Director who
attends or, to any Director who in writing executed and filed with the records
of the meeting either before or after the holding thereof, waives such notice.
Any meeting of the Board, regular or special, may adjourn from time to time to
reconvene at the same or some other place, and no notice need be given of any
such adjourned meeting other than by announcement at the adjourned meeting.
SECTION 2.7 QUORUM. At all meetings of the Board, one-third of the
Directors (but in no event fewer than two Directors) shall constitute a quorum
for the transaction of business. Except in cases in which it is by statute, by
the charter or by these Bylaws otherwise provided, the vote of a majority of
such quorum at a duly constituted meeting shall be sufficient to elect and pass
any measure. In the absence of a quorum, the Directors present by majority vote
and without notice other than by announcement at the meeting may adjourn the
meeting from time to time until a quorum shall attend. At any such adjourned
meeting at which a quorum shall be present, any business may be transacted which
might have been transacted at the meeting as originally noticed.
SECTION 2.8 VACANCIES. Any vacancy occurring in the Board of
Directors for any cause other than by reason of an increase in the number of
Directors may be filled by a majority of the remaining members of the Board of
Directors, although such majority is less than a quorum. Any vacancy occurring
by reason of an increase in the number of Directors may be filled by action of a
majority of the entire Board of Directors; provided, in either case, that
immediately after filling such vacancy at least two-thirds of the Directors then
holding office shall have been elected to such office by the shareholders at an
annual or special meeting thereof. If at any time after the first annual meeting
of shareholders of the Corporation a majority of the Directors in office shall
consist of Directors elected by the Board of Directors, a meeting of the
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shareholders shall be called forthwith for the purpose of electing the entire
Board of Directors, and the terms of office of the Directors then in office
shall terminate upon the election and qualification of such Board of Directors.
A Director elected by the Board of Directors or the shareholders to fill a
vacancy shall be elected to hold office until the next annual meeting of
shareholders and until his successor is elected and qualifies.
SECTION 2.9 COMPENSATION AND EXPENSES. Directors may, pursuant to
resolution of the Board, be paid fees for their services, which fees may
include, but are not limited to, an annual fee or retainer and/or a fixed fee
for attendance at meetings. In addition, Directors may be reimbursed for
expenses incurred in connection with their attendance at meetings or otherwise
in performing their duties as Directors. Members of committees may be allowed
like compensation and reimbursement. Nothing herein contained shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 2.10 ACTION BY DIRECTORS OTHER THAN AT A MEETING. Any
action required or permitted to be taken at any meeting of the Board, or of any
committee thereof, may be taken without a meeting, if a written consent to such
action is signed by all members of the Board or of such committee, as the case
may be, and such written consent is filed with the minutes of proceedings of the
Board or committee.
SECTION 2.11 AUDIT COMMITTEE. The Board of Directors may by the
affirmative vote of a majority of the entire Board appoint from its members an
Audit Committee composed of two or more Directors who are not "interested
persons" (as defined in the 1940 Act) of the Corporation, as the Board may from
time to time determine. The Audit Committee shall (a) recommend independent
public accountants for selection by the Board, (b) review the scope of audit,
accounting and financial internal controls and the quality and adequacy of the
Corporation's accounting staff with the independent public accountants and such
other persons as may be deemed appropriate, (c) review with the accounting staff
and the independent public accountants the compliance of transactions of the
Corporation with any service provider with the financial terms of applicable
agreements, (d) review reports of the independent public accountants and comment
to the Board when warranted, (e) report to the Board at least once each year and
at such other times as the committee deems desirable, and (f) be directly
available to the independent public accountants and responsible officers of the
Corporation for consultation on audit, accounting and related financial matters.
SECTION 2.12 NOMINATING COMMITTEE OF DIRECTORS. The Board of
Directors may by the affirmative vote of a majority of the entire Board appoint
from its members a Director Nominating Committee composed of two or more
Directors. The Director Nominating Committee shall recommend to the Board a
slate of persons to be nominated for election as Directors by the stockholders
at each annual meeting of stockholders and a person to be elected to fill any
vacancy occurring for any reason in the Board. Notwithstanding anything in this
Section 2.12 to the contrary, so long as the Corporation has in effect one or
more plans pursuant to Rule 12b-1 under the 1940 Act, the selection and
nomination of those Directors who are not "interested persons" (as defined in
the 1940 Act) shall be committed to the discretion of such disinterested
Directors.
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SECTION 2.13 OTHER COMMITTEES. The Board of Directors may appoint
from among its members other committees composed of two or more of its Directors
which shall have such powers as may be delegated or authorized by the resolution
appointing them.
SECTION 2.14 HOLDING OF MEETINGS BY CONFERENCE TELEPHONE CALL. At
any regular or special meeting of the Board or any committee thereof, members
thereof may participate in such meeting by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at such meeting, unless the 1940 Act
specifically requires the Directors to act "in person," in which case such term
shall be construed consistent with Securities and Exchange Commission or staff
releases or interpretations.
SECTION 2.15 QUALIFICATION OF DIRECTORS. No person shall be
qualified to stand for election or appointment as a Director if such person has
already reached the age of 70. Each Director shall retire from service on the
Board of Directors no later than the end of the calendar year in which such
Director reaches age 70, provided that any Director who is an initial Director
and who had reached the age of 70 prior to being appointed as such may continue
to serve as a Director of the Company until the end of the calendar year in
which such Director reaches age 75 and may continue to serve for successive
annual periods thereafter upon the vote of a majority of the other Directors.
ARTICLE III
OFFICERS
SECTION 3.1 EXECUTIVE OFFICERS. The Board of Directors may choose
a Chairman of the Board and a Vice Chairman of the Board from among the
Directors, and shall choose a President, a Secretary and a Treasurer who need
not be Directors. The Board of Directors may choose a Chief Operating Officer,
an Executive Vice President, one or more Senior Vice Presidents, one or more
Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers or assistant officers, none of whom need be
a Director. Any two or more of the above-mentioned offices, except those of
President and a Secretary, may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity if such
instrument be required by law, by the charter, by the Bylaws or by resolution of
the Board of Directors to be executed by any two or more officers. Each such
officer shall hold office until his successor shall have been duly chosen and
qualified, or until he shall have resigned or shall have been removed. Any
vacancy in any of the above offices may be filled for the unexpired portion of
the term of the Board of Directors at any regular or special meeting.
SECTION 3.2 CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Chairman
of the Board, if one be elected, shall preside at all meetings of the Board of
Directors and of the shareholders at which he is present. He shall have and may
exercise such powers as are, from
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time to time, assigned to him by the Board of Directors. The Vice Chairman of
the Board, if one be elected, shall, when present and in the absence of the
Chairman of the Board, preside at all meetings of the shareholders and
Directors, and he shall perform such other duties as may from time to time be
assigned to him by the Board of Directors or as may be required by law.
SECTION 3.3 PRESIDENT. In the absence of the Chairman or Vice
Chairman of the Board, the President shall preside at all meetings of the
shareholders and of the Board at which the President is present; shall be the
chief executive officer; and in general, shall perform all duties incident to
the office of a president of a Maryland corporation, and such other duties, as
from time to time, may be assigned to him by the Board.
SECTION 3.4 VICE PRESIDENTS. The Vice President or Vice
Presidents, including any Executive or Senior Vice President(s), at the request
of the President or in the President's absence or during the President's
inability or refusal to act, shall perform the duties and exercise the functions
of the President, and when so acting shall have the powers of the President. If
there be more than one Vice President, the Board may determine which one or more
of the Vice Presidents shall perform any of such duties or exercise any of such
functions, or if such determination is not made by the Board, the President may
make such determination. The Vice President or Vice Presidents shall have such
other powers and perform such other duties as may be assigned by the Board, the
Chairman of the Board, or the President.
SECTION 3.5 CHIEF OPERATING OFFICER. The Chief Operating Officer
shall have the authority and duties that generally pertain to such office,
including, but not limited to, those delegated by the Chairman or the President.
SECTION 3.6 SECRETARY AND ASSISTANT SECRETARIES. The Secretary
shall keep the minutes of the meetings of the shareholders, of the Board and of
any committees, in books provided for the purpose; shall see that all notices
are duly given in accordance with the provisions of these Bylaws or as required
by law; be custodian of the records of the Corporation; see that the corporate
seal is affixed to all documents the execution of which, on behalf of the
Corporation, under its seal, is duly authorized, and when so affixed may attest
the same; and in general perform all duties incident to the office of a
secretary of a Maryland corporation, and such other duties as, from time to
time, may be assigned to him by the Board, the Chairman of the Board, or the
President.
The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board, the President or the
Chairman of the Board, shall, in the absence of the Secretary or in the event of
the Secretary's inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the Board may from time to time prescribe.
SECTION 3.7 TREASURER AND ASSISTANT TREASURERS. The Treasurer
shall have charge of and be responsible for all funds, securities, receipts and
disbursements of the Corporation, and shall deposit, or cause to be deposited in
the name of the Corporation, all moneys or other
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valuable effects in such banks, trust companies or other depositories as shall,
from time to time, be selected by the Board in accordance with Section 5.4 of
these Bylaws; render to the Chief Operating Officer, President, the Chairman of
the Board and to the Board, whenever requested, an account of the financial
condition of the Corporation; and in general, perform all the duties incident to
the office of a treasurer of a corporation, such other duties as may be assigned
to him by the Board, the President, the Chief Operating Officer or the Chairman
of the Board.
The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board, the President, the
Chief Operating Officer or the Chairman of the Board shall, in the absence of
the Treasurer or in the event of the Treasurer's inability or refusal to act,
perform the duties and exercise the powers of the Treasurer and shall perform
other duties and have such other powers as the Board may from time to time
prescribe.
SECTION 3.8 SUBORDINATE OFFICERS. The Board may from time to time
appoint such subordinate officers as it may deem desirable. Each such officer
shall hold office for such period and perform such duties as the Board, the
President, the Chief Operating Officer or the Chairman of the Board may
prescribe. The Board may, from time to time, authorize any committee or officer
to appoint and remove subordinate officers and prescribe the duties thereof.
SECTION 3.9 REMOVAL. Any officer or agent of the Corporation may
be removed by the Board whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contractual rights, if any, of the person so removed.
ARTICLE IV
STOCK
SECTION 4.1 CERTIFICATES. In accordance with Section 2-210 of the
Maryland General Corporation Law, shareholders will not be entitled to a
certificate or certificates which represent the number of shares of stock owned
by him or her in the Corporation, unless a majority of the Board of Directors
otherwise provides by resolution. At the time of issuance of shares of stock,
the Corporation shall send, or cause to be sent, to the shareholder a written
statement of the information otherwise required on stock certificates.
SECTION 4.2 TRANSFERS. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem necessary or
expedient concerning the issue, transfer and registration of shares of stock;
and may appoint transfer agents and registrars thereof. The duties of transfer
agent and registrar, if any, may be combined.
SECTION 4.3 STOCK LEDGERS. A stock ledger, containing the names
and addresses of the shareholders of the Corporation and the number of shares of
each class held by them, respectively, shall be kept by the Transfer Agent of
the Corporation. The stock ledger may be in
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written form or in any other form which can be converted within a reasonable
time into written form for visual inspection.
SECTION 4.4 RECORD DATES. The Board is hereby empowered to fix, in
advance, a date as the record date for the purpose of determining shareholders
entitled to notice of, or to vote at, any meeting of shareholders, or
shareholders entitled to receive payment of any dividend, capital gains
distribution or the allotment of any rights, or in order to make a determination
of shareholders for any other proper purpose. Such date in any case shall be not
more than ninety days, and in case of a meeting of shareholders, not less than
ten days, prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken.
ARTICLE V
GENERAL PROVISIONS
SECTION 5.1 DIVIDENDS. Dividends or distribution upon the capital
stock of the Corporation, subject to provisions of the charter, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends or distributions may be paid only in cash or in shares of the
capital stock, subject to the provisions of the Articles of Incorporation.
Before payment of any dividend or distribution there may be set
aside out of any funds of the Corporation available for dividends or
distributions such sum or sums as the Directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends or distributions or for maintaining
any property of the Corporation, or for such other purpose as the Directors
shall think conducive to the interest of the Corporation, and the Directors may
modify or abolish any such reserve in the manner in which it was created.
SECTION 5.2 CHECKS. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board may from time to time designate.
SECTION 5.3 FISCAL YEAR. The fiscal year of the Corporation shall
be fixed by resolution of the Board of Directors.
SECTION 5.4 CUSTODIAN. All securities and cash of the Corporation
shall be placed in the custody of a bank or trust company ("Custodian") having
(according to its last published report) not less than $2,000,000 aggregate
capital, surplus and undivided profits, provided such a Custodian can be found
ready and willing to act (or maintained in such other manner as is consistent
with Section 17(f) of the Investment Company Act of 1940 and the rules and
regulations promulgated thereunder). The Corporation shall enter into a written
contract with the Custodian regarding the powers, duties and compensation of the
Custodian with respect to the cash and securities of the Corporation held by the
Board of Directors of the Corporation. The
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Corporation shall upon the resignation or inability to serve of the Custodian
use its best efforts to obtain a successor custodian; require that the cash and
securities owned by the Corporation be delivered directly to the successor
custodian; and in the event that no successor custodian can be found, submit to
the shareholders, before permitting delivery of the cash and securities owned by
the Corporation to other than a successor custodian, the question whether or not
the Corporation shall be liquidated or shall function without a custodian.
SECTION 5.5 SEAL. The Board of Directors may provide a suitable
seal, bearing the name of the Corporation, which shall be in the custody of the
Secretary. The Board of Directors may authorize one or more duplicate seals and
provide for the custody thereof.
SECTION 5.6 REPRESENTATION OF SHARES. Any officer of the
Corporation is authorized to vote, represent and exercise for the Corporation
any and all rights incident to any shares of any corporation or other business
enterprise owned by the Corporation.
SECTION 5.7 PROHIBITED TRANSACTIONS. No officer or Director of the
Corporation or of its investment adviser shall deal for or on behalf of the
Corporation with himself, as principal or agent, or with any corporation or
partnership in which he has a financial interest. This prohibition shall not
prevent: (a) officers or Directors of the Corporation from having a financial
interest in the Corporation, its principal underwriter or its investment
adviser; (b) the purchase of securities for the portfolio of the Corporation or
the sale of securities owned by the Corporation through a securities dealer, one
or more of whose partners, officers or Directors is an officer or Director of
the Corporation, provided such transactions are handled in the capacity of
broker only and provided commissions charged do not exceed customary brokerage
charges for such service; or (c) the employment of legal counsel, registrar,
transfer agent, dividend disbursing agent, or custodian having a partner,
officer or Director who is an officer or Director of the Corporation, provided
only customary fees are charged for services rendered to or for the benefit of
the Corporation.
SECTION 5.8 BONDS. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties, with one or more sureties
and in such amount as may be satisfactory to the Board of Directors. The Board
of Directors shall, in any event, require the Corporation to provide and
maintain a bond issued by a reputable fidelity insurance company, against
larceny and embezzlement, covering each officer and employee of the Corporation
who may singly, or jointly with others, have access to securities or funds of
the Corporation, either directly or through authority to draw upon such funds,
or to direct generally the disposition of such securities, such bond or bonds to
be in such reasonable amount as a majority of the Board of Directors who are not
such officers or employees of the Corporation shall determine with due
consideration to the value of the aggregate assets of the Corporation to which
any such officer or employee may have access, or in any amount or upon such
terms as the Securities and Exchange Commission may prescribe by order, rule or
regulations.
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SECTION 5.9 ANNUAL STATEMENT OF AFFAIRS. The President or the
Controller shall prepare annually a full and correct statement of the affairs of
the Corporation, to include a balance sheet and a financial statement of
operations for the preceding fiscal year. The statement of affairs shall be
placed on file at the Corporation's principal office within 120 days after the
end of the fiscal year.
ARTICLE VI
AMENDMENT OF BY-LAWS
These of the Corporation may be altered, amended, added to or
repealed by majority vote of the shareholders or by majority vote of the entire
Board.
Dated: July 10, 1996
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EXHIBIT 99.D1
INVESTMENT ADVISORY AGREEMENT
NATIONS LIFEGOAL FUNDS, INC.
THIS AGREEMENT is made as of this 15th day of October, 1996, by
and between NATIONS LIFEGOAL FUNDS, INC., a Maryland corporation (the
"Company"), and NATIONSBANC ADVISORS, INC., a North Carolina corporation (the
"Adviser"), on behalf of those portfolios of the Company now or hereafter
identified on Schedule I hereto (each a "Fund" and, collectively, the "Funds").
RECITALS
WHEREAS, the Company is registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act") as an open-end, series management investment
company; and
WHEREAS, the Adviser is registered with the Commission under the
Investment Advisers Act of 1940, as amended (the "Advisers Act") as an
investment adviser; and
WHEREAS, the Company and the Adviser desire to enter into an
agreement to provide for investment advisory services to the Company upon the
terms and conditions hereinafter set forth; and
WHEREAS, the Company and the Adviser contemplate that certain
duties of the Adviser under this Agreement will be delegated to one or more
sub-investment adviser(s) (the "Sub-Adviser(s)") pursuant to separate
sub-advisory agreement(s) (the "Sub-Advisory Agreement(s)");
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. ADVISORY SERVICES. The Adviser shall act as investment adviser
for the Funds and shall, in such capacity, manage and supervise the investment
and reinvestment of the cash, securities or other properties comprising the
Funds' assets, subject at all times to the policies and control of the Company's
Board of Directors. The Adviser shall give the Funds the benefit of its best
judgment, efforts and facilities in rendering its services as investment
adviser.
2. INVESTMENT ANALYSIS AND IMPLEMENTATION. In carrying out its
obligations under paragraph 1 hereof, the Adviser shall:
(a) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial
data, domestic, foreign or otherwise, whether affecting the
economy generally or the Funds specifically, and whether
concerning the individual issuers whose securities are included in
the Funds
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or the activities in which such issuers engage, or with respect to
securities which the Adviser considers desirable for inclusion in
the Funds;
(b) invest and reinvest, on an ongoing basis, assets
held in the Funds in strict accordance with the investment
policies of the Funds as set forth in the registration statement
of the Company with respect to the Funds, as the same may be
amended from time to time;
(c) select brokers and dealers to execute portfolio
transactions for the Funds and select the markets on or in which
the transactions will be executed;
(d) vote, either in person or by general or limited
proxy, or refrain from voting, any securities held in the Funds
for any purposes; exercise or sell any subscription or conversion
rights; consent to and join in or oppose any voting trusts,
reorganizations, consolidations, mergers, foreclosures and
liquidations and in connection therewith, deposit securities, and
accept and hold other property received therefor;
(e) determine on an ongoing basis the overall
investment strategy with respect to the Funds, and ensure on an
ongoing basis adherence to such strategy;
(f) use the same skill and care in providing
services to the Funds as it uses in providing services to
fiduciary accounts for which it has investment responsibilities;
(g) furnish the Company's Board of Directors with
such periodic and special reports as the Board of Directors may
request; and
(h) take, on behalf of the Funds, all actions which
appear necessary to carry into effect such purchase and sale
programs and supervisory functions set forth in this Paragraph 2.
3. DELEGATION OF RESPONSIBILITIES. Subject to the approval of the
Company's Board of Directors and, if required, the shareholders of the Funds,
the Adviser may, pursuant to the Sub-Advisory Agreement(s), delegate to the
Sub-Adviser(s) those of its duties hereunder identified in the Sub-Advisory
Agreement(s), provided that the Adviser shall continue to supervise and monitor
the performance of the duties delegated to the Sub-Adviser(s) and any such
delegation shall not relieve the Adviser of its duties and obligations under
this Agreement. The Adviser shall be solely responsible for providing
compensation, if any, to the Sub-Adviser(s) for services rendered under the
Sub-Advisory Agreement(s).
4. CONTROL BY BOARD OF DIRECTORS. Any investment activities
undertaken by the Adviser pursuant to this Agreement, as well as any other
activities undertaken by the Adviser on behalf of the Funds, shall at all times
be subject to any directives of the Company's Board of Directors.
2
<PAGE>
5. COMPLIANCE WITH APPLICABLE REQUIREMENTS. In carrying out its
obligations under this Agreement, the Adviser shall at all times conform to:
(a) all applicable provisions of the 1940 Act, the
Advisers Act and any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of
the Company, as the same may be amended from time to time, under
the Securities Act of 1933 and the 1940 Act;
(c) the provisions of the Articles of Incorporation
of the Company, as the same may be amended from time to time;
(d) the provisions of the By-laws of the Company, as
the same may be amended from time to time; and
(e) any other applicable provisions of state or
federal law.
6. BROKER-DEALER RELATIONSHIPS. The Adviser is responsible for the
purchase and sale of securities for the Funds, broker-dealer selection, and
negotiation of brokerage commission rates. The Adviser's primary consideration
in effecting a security transaction will be to obtain the best price and
execution. In selecting a broker-dealer to execute each particular transaction
for a Fund, the Adviser will take the following into consideration: the best net
price available, the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the Fund on a continuing
basis. Accordingly, the price to the Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Company's Board of Directors may from
time to time determine, the Adviser shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise solely by
reason of having caused a Fund to pay a broker or dealer that provides brokerage
and research services to the Adviser an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction, if the
Adviser determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
overall responsibilities of the Adviser with respect to the Fund and to other
clients of the Adviser. The Adviser is further authorized to allocate the orders
placed by it on behalf of the Funds to brokers and dealers who also provide
research or statistical material, or other services to the Funds or to the
Adviser. Such allocation shall be in such amounts and proportions as the Adviser
shall determine and the Adviser will report on said allocations regularly to the
Board of Directors of the Company indicating the brokers to whom such
allocations have been made and the basis therefor.
3
<PAGE>
7. COMPENSATION. Each Fund shall pay the Adviser, as compensation
for services rendered and expenses assumed hereunder, fees, payable monthly, at
the annual rate of 0.25% of the average daily net assets of the Fund. Each
Fund's obligations hereunder are several, and not joint, and no Fund shall be
responsible for the payment of any fees of any other Fund.
8. EXPENSES OF THE FUNDS. The Adviser hereby agrees to bear any
and all fees and expenses of the Funds (other than the management fee payable
under this Agreement), except taxes, brokerage fees and commissions,
extraordinary expenses, and any applicable Rule 12b-1 fees, shareholder
servicing fees and/or shareholder administration fees. The expenses borne by the
Adviser include, but are not limited to, legal, auditing, or governmental fees,
the cost of preparing share certificates, custodian, transfer agent and
shareholder service agent costs, expenses of issue, sale, redemption and
repurchase of shares, expenses of registering and qualifying shares for sale,
expenses relating to directors and shareholder meetings, the cost of preparing
and distributing reports and notices to shareholders, the fees and other
expenses incurred by the Funds in connection with membership in investment
company organizations and the cost of printing prospectuses and statements of
additional information distributed to the Funds' shareholders.
9. NON-EXCLUSIVITY. The services of the Adviser to the Funds are
not to be deemed to be exclusive, and the Adviser shall be free to render
investment advisory and administrative or other services to others (including
other investment companies) and to engage in other activities. It is understood
and agreed that officers or directors of the Adviser may serve as officers and
directors of the Company, and that officers or directors of the Company may
serve as officers or directors of the Adviser, to the extent that such services
may be permitted by law, and that the officers and directors of the Adviser are
not prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.
10. RECORDS. The Adviser shall, with respect to orders the Adviser
places for the purchase and sale of portfolio securities of the Funds, maintain
or arrange for the maintenance of the documents and records required pursuant to
Rule 31a-1 under the 1940 Act as well as such records as the Funds'
administrator reasonably requests to be maintained, including, but not limited
to, trade tickets and confirmations for portfolio trades. All such records shall
be maintained in a form acceptable to the Funds and in compliance with the
provisions of Rule 31a-1. All such records will be the property of the Funds and
will be available for inspection and use by the Funds. The Adviser will promptly
notify the Funds' administrator if it experiences any difficulty in maintaining
the records in an accurate and complete manner.
11. TERM AND APPROVAL. This Agreement shall become effective with
respect to a Fund when approved in accordance with the requirements of the 1940
Act, and shall thereafter continue from year to year, provided that the
continuation of the Agreement is specifically approved at least annually:
4
<PAGE>
(a) (i) by the Company's Board of Directors or (ii) by the
vote of "a majority of the outstanding voting securities" of the
Fund (as defined in Section 2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the Company's
Directors who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of a party to this Agreement
(other than as Directors of the Company), by votes cast in person
at a meeting specifically called for such purpose.
12. TERMINATION. This Agreement may be terminated with respect to a
Fund at any time, without the payment of any penalty, by vote of the Company's
Board of Directors or by vote of a majority of a Fund's outstanding voting
securities, or by the Adviser, on sixty (60) days' written notice to the other
party. The notice provided for herein may be waived by the party entitled to
receipt thereof. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" for purposes of this paragraph having the
meaning defined in Section 2(a)(4) of the 1940 Act.
13. LIABILITY OF ADVISER. In the absence of willful misfeasance, bad
faith, negligence or reckless disregard of obligations or duties hereunder on
the part of the Adviser or any of its officers, directors, employees or agents,
the Adviser shall not be subject to liability to the Company or to any
shareholder of the Company for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
14. INDEMNIFICATION. In the absence of willful misfeasance, bad
faith, negligence or reckless disregard of duties hereunder on the part of the
Adviser or any of its officers, directors, employees or agents, the Company
hereby agrees to indemnify and hold harmless the Adviser against all claims,
actions, suits or proceedings at law or in equity whether brought by a private
party or a governmental department, commission, board, bureau, agency or
instrumentality of any kind, arising from the advertising, solicitation, sale,
purchase or pledge of securities, whether of the Funds or other securities,
undertaken by the Funds, their officers, directors, employees or affiliates,
resulting from any violations of the securities laws, rules, regulations,
statutes and codes, whether federal or of any state, by the Funds, their
officers, directors, employees or affiliates. Federal and state securities laws
impose liabilities under certain circumstances on persons who act in good faith,
and nothing herein shall constitute a waiver or limitation of any rights which a
Fund may have and which may not be waived under any applicable federal and state
securities laws.
15. NOTICES. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Company
shall be c/o Stephens Inc., 111 Center Street, Suite 300, Little Rock, Arkansas
72201 and that of the Adviser shall be One NationsBank Plaza, Charlotte, North
Carolina 28255.
5
<PAGE>
16. QUESTIONS OF INTERPRETATION. Any question of interpretation of
any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act or the Advisers Act shall be
resolved by reference to such terms or provision of the 1940 Act or the Advisers
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Commission issued pursuant to the 1940 Act or the Advisers Act.
In addition, where the effect of a requirement of the 1940 Act or the Advisers
Act reflected in any provision of this Agreement is revised by rule, regulation
or order of the Commission, such provision shall be deemed to incorporate the
effect of such rule, regulation or order.
17. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. No amendment of this
Agreement affecting a Fund shall be effective until approved by vote of a
majority of the outstanding voting securities of such Fund. However, this shall
not prevent the Adviser from reducing, limiting or waiving its fee.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to
be executed in duplicate by their respective officers on the day and year first
written above.
NATIONS LIFEGOAL FUNDS, INC.
on behalf of the Funds
By: /s/ A. Max Walker
--------------------------------
A. Max Walker
President and Chairman of the
Board of Directors
NATIONSBANC ADVISORS, INC.
By: /s/ Mark H. Williamson
----------------------------------
Mark H. Williamson
President and Director
7
<PAGE>
SCHEDULE I
LifeGoal Growth Portfolio
LifeGoal Balanced Growth Portfolio
LifeGoal Income and Growth Portfolio
8
EXHIBIT 99.D2
SUB-ADVISORY AGREEMENT
NATIONS LIFEGOAL FUNDS, INC.
THIS AGREEMENT is made as of this 15th day of October, 1996, by
and among NATIONSBANC ADVISORS, INC., a North Carolina corporation (the
"Adviser"), TRADESTREET INVESTMENT ASSOCIATES, INC., a Maryland corporation (the
"Sub-Adviser"), and NATIONS LIFEGOAL FUNDS, INC., a Maryland corporation (the
"Company"), on behalf of those portfolios of the Company now or hereafter
identified on Schedule I hereto (each a "Fund" and collectively, the "Funds").
RECITALS
WHEREAS, the Company is registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act") as an open-end, series management investment
company; and
WHEREAS, the Adviser is registered with the Commission under the
Investment Advisers Act of 1940, as amended (the "Advisers Act") and engages in
the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser also is registered with the Commission
under the Advisers Act as an investment adviser; and
WHEREAS, the Adviser and the Company have entered into an
Investment Advisory Agreement of even date herewith (the "Investment Advisory
Agreement"), pursuant to which the Adviser shall act as investment adviser with
respect to the Funds; and
WHEREAS, pursuant to such Investment Advisory Agreement, the
Adviser, with the approval of the Company, wishes to retain the Sub-Adviser for
purposes of rendering advisory services to the Adviser and the Company in
connection with the Funds upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. APPOINTMENT OF SUB-ADVISER. The Adviser hereby appoints, and
the Company hereby approves, the Sub-Adviser to render investment research and
advisory services to the Adviser and the Company with respect to the Funds,
under the supervision of the Adviser and subject to the policies and control of
the Company's Board of Directors, and the Sub-Adviser hereby accepts such
appointment, all subject to the terms and conditions contained herein.
<PAGE>
2. INVESTMENT SERVICES. The specific duties of the Adviser
delegated to the Sub-Adviser shall be the following:
(a) obtaining and evaluating pertinent information
about significant developments and economic, statistical and
financial data, domestic, foreign or otherwise, whether affecting
the economy generally or the Funds specifically, and whether
concerning the individual issuers whose securities are included in
the Funds or the activities in which such issuers engage, or with
respect to securities which the Adviser or Sub-Adviser considers
desirable for inclusion in the Funds;
(b) investing and reinvesting, on an ongoing basis,
assets held in the Funds in strict accordance with the investment
policies of the Funds as set forth in the registration statement
of the Company with respect to the Funds, as the same may be
amended from time to time;
(c) in accordance with policies and procedures
established by the Board of Directors of the Company and the
Adviser, selecting brokers and dealers to execute portfolio
transactions for the Funds and selecting the markets on or in
which the transactions will be executed;
(d) voting, either in person or by general or
limited proxy, or refraining from voting, any securities held in
the Funds for any purposes; exercising or selling any subscription
or conversion rights; consenting to and joining in or opposing any
voting trusts, reorganizations, consolidations, mergers,
foreclosures and liquidations and in connection therewith,
depositing securities, and accepting other property received
therefor; and
(e) performing other acts necessary or appropriate
in connection with the proper management of the Funds, consistent
with its obligations hereunder, and as may be directed by the
Adviser and/or the Company's Board of Directors.
3. CONTROL BY BOARD OF DIRECTORS. As is the case with respect to
the Adviser under the Investment Advisory Agreement, any investment activities
undertaken by the Sub-Adviser pursuant to this Agreement, as well as any other
activities undertaken by the Sub-Adviser with respect to the Funds, shall at all
times be subject to any directives of the Board of Directors of the Company.
4. COMPLIANCE WITH APPLICABLE REQUIREMENTS. In carrying out its
obligations under this Agreement, the Sub-Adviser shall at all times conform to:
(a) all applicable provisions of the 1940 Act, the
Advisers Act and any rules and regulations adopted thereunder;
-2-
<PAGE>
(b) the provisions of the registration statement of
the Company applicable to the Funds, as the same may be amended
from time to time, under the Securities Act of 1933 and the 1940
Act;
(c) the provisions of the Articles of Incorporation
of the Company, as the same may be amended from time to time;
(d) the provisions of the By-Laws of the Company, as
the same may be amended from time to time;
(e) any other applicable provisions of state or
federal law.
In addition, any code of ethics adopted by the Sub-Adviser
pursuant to Rule 17j-1 under the 1940 Act shall include policies, prohibitions
and procedures which substantially conform to the recommendations regarding
personal investing approved by the Board of Governors of the Investment Company
Institute on June 30, 1994, as such recommendations may be amended from time to
time.
5. BROKER-DEALER RELATIONSHIPS. The Sub-Adviser is responsible for
the purchase and sale of securities for the Funds, broker-dealer selection, and
negotiation of brokerage commission rates. The Sub-Adviser's primary
consideration in effecting a security transaction will be to obtain the best
price and execution. In selecting a broker-dealer to execute each particular
transaction for a Fund, the Sub-Adviser will take the following into
consideration: the best net price available, the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the Fund on a continuing basis. Accordingly, the price to the
Fund in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered. Subject to such policies as the Adviser or
the Company's Board of Directors may from time to time determine, the
Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of having caused a
Fund to pay a broker or dealer that provides brokerage and research services to
the Sub-Adviser an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Sub-Adviser determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the Fund and to other
clients of the Sub-Adviser. The Sub-Adviser is further authorized to allocate
the orders placed by it on behalf of the Funds to brokers and dealers who also
provide research or statistical material, or other services to the Funds or to
the Sub-Adviser. Such allocation shall be in such amounts and proportions as the
Sub-Adviser shall determine, and the Sub-Adviser will report on said allocations
regularly to the
-3-
<PAGE>
Adviser and to the Board of Directors of the Company indicating the brokers to
whom such allocations have been made and the basis therefor.
6. COMPENSATION. The Adviser shall pay the Sub-Adviser, as
compensation for services rendered hereunder, fees, payable monthly, at the
annual rate of 0.05% of the average daily net assets of each Fund. It is
understood that the Adviser shall be responsible for the Sub-Adviser's fee for
its services hereunder, and the Sub-Adviser agrees that it shall have no claim
against the Company or the Fund with respect to compensation under this
Agreement. The Sub-Adviser's fees shall be pro-rated for portions of months in
which sub-advisory services are provided.
The average daily net asset value of the Funds shall be determined
in the manner set forth in the Articles of Incorporation and registration
statement of the Company, as amended from time to time.
7. EXPENSES OF THE FUNDS. All of the ordinary business expenses
incurred by the Company in the operations of the Funds and the offering of their
shares shall be borne by the Funds unless specifically provided otherwise in
this Agreement or in the Investment Advisory Agreement.
8. NON-EXCLUSIVITY. The services of the Sub-Adviser to the Adviser
and the Company with respect to the Fund are not to be deemed to be exclusive,
and the Sub-Adviser shall be free to render investment advisory and
administrative or other services to others (including other investment
companies) and to engage in other activities. It is understood and agreed that
the officers and directors of the Sub-Adviser are not prohibited from engaging
in any other business activity or from rendering services to any other person,
or from serving as partners, officers, directors or trustees of any other firm
or trust, including other investment advisory companies.
9. RECORDS. The Sub-Adviser shall, with respect to the orders the
Sub-Adviser places for the purchases and sales of portfolio securities of the
Funds, maintain or arrange for the maintenance of the documents and records
required pursuant to Rule 31a-1 under the 1940 Act as well as such records as
the Funds' administrator reasonably requests to be maintained, including, but
not limited to, trade tickets and confirmations for portfolio trades. All such
records shall be maintained in a form acceptable to the Funds and in compliance
with the provisions of Rule 31a-1. All such records will be the property of the
Funds and will be available for inspection and use by the Adviser or the Funds
upon request. The Sub-Adviser will promptly notify the Adviser and the Fund's
administrator if it experiences any difficulty in maintaining the records in an
accurate and complete manner.
10. TERM AND APPROVAL. This Agreement shall become effective with
respect to each Fund when approved in accordance with the requirements of the
1940 Act, and shall thereafter continue in force and effect for one year, and
may be continued
-4-
<PAGE>
from year to year with respect to each Fund thereafter, provided that the
continuation of the Agreement is specifically approved at least annually:
(a) (i) by the Company's Board of Directors or (ii) by the
vote of "a majority of the outstanding voting securities" of the
Fund (as defined in Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the Directors
of the Company who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of a party to
this Agreement (other than as Directors of the Company), by votes
cast in person at a meeting specifically called for such purpose.
11. TERMINATION. This Agreement may be terminated at any time with
respect to a Fund, without the payment of any penalty, by vote of the Company's
Board of Directors or by vote of a majority of the Fund's outstanding voting
securities, or by the Adviser or by the Sub-Adviser, on sixty (60) days' written
notice to the other parties to this Agreement. Any party entitled to notice may
waive the notice provided for herein. This Agreement shall automatically
terminate in the event of its assignment, the term "assignment" for purposes of
this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act.
12. LIABILITY OF SUB-ADVISER. In the absence of willful
misfeasance, bad faith, negligence or reckless disregard of obligations or
duties hereunder on the part of the Sub-Adviser or any of its officers,
directors, employees or agents, the Sub-Adviser shall not be subject to
liability to the Adviser or to the Company for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security.
13. INDEMNIFICATION. In the absence of willful misfeasance, bad
faith, negligence or reckless disregard of duties hereunder on the part of the
Sub-Adviser, or any officers, directors, employees or agents thereof, the
Company hereby agrees to indemnify and hold harmless the Sub-Adviser against all
claims, actions, suits or proceedings at law or in equity whether brought by a
private party or a governmental department, commission, board, bureau, agency or
instrumentality of any kind, arising from the advertising, solicitation, sale,
purchase or pledge of securities, whether of the Funds or other securities,
undertaken by the Funds, their officers, directors, employees, agents or
affiliates, resulting from any violations of the securities laws, rules,
regulations, statutes and codes, whether federal or of any state, by the Funds,
their officers, directors, employees or affiliates. Federal and state securities
laws impose liabilities under certain circumstances on persons who act in good
faith, and nothing herein shall constitute a waiver or limitation of any rights
which a Fund may have and which may not be waived under any applicable federal
and state securities laws.
-5-
<PAGE>
14. NOTICES. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to such address as may be
designated for the receipt of such notice, with a copy to the Company. Until
further notice, it is agreed that the address of the Company shall be 111 Center
Street, Little Rock, Arkansas 72201; that of the Sub-Adviser shall be One
NationsBank Plaza, Charlotte, North Carolina 28255; and that of the Adviser
shall be One NationsBank Plaza, Charlotte, North Carolina 28255.
15. QUESTIONS OF INTERPRETATION. Any question of interpretation of
any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act or the Advisers Act shall be
resolved by reference to such term or provision of the 1940 Act or the Advisers
Act and to interpretations thereof, if any, by the United States courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Commission issued pursuant to the 1940 Act or the Advisers Act.
In addition, where the effect of a requirement of the 1940 Act or the Advisers
Act reflected in any provision of this Agreement is revised by rule, regulation
or order of the Commission, such provision shall be deemed to incorporate the
effect of such rule, regulation or order.
16. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. No amendment of this
Agreement affecting a Fund shall be effective until approved by vote of a
majority of the outstanding voting securities of such Fund. However, this shall
not prevent the Sub-Adviser from reducing, limiting or waiving its fee.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in triplicate by their respective officers on the day and year
first written above.
NATIONS LIFEGOAL FUNDS, INC.,
on behalf of the Funds
By: /s/ A. Max Walker
-------------------------------
A. Max Walker
President and Chairman of the
Board of Directors
NATIONSBANC ADVISORS, INC.
By:/s/ Mark H. Williamson
--------------------------------
Mark H. Williamson
President and Director
TRADESTREET INVESTMENT
ASSOCIATES, INC.
By:/s/ Andrew M. Silton
--------------------------------
Andrew M. Silton
President and Director
-7-
<PAGE>
SCHEDULE I
----------
LifeGoal Growth Portfolio
LifeGoal Balanced Growth Portfolio
LifeGoal Income and Growth Portfolio
-8-
EXHIBIT 99.E
DISTRIBUTION AGREEMENT
NATIONS LIFEGOAL FUNDS, INC.
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Gentlemen:
This is to confirm that, in consideration of the agreements
hereinafter contained, the undersigned, Nations LifeGoal Funds, Inc. (the
"Company"), a Maryland corporation, has agreed that Stephens Inc. (the
"Distributor") shall be, for the period of this Agreement, the exclusive
distributor of the shares of common stock in all classes of shares ("Shares") of
the investment portfolios of the Company listed on Schedule I (individually, a
"Portfolio" and collectively the "Portfolios"). Absent written notification to
the contrary by either the Company or the Distributor, each new investment
portfolio established in the future shall automatically become a "Portfolio" for
all purposes hereunder and shares of each new class established in the future
shall automatically become "Shares" for all purposes hereunder as if set forth
on Schedule I.
1. Services as Distributor.
1.1 The Distributor will act as agent for the distribution of
Shares in accordance with the instructions of the Company's Board of Directors
and the Company's registration statement and prospectus then in effect under the
Securities Act of 1933, as amended (the "1933 Act"), and will transmit promptly
any orders received by it for the purchase or redemption of Shares to the
Company or its transfer agent.
1.2 The Distributor agrees to use appropriate efforts to solicit
orders for the sale of Shares and will undertake such advertising and promotion
as it believes appropriate in connection with such solicitation. The Company
understands that the Distributor is and may in the future be the distributor of
shares of other investment company portfolios ("Funds") including Funds having
investment objectives similar to those of the Portfolios. The Company further
understands that existing and future investors in the Portfolios may invest in
shares of such other Funds. The Company agrees that the Distributor's duties to
such Funds shall not be deemed in conflict with its duties to the Company under
this paragraph 1.2.
1.3 The Distributor shall, at its own expense, finance such
activities as it deems reasonable and which are primarily intended to result in
the sale of Shares, including, but not limited to, advertising, compensation of
underwriters, dealers and sales personnel, the printing and mailing of
prospectuses to other than current shareholders, and the printing and mailing of
sales literature. The Distributor shall be responsible for reviewing and
providing advice and counsel on all sales literature (e.g., advertisements,
brochures and shareholder communications)
1
<PAGE>
with respect to each of the Portfolios. In addition, the Distributor will
provide one or more persons, during normal business hours, to respond to
telephone questions with respect to the Portfolios.
1.4 All activities by the Distributor and its agents and employees
as distributor of Shares shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made or
adopted pursuant to the Investment Company Act of 1940, as amended ("1940 Act")
by the Securities and Exchange Commission (the "SEC") or any securities
association registered under the Securities Exchange Act of 1934.
1.5 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by other circumstances of any kind,
the Company's officers may decline to accept any orders for, or make any sales
of Shares until such time as those officers deem it advisable to accept such
orders and to make such sales.
1.6 The Company agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the registration or
qualification of Shares for sale in such states as the Distributor may designate
to the Company and the Company may approve, and the Company shall pay all fees
and other expenses incurred in connection with such registration or
qualification.
1.7 The Company shall furnish from time to time, for use in
connection with the sale of Shares, such information with respect to the
Portfolios and Shares as the Distributor may reasonably request; and the Company
warrants that the statements contained in any such information shall fairly show
or represent what they purport to show or represent. The Company shall also
furnish the Distributor upon request with: (a) audited annual and unaudited
semi-annual statements of the Company's books and accounts with respect to each
Portfolio, and, (b) from time to time such additional information regarding the
Portfolios' financial condition as the Distributor may reasonably request.
1.8 The Distributor may be reimbursed for all or a portion of the
expenses described above to the extent permitted by a distribution plan adopted
by the Company on behalf of a Portfolio pursuant to Rule 12b-1 under the 1940
Act. No provision of this Agreement shall be deemed to prohibit any payments by
a Portfolio to the Distributor or by a Portfolio or the Distributor to
investment dealers, banks or other financial institutions through whom shares of
the Portfolio are sold where such payments are made under a distribution plan
adopted by the Company on behalf of such Portfolio pursuant to Rule 12b-1 under
the 1940 Act. In addition, the Distributor shall be entitled to retain any
front-end sales charge imposed upon the sale of the shares (and reallow a
portion thereof) as specified in the Portfolio's Registration Statement and the
Company shall pay to the Distributor the proceeds from any contingent deferred
sales charge imposed on the redemption of the shares as specified in the
Portfolio's Registration Statement.
1.9 The Distributor will execute and deliver agreements with
broker/dealers, financial institutions and other industry professionals based on
the forms attached hereto or based
2
<PAGE>
on the additional forms of agreement approved from time to time by the Company's
Board of Directors with respect to the various classes of shares of the
Portfolios, including but not limited to forms of sales support agreements
approved in connection with a distribution approved in accordance with Rule
12b-1 under the 1940 Act.
2. Representations; Indemnification.
2.1 The Company represents to the Distributor that all
registration statements and prospectuses filed by the Company with the SEC under
the 1933 Act, with respect to Shares have been prepared in conformity with the
requirements of the 1933 Act and rules and regulations of the SEC thereunder. As
used in this Agreement, the terms "registration statement" and "prospectus"
shall mean any registration statement and then current prospectus (together with
any related then current statement of additional information) filed with the SEC
with respect to Shares, and any amendments and supplements thereto which at any
time shall have been filed therewith. The Company represents and warrants to the
Distributor that any registration statement and prospectus, when such
registration statement becomes effective, will contain all statements required
to be stated therein in conformity with the 1933 Act and the rules and
regulations of the SEC; that all statements of fact contained in any such
registration statement and prospectus will be true and correct when such
registration statement and prospectus become effective; and that neither any
registration statement nor any prospectus when any registration statement
becomes effective will include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of Shares. The Company may, but
shall not be obligated to, propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements to
any prospectus which in light of future developments, may, in the opinion of the
Company's counsel, be necessary or advisable. The Company shall promptly notify
the Distributor of any advice given to it by the Company's counsel regarding the
necessity or advisability so to amend or supplement such registration statement
or prospectus. If the Company shall not propose such amendment or amendments
and/or supplement or supplements within fifteen days after receipt by the
Company of a written request from the Distributor to do so, the Distributor may,
at its option, terminate this Agreement. The Company shall not file any
amendment to any registration statement or supplement to any prospectus without
giving the Distributor reasonable notice thereof in advance; provided, however,
that nothing contained in this Agreement shall in any way limit the Company's
right to file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Company may deem
advisable, such right being in all respects absolute and unconditional.
2.2 The Company authorizes the Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the sale
of Shares and represented by the Company as being the then current form of
prospectus. The Company agrees to indemnify, defend and hold the Distributor,
its several officers and directors, and any person who controls the Distributor
within the meaning of Section 15 of the 1933 Act free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Distributor, its
officers and directors, or any such controlling person, may
3
<PAGE>
incur under the 1933 Act or under common law or otherwise, arising out of or
based upon any untrue statement, or alleged untrue statement, of a material fact
contained in any registration statement or any prospectus or arising out of or
based upon any omission, or alleged omission, to state a material fact required
to be stated in any registration statement or prospectus or necessary to make
any statement in such documents not misleading; provided, however, that the
Company's agreement to indemnify the Distributor, its officers or directors, and
any such controlling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any untrue statement or alleged untrue
statement or omission or alleged omission made in any registration statement or
prospectus or in any financial or other statements in reliance upon and in
conformity with any information furnished to the Company by the Distributor or
any affiliate thereof and used in the preparation thereof; and further provided
that the Company's agreement to indemnify the Distributor and the Company's
representations and warranties herein set forth shall not be deemed to cover any
liability to the Company or its shareholders to which the Distributor would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of the Distributor's
reckless disregard of its obligations and duties under this Agreement. The
Company's agreement to indemnify the Distributor, its officers and directors,
and any such controlling person, as aforesaid, is expressly conditioned upon the
Company's being notified of any action brought against the Distributor, its
officers or directors, or any such controlling person, such notification to be
given by letter or by telegram addressed to the Company at its principal office
and sent to the Company by the person against whom such action is brought,
within a reasonable period of time after the summons or other first legal
process shall have been served. The failure to so notify the Company of any such
action shall not relieve the Company from any liability which the Company may
have to the person against whom such action is brought by reason of any such
untrue, or allegedly untrue, statement or omission, or alleged omission,
otherwise than on account of the Company's indemnity agreement contained in this
paragraph 2.2. The Company will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case, such
defense shall be conducted by counsel of good standing chosen by the Company and
approved by the Distributor, which approval shall not unreasonably be withheld.
In the event the Company elects to assume the defense of any such suit and
retain counsel of good standing approved by the Distributor, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case the Company does not elect to
assume the defense of any such suit, or in case the Distributor reasonably does
not approve of counsel chosen by the Company, the Company will reimburse the
Distributor, its officers and directors, or the controlling person or persons
named as defendant or defendants in such suit, for the fees and expenses of any
counsel retained by the Distributor or them. The Company's indemnification
agreement contained in this paragraph 2.2 and the Company's representations and
warranties in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Distributor, its
officers and directors, or any controlling person, and shall survive the
delivery of any Shares. This agreement of indemnity will inure exclusively to
the Distributor's benefit, to the benefit of its several officers and directors,
and their respective estates, and to the benefit of the controlling persons and
their successors. The Company agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against
4
<PAGE>
the Company or any of its officers or directors in connection with the issue and
sale of any Shares.
2.3 The Distributor agrees to indemnify, defend and hold the
Company, its several officers and directors, and any person who controls the
Company within the meaning of Section 15 of the 1933 Act free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
costs of investigation or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Company, its officers
or directors or any such controlling person, may incur under the 1933 Act or
under common law or otherwise, but only to the extent that such liability or
expense incurred by the Company, its officers or directors, or such controlling
person resulting from such claims or demands, shall arise out of or be based
upon any untrue, or alleged untrue, statement of a material fact contained in
information furnished by the Distributor or any affiliate thereof to the Company
or its counsel and used in the Company's registration statement or corresponding
statements made in the prospectus, or shall arise out of or be based upon any
omission, or alleged omission, to state a material fact in connection with such
information furnished by the Distributor or any affiliate thereof to the Company
or its counsel required to be stated in such answers or necessary to make such
information not misleading. The Distributor's agreement to indemnify the
Company, its officers and directors, and any such controlling person, as
aforesaid, is expressly conditioned upon the Distributor's being notified of any
action brought against the Company, its officers or directors, or any such
controlling person, such notification to be given by letter or telegram
addressed to the Distributor at its principal office in Little Rock, Arkansas
and sent to the Distributor by the person against whom such action is brought,
within a reasonable period of time after the summons or other first legal
process shall have been served. The Distributor shall have the right to control
the defense of such action, with counsel of its own choosing, satisfactory to
the Company, if such action is based solely upon such alleged misstatement or
omission on the Distributor's part or any affiliate thereof, and in any other
event the Company, its officers or directors or such controlling person shall
each have the right to participate in the defense or preparation of the defense
of any such action. The failure so to notify the Distributor of any such action
shall not relieve the Distributor or any affiliate thereof from any liability
which the Distributor or any affiliate thereof may have to the Company, its
officers or directors, or to such controlling person by reason of any such
untrue or alleged untrue statement, or omission or alleged omission, otherwise
than on account of the Distributor's indemnity agreement contained in this
paragraph 2.3.
2.4 No Shares shall be offered by either the Distributor or the
Company under any of the provisions of this Agreement and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Company if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the 1933 Act, or if and so long as a current prospectus, as required by Section
10(b) of the 1933 Act is not on file with the SEC; provided, however, that
nothing contained in this paragraph 2.4 shall in any way restrict or have any
application to or bearing upon the Company's obligation to repurchase Shares
from any shareholder in accordance with the provisions of the Company's
prospectus or Articles of Incorporation.
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2.5 The Company agrees to advise the Distributor as soon as
reasonably practical:
(a) of any request by the SEC for amendments to the
registration statement or prospectus
then in effect;
(b) of the issuance by the SEC of any stop order suspending
the effectiveness of the registration statement or prospectus then in effect or
of the initiation of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration statement or prospectus
then in effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not misleading;
(d) of all actions of the SEC with respect to any amendment
to any registration statement or prospectus which may from time to time be filed
with the SEC; and
(e) if a current prospectus is not on file with the SEC.
For purposes of this section, informal requests by or acts of the
Staff of the SEC shall not be deemed actions of or requests by the SEC.
3. Confidentiality.
The Distributor agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Company all records
and other information relative to the Portfolios and/or the Company and its
prior, present or potential shareholders, and not to use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably withheld and may not be
withheld where the Distributor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Company.
4. Limitations of Liability.
Except as provided in paragraph 2.3, the Distributor shall not be
liable for any error of judgment or mistake or law or for any loss suffered by
the Company or any Portfolio in connection with matters to which this agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard of its obligations and duties under this agreement.
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5. Term.
This agreement shall become effective on the date of its execution
and, unless sooner terminated as provided herein, shall continue thereafter with
respect to each Portfolio for successive annual periods, provided such
continuance is specifically approved at least annually by (i) the Company's
Board of Directors or (ii) by a vote of a majority (as defined in the 1940 Act)
of the outstanding voting securities of the Portfolio, provided that in either
event the continuance is also approved by the majority of the Company's
Directors who are not parties to this agreement or interested persons (as
defined in the 1940 Act) of any such party, by vote cast in person at a meeting
called for the purpose of voting on such approval. This agreement is not
assignable and is terminable with respect to a Portfolio, without penalty, on
not less than sixty days' notice, by the Company's Board of Directors, by vote
of a majority (as defined in the 1940 Act) of the outstanding voting securities
of such Portfolio, or by the Distributor. This agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).
6. Miscellaneous.
6.1 No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which an enforcement of the change, waiver, discharge or
termination is sought.
6.2 This agreement shall be governed by the laws of the State of
Arkansas.
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place indicated below,
whereupon it shall become a binding agreement between us.
Yours very truly,
NATIONS LIFEGOAL FUNDS, INC.
By: /s/ A. Max Walker
-------------------------------
A. Max Walker
President and Chairman of the
Board of Directors
Accepted:
STEPHENS INC.
By: /s/ R. Greg Feltus
--------------------------
R. Greg Feltus
Senior Vice President
7
Dated as of October 15, 1996
<PAGE>
SCHEDULE I
LifeGoal Growth Portfolio
LifeGoal Balanced Growth Portfolio
LifeGoal Income and Growth Portfolio
Dated as of October 15, 1996
8
EXHIBIT 99.G
CUSTODY AGREEMENT
-----------------
THIS AGREEMENT is made this 15th day of October, 1996 by and between
Nations LifeGoal Funds, Inc. (the "Company") on behalf of its portfolios listed
on Schedule I, as such Schedule may be amended from time to time (individually a
"Fund" and collectively the "Funds") and NationsBank of Texas, N.A., a national
banking association (the "Custodian").
W I T N E S S E T H
-------------------
WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Company desires to retain the Custodian to serve as the
Company's custodian and the Custodian is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Custodian to act as
custodian of its portfolio securities, cash and other property on the terms set
forth in this Agreement. The Custodian accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as provided
in Paragraph 24 of this Agreement. The Custodian agrees to comply with all
relevant provisions of the 1940 Act and applicable rules and regulations
thereunder. The Company may from time to time issue separate series, classes or
classify and reclassify shares of any such series or class. The Custodian shall
identify to each such series or class Property, as hereinafter defined,
belonging to such series or class and in such reports, confirmations and notices
and to the Company called for under this Agreement shall identify the series or
class to which such report, confirmation or notice pertains.
2. Delivery of Documents. The Company has furnished the Custodian with
copies properly certified or authenticated of each of the following:
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(a) Resolutions of the Company's Board of Directors
authorizing the appointment of the Custodian as Custodian of the portfolio
securities, cash and other property of the Company and approving this Agreement;
(b) Schedule A identifying and containing the signatures of
the Company's officers and/or other persons authorized to issue Oral
Instructions and to sign Written Instructions, as hereinafter defined, on behalf
of the Company;
(c) Schedule B setting forth the names and signatures of the
present officers of the Company;
(d) The Company's Articles of Incorporation filed with the
State of Maryland and all amendments thereto (such as currently in effect and as
they shall from time to time be amended, are herein called the "Charter");
(e) The Company's By-Laws and all amendments thereto (such
By-Laws, as currently in effect and as they shall from time to time be amended,
are herein called the "By-Laws");
(f) Resolutions of the Company's Board of Directors appointing
the investment advisers and sub-adviser of the Company and resolutions of the
Company's Board of Directors and the Company's shareholders approving (i) the
Investment Advisory Agreement (the "Investment Advisory Agreement") dated
October 15, 1996 between the Company, on behalf of the Portfolios, and
NationsBanc Advisors, N.A. ("NBAI"); (ii) the Sub-Advisory Agreement (the
"Sub-Advisory Agreement") dated October 15, 1996 among the Company, on behalf of
the Portfolios, NBAI and TradeStreet Investment Associates, Inc. ("TradeStreet")
(as used herein the Adviser shall mean NBAI and/or TradeStreet as the context
may require);
(g) The Investment Advisory Agreement, dated October 15, 1996;
(h) The Sub-Advisory Agreement, dated October 15, 1996;
(i) The Distribution Agreement, dated October 15, 1996,
between the Company and Stephens Inc. ("Stephens");
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(j) The Administration Agreement, dated October 15, 1996,
between the Company on behalf of the Funds and Stephens;
(k) The Co-Administration Agreement, dated October 15, 1996,
between the Company and First Data Investor Services Group, Inc.
(l) The Company's Notification of Registration filed pursuant
to Section 8(a) of the 1940 Act, as filed with the Securities and Exchange
Commission (the "SEC");
(m) The Company's current Registration Statement on Form N-1A
under the 1940 Act and the Securities Act of 1933, as amended ("the 1933 Act")
as filed with the SEC, relating to shares of common stock of the Company,
without par value (the "Shares");
(n) The current prospectuses and statements of additional
information of each of the Funds, including all amendments and supplements
thereto (the "Prospectuses"). The Company will furnish the Custodian from time
to time with copies of all amendments of or supplements to the foregoing, if
any. The Company will also furnish the Custodian with a copy of the opinion of
counsel for the Company with respect to the validity of the Shares and the
status of such Shares under the 1933 Act filed with the SEC, and any other
applicable federal law or regulation; and
(o) Before any Fund of the Company engages in any transactions
regulated by the Commodity Futures Trading Commission ("CFTC"), a copy of either
(i) a filed notice of eligibility to claim the exclusion from the definition of
"commodity pool operator" contained in Section 2(a)(1)(A) of the Commodity
Exchange Act ("CEA") that is provided in Rule 4.5 under the CEA, together with
all supplements as are required by the CFTC, or (ii) a letter which has been
granted to the Company by the CFTC which states that the Company will not be
treated as a "pool" as defined in Section 4.10(d) of the CFTC's General
Regulations, or (iii) a letter which has been granted to the Company by the CFTC
which states that the CFTC will not take any enforcement action if the Company
does not register as a "commodity pool operator."
The Company will furnish the Custodian from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
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3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any of the Company's officers, and any other person,
whether or not any such person is an officer or employee of the Company, duly
authorized by the Board of Directors of the Company to give Oral and Written
Instructions on behalf of the Company and listed on Schedule A, which may be
amended from time to time.
(b) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve/Treasury book-entry system for
United States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system maintained by a clearing agency
registered with the SEC under Section 17A of the Securities Exchange Act of 1934
(the "1934 Act").
(c) "Oral Instructions". As used in this Agreement, the term
"Oral Instructions" means oral instructions actually received by the Custodian
from an Authorized Person or from a person reasonably believed by the Custodian
to be an Authorized Person. The Company agrees to deliver to the Custodian, at
the time and in the manner specified in Paragraph 9 of this Agreement Written
Instructions confirming Oral Instructions.
(d) "Officer's Certificate". The term "Officer's Certificate"
as used in this Agreement means instructions delivered by hand, mail, tested
telegram, cable, telex, facsimile sending device, and received by the Custodians
signed by two officers of the Company listed on Schedule B.
(e) "Property". The term "Property", as used in this
Agreement, means:
(i) any and all securities and other property of the
Company which the Company may from time to time deposit, or cause to be
deposited, with the Custodian or which the Custodian may, from time to time,
hold for the Company;
(ii) all income in respect of any other such securities or
other property;
(iii) all proceeds of the sales of any of such securities
or other property; and
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(iv) all proceeds of the sale of securities issued by the
Company, which are received by the Custodian from time to time from or on behalf
of the Company.
(f) "Securities Depository". As used in this Agreement, the
term "Securities Depository" shall mean The Depository Trust Company, a clearing
agency registered with the SEC or its successor or successors and its nominee or
nominees; and shall also mean any other registered clearing agency, its
successor or successors specifically identified in a certified copy of a
resolution of the Company's Board of Directors approving deposits by the
Custodian therein.
(g) "Written Instructions". As used in this Agreement,
"Written Instructions" means instructions delivered by hand, mail, tested
telegram, cable, telex, facsimile sending device, and received by the Custodian,
signed by two Authorized Persons.
4. Delivery and Registration of the Property. The Company will deliver
or cause to be delivered to the Custodian all securities and all monies owned by
it, including cash received for the issuance of its Shares, at any time during
the period of this Agreement, except for securities and monies to be delivered
to any sub-custodian appointed pursuant to Paragraph 7 hereof. The Custodian
will not be responsible for such securities and such monies until actually
received by it. All securities delivered to the Custodian or to any such
sub-custodian (other than in bearer form) shall be registered in the name of the
Company or in the name of a nominee of the fund or in the name of the Custodian
or any nominee of the Custodian (with or without indication of fiduciary status)
or in the name of any sub-custodian or any nominee of such sub-custodian
appointed pursuant to Paragraph 7 hereof or shall be properly endorsed and in
form for transfer satisfactory to the Custodian.
5. Voting Rights. With respect to all securities, however registered,
it is understood that the voting and other rights and powers shall be exercised
by the Company. The Custodian's only duty shall be to mail to the Company any
documents received, including proxy statements and offering circulars, with any
proxies for securities registered in a nominee name executed by such nominee.
Where warrants, options, tenders or other securities have fixed expiration
dates, the Company understands that in order for the Custodian to act, the
Custodian must receive the
5
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Company's instructions at its offices in New York, addressed as the Custodian
may from time to time request, by no later than noon (New York City time) at
least one business day prior to the last scheduled date to act with respect
thereto (or such earlier date or time as the Custodian may reasonably notify the
Company). Absent the Custodian's timely receipt of such instructions, such
instructions will expire without liability to the Custodian. Corporate reports
need not be forwarded to the Company.
6. Receipt and Disbursement of Money.
(a) the Custodian shall open and maintain a custody
account for each Fund of the Company, subject only to draft or order by the
Custodian acting pursuant to the terms of this Agreement, and shall hold in such
account, subject to the provisions hereof, all cash received by it from or for
the Company. The Custodian shall make payments of cash to, or for the account
of, each Fund of the Company from such cash only (i) for the purchase of
securities for the Company as provided in paragraph 14 hereof; (ii) upon receipt
of an Officer's Certificate for the payment of dividends or other distributions
of shares, or for the payment of interest, taxes, administration, distribution
or advisory fees or expenses which are to be borne by the Company under the
terms of this Agreement, and, with respect to each Fund, and Investment Advisory
Agreement, Sub-Advisory Agreement, Administration Agreement or Distribution
Agreement; (iii) upon receipt of Written Instructions for payments in connection
with the conversion, exchange or surrender of securities owned or subscribed to
by the Company and held by or to be delivered to the Custodian; (iv) to a
sub-custodian pursuant to Paragraph 7 hereof; or (v) for the redemption of Fund
Shares; or (vi) upon receipt of an Officer's Certificate for other corporate
purposes. No payment pursuant to (i) above shall be made unless the Custodian
has received a copy of the broker's or dealer's confirmation or the payee's
invoice as appropriate.
(b) The Custodian is hereby authorized to endorse and
collect all checks, drafts or other orders for the payment of money received as
custodian for the Company.
(c) In the event that a payment required to be made under
this Agreement exceeds the cash available in the account of a Fund, the
Custodian, in its discretion, may advance
6
<PAGE>
to the Fund an amount equal to that excess and such advance will be deemed a
loan from Custodian to the Fund, payable on demand, bearing interest at such
fair market rate as may be agreed upon from time to time by the parties hereto.
Custodian may not unreasonably decline to advance funds. In exercising its
discretion under this Paragraph 6(c), Custodian recognizes the interest of a
Fund in avoiding failed trades and in meeting redemption requests on a same-day
basis, and will inform the Fund immediately whenever Custodian anticipates that
it may, in the future, be necessary to exercise its discretion to decline an
advance of funds. In any event, where practicable, Custodian will give a Fund at
least three business days' notice before declining to advance funds. In this
regard, the parties agree to cooperate in good faith to minimize the need for
advances under this Paragraph 6(c).
7. Receipt of Securities.
(a) Except as provided by Paragraph 8 hereof, the
Custodian shall hold and physically segregate in a separate account with respect
to each Fund, identifiable from those of any other person, all securities and
non-cash property received by it for the Company. All such securities and
non-cash property are to be held or disposed of by the Custodian for each Fund
of the Company pursuant to the terms of this Agreement. In the absence of
Written Instructions accompanied by a certified resolution authorizing the
specific transaction by the Company's Board of Directors, the Custodian shall
have no power or authority to withdraw, deliver, assign, hypothecate, pledge or
otherwise dispose of any such securities and investments, except in accordance
with the express terms provided for in this Agreement. In no case may any
director, officer, employee or agent of the Company withdraw any securities
except as provided in this Agreement and pursuant to a duly adopted resolution
of the Board of Directors. In connection with its duties under this Paragraph 7,
the Custodian may, at its own expense, enter into sub-custodian Agreements with
other banks or trust companies for the receipt of certain securities and cash to
be held by the Custodian for the account of a Fund of the Company pursuant to
this Agreement; provided that each such bank or trust company has an aggregate
capital, surplus and undivided profits, as shown by its last published report,
of not less than one million dollars
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($1,000,000) for a Custodian subsidiary or affiliate, or of not less than twenty
million dollars ($20,000,000) for a sub-custodian that is not a Custodian
subsidiary or affiliate and that in either case such bank or trust company
agrees with the Custodian to comply with all relevant provisions of the 1940 Act
and applicable rules and regulations thereunder. The Custodian will provide the
Company with a copy of each sub-custodian agreement it executes relating to the
Company. The Custodian will be liable for acts or omissions of any such
sub-custodian, under the standards of care provided for herein, of any bank or
trust company that it chooses pursuant to this Paragraph 7.
(b) Promptly after the close of business on each day the
Custodian shall furnish the Company with confirmations and a summary of all
transfers to or from the account of each Fund of the Company during said day.
Where securities are transferred to the account of any Fund of the Company
established at a Securities Depository or the Book-Entry System pursuant to
Paragraph 8 herein, the Custodian shall also by book-entry or otherwise,
identify as belonging to such Fund the quantity of securities in a fungible bulk
of securities registered in the name of the Custodian (or its nominee) or shown
in the Custodian's account on the books of a Securities Depository or the
Book-Entry System. At least monthly and from time to time, the Custodian shall
furnish the Company with a detailed statement of the Property held for each Fund
under this Agreement.
8. Use of Securities Depository or the Book-Entry System. The Company
shall deliver to the Custodian a certified resolution of the Board of Directors
of the Company approving, authorizing and instructing the Custodian on a
continuous and ongoing basis until instructed to the contrary by Oral or Written
Instructions actually received by the Custodian (i) to deposit in a Securities
Depository or the Book-Entry System all securities of the Company eligible for
deposit therein and (ii) to utilize a Securities Depository or the Book-Entry
System to the extent possible in connection with the performance of its duties
hereunder, including without limitation settlements of purchases and sales of
securities by the Company, and deliveries and returns of securities loaned,
subject to repurchase agreements or used as collateral in connection
8
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with borrowings. Without limiting the generality of such use, it is agreed that
the following provisions shall apply thereto:
(a) Securities and any cash of the Company deposited in a
Securities Depository or the Book-Entry System will at all times be segregated
from any assets and cash controlled by the Custodian in other than a fiduciary
or custodian capacity. The Custodian and its sub-custodians, if any, will pay
out money only upon receipt of securities and will deliver securities only upon
receipt of money, unless the Company has given the Custodian Written
Instructions to the contrary.
(b) All books and records maintained by the Custodian that
relate to the Company participation in a Securities Depository or the Book-Entry
System will at all times during the Custodian's regular business hours be open
to the inspection of the Company's duly authorized employees or agents and the
Company's independent auditors in accordance with applicable regulations, and
the Company will be furnished with all information in respect of the services
rendered to it as it may require.
(c) The Custodian will provide the Company with copies of
any report obtained by the Custodian on the system of internal accounting
control of the Securities Depository or Book-Entry System promptly after receipt
of such a report by the Custodian. The Custodian will also provide the Company
with such reports on its own system of internal control as the Company may
reasonably request from time to time.
9. Instructions Consistent With the Charter, etc.. Unless otherwise
provided in this Agreement, the Custodian shall act only upon Oral and Written
Instructions. The Custodian may assume that any Oral or Written Instructions
received hereunder are not in any way inconsistent with any provision of the
Charter or By-Laws or any vote or resolution of the Company's Board of
Directors, or any committee thereof. The Custodian shall be entitled to rely
upon any Oral or Written Instructions actually received by the Custodian
pursuant to this Agreement. The Company agrees to forward to the Custodian
Written Instructions confirming Oral Instructions in such manner that the
Written Instructions are received by the Custodian at the close of business
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<PAGE>
of the same day that such Oral Instructions are given to the Custodian. The
Company agrees that the fact that such confirming Written Instructions are not
received by the Custodian shall in no way affect the validity of any of the
transactions authorized by the Company by giving Oral Instructions. The Company
agrees that the Custodian shall incur no liability in acting upon Oral
Instructions given to the Custodian hereunder concerning such transactions,
provided that such instructions reasonably appear to have been received from an
Authorized Person, unless any liability to the Company results from the
negligence or willful misconduct of the Custodian. In accordance with
instructions from the Company, as required by accepted industry practice or as
the Custodian may elect in effecting the execution of the Company instructions,
advances of cash or other Property made by the Custodian, arising from the
purchase, sale, redemption, transfer or other disposition of Property of the
Company, or in connection with the disbursement of funds to any party, or in
payment of fees, expenses, claims or liabilities owed to the Custodian by the
Company, or to any other party which has secured judgment in a court of law
against the Company which creates an overdraft in the accounts or overdelivery
of Property shall be deemed a loan by the Custodian to the Company, payable on
demand, bearing interest at such rate customarily charged by the Custodian for
similar loans.
10. Transactions Not Requiring Instructions. The Custodian is
authorized to take the following action without Written Instructions:
(a) Collection of Income and Other Payments. The Custodian
shall:
(i) collect and receive for the account of any Fund
of the Company, all income and other payments and distributions, including
(without limitation) stock dividends, rights, warrants and similar items,
included or to be included in the Property of any Fund of the Company, and
promptly advise the Company of such receipt and shall credit such income, as
collected, to such Fund of the Company. From time to time, the Custodian may
elect, but shall not be so obligated, to credit the account with interest,
dividends or principal payments on payable or contractual settlement date, in
anticipation of receiving same from a payor, central depository, broker or other
agent employed by the Company or the Custodian. Any such
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crediting and posting shall be at the Company's sole risk, and the Custodian
shall be authorized to reverse any such advance posting in the event that it
does not receive good funds from any such payor, central depository, broker or
agent.
(ii) with respect to securities of foreign issue,
effect collection of dividends, interest and other income, and to notify the
Company of any call for redemption, offer of exchange, right of subscription,
reorganization, or other proceedings affecting such securities, or any default
in payments due thereon. It is understood, however, that the Custodian shall be
under no responsibility for any failure or delay in effecting such collections
or giving such notice with respect to domestic securities regardless of whether
or not the relevant information is published in any financial service available
to it unless such failure or delay is due to its negligence; however, this
sentence shall not be construed as creating any such responsibility with respect
to securities of non-foreign issue, other than such responsibility of the
Custodian. Collections of income in foreign currency are, to the extent
possible, to be converted into United States dollars unless otherwise instructed
in writing, and in effecting such conversion the Custodian may use such methods
or agencies as it may see fit, including the facilities of its own foreign
division at customary rates. All risk and expenses incident to such collection
and conversion is for the account of the Company and the Custodian shall have no
responsibility for fluctuations in exchange rates affecting any such conversion.
(iii) endorse and deposit for collection in the name
of the Company and each of its Funds, checks, drafts, or other orders for the
payment of money on the same day as received;
(iv) receive and hold for the account of each of the
Company's all securities received by the Company as a result of a stock
dividend, share or reorganization, recapitalization, readjustment or other
rearrangement or distribution of rights or similar securities issued with
respect to any portfolio securities of the Company held by the Custodian
hereunder;
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(v) present for payment and collect the amount
payable upon all securities which may mature or be called, redeemed or retired,
or otherwise become payable on the date such securities become payable; (vi)
take any action which may be necessary and proper in connection with the
collection and receipt of such income and other payments and the endorsement for
collection of checks, drafts and other negotiable instructions;
(vii) with respect to domestic securities, to
exchange securities in temporary form for securities in definitive form, to
effect an exchange of the shares where the par value of stock is changed, and to
surrender securities at maturity or when advised of earlier call for redemption,
against payment therefor, in accordance with accepted industry practice. When
fractional shares of stock of a declaring corporation are received as a stock
distribution, the Custodian is authorized to sell the fraction received and
credit the Company account. Unless specifically instructed to the contrary in
writing, the Custodian is authorized to exchange securities in bearer form for
securities in registered form. If any Property registered in the name of a
nominee of the Custodian is called for partial redemption by the issuer of such
Property, the Custodian is authorized to allot the called portion to the
respective beneficial holders of the Property in such manner deemed to be fair
and equitable by the Custodian in its sole discretion.
(b) Miscellaneous Transactions. The Custodian
is authorized to deliver or cause to be delivered Property against payment or
other consideration or written receipt therefor in the following cases:
(c) for examination by a broker selling for the account of
the Company in accordance with street delivery custom;
(d) for the exchange for interim receipts or temporary
securities for definitive securities;
(e) for transfer of securities into the name of the
Company or the Custodian or a nominee of either, or for exchange or securities
for a different number of bonds, certificates, or other evidence, representing
the same aggregate face amount or number of units bearing the same
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<PAGE>
interest rate, maturity date and call provisions, if any; provided that, in any
such case, the new securities are to be delivered to the Custodian.
11. Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, the Custodian, directly or through the
use of a Securities Depository or the Book-Entry System, shall:
(a) Execute and deliver to such persons as may be
designated in such Oral or Written Instructions, proxies, consents,
authorizations, and any other instruments whereby the authority of the Company
as owner of any securities may be exercised;
(b) Deliver any securities held for any Fund of the
Company against receipt of other securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
(c) Deliver any securities held for any Fund of the
Company to any protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of any corporation, against receipt of such
certificates or deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of any
Fund of the Company and take such other steps as shall be stated in said
instructions to be for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or recapitalization of the
Company;
(e) Release securities belonging to any Fund of the
Company to any bank or trust company for the purpose of pledge or hypothecation
to secure any loan incurred by the Company; provided, however, that securities
shall be released only upon payment to the Custodian of the monies borrowed,
except that in cases where additional collateral is required to secure a
borrowing already made, subject to proper prior authorization, further
securities may be
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<PAGE>
released for that purpose; and pay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon surrender of the note or
notes evidencing the loan;
(f) Deliver any securities held for the Company upon the
exercise of a covered call option written by the Company on such securities;
(g) Release and deliver securities owned by the Company in
connection with any repurchase agreement entered into on behalf of any Fund of
the Company, but only on receipt of payment therefor; and pay out monies of the
Company in connection with such repurchase agreements, but only upon the
delivery of the securities;
(h) Otherwise transfer, exchange or deliver securities in
accordance with Oral or Written Instructions.
12. Segregated Accounts.
(a) The Custodian shall, upon receipt of Written or Oral
Instructions, establish and maintain a segregated account or accounts, on its
records, for and on behalf of any Fund of the Company, into which account or
accounts may be transferred cash and/or securities, including securities in the
Book-Entry System (i) for the purposes of compliance by the Company with the
procedures required by a securities or option exchange, providing such complies
with the Investment Company Act and Release No. 10666 or any subsequent release
or releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies and (ii)
for other proper corporate purposes, but only, in the case of clause (ii), upon
receipt of Written Instructions.
13. Dividend and Distributions.
(a) The Company shall furnish the Custodian with
appropriate evidence of action by the Company's Board of Directors declaring and
authorizing the payment of any dividends and distributions. Upon receipt by the
Custodian of an Officer's Certificate with respect to dividends and
distributions declared by the Company's Board of Directors and payable to
shareholders of any Fund who are entitled to receive cash for fractional shares
and those who have elected in the proper manner to receive their distributions
on dividends in cash, and in
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conformance with procedures mutually agreed upon by the Custodian, The Company
and the Company's Administrator or transfer agent, the Custodian shall pay to
the Fund's transfer agent, as agent for the shareholders, an amount equal to the
amount indicated in said Officer's Certificate as payable by the fund to such
shareholders for distribution in cash by the transfer agent to such
shareholders. In lieu of paying the Company's transfer agent cash dividends and
distributions, the Custodian may arrange for the direct payment of cash
dividends and distributions to shareholders by the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time by
and among the Company, the Custodian and the Company's Administrator and
Transfer Agent.
In accordance with the Prospectuses, the Internal Revenue Code of 1986,
as amended, and regulations promulgated thereunder, and with such procedures and
controls as are mutually agreed upon from time to time by and among the Company,
the Custodian, the Company's Administrator and Transfer Agent, the Custodian
shall arrange for the establishment of Individual Retirement Accounts ("IRAs")
as custodian accounts for such shareholders holding shares through IRA accounts.
(b) The Custodian may enter into separate custodial
agreements with various futures commission merchants ("FCMs") that the Company
uses (each an "FCM Agreement"), pursuant to which the Company's margin deposits
in any transactions involving futures contracts and options on futures contracts
will be held by the Custodian in accounts (each an "FCM Account") subject to the
disposition by the FCM involved in such contracts in accordance with the
customer contract between FCM and the Company ("FCM Contract"), SEC rules
governing such segregated accounts, CFTC rules and the rules of the applicable
commodities exchange. Such FCM Agreements shall only be entered into upon
receipt of Written Instructions from the Company which stated that (i) an FCM
Contract has been entered into; and (ii) the Company is in compliance with all
the rules and regulations of the CFTC. Transfers of initial margin shall be made
into FCM Account only upon Written Instructions; transfers of premium and
variation margin may be made into an FCM Account pursuant to Oral Instructions.
Transfers of funds
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<PAGE>
from an FCM Account to the FCM for which the Custodian holds such an account may
only occur upon certification by the FCM to the Custodian that pursuant to the
FCM Agreement and the FCM Contract, all conditions precedent to its right to
give the Custodian such instruction have been satisfied.
14. Purchase of Securities. Promptly after each purchase of securities
by the Adviser on behalf of any Fund, the Company shall deliver to the Custodian
Oral or Written Instructions specifying with respect to each such purchase: (a)
the name of the issuer and the title of the securities, (b) the number of shares
of the principal amount purchased and accrued interest, if any, (c) the dates of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, (f) the name of the person, from whom, or the broker
through whom, the purchase was made and (g) the Fund for which the purchase was
made. The Custodian shall, upon receipt of securities purchased by or for the
Company, pay out of the monies held for the account of such Fund, the total
amount payable to the person, from whom, or the broker through whom, the
purchase was made, provided that the same conforms to the total amount payable
as set forth in such Oral or Written Instructions.
15. Notation. With respect to each deposit or withdrawal of securities
or when ordering the deposit or withdrawal of securities from safekeeping, the
Custodian shall sign a notation in respect of each such deposit, withdrawal or
order that shall show: (a) the date and time of the deposit, withdrawal or
order; (b) the title and amount of the securities or other investments
deposited, withdrawn or ordered to be withdrawn, and the identification thereof
by certificate numbers or otherwise; (c) the manner of acquisition of the
securities or similar investments deposited or the purpose for which they have
been withdrawn, or ordered to be withdrawn; and (d) if withdrawn and delivered
to another person, the name of such person. The time of any deposit, withdrawal
or order means the time of the formal recording of such transactions on the
books of the Custodian at the Custodian's close of business. Such notation shall
be transmitted promptly to an officer or director of the Company designated by
the Board of
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Directors who shall not otherwise be authorized to have access to the Company's
securities. Such notation shall be on serially numbered forms and shall be
preserved for at least one year.
16. Sales of Securities. Promptly after each sale of securities by the
Adviser, the Company shall deliver to the Custodian Oral or Written
Instructions, specifying with respect to each such sale: (a) the name of the
issuer and the title of the security, (b) the number of the shares or principal
amount sold, and accrued interest, if any, (c) the dates of sale, (d) the sale
price per unit, (e) the total amount payable to the Company upon such sale, (f)
the name of the broker, through whom, or the person to whom, the sale was made
and (g) the Fund for which the sale was made. The Custodian shall deliver the
securities upon receipt of the total amount payable to the Company upon such
sale, provided that the same conforms to the total amount payable as set forth
in such Oral and Written Instructions. Subject to the foregoing, the Custodian
may accept payment in such form as shall be satisfactory to it, and may deliver
securities and arrange for payment in accordance with the customs prevailing
among dealers in securities.
17. Records. The books and records pertaining to the Company which are
in the possession of the Custodian shall be the property of the Company. Such
books and records shall be prepared and maintained as required by the 1940 Act,
as amended, and other applicable securities laws and rules and regulations. The
SEC, the Company, or the Company's authorized representatives, shall have access
to such books and records at all times during the Custodian's normal business
hours, and such books and records shall be surrendered to the Company promptly
upon request. Upon reasonable request of the Company, copies of any such books
and records shall be provided by the Custodian to the Company or the Company's
authorized representative at the Company's expense.
18. Reports.
(a) The Custodian shall furnish the Company the following
reports:
(i) such periodic and special reports as the Company may
reasonably request;
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(ii) a monthly statement summarizing all transactions and
entries for the account of each Fund of the Company;
(iii) a monthly report of portfolio securities belonging
to each fund of the Company showing the adjusted average cost of each issue and
the market value at the end of such month;
(iv) a monthly report of the cash account of each Fund of
the Company showing disbursements;
(v) the reports to be furnished to the Company pursuant to
Rule 17f-4 under the 1940 Act; and
(vi) such other information as may be agreed upon from
time to time between the Company and the Custodian.
(b) The Custodian shall transmit promptly to the Company
any proxy statement, proxy materials, notice of a call or conversation or
similar communications received by it as Custodian of the Property.
19. Cooperation with Accountants. The Custodian shall cooperate with
the Company's independent certified public accountant and shall take all
reasonable action in the performance of its obligations under this Agreement and
those under Rule 17f-2 under the 1940 Act ("Rule 17f-2") to the extent such Rule
is applicable, to assure that the necessary information is made available to
such accountant for the expression of its unqualified opinion with respect to,
including without limitation, the three audits required each year, the
certificates with respect to such annual audits and the opinion included in the
Company's semi-annual report on Form N-SAR, and will require each sub-custodian
appointed pursuant to paragraph 7 hereof to grant such access to the information
to the fund's independent certified public accountant. The Custodian shall
require any sub-custodian it appoints with respect to the Company to comply with
the provisions of this Paragraph 19.
20. Confidentiality. The Custodian agrees on behalf of itself and its
employees to treat confidentially and as the proprietary information of the
Company, all record and other
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information relative to the Company and its prior, present or potential
shareholders and relative to the managers and its prior, present or potential
customers, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Company, which approval
shall not be unreasonably withheld and may not be withheld where the Custodian
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by the Company.
21. Equipment Failures. In the event of equipment failures beyond the
Custodian's control, the Custodian shall, at no additional expense to the
Company, take reasonable steps to minimize service interruptions but shall not
have liability with respect thereto. The Custodian shall enter into and shall
maintain in effect with appropriate parties one or more agreements making
reasonable provision for back up emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
22. Right to Receive Advice.
(a) Advice of Fund. If the Custodian shall be in doubt as
to any action to be taken or omitted by it, it may request, and shall receive,
from the Company clarification or advice, including Oral or Written
Instructions.
(b) Advice of Counsel. If the Custodian shall be in doubt
as to any question of law involved in any action to be taken or omitted by the
Custodian, it may request advice at its own cost from counsel of its own
choosing (who may be counsel for the Company or the Custodian, at the option of
the Custodian).
(c) Conflicting Advice. In case of conflict between
directions, advice or Oral or Written Instructions received by the Custodian
pursuant to subparagraph (a) of this paragraph and advice received by the
Custodian pursuant to subparagraph (b) of this paragraph, the Custodian shall be
entitled to rely on and follow the advice received pursuant to the latter
provision alone.
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(d) Protection of the Custodian. The Custodian shall be
protected in any action or inaction which it takes or omits to take in reliance
on any directions, advice or Oral or Written Instructions received pursuant to
subparagraphs (a) or (b) of this section which the Custodian, after receipt of
any such directions, advice or Oral or Written Instructions, in good faith
believes to be consistent with such directions, advice or Oral or Written
Instructions, as the case may be. Nothing in this paragraph shall be construed
as imposing upon the Custodian any obligation (i) to seek such directions,
advice or Oral or Written Instructions, or (ii) to act in accordance with such
directions, advice or Oral or Written Instructions when received, unless, under
the terms or another provision of this Agreement, the same is a condition to the
Custodian's properly taking or omitting to take such action. Nothing in this
subparagraph shall excuse the Custodian when an action or omission on the part
of the Custodian constitutes willful misfeasance, bad faith, negligence or
reckless disregard by the Custodian of its duties under this Agreement.
23. Compliance with Governmental Rules and Regulations. The Custodian
undertakes to comply with all applicable requirements of the 1933 Act, the 1934
Act, the 1940 Act and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties and obligations to be
performed by the Custodian hereunder. The Custodian acknowledges that the
Company is subject to Rule 17f-2 and will undertake to assist the Company in
complying with its obligations thereunder.
24. Compensation. As compensation for the services rendered by the
Custodian during the term of this Agreement, the Company will pay to the
Custodian, in addition to reimbursement of its out-of-pocket expenses, monthly
fees as outlined in Schedule C, or as otherwise agreed upon from time to time in
writing by the Custodian and the Company.
25. Indemnification. The Company, as sole owner of the Property, agrees
to indemnify and hold harmless the Custodian and its nominees from all taxes,
charges, expenses, assessments, claims, and liabilities (including, without
limitation, liabilities arising under the 1933 Act, the Act of 1934, the 1940
Act, the CEA, and any state and foreign securities and blue
20
<PAGE>
sky laws, all as or to be amended from time to time) and expenses, including
(without limitation) attorney's fees and disbursements, arising directly or
indirectly (a) from the fact that securities included in the Property are
registered in the name of any such nominee or (b) without limiting the
generality of the foregoing clause (a) from any action or thing which the
Custodian takes or does or omits to take or do (i) at the request or at the
direction of or in reliance on the advice of the Company, or (ii) upon Oral or
Written Instructions, provided, that neither the Custodian nor any of its
nominees or sub-custodians shall be indemnified against any liability to any
Fund of the Company or to its shareholders (or any expenses incident to such
liability) arising out of (x) the Custodian's or such nominee's or
sub-custodian's own willful misfeasance, bad faith, negligence or reckless
disregard of its duties under this Agreement or any agreement between the
Custodian and any nominee or sub-custodian or (y) the Custodian's own negligent
failure to perform its duties under this Agreement. In the event of any advance
of cash for any purpose made by the Custodian resulting from Oral or Written
Instructions of the Company, or in the event that the Custodian or its nominee
or sub-custodian shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Agreement, except such as may arise from its or its nominee's or sub-custodian's
own negligent action, negligent failure to act, willful misconduct, or reckless
disregard, the Company shall promptly reimburse the Custodian for such advance
of cash or such taxes, charges, expenses, assessment claims or liabilities.
Notwithstanding anything to the contrary, any one Fund shall not provide
indemnification to the Custodian for any loss or liability resulting from
actions with respect to any other Fund.
26. Responsibility of The Custodian. The Custodian shall be under no
duty to take any action on behalf of the Company except as specifically set
forth herein or as may be specifically agreed to by the Custodian in writing. In
the performance of its duties hereunder, the Custodian shall be obligated to
exercise care and diligence and to act in good faith and to use its best efforts
within reasonable limits to ensure the accuracy of all services performed under
this Agreement. The Custodian shall be responsible for its own negligent failure
or that of any sub-
21
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custodian it shall appoint to perform its duties under this Agreement but to the
extent that duties, obligations and responsibilities are not expressly set forth
in this Agreement, the Custodian shall not be liable for any act or omission
which does not constitute willful misfeasance, bad faith, or negligence on the
part of the Custodian or reckless disregard of such duties, obligations and
responsibilities. Without limiting the generality of the foregoing or of any
other provision of this Agreement, the Custodian in connection with its duties
under this Agreement shall not be under any duty or obligation to inquire into
and shall not be liable for or in respect of (a) the validity or invalidity or
authority or lack thereof of any advice, direction, notice or other instrument
which conforms to the applicable requirements of this Agreement, if any, and
which the Custodian believes to be genuine, (b) the validity of the issue of any
securities purchased or sold by the Company, the legality of the purchase or
sale thereof or the propriety of the amount paid or received therefor, (c) the
legality of the issue or sale of any Shares, or the sufficiency of the amount to
be received therefor, (d) delays or errors or loss of data occurring by reason
of circumstances beyond the Custodian's control, including acts of civil or
military authority, national emergencies, labor difficulties, fire, mechanical
breakdown (except as provided in Paragraph 21), flood or catastrophe, acts of
God, insurrection, war, riots, or failure of the mail, transportation,
communication or power supply.
27. Collection. All collections of monies or other property in respect,
or which are to become part, of the Property (but not the safekeeping thereof
upon receipt by the Custodian) shall be at the sole risk of the Company. In any
case in which the Custodian does not receive any payment due the Company within
a reasonable time after the Custodian has made proper demands for the same, it
shall so notify the Company in writing, including copies of all demand letters,
any written responses thereto, and memoranda of all oral responses thereto, and
to telephonic demands, and await instructions from the Company. The Custodian
shall not be obliged to take legal action for collection unless and until
reasonably indemnified to its satisfaction. The Custodian shall also notify the
Company as soon as reasonably practicable whenever income due on securities is
not collected in due course.
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28. Duration and Termination. This Agreement shall be effective as of
the date hereof and shall continue until termination by the Company or by the
Custodian on 60 days written notice provided that this Agreement shall terminate
at the end of two years from the date hereof unless the Agreement is approved on
an annual basis thereafter by the Board of Directors of the Company, including a
majority of the Directors who are not "interested persons" under the 1940 Act.
Upon any termination of this Agreement, pending appointment of a successor to
the Custodian or a vote of the shareholders of the Company to dissolve or to
function without a custodian of its cash, securities or other property, the
Custodian shall not deliver cash, securities or other property of the Company to
the Company, but may deliver them to a bank or trust company of its own
selection, having aggregate capital, surplus and undivided profits, as shown by
its last published report of not less than twenty million dollars ($20,000,000)
as a custodian for the Company to be held under terms similar to those of this
Agreement, provided, however, that the Custodian shall not be required to make
any such delivery or payment until full payment shall have been made by the
Company of all liabilities constituting a charge on, or against, the properties
then held by the Custodian, or on or against the Custodian, and until full
payment shall have been made to the Custodian of all of its fee, compensation,
costs and expenses, subject to the provisions of Paragraph 21 of this Agreement.
29. Notices. All notices and other communications (collectively
referred to as "Notice" or "Notices" in this paragraph) hereunder shall be in
writing or by confirm in telegram, cable, telex, or facsimile sending device.
Notices shall be addressed (a) if the Custodian, at the Custodian's address, 901
Main Street, Dallas, Texas 75283-2222, Attention: ______; (b) if to the Company,
at the address of Nations LifeGoal Funds, Inc., 111 Center Street, Little Rock,
Arkansas 72201, Attention: Richard H. Blank, Jr., Secretary; or (c) if to
neither of the foregoing, at such other address as shall have been notified to
the sender of any such Notice or other communication. Notice shall be deemed to
have been given when actually received by the other party. All postage, cable,
telegram, telex and facsimile sending device charges arising from the sending of
a Notice hereunder shall be paid by the sender.
23
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30. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
31. Amendments. This Agreement or any party hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
32. Miscellaneous. This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in New York and
governed by New York law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
24
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their offices designated below as of the day and year first above
written.
NATIONS LIFEGOAL FUNDS, INC.
on behalf of the LifeGoal Portfolios
By: /s/ A. Max Walker ATTEST: /s/ Richard H. Blank, Jr.
----------------- -------------------------
Name: A. Max Walker Secretary
Title: President and Chairman of the
Board of Directors
NATIONSBANK OF TEXAS, N.A. ATTEST: /s/ Joseph T. Brady
------------------------
Senior Vice President
By: /s/ John R. Glover
---------------------
Name: John R. Glover
Title: Senior Vice President
25
<PAGE>
SCHEDULE A
AUTHORIZED PERSONS FOR
ORAL AND WRITTEN INSTRUCTIONS
ANDREW SILTON
CHARLES T. CLAPP
EDWARD D. BEDARD
JAMES JONES
RICHARD S. SZAFRAN
26
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SCHEDULE B
----------
OFFICERS OF THE COMPANY
A. Max Walker President and Chief Executive Officer
Richard H. Rose Treasurer
Joseph C. Viselli Assistant Treasurer
Richard H. Blank, Jr. Secretary
Michael W. Nolte Assistant Secretary
Louise P. Newcomb Assistant Secretary
James E. Banks, Jr. Assistant Secretary
27
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SCHEDULE C
----------
FEE SCHEDULE
Each Portfolio of the Company shall pay the Custodian the following annual fees:
1. 1.25% of 1.00% of the average daily net assets of each Portfolio;
2. $10.00 per Repurchase Collateral movement; and
3. $15.00 per Purchase, Sale and Maturity transaction
This fee will be paid monthly, based upon the average daily net assets of each
Portfolio.
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SCHEDULE I
The Custody Agreement between the Company and the Custodian applies to
the following portfolios of the Company:
LifeGoal Growth Portfolio
LifeGoal Balanced Growth Portfolio
LifeGoal Income and Growth Portfolio
29
EXHIBIT 99.H1
CO-ADMINISTRATION AGREEMENT
This CO-ADMINISTRATION AGREEMENT (the "Agreement") is made as of
December 1, 1998 by and among STEPHENS INC. ("Stephens"), NATIONSBANC ADVISORS,
INC. ("NBAI") and NATIONS LIFEGOAL FUNDS, INC. ("LifeGoal").
WHEREAS, LifeGoal is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, LifeGoal desires to retain Stephens and NBAI to render certain
administrative services for the investment portfolios of LifeGoal listed on
Schedule I (individually, a "Fund" and collectively, the "Funds"), and Stephens
and NBAI are willing to render such services.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed among the parties hereto as follows:
1. Appointment.
(a) LifeGoal hereby appoints Stephens to act as Co-Administrator
of the Funds and Stephens hereby accepts such appointment and agrees to render
such services and duties set forth in Paragraph 3, for the compensation and on
the terms herein provided. Absent written notification to the contrary by
LifeGoal, NBAI or Stephens, each new investment portfolio established in the
future by LifeGoal shall automatically become a "Fund" for all purposes
hereunder as if listed on Schedule I.
(b) LifeGoal also hereby appoints NBAI to act as Co-Administrator
of the Funds, and NBAI hereby accepts such appointment and agrees to render such
services and duties set forth in Paragraph 4, for the compensation and on the
terms herein provided. Absent written notification to the contrary by either
LifeGoal or NBAI, each new investment portfolio established in the future by
LifeGoal shall automatically become a "Fund" for all purposes hereunder as if
listed on Schedule I.
2. Delivery of Documents. LifeGoal has furnished Stephens and NBAI with
copies properly certified or authenticated of each of the following:
(a) LifeGoal's most recent Post-Effective Amendment to its
Registration Statement on Form N-1A (the "Registration Statement") under the
Securities Act of 1933, as amended, and under the 1940 Act (File Nos. 33-9703
and 811-7745), as filed with the Securities and Exchange Commission (the "SEC")
relating to the Funds' shares (the "Shares");
(b) The Funds' most recent Prospectus(es); and
(c) The Funds' most recent Statement(s) of Additional Information.
<PAGE>
LifeGoal will furnish Stephens and NBAI from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to the
foregoing. Furthermore, LifeGoal will provide Stephens and NBAI with any other
documents that Stephens and NBAI may reasonably request and will notify Stephens
and NBAI as soon as possible of any matter materially affecting either Stephens'
or NBAI's performance of its services under this Agreement.
3. Duties as Co-Administrator. Subject to the supervision and direction
of the Board of Directors of LifeGoal, Stephens, as Co-Administrator, will
assist in supervising various aspects of LifeGoal's administrative operations
and undertakes to perform the following specific services from and after the
effective date of this Agreement:
(a) Maintaining office facilities for LifeGoal (which may be in the
offices of Stephens or a corporate affiliate);
(b) Furnishing clerical services, internal executive and
administrative services and stationery and office supplies in connection with
the foregoing;
(c) Assist in furnishing statistical and research data and data
processing services in connection with the foregoing;
(d) Furnishing corporate secretarial services, including assisting
in the coordination of the preparation and distribution of materials for Board
of Directors meetings;
(e) Providing the services of certain persons who may be appointed
as officers of LifeGoal by LifeGoal's Board of Directors;
(f) Assist in coordinating the provision of legal advice and
counsel to LifeGoal with respect to regulatory matters, including monitoring
regulatory and legislative developments which may affect LifeGoal and assisting
in the strategic response to such developments, counseling and assisting
LifeGoal in routine regulatory examinations or investigations of LifeGoal, and
working closely with outside counsel to LifeGoal in connection with any
litigation in which LifeGoal is involved;
(g) Assist in coordinating the preparation of reports to LifeGoal's
shareholders of record and the SEC including, but not necessarily limited to,
Annual Reports and Semi-Annual Reports to Shareholders and on Form N-SAR and
Notices pursuant to Rule 24f-2 under the 1940 Act;
(h) Coordinating with LifeGoal regarding the jurisdictions in which
the Shares shall be registered or qualified for sale and, in connection
therewith, being responsible for the registration or qualification and the
maintenance of such registration or qualification of Shares for sale under the
securities laws of any state. Payment of share registration fees and any fees
for qualifying or continuing the qualification of LifeGoal or any Fund as a
dealer or broker shall be made or reimbursed by NBAI, as set forth in Schedule
A;
2
<PAGE>
(i) Assisting in the preparation and filing on a timely basis of
various reports, registration statements and post-effective amendments thereto,
and other documents required by federal, state and other applicable laws and
regulations, other than those filed or required to be filed by NBAI or the
Funds' Sub-Advisers, Transfer Agent, Sub-Transfer Agent or Custodian;
(j) Performing certain compliance procedures for LifeGoal which
will include, among other matters, monitoring compliance with personal trading
guidelines by LifeGoal's Board of Directors; and
(k) Generally assisting in all aspects of LifeGoal's operations.
In performing all services under this Agreement, Stephens shall (i) act
in conformity with: LifeGoal's Articles of Incorporation and Bylaws, the 1940
Act and the rules thereunder, and other applicable laws and regulations, as the
same may be amended from time to time, and LifeGoal's Registration Statement, as
such Registration Statement may be amended from time to time; (ii) consult and
coordinate with LifeGoal, as necessary and appropriate; and (iii) advise and
report to LifeGoal, as necessary or appropriate, with respect to any compliance
matters that come to its attention.
Stephens represents and warrants to LifeGoal that it will use
reasonable efforts to perform its duties and obligations under this Agreement
without: (a) any failure of its computer systems, or those used by it in the
performance of its duties hereunder, to properly record, store, process,
calculate or present calendar dates falling on and after, and time spans
including, January 1, 2000 as a result of the occurrence of, or use of data
containing, such date; (b) any failure of its computer systems, or those used by
it in the performance of its duties hereunder, to calculate any information
dependent on or relating to dates on or after January 1, 2000; or (c) any loss
of functionality or performance with respect to the maintenance of records or
processing of data containing dates falling on or after January 1, 2000 ((a),
(b), and (c) above shall be referred to as "Y2K Failures"). Notwithstanding the
above, Stephens shall not be liable for any Y2K Failures caused by Y2K Failures
in a third party system with which Stephens interfaces or from which Stephens
receives data in connection with the performance of its duties hereunder.
In performing its services under this Agreement, Stephens shall
cooperate and coordinate with NBAI as necessary and appropriate and shall
provide such information as is reasonably necessary or appropriate for NBAI to
perform its responsibilities to LifeGoal.
4. Duties as Co-Administrator. Subject to the supervision and direction
of the Board of Directors of LifeGoal, NBAI, as Co-Administrator, will assist in
supervising various aspects of LifeGoal's administrative operations and
undertakes to perform the following specific services, from and after the
effective date of this Agreement:
(a) providing accounting and bookkeeping services (including the
maintenance for the periods prescribed by Rule 31a-2 under the 1940 Act of such
accounts, books and records of LifeGoal as may be required by Section 31(a) of
the 1940
3
<PAGE>
Act and the rules thereunder). NBAI further agrees that all such
records which it maintains for LifeGoal are the property of LifeGoal and further
agrees to surrender promptly to LifeGoal any of such records upon LifeGoal's
request;
(b) valuing each Fund's assets and calculating the net asset value
and the net income of the shares of each Fund in accordance with LifeGoal's
current Prospectus(es), applicable pricing procedures and resolutions of
LifeGoal's Board of Directors, provided, that in performing such services, NBAI
shall obtain security market quotes from independent pricing services, or if
such quotes are unavailable, obtain such prices from the Funds' Sub-Advisers;
(c) accumulating information for reports to LifeGoal's shareholders
of record and the SEC including, but not necessarily limited to, Annual Reports
and Semi-Annual Reports to Shareholders and on Form N-SAR and Notices pursuant
to Rule 24f-2 under the 1940 Act;
(d) preparing and filing on a timely basis LifeGoal's tax returns
and other tax filings;
(e) monitoring the development and implementation of certain
compliance procedures for LifeGoal including, but not limited to, monitoring (i)
each Fund's status as a regulated investment company under Sub-Chapter M of the
Internal Revenue Code of 1986, as amended, including performing, on a monthly
basis and based upon information provided by the Fund's Sub-Advisers, the 90%
gross income and asset diversification tests derived from such Sub-Chapter; and
(ii) compliance by each Fund with its investment objective, policies and
restrictions, and applicable laws and regulations;
(f) preparing and furnishing to LifeGoal monthly broker security
transaction summaries and monthly security transaction listings and (at
LifeGoal's request) performance information (including yield and total return
information) calculated in accordance with applicable U.S. securities laws and
reporting to external databases such information as may reasonably be requested;
(g) assisting LifeGoal and its agents in their accumulation and
preparation of materials for the Board of Directors' meetings and for regulatory
examinations and inspections of LifeGoal, to the extent such materials relate to
the services being performed for LifeGoal by NBAI; and
(h) coordinate the provisions of services to LifeGoal by other
service providers to LifeGoal, including the transfer agent, sub-transfer agent
and custodian.
In performing all services under this Agreement, NBAI shall (i) act in
conformity with LifeGoal's Articles of Incorporation and Bylaws; the 1940 Act
and the rules thereunder, and other applicable laws and regulations, as the same
may be amended from time to time; and LifeGoal's Registration Statement, as such
Registration Statement may be amended from time to time, (ii) consult and
coordinate with LifeGoal, as necessary and appropriate, and (iii) advise and
report to LifeGoal, as necessary or appropriate, with respect to any compliance
matters that come to its attention.
4
<PAGE>
NBAI represents and warrants to LifeGoal that it will use reasonable
efforts to perform its duties and obligations under this Agreement without: (a)
any failure of its computer systems to properly record, store, process,
calculate or present calendar dates falling on and after, and time spans
including, January 1, 2000 as a result of the occurrence of, or use of data
containing, such date; (b) any failure of its computer systems to calculate any
information dependent on or relating to dates on or after January 1, 2000; or
(c) any loss of functionality or performance with respect to the maintenance of
records or processing of data containing dates falling on or after January 1,
2000 ((a), (b), and (c) above shall be referred to as "Y2K Failures").
Notwithstanding the above, NBAI shall not be liable for any Y2K Failures caused
by Y2K Failures in a third party system with which NBAI interfaces or from which
NBAI receives data in connection with the performance of its duties hereunder
including, without limitation, the system of any sub-administrator engaged
pursuant to Paragraph 4.
In connection with its duties under this Paragraph 4, it is understood
and agreed that NBAI may, at its own expense, enter into sub-administration
agreements with other service providers and the Fund(s), provided that each such
service provider agrees with NBAI and the Fund(s) to comply with all relevant
provisions of the 1940 Act and applicable rules and regulations thereunder. In
addition, upon notice to the Board of Directors of LifeGoal, the parties agree
that NBAI may from time to time assume some or all of Stephens' duties set forth
in Paragraph 3 above.
In performing its responsibilities under this Agreement, NBAI shall
cooperate and coordinate with Stephens as necessary and appropriate and shall
provide such information within its possession or control as is reasonably
necessary or appropriate to Stephens to enable it to perform its
responsibilities to LifeGoal.
5. Compensation.
(a) Stephens shall bear all expenses in connection with the
performance of its services under this Agreement, except those enumerated in
Paragraph 5(a)(2) below and as set forth in Schedule A.
(1) Stephens will from time to time employ or associate with
such person or persons as Stephens may believe to be particularly suited to
assist it in performing services under this Agreement. Such person or persons
may be officers and employees of both Stephens and LifeGoal. The compensation of
such person or persons shall be paid by Stephens and no obligation shall be
incurred on behalf of LifeGoal or NBAI in such respect.
(2) Stephens shall not be required to pay any of the following
expenses incurred by LifeGoal: investment advisory expenses; costs of printing
and mailing stock certificates, prospectuses, reports and notices; interest on
borrowed money; brokerage fees and commissions; taxes and fees payable to
federal, state and other governmental agencies; fees of Directors of LifeGoal
who are not affiliated with Stephens; outside auditing expenses; outside legal
expenses; fees of any other service provider to LifeGoal;
5
<PAGE>
or other expenses not specified in this Section 5(a) which may be properly
payable by NBAI and/or LifeGoal, as set forth in Schedule A.
(3) NBAI will compensate Stephens for its services rendered
pursuant to this Agreement in accordance with Schedule A. In addition, NBAI
shall reimburse Stephens for certain reasonable out-of-pocket distributions made
in connection with fulfilling its obligations under the Agreement. The items
eligible for reimbursement are set forth on Schedule A.
(b) NBAI shall bear all expenses in connection with the performance
of its services under this Agreement, except those enumerated in Schedule A.
(1) NBAI will from time to time employ or associate with such
person or persons as NBAI may believe to be particularly suited to assist it in
performing services under this Agreement. Such person or persons may be officers
and employees of both NBAI and LifeGoal. The compensation of such person or
persons shall be paid by NBAI and no obligation shall be incurred on behalf of
LifeGoal or Stephens in such respect.
(2) NBAI shall receive compensation for its services rendered
pursuant to this Agreement in accordance with Schedule A.
6. Limitation of Liability; Indemnification.
(a) Stephens shall not be liable for any error of judgment or
mistake of law or for any loss suffered by LifeGoal in connection with the
performance of its obligations and duties under this Agreement, except a loss
resulting from Stephens' willful misfeasance, bad faith or gross negligence in
the performance of such obligations and duties, or by reason of its reckless
disregard thereof.
(b) NBAI shall not be liable for any error of judgment or mistake
of law or for any loss suffered by LifeGoal in connection with the performance
of its obligations and duties under this Agreement, except a loss resulting from
NBAI's willful misfeasance, bad faith or gross negligence in the performance of
such obligations and duties, or by reason of its reckless disregard thereof.
(c) LifeGoal, on behalf of each Fund, will indemnify Stephens
and/or NBAI against and hold each harmless from any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action or suit relating to the
particular Fund and not resulting from the willful misfeasance, bad faith or
gross negligence of Stephens and/or NBAI in the performance of such obligations
and duties or by reason of their reckless disregard thereof. Stephens and/or
NBAI will not confess any claim or settle or make any compromise in any instance
in which LifeGoal will be asked to provide indemnification, except with
LifeGoal's prior written consent. Any amounts payable by LifeGoal under this
Section 6(c) shall be satisfied only against the assets of the Fund involved in
the claim, demand, action or suit and not against the assets of any other
investment portfolio of LifeGoal.
6
<PAGE>
7. Effective Date; Termination of Agreement.
(a) This Agreement shall become effective, on a Fund by Fund basis,
upon the completion of the transfer of a Fund's accounting function to The Bank
of New York, notice of which shall be provided by LifeGoal to Stephens and NBAI
for each Fund. This Agreement shall remain in full force and effect with respect
to such Fund(s) unless terminated pursuant to the provisions of Section 7(c).
(b) The parties agree that the administration arrangements between
Stephens and LifeGoal, dated September 1, 1993, and the sub-administration
arrangements between Stephens and NBAI, dated November 18, 1997, with respect to
the Funds shall be terminated on a Fund by Fund basis upon the effectiveness of
this Agreement.
(c) This Agreement may be terminated at any time without payment of
any penalty, upon 60 days' written notice, by vote of the Board of Directors of
LifeGoal, by Stephens or by NBAI. Stephens and NBAI will each cooperate with and
assist LifeGoal, its agents and any successor administrator or administrators in
the substitution/conversion process.
(d) Sections 6 and 9 shall survive this Agreement's termination.
8. Amendments. No provision of this Agreement may be changed,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, discharge or termination is
sought.
9. Confidentiality. All books, records, information and data pertaining
to the business of LifeGoal, its prior, present or potential shareholders and
NBAI's customers that are exchanged or received pursuant to the performance of
Stephens' and/or NBAI's duties under this Agreement shall remain confidential
and shall not be disclosed to any other person, except as specifically
authorized by LifeGoal or as may be required by law, and shall not be used for
any purpose other than performance of NBAI's and Stephens' responsibilities and
duties hereunder.
10. Service to Other Companies or Accounts. LifeGoal acknowledges that
both Stephens and NBAI now act, will continue to act and may act in the future
as investment adviser to fiduciary and other managed accounts, and as investment
adviser, investment sub-adviser and/or administrator to other investment
companies or series of investment companies, and LifeGoal has no objection to
either Stephens or NBAI so acting. LifeGoal further acknowledges that the
persons employed by both Stephens and NBAI to assist in the performance of their
duties under this Agreement may not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of Stephens or NBAI or any affiliate of either to engage in and devote
time and attention to other businesses or to render services of whatever kind or
nature.
11. Miscellaneous.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to LifeGoal, Stephens or NBAI shall be
sufficiently given if
7
<PAGE>
addressed to that party and received by it at its office set forth below or at
such other place as it may from time to time designate in writing.
To LifeGoal:
Nations LifeGoal Funds, Inc.
111 Center Street, Suite 3000
Little Rock, Arkansas 72201
Attention: Secretary
To Stephens:
Stephens Inc.
111 Center Street, Suite 3000
Little Rock, Arkansas 72201
Attention: Richard H. Blank, Jr.
To NBAI:
NationsBanc Advisors, Inc.
One Bank of America Plaza
33rd Floor
Charlotte, NC 28255
Attention: Edward D. Bedard
(b) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable without the written consent of the
other parties.
(c) This Agreement shall be construed in accordance with the laws
of the State of Maryland.
(d) This Agreement may be executed in any number of counterparts
each of which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
(e) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(f) This Agreement constitutes the entire agreement between the
parties hereto with respect to the matters described herein.
8
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
STEPHENS INC.
By: /s/ Richard H. Blank, Jr.
--------------------------------
Richard H. Blank, Jr.
Senior Vice President
NATIONSBANC ADVISORS, INC.
By: /s/ Edward D. Bedard
--------------------------------
Edward D. Bedard
Senior Vice President and
Chief Operating Officer
NATIONS LIFEGOAL FUNDS, INC.
By: /s/ James E. Banks, Jr.
--------------------------------
James E. Banks, Jr.
Assistant Secretary
9
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SCHEDULE I
1. LifeGoal Growth Portfolio
2. LifeGoal Balanced Growth Portfolio
3. LifeGoal Income and Growth Portfolio
<PAGE>
SCHEDULE A
NBAI shall be compensated for its services rendered pursuant to this
Agreement as agreed upon by LifeGoal and NBAI. Stephens shall receive
compensation for administration services rendered pursuant to this Agreement
directly from NBAI, at a rate which Stephens and NBAI may agree on from time to
time.
NBAI shall reimburse all expenses of the Funds (including all expenses
incurred by Stephens) except taxes, brokerage fees and commissions, if any,
extraordinary expenses and any class-level distribution fees, shareholder
servicing fees and/or shareholder administration fees, which shall be paid by
the Funds (or classes thereof, as appropriate).
EXHIBIT 99.H2
SUB-ADMINISTRATION AGREEMENT
This SUB-ADMINISTRATION AGREEMENT (the "Agreement") is made as of
December 1, 1998 by and among THE BANK OF NEW YORK ("BNY"), NATIONSBANC
ADVISORS, INC. ("NBAI") and NATIONS LIFEGOAL FUNDS, INC. ("LifeGoal").
WHEREAS, LifeGoal is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, NBAI serves as the Co-Administrator for the investment
portfolios of LifeGoal pursuant to a separate Co-Administration Agreement; and
WHEREAS, NBAI desires to retain BNY to render certain
sub-administrative services to LifeGoal and to NBAI, as Co-Administrator of
LifeGoal, and BNY is willing to render such services.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed among the parties hereto as follows:
1. Appointment and Duties as Sub-Administrator.
(a) NBAI hereby appoints BNY to act as Sub-Administrator of LifeGoal
and to render sub-administrative services for each portfolio of LifeGoal listed
on Schedule I (individually, a "Fund" and collectively, the "Funds") and BNY
hereby accepts such appointment and agrees to render the services and duties set
forth in Schedule II as it may be amended from time to time, for the
compensation and on the terms herein provided. Each new investment portfolio
established in the future by LifeGoal or NBAI will become a "Fund" for all
purposes hereunder when BNY receives a revised Schedule I from NBAI or LifeGoal
that includes such new portfolio.
(b) Subject to the other provisions of this Section 1, in performing
all services under this Agreement, BNY shall (i) act in conformity with
LifeGoal's Articles of Incorporation and Bylaws (the "Bylaws"), the 1940 Act and
the rules thereunder, including but not limited to Rules 31a-1 to 31a-3, and
other applicable laws and regulations, as the same may be amended from time to
time, and LifeGoal's Registration Statement, as such Registration Statement may
be amended from time to time; (ii) consult and coordinate with NBAI and
LifeGoal, as necessary and appropriate; and (iii) advise and report to NBAI and
LifeGoal, as necessary or appropriate, with respect to any compliance matters
that come to its attention. In performing all services under this Agreement BNY
shall meet the minimum quality of service standards set forth on Schedule III.
(c) LifeGoal has furnished BNY and NBAI with copies properly certified
or authenticated of each of the following: (i) LifeGoal's Articles of
Incorporation or other organizational document and all amendments thereto (the
"Charter"); (ii) LifeGoal's Bylaws; (iii)
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<PAGE>
resolutions of LifeGoal's Board of Directors or other governing body (the
"Board") authorizing the execution, delivery and performance of this Agreement
by LifeGoal; (iv) LifeGoal's most recent Post-Effective Amendment to its
Registration Statement on Form N-1A (the "Registration Statement") under the
Securities Act of 1933, as amended, and under the 1940 Act (File Nos. 333-9703
and 811-7745), as filed with the Securities and Exchange Commission (the "SEC")
relating to the Funds' shares (the "Shares"); (iv) the Funds' current
Prospectus(es); (v) the Funds' current Statement(s) of Additional Information;
and (vi) the pricing procedures applicable to the calculation of the Funds' net
asset values as approved by LifeGoal's Board (the "Pricing Procedures"). It is
solely LifeGoal's responsibility to furnish BNY from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to the
foregoing, and BNY will not be held to have knowledge of any such amendments or
supplements until the same are actually received by BNY. Furthermore, LifeGoal
will provide BNY with any other documents that BNY and NBAI may reasonably
request and will notify BNY and NBAI as soon as possible of any matter
materially affecting either BNY's or NBAI's performance of its services under
this Agreement.
(d)(i) BNY undertakes to report on a regular basis to NBAI and LifeGoal
regarding: (A) the readiness of its computer systems, or those used by it in the
performance of its duties hereunder, properly to record, store, process,
calculate or present calendar dates falling on and after, and time spans
including, September 9, 1999, January 1, 2000 or February 29, 2000 (the "Subject
Dates") as a result of the occurrence, or use of data containing any such
Subject Dates; (B) the readiness of its computer systems or those used by it in
the performance of its duties hereunder, to calculate any information dependent
on or relating to dates on or after the Subject Dates; and (C) its ability to
perform the administration and fund accounting services set forth in Schedule II
(the "Services") in accordance with any applicable performance standards set
forth in Schedule III (the "Standards") with respect to the maintenance of
records or processing of data containing dates falling on or after the Subject
Dates, provided that, with respect to computers used but not owned by BNY and
third-party computer systems other than InvestOne, BNY's responsibility shall be
limited to seeking similar reports from such owners or third parties and
promptly forwarding such reports to NBAI. Without limiting the foregoing, BNY
undertakes to notify NBAI and LifeGoal, in writing, of any concerns believed by
BNY to be material regarding the events described in this paragraph, provided
that, with respect to computers owned by others and third-party computer systems
other than InvestOne, BNY's responsibility shall be limited to seeking similar
notice from such owners or third parties and promptly forwarding such
notifications to NBAI.
(ii) NBAI or LifeGoal shall have the right to terminate this Agreement
if there is a "material failure" by BNY to perform any of the Services in
accordance with the Standards due to a failure by computers owned or used by BNY
in performing its duties hereunder to properly process the occurrence of the
Subject Dates or data containing the Subject Dates. As used in this Section
1(d), the term "material failure" shall be limited to a failure to provide any
of the Services in accordance with the Standards, provided that no such failure
shall be deemed a "material failure" if such failure occurs at or about the time
other major financial institutions similar to BNY providing similar services in
a similar volume to investment companies similar to LifeGoal are experiencing
similar failures, and, provided further, that no failure by BNY shall
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be or be deemed a "material failure" if BNY substantially provides the Services
under a contingency plan, it being agreed that, to the extent that the parties
mutually agree, the time frames and deadlines set forth in Schedule III of this
Agreement and elsewhere shall not be considered in determining whether BNY is
substantially providing the Services in accordance with the Standards. NBAI and
LifeGoal agree to act reasonably and in good faith in considering any request by
BNY to extend time frames and deadlines.
(iii) In the event there is a "material failure" by BNY to provide the
Services and such "material failure" is not cured by BNY within 10 days after
such material failure arises, NBAI or LifeGoal shall have the right to terminate
this Agreement upon the giving of 60 days written notice to BNY. BNY shall,
notwithstanding any other provision contained in this Agreement, have no
liability to LifeGoal or NBAI under this Agreement if such "material failure"
initially arose out of or was caused by a failure of a computer used but not
owned by BNY or owned by a third party (other than InvestOne) to properly
process the Subject Dates or data containing the Subject Dates, and BNY shall be
entitled to any compensation and reimbursement for out-of-pocket expense as may
then be due and payable, as well as agreed-upon out-of-pocket expenses incurred
in connection with such a termination. If such a termination is the result of a
"material failure" initially arising out of, or caused by a failure of computers
owned by BNY or a failure by InvestOne, then, first, BNY's liability hereunder
for such failure shall, notwithstanding any other provision contained in this
Agreement to the contrary, be limited to the lesser of (x) the fees paid to a
successor service provider during the six months next succeeding the date of
termination to the extent such fees exceed the fees that would have been paid to
BNY hereunder, and (y) $1,000,000; and second, BNY shall not be entitled to
out-of-pocket expenses incurred in connection with such a termination.
(iv) In the event of conflict between this Section 1(d) and any other
provision contained in this Agreement, this Section 1(d) shall control.
(v) NBAI and LifeGoal each agree to hold all of the provisions of this
Section 1(d) in strict confidence and not to disclose, nor permit disclosure of,
such provisions.
(e) Subject to the direction and approval of LifeGoal's Board and
appropriate officers and the provisions of this Agreement, BNY shall provide to
each Fund the administrative services set forth on Schedule II attached hereto.
In performing such services hereunder, BNY shall provide, at its expense, office
space, facilities, equipment and personnel. BNY shall not provide any services
relating to the management, investment advisory or sub-advisory functions of any
Fund, distribution of shares of any Fund, maintenance of any Fund's financial
records (except as otherwise agreed by the parties) or any services normally
performed by the Funds' counsel or independent accountants. Upon receipt of
LifeGoal's prior written consent, BNY may delegate any of its duties and
obligations hereunder to any delegee or agent whenever and on such terms and
conditions as it deems necessary or appropriate. Unless expressly agreed in
writing, BNY shall not be relieved of liability or responsibility for the
performance of any duties or obligations delegated to a delegee or agent,
provided that BNY shall have no liability for duties or obligations that are
delegated to a delegee or agent at the instruction of LifeGoal or NBAI. LifeGoal
and NBAI shall cause their respective officers, and shall use reasonable efforts
to cause LifeGoal's or NBAI's legal counsel, independent accountants, and
transfer agent to
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cooperate with BNY and to provide BNY, upon BNY's reasonable written request,
with such information, documents and advice relating to such Fund as is within
the possession or knowledge of such persons, in order to enable BNY to perform
its duties hereunder. Such cooperation or provision of information, documents or
advice shall be at no cost to BNY, provided BNY's request is reasonable and NBAI
shall have been notified of the request. In connection with its duties
hereunder, BNY shall be entitled to reasonably rely upon any documents relating
to a Fund provided to BNY by any of the aforementioned persons. BNY may apply to
LifeGoal or NBAI for written instructions with respect to any matter arising in
connection with BNY's performance hereunder. If, after a reasonable period of
time, BNY receives no response to any such application, BNY may then notify
LifeGoal or NBAI of reasonable action that BNY shall take if written
instructions are not received within a stated period of time after such notice,
and then BNY shall not be liable for taking such reasonable action as if written
instructions had been provided. BNY is entitled to reasonably rely and act in
accordance with written instructions believed to have been given by authorized
persons and shall incur no costs for such reasonable reliance. BNY shall have no
duties or responsibilities whatsoever except such duties and responsibilities as
are specifically set forth in this Agreement and Schedule II hereto, and no
covenant or obligation shall be implied against BNY in connection with this
Agreement.
(f) LifeGoal and NBAI, for itself and not for the others, hereby
represents and warrants to the BNY, which representations and warranties shall
be deemed to be continuing, that: (i) it is duly organized and existing under
the laws of the jurisdiction of its organization, with full power to carry on
its business as now conducted, to enter into this Agreement and to perform its
obligations hereunder; (ii) this Agreement has been duly authorized, executed
and delivered by it in accordance with all requisite action and constitutes a
valid and legally binding obligation, enforceable in accordance with its terms;
(iii) it is conducting its business substantially in compliance with all
applicable laws and regulations, both state and federal, and has obtained all
regulatory licenses, approvals and consents necessary to carry on its business
as now conducted; (iv) there is no statute, regulation, rule, order or judgment
binding on it and no provision of its Charter or Bylaws, nor of any mortgage,
indenture, credit agreement or other contract binding on it or affecting its
property which would prohibit its execution or performance of this Agreement;
and (v) LifeGoal and NBAI will use reasonable efforts to promptly notify BNY of
any errors or omissions contained in any reports, calculations, valuations and
other items of information, provided that any failure by LifeGoal or NBAI to
detect any such errors or omissions shall not relieve BNY of any resulting
liability therefrom. To the extent that NBAI has actual knowledge of any such
error or omission and fails to use reasonable efforts to promptly notify BNY,
BNY shall be relieved of any liability that BNY may have mitigated had NBAI
provided notice of such error or omission to BNY.
(g) BNY hereby represents and warrants to LifeGoal and NBAI, which
representations and warranties shall be deemed to be continuing, that: (i) it is
duly organized and existing under the laws of the jurisdiction of its
organization, with full power to carry on its business as now conducted, to
enter into this Agreement and to perform its obligations hereunder; (ii) this
Agreement has been duly authorized, executed and delivered by it in accordance
with all requisite action and constitutes a valid and legally binding
obligation, enforceable in accordance with its terms; and (iii) it is conducting
its business substantially in
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compliance with all applicable laws and regulations, both state and federal, and
has obtained all regulatory licenses, approvals and consents necessary to carry
on its business as now conducted; there is no statute, regulation, rule, order
or judgment binding on it and no provision of its Charter or Bylaws, nor of any
mortgage, indenture, credit agreement or other contract binding on it or
affecting its property which would prohibit its execution or performance of this
Agreement.
2. Compensation. For the services to be rendered, the facilities to be
furnished and the compensation and other expenses to be borne by BNY, as
provided for in this Agreement, BNY shall be entitled to receive a monthly fee
from NBAI and reimbursement for out-of-pocket expenses as set forth in Schedule
IV to this Agreement. It is understood that NBAI shall be responsible for BNY's
monthly fee for its services hereunder, and BNY agrees that it shall have no
claim against LifeGoal or the Funds with respect to compensation under this
Agreement.
3. Recordkeeping. BNY shall, as agent for LifeGoal, and subject to the
direction and approval of LifeGoal's Board and the provisions of this Agreement,
maintain and keep current the books, accounts and other documents, if any,
pursuant to the services and duties provided by BNY as set forth in Schedule II
of this Agreement, and preserve any such books, accounts and other documents in
accordance with the applicable provisions of Rule 31a-2 of the 1940 Act. Such
books, accounts and other documents shall be made available upon reasonable
request for inspection by officers, employees and auditors of LifeGoal and NBAI
during BNY's normal business hours. All records maintained and preserved by BNY
pursuant to this Agreement which LifeGoal is required to maintain and preserve
in accordance with Rule 31a-2 of the 1940 Act shall be and remain the property
of LifeGoal and shall be surrendered to LifeGoal promptly upon request in the
form in which such records have been maintained and preserved. Upon reasonable
request of LifeGoal, BNY shall provide in data files or hard copy, whichever
LifeGoal shall reasonably elect, any records included in any such delivery which
are maintained by BNY on a computer disc, or are similarly maintained, and
LifeGoal shall reimburse BNY for its expenses of providing such hard copy..
4. Standard of Care; Indemnification.
(a) BNY shall at all times act in good faith and agrees to use its best
efforts to fulfill its obligations under this Agreement, but assumes no
responsibility for loss or damage to LifeGoal unless such loss or damages is
caused by BNY's own negligence, bad faith or willful misconduct or that of its
directors, officers or employees. BNY shall be responsible hereunder for all
direct damages resulting from its own negligence, bad faith or willful
misconduct, provided however that it shall not be responsible for lost profits
or lost business arising under or in connection with this Agreement. It is
understood and agreed that for purposes of this Section 4(a), "direct damages"
shall include, but shall not be limited to, all legal costs, penalties,
reimbursement for excess distribution and redemption payments, repurchasing
costs for servicing agents and reimbursement to the Funds for net asset value
breaks (as calculated under the Pricing Procedures).
(b) LifeGoal, on behalf of each Fund, will indemnify BNY against and
hold it harmless from any and all losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and expenses of a defense against
any claim, demand, action or suit), relating to the
5
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particular Fund and arising from any one or more of the following: (i) errors in
records or instructions, explanations, information, specifications or
documentation of any kind, as the case may be, supplied to BNY by any person
described in Section 1 hereof or by any third party described in Section 5; (ii)
action or inaction taken or omitted to be taken by BNY pursuant to written or
oral instructions described in this Agreement (or otherwise without bad faith,
negligence or willful misconduct); (iii) any action taken or omitted to be taken
by BNY in good faith in accordance with the advice or opinion of counsel for a
Fund, LifeGoal, NBAI (obtained in accordance with the procedures set forth in
this Agreement) or its own counsel; (iv) any improper use by the Fund, LifeGoal,
NBAI or their respective agents, of any valuations or computations supplied by
BNY pursuant to this Agreement; (v) the method of valuation of the securities
and the method of computing a Fund's net asset value or any other amount
computed by BNY hereunder, provided BNY has followed the Pricing Procedures; and
(vi) any valuation of securities, net asset value or other amount provided by a
Fund or NBAI. BNY will not confess any claim or settle or make any compromise in
any instance in which LifeGoal will be asked to provide indemnification, except
with LifeGoal's prior written consent. Any amounts payable by LifeGoal under
this Section 4(b) shall be satisfied only against the assets of the Fund
involved in the claim, demand, action or suit and not against the assets of any
other investment portfolio of LifeGoal.
5. Fund Accounting Services.
(a) BNY, in performing the services required of it under the terms of
this Agreement, shall be entitled to rely fully on the accuracy and validity of
any and all instructions, explanations, information, specifications and
documentation furnished to it by a Fund and shall have no duty or obligation to
review the accuracy, validity or propriety of such instructions, explanations,
information, specifications or documentation, including, without limitation,
evaluations of securities; the amounts or formula for calculating the amounts
and times of accrual of Fund's liabilities and expenses; the amounts receivable
and the amounts payable on the sale or purchase of securities; and amounts
receivable or amounts payable for the sale or redemption of Fund shares effected
by or on behalf of the Fund. In the event BNY's computations hereunder rely, in
whole or in part, upon information, including, without limitation, bid, offer or
market values of securities or other assets, or accruals of interest or earnings
thereon, from a pricing or similar service utilized, or subscribed to, by BNY
which BNY in its judgment deems reliable, or any other third party pricing
source designated by LifeGoal, BNY shall not be responsible for, under any duty
to inquire into, or deemed to make any assurances with respect to, the accuracy
or completeness of such information. BNY shall not be required to inquire into
any valuation of securities or other assets by the Fund or any third party
described in this Section, even though BNY in performing services similar to the
services provided pursuant to this Agreement for others may receive different
valuations of the same or different securities of the same issuers.
(b) Subject to the provisions of this Agreement and the direction and
approval of LifeGoal's Board, BNY shall perform the computations described in
Schedule II at such times and dates and in the manner specified or described in
the then-current Prospectus(es) of a Fund. To the extent valuation of securities
or a computation specified or described in a Fund's Pricing Procedures or
then-current effective Prospectus is at any time inconsistent with any
applicable laws or regulations, LifeGoal or NBAI shall immediately so notify BNY
in writing and thereafter
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shall furnish BNY at all appropriate times with the values of such securities
and such Fund's net asset value or other amounts otherwise to be calculated by
BNY, or, subject to the prior approval of BNY, instruct BNY in writing to value
securities and make such computations in a manner which LifeGoal or NBAI then
represents in writing to be consistent with all applicable laws and regulations.
LifeGoal or NBAI may also from time to time, subject to the prior approval of
BNY, instruct BNY in writing to make computations other than as specified in
this Section of this Agreement. By giving such instruction, LifeGoal or NBAI
shall be deemed to have represented that such instruction is consistent with all
applicable laws and regulations and the then-current effective Prospectus of the
particular Fund. LifeGoal or NBAI shall have sole responsibility for determining
the method of valuation of securities and the method of computations, and all
computations, valuation of securities and the method of computing each Fund's
net asset value shall be subject to approval by LifeGoal and NBAI. BNY shall not
be liable for relying on any price provided by any pricing service believed by
BNY to be reliable, and LifeGoal or NBAI shall furnish values when the same are
not available from a pricing service utilized by BNY, with such furnishing to
constitute an instruction to BNY to rely on the provided values.
(c) BNY shall be responsible for determining and properly reflecting in
the computations made by it made by it under this Agreement: (i) the taxable
nature of any distribution or amount received or deemed received by, or payable
to, a Fund; (ii) the taxable nature or effect on a Fund or its shareholders of
any corporate actions, class actions, tax reclaims, tax refunds, or similar
events; (iii) the taxable nature or taxable amount of any distribution or
dividend paid, payable or deemed paid, by a Fund to its shareholders; (iv) the
effect under any federal, state, or foreign income tax laws of a Fund making or
not making any distribution or dividend payment, or any election with respect
thereto; or (v) any tax accounting; provided, however, that if BNY is not
certain of the taxable nature, amount or effect of any such item, it may seek
instructions regarding the proper treatment of such item from LifeGoal or NBAI
in accordance with the procedures set forth in Section 1(e), above, and shall
have no liability for acting in reliance on such instructions.
6. Termination of Agreement.
(a) This Agreement shall become effective as of the date first set
forth above and shall remain in full force and effect unless terminated pursuant
to the provisions of Section 6(b).
(b) This Agreement may be terminated at any time without payment of any
penalty, upon 60 days' written notice to BNY by NBAI or by vote of the Board of
LifeGoal; or upon 180 days' written notice to NBAI and LifeGoal by BNY. Upon any
such termination, BNY will cooperate with and assist LifeGoal, NBAI, their
agents and any successor administrator(s) or sub-administrator(s) in the
substitution/conversion process. In connection with any termination of this
Agreement, unless BNY is in breach of this Agreement, the Funds and NBAI agree
to pay BNY any compensation and reimbursement for out-of-pocket expenses as may
then be due and payable, as well as agreed-upon out-of-pocket expenses incurred
in connection with a termination. If BNY is in breach of this Agreement, the
Funds and NBAI may offset any compensation or reimbursement amounts owed to BNY
by the amount of damages, costs and expenses incurred as a result of BNY's
breach, including costs, expenses and reasonable
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incremental fees for a period not to exceed one year incurred in connection with
a conversion by LifeGoal and NBAI to a successor service provider. In the event
of a dispute as to the amount of such damages, the Funds and NBAI agree to
escrow the set-off amount.
(c) Sections 4 and 8 shall survive this Agreement's termination.
7. Amendments. Except as expressly provided in the first paragraph of
Section 1, no provision of this Agreement may be amended or modified orally, but
only by an instrument in writing signed by the party against which enforcement
of the amendment or modification is sought.
8. Confidentiality. All books, records, information and data pertaining
to the business of LifeGoal, or its prior, present or potential shareholders
that are exchanged or received in connection with the performance of BNY's
duties under this Agreement shall remain confidential and shall not be disclosed
to any other person, except as specifically authorized by LifeGoal or as may be
required by law, and shall not be used for any purpose other than performance of
its responsibilities and duties hereunder, and except that BNY retains the right
to disclose matters subject to confidentiality to its examiners, regulators,
internal or external auditors, its accountants, its internal and external
counsel, and to any other entity whenever it is advised by its internal or
external counsel that it is reasonably likely that BNY would be liable for a
failure to do so. BNY will endeavor to provide written notice to LifeGoal and
NBAI at least five business days prior to any disclosures pursuant to this
Section 8, but, provided it shall have provided as much notice as is reasonably
practicable under the circumstances, BNY shall have no liability for any failure
to do so.
9. Service to Other Companies. LifeGoal and NBAI acknowledge that BNY
now provides, will continue to provide and may in the future provide
administrative or other services to other investment companies or series of
investment companies, and LifeGoal and NBAI have no objection to BNY so doing.
LifeGoal and NBAI further acknowledge that the persons employed by BNY to assist
in the performance of BNY's duties under this Agreement may not devote their
full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of BNY or any affiliate of BNY to engage
in and devote time and attention to other businesses or to render services of
whatever kind or nature.
10. Conversion Schedule. If LifeGoal and NBAI, in the exercise of their
reasonable judgment, cannot meet the conversion schedule set forth in Schedule
VI as a result of BNY's inability to provide, or to confirm that it is capable
of providing, the services described in Schedule II or to meet the quality of
service standards set forth in Schedule III with respect to one or more Funds in
accordance with the conversion schedule attached as Schedule VI, then BNY shall
be obligated to pay any resulting incremental costs incurred by LifeGoal or
NBAI, including any incremental fees payable to First Data Investors Services
Group by LifeGoal or NBAI.
11. Miscellaneous.
(a) This Agreement shall be construed in accordance with the laws of
the State of New York, without regard to conflict of laws principles thereof.
Each Fund, LifeGoal and NBAI
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hereby consent to the jurisdiction of a state or federal court situated in New
York City, New York in connection with any dispute arising hereunder. To the
extent that in any such jurisdiction any of the aforementioned persons may now
or hereafter be entitled to claim, for itself or its assets, immunity from suit,
execution, attachment (before or after judgment) or other legal process, each
irrevocably agrees not to claim, and it hereby waives, such immunity.
(b) In case any provision in or obligation under this Agreement shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations shall not in any
way be affected or impaired thereby, and if any provision is inapplicable to any
person or circumstances, it shall nevertheless remain applicable to all other
persons and circumstances.
(c) Each and every right granted to BNY, LifeGoal or NBAI hereunder or
under any other document delivered hereunder or in connection herewith, or
allowed it by law or equity, shall be cumulative and may be exercised from time
to time. No failure on the part of BNY, LifeGoal or NBAI to exercise, and no
delay in exercising, any right will operate as a waiver thereof, nor will any
single or partial exercise by BNY, LifeGoal or NBAI of any right preclude any
other or future exercise thereof or the exercise of any other right.
(d) BNY shall not be responsible for delays or errors that occur by
reason of circumstances beyond its reasonable control in the performance of its
duties under this Agreement, provided that reasonable back-up and disaster
recovery systems are in place, including, without limitation, labor
difficulties, mechanical breakdowns, computer breakdowns or malfunctions
(hardware or software), flood or catastrophe, acts of God, failures of
transportation, communication or power supply, or other similar circumstances.
Nor shall BNY be responsible for delays or failures to supply the information or
services specified in this Agreement where such delays or failures are caused by
the failure of any person(s) other than BNY to supply any instructions,
explanations, information, specifications or documentation deemed necessary by
BNY in the performance of its duties under this Agreement.
(e) Any notice or other instrument authorized or required by this
Agreement to be given in writing to LifeGoal, BNY and/or NBAI shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To LifeGoal:
Nations LifeGoal Funds, Inc.
111 Center Street
Little Rock, Arkansas 72201
Attention: Richard H. Blank, Jr.
To NBAI:
NationsBanc Advisors, Inc.
One Bank of America Plaza
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101 South Tryon Street, NC1-002-33-31
Charlotte, NC 28255-0001
Attention: Edward D. Bedard
To BNY:
The Bank of New York
90 Washington Street
22nd Floor
New York, NY 10286
Attention: Stephen E. Grunston
(f) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement may not be assigned by BNY, nor may BNY delegate
responsibility for the performance of any of its duties hereunder, without the
written consent of the other parties hereto.
(g) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
(h) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(i) This Agreement constitutes the entire agreement between the parties
hereto with respect to the provision by BNY of sub-administrative services and
the receipt of fees therefor, and supersedes all prior arrangements or
understandings, written or oral, with respect to the provision by BNY of such
services and the receipt of fees therefor.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
THE BANK OF NEW YORK
By: /s/ Stephen E. Grunston
---------------------------------------------
Name: Stephen E. Grunston
Title: Vice President
NATIONSBANC ADVISORS, INC.
By: /s/ Edward D. Bedard
--------------------------------------------
Name: Edward D. Bedard
Title: Senior Vice President and
Chief Operating Officer
NATIONS LIFEGOAL FUNDS, INC
By: /s/ James E. Banks, Jr.
-------------------------------------------
Name: James E. Banks, Jr.
Title: Assistant Secretary
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SCHEDULE I
1. LifeGoal Growth Portfolio
2. LifeGoal Balanced Growth Portfolio
3. LifeGoal Income and Growth Portfolio
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SCHEDULE II
FUND ADMINISTRATION SERVICES
BNY shall perform the following sub-administrative services, in
addition to any other services agreed to from time to time:
o Monitor and document compliance by the Funds with their policies and
restrictions as delineated in their Prospectuses and Statements of
Additional Information, including any supplements or amendments thereto,
and with the rules and regulations under the 1940 Act utilizing Charles
River Development's compliance monitoring system or by such other means as
the parties may agree. NBAI shall be responsible for communicating such
policies and restrictions, including any changes thereto, to BNY by such
means as the parties agree.
o Provide income attribution summary schedules necessary for year-end tax
reporting, including the attached examples. Provide a gross up for foreign
taxes on a per share basis and the redesignation of income and capital
gains on a per share basis.
o Prepare federal, state, excise and local income tax returns for the Funds
and file such returns upon the approval of the Funds' independent
accountants; monitor, report on and prepare periodic worksheet and tax
provision packages with respect to Sub-Chapter M qualifications; prepare
and file all Form 1099s with respect to the Funds' Directors; monitor
compliance with Section 4982 of the Internal Revenue Code; calculate and
maintain records pertaining to original issue discount and premium
amortization as required; identify wash sales and all other book/tax
differences, and report results to the Funds' independent accountants and
Funds management; and such other duties relating to federal and/or state
tax compliance as the parties may agree. BNY shall be responsible for
providing all pertinent tax information to the Funds' independent
accountants.
o Prepare Return of Capital Statement of Position 93-2 adjustments.
o Support NBAI in its preparation of the schedules and provide NBAI unaudited
quarterly and semi-annual and audited annual financial statements and
schedules of Fund investments by providing, without limitation, each Funds'
schedule of investments and general ledger in electronic format and/or hard
copy, as required, and such other information as may be necessary to
complete such financial reports.
o Prepare statistical reports for outside information services (referenced in
Schedule V), and such other information services as the parties may agree,
including the ICI expense survey.
o Prepare calculations for capital gains pursuant to IRS rules in conjunction
with NBAI and the Funds' independent accountants.
o Attend Fund shareholder and Board of Directors meetings as requested by
NBAI, including making such presentations as are appropriate, and, with
respect to the Fund administration
II-1
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services described herein, provide such periodic and special reports to
LifeGoal and NBAI as LifeGoal and NBAI shall reasonably request.
FUND ACCOUNTING SERVICES
BNY shall provide all accounting and recordkeeping services necessary
and appropriate for the business of the Funds, including but not limited to
those set forth below.
Required Records; Ledgers and Journals
BNY shall keep current the following accounts and records relating to
the business of the Funds, in such form as is required by the 1940 Act and the
rules thereunder, and generally accepted accounting principles, to support all
filings under applicable federal and state tax laws and regulations and as may
be mutually agreed to among LifeGoal, NBAI and BNY, and shall make available to
NBAI and/or LifeGoal upon request:
1. Cash Receipts Journal
2. Cash Disbursements Journal
3. Dividends Paid and Payable Schedule (book vs. tax basis)
4. Purchase and Sales Journals - Portfolio Securities
5. Realized/Unrealized Gain (Loss) Reports
6. Subscription and Redemption Journals
7. Security Ledgers - Transaction Report and Tax Lot Holdings Report
8. Broker Ledger - Commission Report
9. Daily Expense Accruals
10. Daily Interest Accruals
11. Daily Trial Balance
12. Portfolio Interest Receivable and Income Journal
13. Portfolio Dividend Receivable and Income Register
14. Listing of Portfolio Holdings - showing cost, market value and
percentage of portfolio comprised of each security
15. Aged Receivables (dividends, interest, tax reclaiming)
16. Portfolio Turnover Rate
17. Cash reconciliations
18. Position reconciliations
BNY will be responsible for maintaining, in accordance with
Section 31 and the rules thereunder of the 1940 Act, all books and records so
required and generated in the course of performing their duties under this
agreement. Further, at a minimum, BNY shall maintain on-site the above
referenced reports as of each month end for the most recent fiscal year-ended
and the current fiscal year.
II-2
<PAGE>
Daily Accounting Services
BNY shall perform the following services on each Business Day:
1. Calculate Net Asset Value (NAV), and Public Offering Price (POP) Per Share
Pursuant to SEC formulas:
o Update the valuation of security positions held by each Fund's
portfolio in accordance with the Fund's Pricing Procedures and any
other appropriate procedures established by the Board and NBAI as NBAI
shall provide BNY in writing
o When instructed by NBAI, enter manual prices supplied by broker and
link to pricing procedures
o Calculate each Fund's NAV/POP in accordance with the applicable Pricing
Procedures approved by LifeGoal's Board of Directors and prepare NAV
proof sheet. Review components of change in NAV for reasonableness
based on the tolerance levels as NBAI shall direct BNY in writing
o Review variance reporting for price changes in individual securities
using variance levels established by Fund and report to Fund portfolio
managers and to NBAI
o Review for ex-dividend items indicated by pricing sources; trace to
general ledger for agreement
o Communicate required pricing and yield information (NAV/POP), as
appropriate, to NBAI, the Funds' Transfer Agent and Sub-Transfer Agent
and, electronically, to NASDAQ and to such other third parties as
designated by the Funds with respect to its various distribution
channels. In addition, provide Fund share activity to NBAI.
2. Dividend Rates/Yields/Dollar Weighted Average Maturity:
o Calculate, subject to the approval of NBAI, net investment income
available for distribution daily as appropriate
o Calculate daily dividend rate, and 1, 7, 30-day yields/SEC yields
o Calculate dollar weighted average maturity
3. Determine and Report Cash Availability:
o Receive daily cash and transaction statements from the Funds' Custodian
o Complete daily bank cash reconciliations (including documentation of
any reconciling items) and notify the Funds' Custodian
o Report investable cash to NBAI and Fund sub-advisers
4. Daily Expense Accruals:
o Accrue individual expenses on a daily basis based on Instructions
provided by NBAI, except for those instances where such an adjustment
would cause a full penny break in NAV, in which case such adjustment
will be included in the calculation of NAV on the day received
o If applicable, accrue daily amortization of organization expense as
instructed by NBAI
II-3
<PAGE>
o If applicable, accrue daily Rule 12b-1 Plan expenses
o Adjust expense accruals as instructed by NBAI and provide reports as
requested by NBAI
5. Verify and Record All Daily Income Accruals for Debt Issues:
o Track income and provide year end tax schedules
o Review and verify all interest and amortization reports
o Periodic tie-out of receivables
o Ensure security masters denote proper interest and amortization methods
as per the fund set up sheets as instructed by NBAI
6. Monitor Securities:
o Review each funds portfolio holding and current days security trades
for dividend activity
o Interface with Funds' Custodian for timely collection and postings of
corporate actions, dividends and interest pre-payments
7. Enter All Security Trades:
o Review verification of trade and interest calculations
o Verify settlement through custodian statements
o Maintain security ledger transaction reporting
o Maintain tax lot holdings
o Determine realized gains or losses on security trades
o Provide broker commission information
8. Enter All Fund Share Transactions:
o Periodically reconcile dividend payable amounts with the Funds'
Transfer Agent
o Process activity identified on transfer agent reports
o Verify settlement through custodian statements
o Reconcile to transfer agency report balances
o Process and track capital stock gain/loss activity
9. Prepare Daily Trial Balance:
o Post manual entries to general ledger
o Post custodian bank activity
o Require automated settled transactions between custody and activity
records (prepare, clear and post)
o Post shareholder and security transactions
o Post and verify income and expense accruals and resolve differences
o Prepare general ledger
o Post corporate action activity
II-4
<PAGE>
10. Review and Reconcile Custodian Statements:
o Verify all posted interest, dividends, expenses, and shareholder and
security payments/receipts, etc. when requested
o Post all cash settlement activity to trial balance
o Reconcile to ending cash balance accounts
o Report to NBAI the status of past due items and failed trades with the
custodian
o Reconcile cash exception Income items, tax reclaims and past due income
items with custody area
11. Preparation of Accounting Reports:
o Price Variance Report
o Trial Balance
o Portfolio Valuation
o NAV Calculation Report
o Cash Availability
o Change in NAV
o Non-standard entries
o Stale Price Report
o Other such reports as may be reasonably be requested by NBAI
Monthly/Quarterly Services
BNY shall provide the following services on a monthly or quarterly
basis, within such timeframe as may be mutually agreed upon by BNY, LifeGoal and
NBAI:
1. Submission of Monthly Accounting Reports as mutually agreed upon
2. Reconcile Asset Listing to Custodian Asset Listing
3. Provide Monthly Analysis and Reconciliation of Trial Balance Accounts
4. Prepare Documentation Supporting the Preparation of:
o SEC yield reporting
o Income by state reporting
o Standard Industry Code Valuation Report (please provide NBAI's industry
code classifications/is there a standard for all funds)
o Alternative Minimum Tax Income segregation schedule
II-5
<PAGE>
5. Provide Upon Request Broker Commission and Net Trade Reports
Annual (and Semi-Annual) Accounting Services
BNY shall provide the following services on an annual and semi-annual
basis:
1. Supply auditors InvestOne reports supporting securities and shareholder
transactions, income and expense accruals, etc. during the year in
accordance with standard audit assistance requirements
2. Provide NBAI with information to assist NBAI in the preparation of NSAR
filings
Other Core Services
BNY shall provide the following services:
o Accrete discounts and amortize premiums to put and call events as
directed by NBAI and in a manner acceptable under generally accepted
accounting principles
o Process principal repayments on mortgage backed securities
o Update variable securities with current rates
o Process corporate action events through a primary vender feed, and
monitor results via Reuters, Bloomberg, or other available sources as
the parties may agree
o Perform automated portfolio pricing with a second vendor as requested
by NBAI
o Produce documents and respond to inquiries during account and SEC
examinations
Money Market Funds: Prepare daily mark to market reports and analysis
in compliance with Rule 2a-7 including:
o Calculating the daily portfolio weighted average maturity
o Report portfolio diversification based on trade/security information
provided by NBAI by:
Country, State, Tier, Liquidity, Asset Backed Securities, Industry,
Letter of Credit
o Listing percentage of portfolio maturing in specified intervals (i.e.,
number of days)
o Providing issuer and guarantor diversification exception reporting
International Funds: BNY shall provide the following services:
o Report in base and local currency
II-6
<PAGE>
o Processing of tax liability on foreign income subject to approval of
NBAI
o Daily variance analysis performed on FX rates for security position
held
o Produce automated bifurcation reporting in compliance with IRC Section
988
o Mark to market security receivables and payables on a daily basis
o Determine portfolio exposure by country and currency
In addition to the above, BNY will provide additional support as agreed
upon from time to time (i.e., financial statement production).
II-7
<PAGE>
SCHEDULE III
SERVICE LEVEL PERFORMANCE STANDARDS
<TABLE>
<CAPTION>
- ------------------------------------------------------------ ---------------------------------------------------------------
SERVICE STANDARD
- ------------------------------------------------------------ ---------------------------------------------------------------
<S> <C> <C> <C>
1. Daily Cash Availability |_| 100% accuracy and delivery by 9:00 a.m. EST for
Money Market Funds and 9:30 a.m. EST for all
others
|_| Compensation for uninvested cash at Nations Cash
Reserves' mill rate
- ------------------------------------------------------------ ---------------------------------------------------------------
2. Calculation of daily NAVs |_| 100% accuracy by 5:00 p.m. EST including pricing,
expense accruals, cash activity, manual entries,
S/H activity. Delivery by 5:45 p.m. EST
- ------------------------------------------------------------ ---------------------------------------------------------------
3. Review of daily NAVs |_| 100% review by 5:30 p.m. EST
|_| Review of NAV components for reasonableness including
analysis of the change in the NAV and the change in
mill rates.
|_| Review of price variance report
|_| Review of manual proof
- ------------------------------------------------------------ ---------------------------------------------------------------
4. NASDAQ Reporting |_| 100% accuracy and communication by 5:45 p.m. EST
- ------------------------------------------------------------ ---------------------------------------------------------------
5. Daily Pricing and Rate Report (DPRR) |_| 100% accuracy in nightly transmission of DPRRs
|_| Money Market Funds-5:30 p.m. EST
|_| All other funds- 6:00 p.m. EST
- ------------------------------------------------------------ ---------------------------------------------------------------
6. FundStation Report (SubM) |_| 100% accuracy and nightly transmission by 7:00 p.m.
EST
- ------------------------------------------------------------ ---------------------------------------------------------------
7. Processing of trade tickets |_| 100% accuracy and processed by T+1 if received by the
following cut-off times:
|_| All Funds (except International) - 10:00 am (T+1)
|_| International - 12:00 p.m. (T+1)
|_| Same day settlements - 1:30 p.m.
- ------------------------------------------------------------ ---------------------------------------------------------------
III-1
<PAGE>
- ------------------------------------------------------------ ---------------------------------------------------------------
SERVICE STANDARD
- ------------------------------------------------------------ ---------------------------------------------------------------
8. Problem Resolution (general) |_| NAV impact analysis within 1 day
|_| Clear and timely communication of 100% of issues
|_| Ongoing Tracking
- ------------------------------------------------------------ ---------------------------------------------------------------
9. Cash reconciliations |_| Performed daily and sent daily to NBAI (Money Market
Funds) and sent weekly to NBAI (all other funds)
|_| Issues communicated to NBAI same day
|_| Outstanding items addressed within 1 business day
- ------------------------------------------------------------ ---------------------------------------------------------------
10. Position Reconciliations |_| Performed daily and sent weekly to NBAI
|_| Issues communicated to NBAI same day
|_| Open issues addressed within 2 business days
- ------------------------------------------------------------ ---------------------------------------------------------------
11. Tax reporting
|_| Federal, state, tax returns |_| Tax provision package prepared within time
parameters as set by NBAI/Independent tax personnel (PWC)
|_| Tax provision packages including
Sub-M and excise tax amounts/ |_| Estimates of tax requirements prepared as required
distributions by NBAI for proper tax planning
|_| Identification of all book/tax differences
|_| Capital gain estimate preparations
- ------------------------------------------------------------ ---------------------------------------------------------------
12. Statistical Reports |_| Filed within the time parameters as set forth by
each statistical service
- ------------------------------------------------------------ ---------------------------------------------------------------
13. Expense accruals/payments |_| Payments made on the business day written
instructions from an authorized signator received
|_| Expense accruals made with 100% accuracy based upon
written instructions from NBAI
- ------------------------------------------------------------ ---------------------------------------------------------------
14. Management Reports |_| Provided to NBAI within 10 business days of month end
- ------------------------------------------------------------ ---------------------------------------------------------------
III-2
<PAGE>
- ------------------------------------------------------------ ---------------------------------------------------------------
SERVICE STANDARD
- ------------------------------------------------------------ ---------------------------------------------------------------
15. Year end tax reports |_| Provided to NBAI within the time frame agreed to
- ------------------------------------------------------------ ---------------------------------------------------------------
16. Annual/Semi-Annual Reports |_| Provide Trial Balance within 5 business days after
annual/semi-annual period
|_| Provide additional financial statement support as
agreed to
- ------------------------------------------------------------ ---------------------------------------------------------------
17. Daily Reports |_| To be provided on the following day
|_| Provide detailed portfolio valuation
|_| Trial Balance
- ------------------------------------------------------------ ---------------------------------------------------------------
18. Daily Cash Sweep |_| 100% accuracy and communication by 2:00 p.m. EST
|_| Nations Cash Reserves
|_| AIM
|_| Nuveen
- ------------------------------------------------------------ ---------------------------------------------------------------
19. Post Dividends / Corporate Actions |_| 100% accuracy and posted on effective date
- ------------------------------------------------------------ ---------------------------------------------------------------
20. Monthly Reconciliations |_| Complete reconciliations within 10 business days
- ------------------------------------------------------------ ---------------------------------------------------------------
21. Reporting to Sub-Advisors |_| Provide nightly and other periodic reporting to
Nations Funds Sub-Advisors
- ------------------------------------------------------------ ---------------------------------------------------------------
22. Compliance |_| Provide compliance reports as requested by NBAI
- ------------------------------------------------------------ ---------------------------------------------------------------
</TABLE>
III-3
<PAGE>
SCHEDULE IV
(ATTACHED)
IV-1
<PAGE>
SCHEDULE V
All Database Companies Quarterly List
---------------------- --------------
AMG Data Services Lipper
Barron's Morningstar
Bloomberg CDA Wiesenberger
CDA Wiesenberger Investment Company Institute
Commerce Clearing House (CCH) S&P Micropal
Forbes Institute for Economic Research
Institute for Economic Research Value Line
Interactive Data Services Media General Financial Services
Investment Company Institute LCG Associates
LCG Associates Closed End Fund Digest (Closed End Only)
Lipper Lipper - International (Closed End Only)
Media General
Moody's Investors Service
Morningstar
S&P Micropal
Strategic Insights
Value Line
V-1
<PAGE>
SCHEDULE VI
Conversion Schedule
- -------------------------------- ------------------------- ---------------------
Fund Type Number of Funds No Later Than
- -------------------------------- ------------------------- ---------------------
Money Market Funds 9 Funds 12/1/98
- -------------------------------- ------------------------- ---------------------
Variable Annuity Funds 8 Funds 12/31/98
- -------------------------------- ------------------------- ---------------------
International Funds: 8 Funds 12/31/98
- Global Government
- Emerging Markets
- Pacific Growth
- International Equity
- International Growth
- International Value
- 2 Marsico Funds
- -------------------------------- ------------------------- ---------------------
All Remaining Funds 44 Funds 2/15/99
- -------------------------------- ------------------------- ---------------------
VI-1
EXHIBIT 99.H3
TRANSFER AGENCY AND SERVICES AGREEMENT
(With Facilities Management Arrangement)
THIS AGREEMENT, dated as of this first day of June, 1995 between
NATIONS FUND, INC., a Maryland corporation, NATIONS FUND TRUST, a Massachusetts
business trust, THE CAPITOL MUTUAL FUNDS, a Massachusetts business trust,
NATIONS FUND PORTFOLIOS, INC., a Maryland corporation, and each other investment
company which may become a party hereto pursuant to the terms of this Agreement
(individually a "Fund", and collectively, the "Funds"), each with its principal
place of business at 111 Center Street, Little Rock, Arkansas 72201 and
additional offices at 101 South Tryon Street, Charlotte, North Carolina 28255,
and THE SHAREHOLDER SERVICES GROUP, INC. (the "Transfer Agent"), a Massachusetts
corporation with principal offices at One Exchange Place, 53 State Street,
Boston, Massachusetts 02109.
WITNESSETH
WHEREAS, each Fund desires to appoint the Transfer Agent as its
transfer agent, dividend disbursing agent and agent in connection with certain
other activities and the Transfer Agent desires to accept such appointment;
WHEREAS, each Fund may authorize the issuance of Shares in separate
series, with each such series representing interests in a separate portfolio of
securities and other assets ("Portfolio");
WHEREAS, each Fund and each Portfolio of a Fund subject to this
Agreement, including any investment company or Portfolio as may be added to this
Agreement pursuant to Section 17, shall be identified in the attached Schedule
G; and
WHEREAS, the Transfer Agent and NationsBank, N.A. (Carolinas)
("NationsBank") have entered into a Facilities Management Agreement ("Facilities
Agreement") dated June 1, 1995 pursuant to which the Transfer Agent has
established a servicing and processing center to provide transfer agent services
on behalf of the Funds in Charlotte, North Carolina (the "Charlotte Facility").
NOW THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Funds and the Transfer Agent agree as follows:
Article 1 Definitions
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of a Fund as the same may be amended from
time to time.
<PAGE>
(b) "Authorized Person" of a Fund shall be deemed to include (i)
any authorized officer of the Fund; (ii) the members of the Joint
Operations Board (as hereinafter defined); or (iii) any person, whether
or not such person is an officer or employee of the Fund, duly
authorized to give Oral Instructions or Written Instructions on behalf
of the Fund as indicated in writing to the Transfer Agent from time to
time.
(c) "Board of Directors" of a Fund shall mean the Board of
Directors or Board of Trustees of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange Commission.
(e) "Custodian" of a Fund refers to any custodian or subcustodian
of securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.
(f) "Joint Operations Board" shall mean the joint board comprised
of one senior representative from the Transfer Agent, one individual
designated by the Funds jointly to represent their respective interests
and the most senior Transfer Agent manager of the Charlotte Facility.
(g) "1940 Act" shall mean the Investment Company Act of 1940 and
the rules and regulations promulgated thereunder, all as amended from
time to time.
(h) "Oral Instructions" shall mean instructions, other than Written
Instructions, actually received by the Transfer Agent from a person
reasonably believed by the Transfer Agent to be an Authorized Person;
(i) "Prospectus" of a Fund shall mean collectively the most
recently dated Fund Prospectuses and Statements of Additional
Information, including any supplements thereto, if any, with respect to
each Portfolio of the Fund which have become effective under the
Securities Act of 1933 and the 1940 Act.
(j) "Shares" of a Fund refers collectively to such shares of
capital stock or beneficial interest, as the case may be, or class
thereof, of the Fund as may be issued from time to time.
(k) "Shareholder" shall mean a record owner of Shares.
(l) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by the Transfer Agent to be an
Authorized Person and actually received by the Transfer Agent. Written
Instructions shall include manually executed originals and authorized
electronic transmissions, including telefacsimile of a manually
executed original or other process.
2
<PAGE>
Article 2 Appointment of the Transfer Agent
2.1 Each Fund hereby appoints and constitutes the Transfer Agent as
transfer agent and dividend disbursing agent for Shares of the Fund and the
Transfer Agent hereby accepts such appointments and agrees to perform the duties
hereinafter set forth.
Article 3 Duties of the Transfer Agent
3.1 The Transfer Agent shall be responsible for:
(a) Administering and performing the customary services of a
transfer agent; agent in connection with dividend and distribution
functions; and agent in connection with shareholder account and
administrative functions in connection with the issuance, transfer and
redemption or repurchase (including coordination with the Custodian) of
Shares, as more fully described in the written schedule of Duties of
the Transfer Agent annexed hereto as Schedule A and incorporated
herein, and in accordance with the terms of each Fund's Prospectus,
applicable law and the procedures established from time to time between
the Transfer Agent and the Funds.
(b) Recording the issuance of Shares and maintaining pursuant to
Commission Rule 17Ad-10(e) a record of the total number of Shares which
are authorized, based upon data provided to it by each Fund, and issued
and outstanding. The Transfer Agent shall provide each Fund on a
regular basis with the total number of Shares which are authorized and
issued and outstanding and shall have no obligation, when recording the
issuance of Shares, to monitor the issuance of such Shares or to take
cognizance of any laws relating to the legality or validity of the
issue or sale of such Shares, which functions shall be the sole
responsibility of the Fund.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation to
inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares or the sufficiency of the amount to be
received therefor; (ii) the legality of the redemption of any Shares,
or the propriety of the amount to be paid therefor; (iii) the legality
of the declaration of any dividend by the Board of Directors, or the
legality of the issuance of any Shares in payment of any dividend; or
(iv) the legality of any recapitalization or readjustment of the
Shares.
3.2 In addition, each Fund shall verify the establishment of shares or
share transactions for each State prior to activation on the Transfer Agent's
system and thereafter monitor the daily activity of shares for each State based
upon daily transactions recorded by the Transfer Agent and transmitted to the
Fund or its designated agent. The responsibility of the Transfer Agent for a
Fund's blue sky State registration status is solely limited to the initial
establishment of shares or share transactions subject to blue sky compliance by
the Fund and the reporting of such transactions to the Fund as provided above.
3
<PAGE>
3.3 In addition to the duties set forth herein, the Transfer Agent
shall perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Funds
and the Transfer Agent.
Article 4 Duties of the Joint Operations Board
4.1 The Joint Operations Board will be responsible for the following
with respect to the services to be performed by the Transfer Agent under this
Agreement (the "Services"):
(a) General oversight of the provision of Services by the Transfer
Agent, including, but not limited to, the creation and quarterly review
of quality standards governing the Services pursuant to Article 5
hereof, the establishment of strategic and/or operational goals with
respect to the Services to be provided at the Charlotte Facility, and
addressing such issues and concerns that may arise from time to time
amongst the Funds and the Transfer Agent under this Agreement.
(b) Review and approval of, from a technical feasibility
standpoint, imaging and other new technologies proposed to be used by
the Transfer Agent in performing the Services at the Charlotte
facility.
(c) Review and approval of the Charlotte Facility budget and
expense statements, including those costs for which compensation is
sought by the Transfer Agent pursuant to Article 8 hereof.
(d) Review of those costs incurred by the Transfer Agent, other
than in connection with the Charlotte Facility, for which compensation
is sought by the Transfer Agent pursuant to Article 8 hereof.
4.2 With respect to matters described in Section 4.1 above, the
decision of the Funds' representative on the Joint Operations Board shall
control.
4.3 On a monthly basis, the Transfer Agent shall provide to the Joint
Operations Board a statement of the internal and external costs incurred by the
Transfer Agent in connection with the provision of Services for which the
Transfer Agent will seek reimbursement under Article 8 hereof.
Article 5 Quality Standards
5.1 The quality of service provided by the Transfer Agent hereunder
shall be maintained at or above the levels set forth in Schedule B hereto. Such
quality standards shall govern the Services provided by the Transfer Agent until
a new set of quality standards is established pursuant to Section 5.2 hereof.
5.2 As soon as practicable after the first ninety (90) days of
operation of the Charlotte Facility, the Joint Operations Board shall establish
a new set of quality standards reasonably acceptable to the Funds and the
Transfer Agent.
4
<PAGE>
5.3 The Joint Operations Board shall review and update, if necessary,
the quality standards on a semi-annual basis.
5.4 If, at any time during the term of this Agreement, 20% or more of
the then-current quality standards (e.g., 2 or more out of 10 standards) are not
met by the Transfer Agent during any month (as evidenced by monthly reports),
the Funds shall promptly notify the Transfer Agent in writing of such failure
and the details relating to such failure. If, any of the failed quality
standards are not met by the Transfer Agent during the three month period
commencing thirty (30) days after the Transfer Agent receives such notice, the
Funds shall have the right to terminate this Agreement on thirty (30) days
notice.
5.5 Notwithstanding the foregoing, the Funds shall not have the right
to terminate this Agreement based on the failure by the Transfer Agent to have
satisfied a quality standard if such failure was caused directly by the negative
vote of the Funds' representative on the Joint Operations Board with respect to
a commercially reasonable funding request of the Transfer Agent for the
Charlotte Facility.
Article 6 Recordkeeping and Other Information
6.1 The Transfer Agent shall create and maintain all records required
of it pursuant to its duties hereunder and as set forth in Schedule A in
accordance with all applicable laws, rules and regulations, including records
required by Section 31(a) of the 1940 Act. All records shall be available during
regular business hours for inspection and use by the Funds. Where applicable,
such records shall be maintained by the Transfer Agent for the periods and in
the places required by Rule 31a-2 under the 1940 Act.
6.2 To the extent required by Section 31 of the 1940 Act, the Transfer
Agent agrees that all such records prepared or maintained by the Transfer Agent
relating to the Services are the property of the relevant Fund and will be
preserved, maintained and made available in accordance with such section, and
will be surrendered promptly to such Fund on and in accordance with the Fund's
request.
6.3 In case of any requests or demands for the inspection of
Shareholder records of a Fund, the Transfer Agent will endeavor to notify the
Fund of such request and secure Written Instructions as to the handling of such
request. The Transfer Agent reserves the right, upon prior notice to the Fund,
to exhibit the Shareholder records to any person whenever it is advised by its
counsel that it may be held liable for the failure to comply with such request.
6.4 Upon reasonable notice by a Fund, the Transfer Agent shall make
available during regular business hours such of its facilities and premises
employed in connection with the performance of its duties under this Agreement
for reasonable visitation by the Fund, or any person retained by the Fund as may
be necessary for the Fund to evaluate the quality of the Services performed by
the Transfer Agent pursuant hereto.
5
<PAGE>
Article 7 Fund Instructions
7.1 The Transfer Agent will have no liability when acting for a Fund in
accordance with Written or Oral Instructions believed to have been executed or
orally communicated by an Authorized Person of the Fund and will not be held to
have any notice of any change of authority of any person until receipt of a
Written Instruction thereof from the Fund. The Transfer Agent will also have no
liability when processing Share certificates for a Fund which it reasonably
believes to bear the proper manual or facsimile signatures of the officers of
the Fund and the proper countersignature of the Transfer Agent.
7.2 The Transfer Agent may request Written Instructions from a Fund and
may seek advice from legal counsel for the Fund with prior notice to the Fund,
or its own legal counsel, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for the Transfer Agent.
Written Instructions requested by the Transfer Agent will be provided by the
Fund within a reasonable period of time.
7.3 The Transfer Agent, its officers, agents or employees, shall accept
Oral Instructions or Written Instructions given to them with respect to a Fund
by any person representing or acting on behalf of the Fund only if said
representative is an Authorized Person of the Fund. The Funds agree that all
Oral Instructions shall be followed within one business day by confirming
Written Instructions, and that the Funds' failure to so confirm shall not impair
in any respect the Transfer Agent's right to reply on Oral Instructions.
Article 8 Compensation
8.1 The Funds shall reimburse the Transfer Agent for all the Transfer
Agent's "Costs" incurred in connection with the provision of Services as set
forth in the written Schedule of Costs annexed hereto as Schedule C and
incorporated herein and in addition the Funds shall compensate the Transfer
Agent for the following amounts (the "Margin");
(a) During the first 36 months of the Initial Term (as defined
below), an amount equal to 15% of such Costs during each month.
(b) During the last 24 months of the Initial Term and during each
Renewal Term (as defined below), an amount equal to 12.5% of such Costs
during each month.
8.2 Notwithstanding the foregoing, the charges incurred by the Transfer
Agent under the Facilities Agreement with NationsBank and such other expenses
set forth in the written schedule of Non-Margin Expenses annexed hereto as
Schedule D shall not be included as Costs in connection with the calculation of
the Margin amounts set forth in Subsections 8.1(a) and (b).
6
<PAGE>
8.3 In addition to the Costs and Margin described above, the Fund shall
reimburse the Transfer Agent, and will be billed separately for, those
out-of-pocket expenses incurred by the Transfer Agent in the performance of its
duties hereunder as specified in the written schedule of out-of-pocket expenses
annexed hereto as Schedule E and incorporated herein.
8.4 The Funds agree to pay all fees and out-of-pocket expenses within
thirty (30) days following the receipt of the respective invoice. The Funds
shall not be obligated to pay amounts that are reasonably in dispute until such
dispute is resolved.
Article 9 Documents
9.1 In connection with the appointment of the Transfer Agent, each Fund
shall, on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for the Transfer Agent to prepare to perform
its duties hereunder, deliver or cause to be delivered to the Transfer Agent the
documents set forth in the written schedule of Fund Documents annexed hereto as
Schedule F.
Article 10 Transfer Agent System
10.1 The Transfer Agent shall retain title to and ownership of any and
all data bases, computer programs, screen formats, report formats, interactive
design techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade secrets,
and other related legal rights utilized by the Transfer Agent in connection with
the services provided by the Transfer Agent to the Fund herein (the "Transfer
Agent System").
10.2 The Transfer Agent hereby grants to each Fund a limited license to
the Transfer Agent System for the sole and limited purpose of having the
Transfer Agent provide the services contemplated hereunder and nothing contained
in this Agreement shall be construed or interpreted otherwise and such license
shall immediately terminate upon the termination of this Agreement.
10.3 The Transfer Agent agrees to provide the Funds with full access to
the Transfer Agent System and all enhancements thereto to the same extent that
such is made available to other Transfer Agent clients.
10.4 In the event the Funds desire the Transfer Agent to develop any
enhancements for the Transfer Agent System, the parties shall agree on the
staffing requirements which will be subject to the approval of the Joint
Operations Board.
10.5 In the event the Funds request an enhancement to the Transfer
Agent System which is estimated to require 5,000 programming hours or more
("Enhancement Project") and the Funds agree to assume the cost of such
Enhancement Project, the Funds and the Transfer Agent shall agree in writing on
any restrictions imposed on the Transfer Agent with respect to the use of such
enhancement prior to commencement of the Enhancement Project.
7
<PAGE>
10.6 Each Fund reserves the right to review and examine "imaging" and
significant other technological developments to be implemented with the Transfer
Agent System from a technical feasibility standpoint.
Article 11 Representations and Warranties of the Transfer Agent
11.1 The Transfer Agent represents and warrants to each Fund that:
(a) It is a corporation duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) All requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
(d) It is duly registered with the appropriate regulatory agencies
as a transfer agent and such registration will remain in effect for the
duration of this Agreement;
(e) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
Article 12 Representations and Warranties of the Funds
12.1 Each Fund represents and warrants to the Transfer Agent that:
(a) It is duly organized and existing and in good standing under
the laws of the jurisdiction in which it is organized;
(b) It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into this Agreement;
(c) All corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize
it to enter into this Agreement;
(d) A registration statement under the Securities Act of 1933, as
amended, is currently effective and will remain effective, and all
appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of the Fund being
offered for sale;
(e) All outstanding Shares are validly issued, fully paid and
non-assessable and that, when Shares are hereafter issued in accordance
with the terms of the Fund's Articles of Incorporation and its
Prospectus, such Shares shall be validly issued, fully paid and
non-assessable.
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<PAGE>
Article 13 Indemnification
13.1 The Transfer Agent shall not be responsible for and each Fund
shall indemnify and hold the Transfer Agent harmless from and against any and
all claims, costs, expenses (including reasonable attorneys' fees), losses,
damages, charges, payments and liabilities of any sort or kind which may be
asserted against the Transfer Agent or for which the Transfer Agent may be held
to be liable (a "Claim") arising out of or attributable to any of the following:
(a) Any actions of the Transfer Agent required to be taken pursuant
to this Agreement for the Fund unless such Claim resulted from a
negligent act or failure to act or bad faith by the Transfer Agent in
the performance of its duties hereunder.
(b) The Transfer Agent's reasonable reliance on, or reasonable use
of information, data, records and documents (including but not limited
to magnetic tapes, computer printouts, hard copies and microfilm
copies) received by the Transfer Agent from the Fund, or any authorized
third party acting on behalf of the Fund, including but not limited to
the prior transfer agent for the Fund, in the performance of the
Transfer Agent's duties and obligations hereunder.
(c) The reliance on, or the implementation of, any Written or Oral
Instructions or any other instructions or requests of the Fund which
are deemed to be provided by an Authorized Person of the Fund.
(d) The offer or sales of Shares by the Fund in violation of any
requirement under the securities laws or regulations of any state that
such Shares be registered in such state or in violation of any stop
order or other determination or ruling by any state with respect to the
offer or sale of such Shares in such state.
(e) The Fund's refusal or failure to comply with the terms of this
Agreement, or any Claim which arises out of the Fund's negligence or
misconduct or the breach of any representation or warranty of the Fund
made herein.
13.2 In any case in which a Fund may be asked to indemnify or hold the
Transfer Agent harmless, the Transfer Agent will notify the Fund promptly after
identifying any situation which it believes presents or appears likely to
present a claim for indemnification against the Fund although the failure to do
so shall not prevent recovery by the Transfer Agent, unless the Fund is actually
prejudiced thereby, and the Transfer Agent shall keep the Fund advised with
respect to all developments concerning such situation. The Fund shall have the
option to defend the Transfer Agent against any Claim which may be the subject
of this indemnification, and, in the event that the Fund so elects, such defense
shall be conducted by counsel chosen by the Fund and satisfactory to the
Transfer Agent, and thereupon the Fund shall take over complete defense of the
Claim and the Transfer Agent shall sustain no further legal or other expenses in
respect of such Claim. The Transfer Agent will not confess any Claim or make any
compromise in
9
<PAGE>
any case in which the Fund will be asked to provide indemnification, except with
the Fund's prior written consent. The obligations of the parties hereto under
this Article shall survive the termination of this Agreement, so long as the
Transfer Agent and the Fund act in good faith and are not negligent in their
actions.
Article 14 Standard of Care
14.1 The Transfer Agent shall at all times act in good faith and agrees
to use its best efforts within commercially reasonable limits to ensure the
accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Funds unless said errors are caused by
the Transfer Agent's own negligence, bad faith or willful misconduct or that of
its employees.
Article 15 Consequential Damages
15.1 In no event and under no circumstances shall either a Fund or the
Transfer Agent be liable to another party for consequential or indirect loss of
profits, reputation or business or any other special damages under any provision
of this Agreement or for any act or failure to act hereunder.
Article 16 Term and Termination
16.1 This Agreement shall be effective on the date first written above
and shall continue for a period of sixty (60) months (the "Initial Term"),
unless earlier terminated pursuant to the terms of this Agreement. Thereafter,
this Agreement shall automatically be renewed for successive terms of
twenty-four (24) months ("Renewal Terms") each, unless terminated pursuant to
this Agreement.
16.2 The Funds or the Transfer Agent may terminate this Agreement at
the end of the Initial Term or at the end of any subsequent Renewal Term upon
not less than nine (9) months prior written notice to the other parties.
16.3 Upon a minimum of nine (9) months prior written notice from the
Boards of Directors of the Funds, the Funds may terminate this Agreement at the
end of the thirty-sixth (36th) or forty-eighth (48th) month of the Initial Term.
16.4 The Funds shall have the right to terminate this Agreement
immediately upon the insolvency or bankruptcy of the Transfer Agent or the
appointment of a receiver for the Transfer Agent, or with respect to any of its
assets, or any change in the financial condition of the Transfer Agent which
impedes the ability of the Transfer Agent to perform any of its obligations
hereunder which is not cured by the Transfer Agent within thirty (30) days of
such occurrence. The Funds shall have the right to seek to renegotiate this
Agreement and, if such negotiations are not successful within a reasonable
period of time, not to exceed ninety (90) days, to terminate this Agreement upon
the transfer of ownership of a controlling interest in the Transfer Agent by or
to any person other than a person who was an affiliate of the Transfer Agent or
its parent company immediately before the transfer.
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<PAGE>
16.5 In the event that the total number of combined Shareholder
accounts for the Funds and any other open-end investment companies affiliated
with the Funds by reason of having a common investment adviser exceeds three
times the 1994 Shareholder account base of 130,000 due to merger or acquisition
activity involving the investment adviser or any affiliates of the adviser, the
Funds shall have the right to terminate this Agreement upon nine (9) months
prior written notice to the Transfer Agent. As used in this Article 16,
"affiliates of the adviser" shall mean (i) a direct or indirect owner of 50% or
more of the outstanding common stock of the adviser (a "parent") or (ii) any
company or association whose outstanding common stock is at least 50% owned,
directly or indirectly, by the adviser or by a parent.
16.6 In the event this Agreement is terminated by the Funds pursuant to
Section 5.4, all expenses associated with the movement of records and materials
to a successor transfer agent will be borne by the Transfer Agent. In the event
of a termination pursuant to any other sections, all expenses associated with
conversion will be borne by the Funds. The Transfer Agent shall cooperate with
any such conversion to a successor transfer agent and shall use its best efforts
to mitigate the costs associated with such transfer.
16.7 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If the Transfer Agent is the Non-Defaulting Party, its
termination of this Agreement shall not constitute a waiver of any other rights
or remedies of the Transfer Agent with respect to services performed prior to
such termination or rights of the Transfer Agent to be reimbursed for
out-of-pocket expenses incurred prior to such termination. In all cases,
termination by the Non-Defaulting Party shall not constitute a waiver by the
Non-Defaulting Party of any other rights it might have under this Agreement or
otherwise against the Defaulting Party. The Defaulting Party shall not be
released from any liability with respect to such services performed prior to
such termination.
16.8 In the event of termination of this Agreement by the Funds
pursuant to Sections 16.3 or 16.5:
(a) Prior to the effective date of the termination, the Funds shall
reimburse the Transfer Agent for all unamortized costs incurred by the
Transfer Agent in establishing the Charlotte Facility.
(b) Prior to the effective date of the termination, the Funds shall
assume any and all obligations that the Transfer Agent may have to
third parties arising out of or in connection with the Transfer Agent's
operations at the Charlotte Facility and that the Transfer Agent is not
able to terminate prior to the effective date of the termination of
this Agreement.
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(c) Prior to the effective date of the termination, the Funds shall
pay the Transfer Agent an amount equal to 80% of the cumulative Margin
(as defined in Section 8.1) paid by the Funds to the Transfer Agent for
the twelve months preceding the notice of termination, unless the
Funds' investment adviser or any affiliate of the adviser has acquired
an entity providing comparable transfer agency services to those
provided under this Agreement.
(d) The Funds shall reimburse the Transfer Agent for all reasonable
expenses (other than accrued vacation, sick or other leave) incurred by
the Transfer Agent in connection with the termination of the Transfer
Agent's employees located at the Charlotte Facility, or, at the option
of the Funds, the transfer of such employees to another entity
providing services to the Funds. The Transfer Agent shall be obligated
to seek to minimize any such expenses to the extent commercially
practicable.
(e) The Transfer Agent shall transfer to the Funds all physical
assets located at the Charlotte Facility.
Article 17 Additional Portfolios and Funds
17.1 In the event that a Fund establishes one or more Portfolios in
addition to those identified initially on Schedule G, with respect to which the
Fund desires to have the Transfer Agent render services as transfer agent under
the terms hereof, the Fund shall so notify the Transfer Agent in writing, and if
the Transfer Agent agrees in writing to provide such services (such agreement
not to be withheld unreasonably), Schedule G shall be amended to include such
additional Portfolios.
17.2 Subsequent to the effective date of this Agreement, one or more
registered investment companies (a "New Fund") for which NationsBank or any of
its affiliates acts as investment adviser may become a party to this Agreement
upon execution of a written adoption agreement by such New Fund pursuant to
which such New Fund agrees to be bound by the terms of this Agreement (an
"Adoption Agreement"). Following the execution of an Adoption Agreement by a New
Fund, such New Fund shall be deemed a Fund for all purposes of this Agreement
and shall have all the rights, obligations and duties of a Fund under this
Agreement.
Article 18 Confidentiality
18.1 In connection with the services provided by the Transfer Agent
hereunder, certain confidential and proprietary information regarding the
Transfer Agent and the Fund may be disclosed to the other. In connection
therewith, the parties agree as follows:
(a) "Confidential Information" shall mean:
(i) any data or information that is competitively sensitive
material, and not generally known to the public, including, but
not limited to, information about product plans, marketing
strategies, finance, operations, customer relationships,
customer profiles,
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<PAGE>
sales estimates, business plans, and internal performance
results relating to the past, present or future business
activities of the Transfer Agent or the Fund,
their respective parent corporation, their respective
subsidiaries and affiliated companies and the customers,
clients and suppliers of any of the foregoing;
(ii) any scientific or technical information, design,
process, procedure, formula, or improvement that is
commercially valuable and secret in the sense that its
confidentiality affords the Transfer Agent or the Fund a
competitive advantage over its competitors; and
(iii) all confidential or proprietary concepts,
documentation, reports, data, specifications, computer
software, source code, object code, flow charts, databases,
inventions, know-how, show-how and trade secrets, whether or
not patentable or copyrightable.
(b) Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory
notebooks, drawings, diagrams, specifications, bills of material,
equipment, prototypes and models, and any other tangible manifestation
of the foregoing which now exist or come into the control or possession
of the party.
18.2 Except as expressly authorized by prior written consent of the
disclosing party ("Discloser"), the party receiving Confidential Information
("Recipient") shall:
(a) limit access to Discloser's Confidential Information to
Recipient's employees and agent who have a need-to-know in connection
with the subject matter thereof;
(b) advise those employees and agents who have access to the
Confidential Information of the proprietary nature thereof and of the
obligations set forth in this Confidential Agreement;
(c) take appropriate action by instruction or agreement with the
employees and agents having access to Discloser's Confidential
Information to fulfill Recipient's obligations under this
Confidentiality Agreement;
(d) safeguard all of Discloser's Confidential Information by using
a reasonable degree of care, but not less than that degree of care used
by Recipient in safeguarding its own similar confidential information
or material;
(e) use all of Discloser's Confidential Information solely for
purposes for which the Confidential Information was conveyed; and
(f) not disclose any of Discloser's Confidential Information, or
information derived therefrom, to third parties.
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<PAGE>
18.3 Upon Discloser's request, Recipient shall surrender to Discloser
all memoranda, notes, records, drawings, manuals, and other documents or
materials (and all copies of same) relating to or containing Discloser's
Confidential Information. When Recipient returns the materials, Recipient shall
certify in writing that it has returned all materials containing or relating to
the Confidential Information.
18.4 The obligations of confidentiality and restriction on use in this
Article 18 shall not apply to any Confidential Information that Recipient
proves:
(a) Was in the public domain prior to the date of this Agreement or
subsequently came into the public domain through no fault of Recipient;
or
(b) Was received by Recipient from a third party without
Recipient's knowledge that the third party was not legally entitled to
disclose such information; or
(c) Was already in Recipient's possession prior to receipt from
Discloser; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not
limited to, giving Discloser as much advance notice as practical of the
possibility of disclosure to allow Discloser to take appropriate legal
action to seek to prevent such disclosure; or
(e) Is subsequently and independently developed by Recipient's
employees, consultants or agents without reference to Confidential
Information.
18.5 The Funds and the Transfer Agent agree that money damages would
not be a sufficient remedy to an injured party for breach of this Article 18.
Accordingly, in addition to all other remedies that a party may have, a party
shall be entitled to specific performance and injunctive or other equitable
relief against another party as a remedy for any breach of the obligations set
forth in this Article 18. The parties agree to waive any requirement for a bond
in connection with any such injunctive or other equitable relief.
18.6 The rights and obligations established by this Article 18 shall
survive the termination of this Agreement.
Article 19 Force Majeure
19.1 In the event a party is unable to perform its obligations under
the terms of this Agreement because of acts of God or by reason of circumstances
beyond its control, including war, national emergencies, strikes, labor
difficulties, insurrection, riots or the failure or unavailability of
transportation or communication services or power supplies, such party shall not
be liable for damages incurred by any other party resulting from such failure to
perform. The above in no way relieves the Transfer Agent or the Funds of
responsibility for exercising all backup and contingency plans available and in
effect at
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such time and does not affect any other remedies that a party may have under
this Agreement.
Article 20 Amendments
20.1 This Agreement may only be amended or modified by a written
instrument executed by all parties except that Schedule A may be amended in the
manner set forth in Section 17.1.
Article 21 Subcontracting
21.1 Each Fund agrees that the Transfer Agent, in its discretion, may
after notification to the Funds, subcontract for certain of the services to be
provided by the Transfer Agent under this Agreement or the Schedules hereto;
provided that the appointment of any such subcontractor shall not relieve the
Transfer Agent of its responsibilities hereunder.
Article 22 Arbitration
22.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by the
American Arbitration Association in Charlotte, North Carolina in accordance with
its applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
22.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
22.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 22.
Article 23 Notice
23.1 Any notice or other instrument authorized or required by this
Agreement to be given in writing to a party, shall be sufficiently given if
addressed to that party and received by it at its office set forth below or at
such other place as such party may from time to time designate in writing.
To either of the Funds:
[Name of Applicable Fund]
111 Center Street
Little Rock, Arkansas 72201
Attention: Corporate Secretary
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To the Transfer Agent:
The Shareholder Services Group
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: President
with a copy to:
General Counsel (same address)
Article 24 Successors
24.1 This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns, provided, however,
that this Agreement shall not be assigned to any person other than a person
controlling, controlled by or under common control with the assignor without the
written consent of the other party, which consent shall not be unreasonably
withheld.
Article 25 Governing Law
25.1 This Agreement shall be governed exclusively by the laws of the
Commonwealth of Massachusetts without reference to the choice of law provisions
thereof. Subject to Article 22 hereof, each party hereto hereby (i) consents to
the personal jurisdiction of the Commonwealth of Massachusetts courts over the
parties hereto, hereby waiving any defense of lack of personal jurisdiction; and
(ii) appoints the person to whom notices hereunder are to be sent as agent for
service of process.
Article 26 Counterparts
26.1 This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original; but such counterparts shall,
together, constitute only one instrument.
Article 27 Captions
27.1 The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 28 Use of Transfer Agent/Fund Name
28.1 The Funds shall not use the name of the Transfer Agent in any
Prospectus, Statement of Additional Information, Shareholders' report, sales
literature or other material relating to the Fund in a manner not approved prior
thereto in writing by the Transfer Agent; provided, that the Transfer Agent need
only receive notice of all reasonable uses of its name which merely refer in
accurate terms to its appointment hereunder or which are required by any
government agency or applicable law or rule.
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28.2 The Transfer Agent shall not use the name of a Fund or material
relating to a Fund on any documents or forms for other than internal use in a
manner not approved prior thereto in writing by such Fund; provided, that the
Fund need only receive notice of all reasonable uses of its name which merely
refer in accurate terms to the appointment of the Transfer Agent as transfer
agent for the Fund or which are required by any government agency or applicable
law or rule.
Article 29 Relationship of Parties
29.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
29.2 The parties hereby acknowledge and agree that each Fund has
entered into this Agreement independently on behalf of itself and its Portfolios
which are now or may hereafter be identified on Schedule G. Notwithstanding
anything to the contrary contained in this Agreement, (i) each Fund individually
shall have the rights and obligations of a Fund as set forth in this Agreement,
(ii) any action by a Fund in violation of this Agreement shall not affect the
rights and obligations of any other Fund under this Agreement, and (iii) the
Transfer agent, in seeking to enforce any provisions of this Agreement with
respect to a Portfolio, shall look solely to the assets and revenues of such
Portfolio and that in no event shall the Transfer Agent in seeking to enforce
such obligation have recourse to the independent assets or revenues of any other
Portfolio.
Article 30 Entire Agreement; Severability
30.1 This Agreement and the Schedules attached hereto constitute the
entire agreement of the parties hereto relating to the matters covered hereby
and supersede any previous agreements. If any provision is held to be illegal,
unenforceable or invalid for any reason, the remaining provisions shall not be
affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
NATIONS FUND, INC.
By: /s/ Richard H. Blank, Jr.
--------------------------
Title: Secretary
-----------------------
NATIONS FUND TRUST
By: /s/ Richard H. Blank, Jr.
--------------------------
Title: Secretary
------------------------
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THE CAPITOL MUTUAL FUNDS
By: /s/ Richard H. Blank, Jr.
--------------------------
Title: Secretary
------------------------
NATIONS FUND PORTFOLIOS, INC.
By: /s/ Richard H. Blank, Jr.
-------------------------
Title: Secretary
-----------------------
THE SHAREHOLDER SERVICES
GROUP, INC.
By: /s/ (Illegible)
-------------------------
Title: (Illegible)
-----------------------
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Schedule A
DUTIES OF THE TRANSFER AGENT
1. Shareholder Information. The Transfer Agent shall maintain a record
of the number of Shares held by each Shareholder of record which shall include
full registration information, including, but not limited to, name, address and
taxpayer identification number and which shall indicate whether such Shares are
held in certificated or uncertificated form.
2. Shareholder Services. The Transfer Agent shall respond as
appropriate to all inquiries and communications from Shareholders relating to
Shareholder accounts with respect to its duties hereunder and as may be from
time to time mutually agreed upon between the Transfer Agent and the Funds.
3. Share Certificates.
(a) At the expense of the appropriate Fund, each Fund shall supply
the Transfer Agent with adequate supply of blank share certificates to meet the
Transfer Agent's requirements therefor. Such Share certificates shall be
properly signed by facsimile. Each Fund agrees that, notwithstanding the death,
resignation, or removal of any officer of the Fund whose signature appears on
such certificates, the Transfer Agent or its agent may continue to countersign
certificates which bear such signatures until otherwise directed by Written
Instructions.
(b) The Transfer Agent shall issue replacement Share certificates
in lieu of certificates which have been lost, stolen or destroyed, upon receipt
by the Transfer Agent of properly executed affidavits and lost certificate
bonds, in form satisfactory to the Transfer Agent, with the appropriate Fund and
the Transfer Agent as obligees under the bond.
(c) The Transfer Agent shall also maintain a record of each
certificate issued, the number of Shares represented thereby and the Shareholder
of record. With respect to Shares held in open accounts or in uncertificated
form (i.e., no certificate being issued with respect thereto) the Transfer Agent
shall maintain comparable records of the Shareholders thereof, including their
names, addresses and taxpayer identification number. The Transfer Agent shall
further maintain a stop transfer record on lost and/or replaced certificates.
4. Mailing Communications to Shareholders; Proxy Materials. The
Transfer Agent will address and mail to Shareholders of the Funds, all reports
to Shareholders, dividend and distribution notices and proxy material for the
Funds' meetings of Shareholders. In connection with meetings of Shareholders,
the Transfer Agent will prepare Shareholder lists, mail and certify as to the
mailing of proxy materials, process and tabulate returned proxy cards, report on
proxies voted prior to meetings, act as inspector of election at meetings and
certify Shares voted at meetings.
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5. Sales of Shares
(a) The Transfer Agent shall not be required to issue any Shares of
a Fund where it has received a Written Instruction from the Fund or official
notice from any appropriate authority that the sale of the Shares of the Fund
has been suspended or discontinued. The existence of such Written Instructions
or such official notice shall be conclusive evidence of the right of the
Transfer Agent to rely on such Written Instructions or official notice.
(b) In the event that any check or other order for the payment of
money is returned unpaid for any reason, the Transfer Agent will endeavor to:
(i) give prompt notice of such return to the Fund or its designee; (ii) place a
stop transfer order against all Shares issued as a result of such check or
order; and (iii) take such actions as the Transfer Agent may from time to time
deem appropriate.
6. Transfer and Repurchase
(a) The Transfer Agent shall process all requests to transfer or
redeem Shares in accordance with the transfer or repurchase procedures set forth
in the Funds' Prospectus.
(b) The Transfer Agent will transfer or repurchase Shares upon
receipt of Oral or Written Instructions or otherwise pursuant to the Prospectus
and Share certificates, if any, properly endorsed for transfer or redemption,
accompanied by such documents as the Transfer Agent reasonably may deem
necessary.
(c) The Transfer Agent reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the instructions
is valid and genuine. The Transfer Agent also reserves the right to refuse to
transfer or repurchase Shares until it is satisfied that the requested transfer
or repurchase is legally authorized, and it shall incur no liability for the
refusal, in good faith, to make transfers or repurchases which the Transfer
Agent, in its good judgment, deems improper or unauthorized, or until it is
reasonably satisfied that there is no basis to any claims adverse to such
transfer or repurchase.
(d) When Shares are redeemed, the Transfer Agent shall, upon
receipt of the instructions and documents in proper form, deliver to the
Custodian and the appropriate Fund or its designee a notification setting forth
the number of Shares to be redeemed. Such redeemed Shares shall be reflected on
appropriate accounts maintained by the Transfer Agent reflecting outstanding
Shares of the Fund and Shares attributed to individual accounts.
(e) The Transfer Agent, upon receipt of the monies paid to it by
the Custodian for the redemption of Shares, pay such monies as are received from
the Custodian, all in accordance with the procedures described in the Written
Instructions received by the Transfer Agent from the Funds.
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(f) The Transfer Agent shall not process or effect any repurchase
with respect to Shares of the Fund after receipt by the Transfer Agent or its
agent of notification of the suspension of the determination of the net asset
value of the Fund.
7. Dividends
(a) Upon the declaration of each dividend and each capital gains
distribution by the Board of Directors of a Fund with respect to Shares of the
Fund, the Fund shall furnish or cause to be furnished to the Transfer Agent
Written Instructions setting forth the date of the declaration of such dividend
or distribution, the ex-dividend date, the date of payment thereof, the record
date as of which Shareholders entitled to payment shall be determined, the
amount payable per Share to the Shareholders of record as of that date, the
total amount payable to the Transfer Agent on the payment date and whether such
dividend or distribution is to be paid in Shares at net asset value.
(b) On or before the payment date specified in such resolution of
the Board of Directors, the Fund will pay to the Transfer Agent sufficient cash
to make payment on such payment date to the Shareholders of record on the record
date.
(c) If, prior to the payment date, the Transfer Agent does not
receive sufficient cash from the Fund to make total dividend and/or distribution
payments to all Shareholders of the Fund of the record date, the Transfer Agent
will, upon notifying the Fund, withhold payment to all Shareholders of record as
of the record date until sufficient cash is provided to the Transfer Agent.
8. In addition to and neither in lieu nor in contravention of the
services set forth above, the Transfer Agent shall: (i) perform all the
customary services of a transfer agent, registrar, dividend disbursing agent and
agent of the dividend reinvestment and cash purchase plan as described herein
consistent with those requirements in effect as at the date of this Agreement.
The detailed definition, frequency, limitations and associated costs (if any)
set out in the attached fee schedule, include but are not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting lists,
mailing proxies, tabulating proxies, mailing Shareholder reports to current
Shareholders, withholding taxes on U.S. resident and non-resident alien accounts
where applicable, preparing and filing U.S. Treasury Department Forms 1099 and
other appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders.
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Schedule B
Quality Standards
(Effective October 2, 1995 as updated on September 25, 1995)
For all funds, open-end and closed-end, serviced by TSSG, under the Transfer
Agency and Services Agreement (with Facilities Management Arrangement) dated
June 1, 1995, the following quality standards shall apply. This schedule shall
replace the temporary quality standard Schedule B in the original agreement as
referenced in Section 5.2.
Financials:
- -----------
Subscriptions 98%
Redemptions 98%
Exchanges 98%
Non-Financials:
- ---------------
Maintenances 98%
Transfers 98%
Correspondence 98%
Adjustments 98%
Telephone Calls 98%
New Accounts:
- -------------
New Account Set-ups 98%
- --------------------------------------------------------------------------------
Performance Standards
- --------------------------------------------------------------------------------
Telephone Performance Standards
- --------------------------------------------------------------------------------
Average speed of answer 20 seconds or less
- --------------------------------------------------------------------------------
Calls abandoned 2% of calls that wait 20 second or more
- --------------------------------------------------------------------------------
Service level* 80%
- --------------------------------------------------------------------------------
Article 1
------------------------
*Represents the percentage of calls answered within 20 seconds.
<PAGE>
Schedule B
[List of Initial Quality Standards based on
1994 quarterly senior management reports]
Nations Fund
------------
Financial Transactions
Subscriptions 98%
Redemptions 98%
Exchanges 98%
Non-Financials
Maintenance 98%
Transfers 98%
New Accounts 98%
% = minimum acceptable levels
Closed End Funds
----------------
Financials 98%
Subscriptions 98%
Redemptions 98%
Exchanges 98%
Non-Financials
Certificate Processing 98%
Maintenance 98%
Transfers 98%
New Accounts 98%
% = minimum acceptable levels
Capitol Funds
-------------
Financials
Subscriptions 98%
Redemptions 98%
Exchanges 98%
Non-Financials
Maintenance 98%
Transfers 98%
1
<PAGE>
New Accounts 98%
% = minimum acceptable levels
2
<PAGE>
Schedule C
Schedule of Costs
1. For purposes of this Agreement, "Costs" shall mean all internal and
external costs incurred by the Transfer Agent in connection with and properly
allocated to the Services provided under the Agreement, including, but not
limited to, the costs involved with the operation of the Charlotte Facility,
those costs reasonably incurred by the Transfer Agent to achieve the quality
standards imposed on it under the terms of this Agreement and the Transfer
Agent's overhead, depreciation and amortization costs, excepting out-of-pocket
expenses and such other costs agreed to in writing by the Transfer Agent and the
Funds.
2. The Funds shall have the right to audit, at their own expense, the
books and records of the Transfer Agent with respect to the Costs for which the
Transfer Agent seeks reimbursement under Article 8 on an annual basis, or more
frequently if the Funds have a reasonable basis to dispute any cost for which
the Transfer Agent seeks reimbursement.
3. The Transfer Agent shall use its best efforts to minimize the costs
incurred by it in connection with the provisions of services under this
Agreement to the extent such action is commercially reasonable and consistent
with the quality standards imposed under this Agreement.
<PAGE>
Schedule D
Non-Margin Expenses
- Facilities related expenses as incurred by the Transfer Agent
under the Facilities Management Agreement between the Transfer
Agent and NationsBank
- Out-of-Pocket expenses
- Sub-Transfer Agent Fees and Expenses
- Any other expenses agreed to in writing by the Transfer Agent and the
Funds
<PAGE>
Schedule E
OUT-OF-POCKET EXPENSES
The Funds shall reimburse the Transfer Agent monthly for reasonable
out-of-pocket expenses incurred in connection with the provision of Services
under this Agreement, including, but not limited to the following items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes, checks and
stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct
pass through to the Funds
- Due diligence mailings
- Telephone and telecommunication costs, including all lease,
maintenance and line costs (excluding such telephone and
telecommunications costs provided by NationsBank pursuant to the
Facilities Agreement)
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings (including all periodic
statements)
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment and
any expenses incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Overtime, as approved by the Funds
- Temporary staff, as approved by the Funds
- Travel and entertainment, as approved by the Funds
- Record retention, retrieval and destruction costs, including, but
not limited to exit fees charged by third party record keeping
vendors
- Third party audit reviews
- All conversion costs: including System start up costs
- Insurance
- Such other miscellaneous expenses reasonably incurred by the
Transfer Agent in performing its duties and responsibilities
under this Agreement.
- Systems Programming utilizing non-dedicated systems resources at
$100 per hour
The Funds agree that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with the Transfer Agent. In addition, the
Funds will promptly reimburse the Transfer Agent for any other unscheduled
expenses incurred by the Transfer Agent whenever the Funds and the Transfer
Agent mutually agree that such
1
<PAGE>
expenses are not otherwise properly borne by the Transfer Agent as part of its
duties and obligations under the Agreement.
2
<PAGE>
Schedule F
Fund Documents
- Certified copy of the Articles of Incorporation of the Fund, as
amended
- Certified copy of the By-laws of the Fund, as amended
- Copy of the resolution of the Board of Directors authorizing the
execution and delivery of this Agreement
- Specimens of the certificates for Shares of the Fund, if
applicable, in the form approved by the Board of Directors of the
Fund, with a certificate of the Secretary of the Fund as to such
approval
- All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered
by the Fund
- Certified list of Shareholders of the Fund with the name, address
and taxpayer identification number of each Shareholder, and the
number of Shares of the Fund held by each, certificate numbers
and denominations (if any certificates have been issued), lists
of any accounts against which stop transfer orders have been
placed, together with the reasons therefore, and the number of
Shares redeemed by the Fund.
- All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation or
By-laws of the Fund or as required by law and shall perform such
other specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any special or
annual meetings of shareholders and any other notices required
thereby.
<PAGE>
SCHEDULE G
FUND PORTFOLIOS
NATIONS FUND TRUST:
1. Nations Government Money Market Fund
2. Nations Tax Exempt Fund
3. Nations Value Fund
4. Nations Strategic Equity Fund
5. Nations Capital Growth Fund
6. Nations Emerging Growth Fund
7. Nations Equity Index Fund
8. Nations Managed Index Fund
9. Nations Managed SmallCap Index Fund
10. Nations Managed Value Index Fund
11. Nations Managed SmallCap Value Index Fund
12. Nations Disciplined Equity Fund
13. Nations Balanced Assets Fund
14. Nations Short-Intermediate Government Fund
15. Nations Short-Term Income Fund
16. Nations Diversified Income Fund
17. Nations Strategic Fixed Income Fund
18. Nations Municipal Income Fund
19. Nations Short-Term Municipal Income Fund
20. Nations Intermediate Municipal Bond Fund
21. Nations Florida Intermediate Municipal Bond Fund
22. Nations Florida Municipal Bond Fund
23. Nations Georgia Intermediate Municipal Bond Fund
24. Nations Georgia Municipal Bond Fund
25. Nations Maryland Intermediate Municipal Bond Fund
26. Nations Maryland Municipal Bond Fund
27. Nations North Carolina Intermediate Municipal Bond Fund
28. Nations North Carolina Municipal Bond Fund
29. Nations South Carolina Intermediate Municipal Bond Fund
30. Nations South Carolina Municipal Bond Fund
31. Nations Tennessee Intermediate Municipal Bond Fund
32. Nations Tennessee Municipal Bond Fund
33. Nations Texas Intermediate Municipal Bond Fund
34. Nations Texas Municipal Bond Fund
35. Nations Virginia Intermediate Municipal Bond Fund
36. Nations Virginia Municipal Bond Fund
NATIONS FUND, INC.:
1. Nations Prime Fund
2. Nations Treasury Fund
1
<PAGE>
3. Nations Equity Income Fund
4. Nations U.S. Government Bond Fund
5. Nations Small Company Growth Fund
6. Nations Government Securities Fund
7. Nations International Growth Fund
NATIONS INSTITUTIONAL RESERVES:
1. Nations Government Reserves
2. Nations Municipal Reserves
3. Nations Cash Reserves
4. Nations Treasury Reserves
5. Nations Money Market Reserves
6. Nations California Tax Exempt Reserves
7. Nations Asset Allocation Fund
8. Nations Capital Income Fund
9. Nations California Municipal Bond Fund
10. Nations Intermediate Bond Fund
11. Nations Blue Chip Fund
12. Nations Marsico Focused Equities Fund
13. Nations Marsico Growth & Income Fund
14. Nations International Equity Fund
15. Nations International Value Fund
16. Nations Emerging Markets Fund
NATIONS LIFEGOAL FUNDS, INC.
1. Nations LifeGoal Growth Portfolio
2. Nations LifeGoal Balanced Growth Portfolio
3. Nations LifeGoal Income and Growth Portfolio
NATIONS ANNUITY TRUST:
4. Nations Value Portfolio
5. Nations International Growth Portfolio
6. Nations Disciplined Equity Portfolio
7. Nations Marsico Focused Equities Portfolio
8. Nations Marsico Growth & Income Portfolio
9. Nations Managed Index Portfolio
10. Nations Managed SmallCap Index Portfolio
11. Nations Balanced Assets Portfolio
CLOSED END FUNDS:
1. Nations Balanced Target Maturity Fund
2. Nations Government Income Term Trust 2003, Inc.
3. Nations Government Income Term Trust 2004, Inc.
Amended: August 19, 1999
2
<PAGE>
3
EXHIBIT 99.H4
ADOPTION AGREEMENT AND
AMENDMENT TO TRANSFER AGENCY
AND SERVICES AGREEMENT
(With Facilities Management Arrangement)
This Adoption Agreement and Amendment, dated as of October 15,
1996, is made to the Transfer Agency and Services Agreement dated as of June 1,
1995, as amended (the "Agreement"), by and among NATIONS FUND, INC., NATIONS
FUND TRUST, THE CAPITOL MUTUAL FUNDS, d/b/a NATIONS INSTITUTIONAL RESERVES,
NATIONS FUND PORTFOLIOS, INC., and each other party which may become a party
thereto pursuant to the terms of the Agreement (individually, a "Fund," and
collectively, the "Funds") and FIRST DATA INVESTOR SERVICES GROUP, INC.,
formerly known as THE SHAREHOLDER SERVICES GROUP, INC. (the "Transfer Agent").
RECITALS
WHEREAS, the Transfer Agent serves as transfer agent, dividend
disbursing agent and agent in connection with certain other services for the
Funds pursuant to the Agreement; and
WHEREAS, Section 17.2 of the Agreement provides that, subsequent to
the date of the Agreement, a registered investment company (a "New Fund") for
which NationsBank, N.A., or any of its affiliates acts as investment adviser may
become a party to the Agreement upon execution of a written adoption agreement
(an "Adoption Agreement") by such New Fund pursuant to which such New Fund
agrees to be bound by the terms of the Agreement; and
WHEREAS, the Board of Directors of Nations LifeGoal Funds, Inc.
("LifeGoal") has approved the selection of the Transfer Agent to serve as the
transfer and dividend disbursing agent for all classes of shares of the
portfolios of LifeGoal; and
WHEREAS, LifeGoal is advised by NationsBanc Advisors, Inc. and
sub-advised by TradeStreet Investment Associates, Inc., each an affiliate of
NationsBank, N.A.;
AGREEMENT
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, the Funds and the Transfer Agent agree that the
Agreement shall be amended as follows:
1. The Funds hereby authorize the addition of LifeGoal as a party
to the Agreement effective upon the execution of this Adoption Agreement and
Amendment to Transfer Agency and Services Agreement.
2. LifeGoal agrees to be bound by the terms of the Agreement.
3. LifeGoal is hereby deemed a Fund for all purposes of the
Agreement and shall have all the rights, obligations and duties of a Fund under
the Agreement.
<PAGE>
4. Schedule G, attached hereto, is hereby attached to the Agreement
as Schedule G and is deemed a part of the Agreement.
5. The terms and provisions of this Adoption Agreement and
Amendment shall be deemed a part of the Agreement for all purposes. To the
extent that any provisions of this Adoption Agreement and Amendment modify or
are otherwise inconsistent with any provisions of the Agreement, the provisions
of this Adoption Agreement and Amendment shall control. In all other respects,
the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Adoption
Agreement and Amendment to be executed by their duly authorized officers, as of
the day and year first above written.
FIRST DATA INVESTOR SERVICES GROUP,
INC., formerly, THE SHAREHOLDER SERVICES GROUP, INC.
By: /s/ Mark M. Hovneltor (Spelling?)___________
Name: Mark M. Hovneltor (Spelling?)
Title: Senior Vice President______________
NATIONS FUND, INC.
By: /s/ Richard H. Blank, Jr.___________________
Name: Richard H. Blank____________________
Title: Secretary__________________________
NATIONS FUND TRUST
By: /s/ Richard H. Blank, Jr.___________________
Name: Richard H. Blank____________________
Title: Secretary__________________________
CAPITOL MUTUAL FUNDS, d/b/a NATIONS
INSTITUTIONAL RESERVES
By: /s/ Richard H. Blank, Jr.___________________
Name: Richard H. Blank____________________
2
<PAGE>
Title: Secretary__________________________
NATIONS FUND PORTFOLIOS, INC.
By: /s/ Richard H. Blank, Jr.___________________
Name: Richard H. Blank____________________
Title: Secretary__________________________
NATIONS LIFEGOAL FUNDS, INC.
By: /s/ Richard H. Blank, Jr.___________________
Name: Richard H. Blank____________________
Title: Secretary__________________________
3
<PAGE>
SCHEDULE G
----------
I) NATIONS FUND TRUST
- ----------------------
1. Nations Value Fund
2. Nations Strategic Equity Fund
3. Nations Capital Growth Fund
4. Nations Emerging Growth Fund
5. Nations Equity Index Fund
6. Nations Managed Index Fund
7. Nations Managed SmallCap Index Fund
8. Nations Managed Value Index Fund
9. Nations Managed SmallCap Value Index Fund
10. Nations Disciplined Equity Fund
11. Nations Balanced Assets Fund
12. Nations Short-Intermediate Government Fund
13. Nations Short-Term Income Fund
14. Nations Diversified Income Fund
15. Nations Strategic Fixed Income Fund
16. Nations Municipal Income Fund
17. Nations Short-Term Municipal Income Fund
18. Nations Intermediate Municipal Bond Fund
19. Nations Florida Intermediate Municipal Bond Fund
20. Nations Florida Municipal Bond Fund
21. Nations Georgia Intermediate Municipal Bond Fund
22. Nations Georgia Municipal Bond Fund
23. Nations Kansas Intermediate Municipal Bond Fund
24. Nations Maryland Intermediate Municipal Bond Fund
25. Nations Maryland Municipal Bond Fund
26. Nations North Carolina Intermediate Municipal Bond Fund
27. Nations North Carolina Municipal Bond Fund
28. Nations South Carolina Intermediate Municipal Bond Fund
29. Nations South Carolina Municipal Bond Fund
30. Nations Tennessee Intermediate Municipal Bond Fund
31. Nations Tennessee Municipal Bond Fund
32. Nations Texas Intermediate Municipal Bond Fund
33. Nations Texas Municipal Bond Fund
34. Nations Virginia Intermediate Municipal Bond Fund
35. Nations Virginia Municipal Bond Fund
4
<PAGE>
II) THE CAPITOL MUTUAL FUNDS, D/B/A NATIONS INSTITUTIONAL RESERVES
- -------------------------------------------------------------------
1. Nations Government Reserves
2. Nations Municipal Reserves
3. Nations Marsico Focused Equities Fund
4. Nations Marsico Growth & Income Fund
5. Nations Cash Reserves
6. Nations Treasury Reserves
7. Nations International Equity Fund
8. Nations Equity Income Fund
9. Nations International Value Fund
10. Nations U.S. Government Bond Fund
11. Nations Small Company Growth Fund
12. Nations Government Securities Fund
13. Nations Emerging Markets Reserves
14. Nations Money Market Reserves
15. Nations California Tax Exempt Reserves
16. Nations Asset Allocation Fund
17. Nations Capital Income Fund
18. Nations California Municipal Bond Fund
19. Nations Intermediate Bond Fund
20. Nations Blue Chip Fund
III) NATIONS LIFEGOAL FUNDS, INC.
1. LifeGoal Growth Portfolio
2. LifeGoal Balanced Growth Portfolio
3. LifeGoal Income and Growth Portfolio
Effective Date: October 15, 1996
5
EXHIBIT 99.H5
NATIONS LIFEGOAL FUNDS, INC.
SHAREHOLDER SERVICING PLAN ("PLAN")
INVESTOR B SHARES
Section 1. Each of the proper officers of Nations LifeGoal Funds, Inc.
(the "Company") is authorized to execute and deliver, in the name and on behalf
of the Company, written agreements based substantially on the form attached
hereto as Appendix A or any other form duly approved by the Company's Board of
Directors ("Agreements") with broker/dealers, banks and other financial
institutions that are dealers of record or holders of record or which have a
servicing relationship ("Servicing Agents") with the beneficial owners of
Investor B Shares (the "Shares") of the LifeGoal portfolios (each a "Fund") (as
defined on Exhibit A) provided that any material modifications of services
listed in the Agreement shall be presented for approval or ratification by the
Directors at the next regularly scheduled Board Meeting. Pursuant to such
Agreements, Servicing Agents shall provide shareholder support services as set
forth therein to their clients who beneficially own Shares of the Funds in
consideration of a fee, computed monthly in the manner set forth in the
applicable Fund's then current prospectus, at an annual rate of up to 0.25% of
the average daily net asset value of the Shares beneficially owned by or
attributable to such clients. Affiliates of the Company's distributor,
administrator, co-administrator and adviser are eligible to become Servicing
Agents and to receive fees under this Plan. All expenses incurred by a Fund in
connection with the Agreements and the implementation of this Plan shall be
borne either by the holders of the Shares of the particular Fund involved. If
more than one Fund is involved and these expenses are not directly attributable
to Shares of a particular Fund, then the expenses may be allocated between or
among the Shares of the Funds in a fair and equitable manner.
Section 2. The Company's administrator and/or co-administrator shall
monitor the arrangements pertaining to the Company's Agreements with Servicing
Agents. The Company's administrator and co-administrator shall not, however, be
obligated by this Plan to recommend, and the Company shall not be obligated to
execute, any Agreement with any qualifying Servicing Agents.
Section 3. So long as this Plan is in effect, the Company's distributor
shall provide to the Company's Board of Directors, and the Directors shall
review, at least quarterly, a written report of the amounts expended pursuant to
this Plan and the purposes for which such expenditures were made.
Section 4. Unless sooner terminated, this Plan shall continue in effect
for a period of one year from its date of execution and shall continue
thereafter for successive annual periods, provided that such continuance is
specifically approved by a majority of the Board of Directors, including a
majority of the Directors who are not "interested persons," as defined in the
Investment Company Act of 1940, of the Company and have no direct or indirect
financial interest in the operation of this Plan or in any Agreement related to
this Plan (the "Disinterested Directors") cast in person at a meeting called for
the purpose of voting on this Plan.
<PAGE>
Section 5. This Plan may be amended at any time with respect to any
Fund by the Company's Board of Directors, provided that any material amendment
of the terms of this Plan (including a material increase of the fee payable
hereunder) shall become effective only upon the approvals set forth in Section
4.
Section 6. This Plan is terminable at any time with respect to any Fund
by vote of a majority of the Disinterested Directors.
Section 7. While this Plan is in effect, the selection and nomination
of the Disinterested Directors shall be committed to the discretion of such
Disinterested Directors.
Section 8. The Company will preserve copies of this Plan, Agreements,
and any written reports regarding this Plan presented to the Board of Directors
for a period of not less than six years.
2
<PAGE>
EXHIBIT A
NATIONS LIFEGOAL FUNDS, INC.
The term "Fund" used in the Plan shall refer to the following Funds of
the Company:
Nations LifeGoal Growth Portfolio
Nations LifeGoal Balanced Growth Portfolio
Nations LifeGoal Income and Growth Portfolio
Dated: October 2, 1996
Amended:
3
EXHIBIT 99.H6
NATIONS LIFEGOAL FUNDS, INC.
SHAREHOLDER SERVICING PLAN ("PLAN")
INVESTOR C SHARES
Section 1. Each of the proper officers of Nations LifeGoal Funds, Inc.
(the "Company") is authorized to execute and deliver, in the name and on behalf
of the Company, written agreements based substantially on the form attached
hereto as Appendix A or any other form duly approved by the Company's Board of
Directors ("Agreements") with broker/dealers, banks and other financial
institutions that are dealers of record or holders of record or which have a
servicing relationship ("Servicing Agents") with the beneficial owners Investor
C Shares ("Shares") of the LifeGoal portfolios (each a "Fund") (as listed on
Exhibit A hereto) in any of the Funds provided that any material modifications
of services listed in the Agreement shall be presented for approval or
ratification by the Directors at the next regularly scheduled Board Meeting.
Pursuant to such Agreements, Servicing Agents shall provide shareholder support
services as set forth therein to their clients who beneficially own Shares of
the Funds in consideration of a fee, computed monthly in the manner set forth in
the applicable Fund's then current prospectus, at an annual rate of up to 0.25%
of the average daily net asset value of the Shares beneficially owned by or
attributable to such clients. Affiliates of the Company's distributor,
administrator, co-administrator and adviser are eligible to become Servicing
Agents and to receive fees under this Plan. All expenses incurred by a Fund in
connection with the Agreements and the implementation of this Plan shall be
borne entirely by the holders of the Shares of the particular Fund involved. If
more than one Fund is involved and these expenses are not directly attributable
to Shares of a particular Fund, then the expenses may be allocated between or
among the Shares of the Funds in a fair and equitable manner.
Section 2. The Company's administrator and/or co-administrator shall
monitor the arrangements pertaining to the Company's Agreements with Servicing
Agents. The Company's administrator and co-administrator shall not, however, be
obligated by this Plan to recommend, and the Company shall not be obligated to
execute, any Agreement with any qualifying Servicing Agents.
Section 3. So long as this Plan is in effect, the Company's distributor
shall provide to the Company's Board of Directors, and the Directors shall
review, at least quarterly, a written report of the amounts expended pursuant to
this Plan and the purposes for which such expenditures were made.
Section 4. Unless sooner terminated, this Plan shall continue in effect
for a period of one year from its date of execution and shall continue
thereafter for successive annual periods, provided that such continuance is
specifically approved by a majority of the Board of Directors, including a
majority of the Directors who are not "interested persons," as defined in the
Investment Company Act of 1940, of the Company and have no direct or indirect
financial interest in the operation of this Plan or in any Agreement related to
this Plan (the "Disinterested Directors") cast in person at a meeting called for
the purpose of voting on this Plan.
1
<PAGE>
Section 5. This Plan may be amended at any time with respect to any
Fund by the Company's Board of Directors, provided that any material amendment
of the terms of this Plan (including a material increase of the fee payable
hereunder) shall become effective only upon the approvals set forth in Section
4.
Section 6. This Plan is terminable at any time with respect to any Fund
by vote of a majority of the Disinterested Directors.
Section 7. While this Plan is in effect, the selection and nomination
of the Disinterested Directors shall be committed to the discretion of such
Disinterested Directors.
Section 8. The Company will preserve copies of this Plan, Agreements,
and any written reports regarding this Plan presented to the Board of Directors
for a period of not less than six years.
2
<PAGE>
EXHIBIT A
NATIONS LIFEGOAL FUNDS, INC.
The term "Fund" used in the Plan shall refer to the following Funds of
the Company:
Nations LifeGoal Growth Portfolio
Nations LifeGoal Balanced Growth Portfolio
Nations LifeGoal Income and Growth Portfolio
Dated: October 2, 1996
Amended:
3
EX-99.23i
[MORRISON & FOERSTER LLP LETTERHEAD]
November 15, 1999
Nations LifeGoal Funds, Inc.
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Capital Stock of
Nations LifeGoal Funds, Inc.
Dear Ladies and Gentlemen:
We refer to Post-Effective Amendment No. 9 and Amendment No. 10 to the
Registration Statement on Form N-1A (SEC File Nos. 333-09703; 811-07745) (the
"Registration Statement") of Nations LifeGoal Funds, Inc. (the "Company")
relating to the registration of an indefinite number of Shares of Capital Stock
of the Company's Portfolios (collectively, the "Shares").
We have been requested by the Company to furnish this opinion as
Exhibit 23i to the Registration Statement.
We have examined such records, documents, instruments, and certificates
of public officials and of the Company, made such inquiries of the Company, and
examined such questions of law as we have deemed necessary for the purpose of
rendering the opinion set forth herein. We have also verified with the Company's
transfer agent the maximum number of shares issued by the Company during the
fiscal year ended March 31, 1999. We have assumed the genuineness of all
signatures and the authenticity of all items submitted to us as originals and
the conformity with originals of all items submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance and sale of the Shares by the Company have been duly and
validly authorized by all appropriate action, and assuming delivery by sale or
in accord with the Funds' dividend reinvestment plan in accordance with the
description set forth in the Registration Statement, as amended, the Shares will
be validly issued, fully paid and nonassessable.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
<PAGE>
Nations LifeGoal Funds, Inc.
November 15, 1999
Page Two
In addition, we consent to the use of our name and to the reference to
our Firm under the heading "Counsel" in the Statement of Additional Information.
Very truly yours,
/S/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 9 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated May 28, 1999, relating to the financial
statements and financial highlights appearing in the March 31, 1999 Annual
Report to Shareholders of Nations LifeGoal Funds, Inc., which is also
incorporated by reference into the Registration Statement. We also consent to
the reference to us under the heading "Financial highlights" in the Prospectuses
and under the heading "Independent Accountants and Reports" in the Statement of
Additional Information.
PricewaterhouseCoopers LLP
New York, New York
November 10, 1999
EXHIBIT 99.M1
NATIONS LIFEGOAL FUNDS, INC.
SHAREHOLDER ADMINISTRATION
PLAN ("PLAN") FOR PRIMARY B SHARES
Section 1. Each of the proper officers of Nations LifeGoal Funds, Inc.
(the "Company") is authorized to execute and deliver, in the name and on behalf
of the Company, written agreements based substantially on the form attached
hereto as Appendix A or any other form duly approved by the Company's Board of
Directors ("Agreements") with broker/dealers, banks and other financial
institutions that are dealers of record or holders of record or which have a
servicing relationship with the beneficial owners of Primary B Shares
("Servicing Agents") in certain of the LifeGoal portfolios (each a "Fund") (as
listed on Exhibit A) offering such shares provided that any material
modifications of services listed in the Agreement shall be presented for
approval or ratification by the Directors at the next regularly scheduled Board
Meeting. Pursuant to such Agreements, Servicing Agents shall provide shareholder
support services as set forth therein to their clients who beneficially own
Primary B Shares of the Funds in consideration of a fee, computed monthly in the
manner set forth in the applicable Fund's then current prospectus, at an annual
rate of up to 0.60% of the average daily net asset value of the Primary B Shares
beneficially owned by or attributable to such clients, provided that in no event
may the portion of such fee that constitutes a "service fee," as that term is
defined in Article III, Section 26(b)(9) of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., exceed 0.25% of the average
daily net asset value of such Primary B Shares of a Fund. Affiliates of the
Company's distributor, administrator, co-administrator and adviser are eligible
to become Servicing Agents and to receive fees under this Plan. All expenses
incurred by a Fund in connection with the Agreements and the implementation of
this Plan shall be borne entirely by the holders of the Primary B Shares of the
particular Fund involved. If more than one Fund is involved and these expenses
are not directly attributable to Primary B Shares of a particular Fund, then the
expenses may be allocated between or among the Primary B Shares of the Funds in
a fair and equitable manner.
Section 2. The Company's administrator and/or co-administrator shall
monitor the arrangements pertaining to the Company's Agreements with Servicing
Agents. The Company's administrator and co-administrator shall not, however, be
obligated by this Plan to recommend, and the Company shall not be obligated to
execute, any Agreement with any qualifying Servicing Agents.
Section 3. So long as this Plan is in effect, the Company's distributor
shall provide to the Company's Board of Directors, and the Directors shall
review, at least quarterly, a written report of the amounts expended pursuant to
this Plan and the purposes for which such expenditures were made.
Section 4. Unless sooner terminated, this Plan shall continue in effect
for a period of one year from its date of execution and shall continue
thereafter for successive annual
<PAGE>
periods, provided that such continuance is specifically approved by a majority
of the Board of Directors, including a majority of the Directors who are not
"interested persons," as defined in the Investment Company Act of 1940 (the
"Act"), of the Company and have no direct or indirect financial interest in the
operation of this Plan or in any Agreement related to this Plan (the
"Disinterested Directors") cast in person at a meeting called for the purpose of
voting on this Plan.
Section 5. This Plan may be amended at any time with respect to any
Fund by the Company's Board of Directors, provided that any material amendment
of the terms of this Plan (including a material increase of the fee payable
hereunder) shall become effective only upon the approvals set forth in Section
4.
Section 6. This Plan is terminable at any time with respect to any Fund
by vote of a majority of the Disinterested Directors.
Section 7. While this Plan is in effect, the selection and nomination
of the Disinterested Directors shall be committed to the discretion of such
Disinterested Directors.
Section 8. To the extent that any portion of the fees payable under the
Agreements is deemed to be for services primarily intended to result in the sale
of Fund shares, such fees are deemed approved and may be paid pursuant to the
Plan and in accordance with Rule 12b-1 under the Act, provided that the
Agreements, to the extent they are deemed to relate to services primarily
intended to result in the sale of Fund shares, are approved and otherwise
treated in all respects as agreements related to the Plan.
Section 9. The Company will preserve copies of this Plan, Agreements,
and any written reports regarding this Plan presented to the Board of Directors
for a period of not less than six years.
2
<PAGE>
EXHIBIT A
NATIONS LIFEGOAL FUNDS, INC.
The term "Fund" used in the Plan shall refer to the following Funds of
the Company:
Nations LifeGoal Growth Portfolio
Nations LifeGoal Balanced Growth Portfolio
Nations LifeGoal Income and Growth Portfolio
Dated: October 2, 1996
Amended:
3
EXHIBIT 99.M2
NATIONS LIFEGOAL FUNDS, INC.
SHAREHOLDER SERVICING AND DISTRIBUTION PLAN
INVESTOR A SHARES
This amended and restated Investor A Shareholder Servicing and
Distribution Plan (the "Plan") has been adopted by the Board of Directors of
Nations LifeGoal Funds, Inc. (the "Company") in conformance with Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act").
Section 1. Payments for Services. Under the terms of this Plan, the
Company may act as a distributor of the Shares of which a LifeGoal portfolio (a
"Fund") is the issuer, pursuant to Rule 12b-1 under the 1940 Act. The Company
may incur as a distributor of the Investor A Shares of each Fund ("Shares")
expenses of up to (A) twenty-five one-hundredths of one percent (0.25%) per
annum of the average daily net assets of the Company attributable to the Shares
of the Funds (as defined on Exhibit A).
Section 2. Expenses Covered by the Plan. Amounts set forth in Section 1
may be expended when and if authorized in advance by the Company's Board of
Directors. Such amounts may be used to finance any activity which is primarily
intended to result in the sale of the Shares, including, but not limited to,
expenses of organizing and conducting sales seminars, printing of prospectuses
and statements of additional information (and supplements thereto) and reports
for other than existing shareholders, preparation and distribution of
advertising material and sales literature, supplemental payments to the
Company's distributor (the "Distributor") and the cost of administering this
Plan, as well as, with respect to payments made under Section 1(A), above, the
shareholder servicing activities described below. All amounts expended pursuant
to this Plan shall be paid:
(i) to the Distributor for reimbursements of distribution-related
expenses actually incurred by the Distributor, including, but not limited
to, expenses of organizing and conducting sales seminars, printing of
prospectuses and statements of additional information (and supplements
thereto) and reports for other than existing shareholders, preparation and
distribution of advertising material and sales literature and costs of
administering this Plan, or
(ii) to certain broker/dealers and other financial institutions
("Agents") who offer shares to their customers and who have entered into (A)
Shareholder Servicing Agreements substantially in the form of Exhibit C with
respect to the Funds, and (B) Sales Support Agreements substantially in the
form of Exhibit B with respect to any of the Funds, for providing the
services contemplated thereunder.
The shareholder servicing activities for which compensation may be
received under this Plan may include, among other things: (i) aggregating and
processing purchase and redemption requests and transmitting promptly net
purchase and redemption orders to the Distributor or transfer agent; (ii)
providing customers with a service that invests the assets of
<PAGE>
their accounts in Shares pursuant to specific or pre-authorized instructions;
(iii) processing dividend and distribution payments; (iv) providing information
periodically to customers showing their positions in Shares; (v) arranging for
bank wires; (vi) responding to customers' inquiries concerning their investment
in Shares; (vii) providing subaccounting with respect to Shares beneficially
owned by customers or the information to the Company necessary for
subaccounting; (viii) if required by law, forwarding shareholder communications
(such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to customers; (ix)
forwarding to customers proxy statements and proxies containing any proposals
regarding the Shareholder Servicing Agreement; (x) general shareholder liaison
services; and (xi) providing such other similar services as the Company may
reasonably request to the extent such firms are permitted to do so under
applicable statutes, rules or regulations.
Section 3. Limitations on Payments. No additional payments are to be
made by the Company on behalf of the Funds with respect to the Shares under this
Plan, provided that the Funds shall not be precluded from making the payments
such Fund is otherwise obligated to make (i) to NationsBanc Advisors, Inc.
("NBAI") and/or TradeStreet Investment Associates, Inc. ("TradeStreet") pursuant
to the Investment Advisory Agreement and the Sub-Investment Advisory Agreement,
(ii) to The Bank of New York ("BONY") pursuant to the Custody Agreement, (iii)
to First Data Investor Services Group, Inc. ("First Data"), pursuant to the
Transfer Agency and Registrar Agreement, (iv) to Stephens Inc. ("Stephens"),
pursuant to the Administration Agreement, (v) to First Data pursuant to the
Co-Administration Agreement, (vi) to Servicing Agents pursuant to Shareholder
Servicing Agreements and (vii) for the expenses otherwise incurred by a Fund and
the Company on behalf of the Shares in the normal conduct of such Fund's
business pursuant to the Investment Advisory Agreement (and/or Sub-Investment
Advisory Agreement), the Custody Agreement, the Transfer Agency and Registrar
Agreement, the Administration Agreement, the Co-Administration Agreement and the
Shareholder Servicing Agreements. However, to the extent any payments by the
Company on behalf of a Fund to NBAI, TradeStreet, BONY, First Data, Stephens or
Servicing Agents; by NBAI, TradeStreet, BONY, First Data, Stephens or Servicing
Agents or any affiliate thereof, to any party, pursuant to any agreement; or,
generally, by the Company on behalf of a Fund to any party, are deemed to be
payments for the financing of any activity primarily intended to result in the
sale of the Shares within the context of Rule 12b-1 under the 1940 Act, then
such payments shall be deemed to be approved pursuant to this Plan as set forth
herein.
Section 4. Reports of Distributor. The officers of the Company shall
report quarterly in writing to the Board of Directors on the amounts and purpose
of payments for any of the activities in Section 2 and shall furnish the Board
of Directors with such other information as the Board may reasonably request in
connection with such payments in order to enable the Board to make an informed
determination on the nature and value of such expenditures.
Section 5. Approval of Plan. This Plan shall continue in effect for a
period of more than one year from the date written below only so long as such
continuance is specifically approved at least annually by the Company's Board of
Directors, including the Directors who are not interested persons of the Company
and have no direct or indirect financial interest in the
2
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operation of this Plan or in any Agreements related to this Plan ("Disinterested
Directors"), by vote cast in person at a meeting called for the purpose of
voting on this Plan.
Section 6. Termination. This Plan may be terminated at any time by vote
of a majority of the Disinterested Directors or with respect to a particular
Fund by vote of a majority of the outstanding voting securities of the Shares of
such Fund, on not more than sixty (60) days' written notice to any other party
to the Plan, and shall terminate automatically in the event of any act that
constitutes an assignment of the Distribution Agreement or the Investment
Advisory Agreement (or with respect to a Fund sub-advised by TradeStreet, the
Sub-Investment Advisory Agreement).
Section 7. Amendments. This Plan may be amended at any time by the
Board of Directors provided that (a) any amendments to increase materially the
costs which a Fund's Investor A Shares may bear for distribution pursuant to
this Plan shall be effective only upon approval by a vote of a majority of the
outstanding Investor A Shares of such Fund, and (b) any material amendments of
the terms of this Plan shall become effective only upon approval as provided in
Section 5 hereof.
Section 8. Selection/Nomination of Directors. So long as this Plan is
in effect, the selection and nomination of the Company's Disinterested Directors
shall be committed to the discretion of such Disinterested Directors.
Section 9. Governing Law. This Plan shall be subject to the laws of The
State of Maryland and shall be interpreted and construed to further promote the
operation of the Company as an open-end management investment company. As used
herein the terms "open-end management investment company," "assignment,"
"principal underwriter," "interested person," and "majority of the outstanding
voting securities" shall have the meanings set forth in the Securities Act of
1933, as amended or the 1940 Act, and the rules and regulations thereunder.
Section 10. Scope of Liability. Nothing herein shall be deemed to
protect the parties to any Agreement entered into pursuant to this Plan against
any liability to the Company or its shareholders to which they would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties hereunder, or by reason of their reckless
disregard of their obligations and duties hereunder.
Section 11. Records. The Company will preserve copies of this Plan,
Agreements and any written reports regarding this Plan presented to the Board of
Directors for a period of not less than six years.
3
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EXHIBIT A
NATIONS LIFEGOAL FUNDS, INC.
The term "Fund" used in the Plan shall refer to the following Funds of
the Company:
Nations LifeGoal Growth Portfolio
Nations LifeGoal Balanced Growth Portfolio
Nations LifeGoal Income and Growth Portfolio
Dated: October 2, 1996
Amended:
EXHIBIT 99.M3
NATIONS LIFEGOAL FUNDS, INC.
INVESTOR B DISTRIBUTION PLAN
This Investor B Distribution Plan (the "Plan") has been adopted by the
Board of Directors of Nations LifeGoal Funds, Inc. (the "Company") in
conformance with Rule 12b-1 under the Investment Company Act of 1940 (the "1940
Act").
Section 1. Payments for Distribution-Related Services. The Company may
compensate or reimburse its Distributor for any activities or expenses primarily
intended to result in the sale of Investor B Shares of the LifeGoal Portfolios
(each a "Fund"), as listed on Exhibit A. Payments by the Company under this
Section of this Plan will be calculated daily and paid monthly at a rate or
rates set from time to time by the Company's Board of Directors, provided that
no rate set by the Board for any Fund may exceed, on an annual basis, 0.75% of
the average daily net asset value of a Fund's Investor B Shares.
Section 2. Expenses Covered by Plan. The fees payable under Section 1
of this Plan shall be used primarily to compensate or reimburse the Distributor
for distribution services provided by it, and related expenses incurred,
including payments by the Distributor to compensate or reimburse banks,
broker/dealers or other financial institutions that have entered into Sales
Support Agreements with the Distributor ("Selling Agents"), for sales support
services provided, and related expenses incurred, by such Selling Agents.
Payments under Section 1 of this Plan may be made with respect to: preparation,
printing and distribution of prospectuses, sales literature and advertising
materials by the Distributor or, as applicable, Selling Agents, attributable to
distribution or sales support activities, respectively; commissions, incentive
compensation or other compensation to, and expenses of, account executives or
other employees of the Distributor or Selling Agents, attributable to
distribution or sales support activities, respectively; overhead and other
office expenses of the Distributor or Selling Agents, attributable to
distribution or sales support activities, respectively; opportunity costs
relating to the foregoing (which may be calculated as a carrying charge on the
Distributor's or Selling Agents' unreimbursed expenses incurred in connection
with distribution or sales support activities, respectively); and any other
costs and expenses relating to distribution or sales support activities. The
overhead and other office expenses referenced in this Section 2 may include,
without limitation, (i) the expenses of operating the Distributor's or Selling
Agents' offices in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefit costs of administrative, operations and
support personnel, utility costs, communication costs and the costs of
stationery and supplies, (ii) the costs of client sales seminars and travel
related to distribution and sales support activities, and (iii) other expenses
relating to distribution and sales support activities.
Section 3. Distribution and Sales Support Agreements. Any officer of
the Company is authorized to execute and deliver, in the name and on behalf of
the Company, a written agreement with the Distributor in a form duly approved
from time to time by the Company's Board of Directors. Such agreement shall
authorize the Distributor to enter into written Sales
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Support Agreements, in substantially the form attached hereto as Exhibit B
("Agreements"), with Selling Agents.
Section 4. Limitations on Payments. Payment made by a particular Fund
under Section 1 must be for distribution or sales support services rendered for
or on behalf of such Fund. However, joint distribution or sales support
financing with respect to the Funds (which financing may also involve other
investment portfolios or companies that are affiliated persons of such a person,
or affiliated persons of the Distributor) shall be permitted in accordance with
applicable regulations of the Securities and Exchange Commission as in effect
from time to time.
Except for the payments specified in Section 1, no additional payments
are to be made by the Company on behalf of the Funds with respect to the Shares
under this Plan, provided that the Funds shall not be precluded from making the
payments such Fund is otherwise obligated to make (i) to NationsBanc Advisors,
Inc. ("NBAI") and/or TradeStreet Investment Associates, Inc. ("TradeStreet")
pursuant to the Investment Advisory Agreement and the Sub-Investment Advisory
Agreement, (ii) to The Bank of New York ("BONY") pursuant to the Custody
Agreement, (iii) to First Data Investor Services Group, Inc. ("First Data"),
pursuant to the Transfer Agency and Registrar Agreement, (iv) to Stephens Inc.
("Stephens"), pursuant to the Administration Agreement, (v) to First Data
pursuant to the Co-Administration Agreement, (vi) to Servicing Agents pursuant
to Shareholder Servicing Agreements and (vii) for the expenses otherwise
incurred by a Fund and the Company on behalf of the Shares in the normal conduct
of such Fund's business pursuant to the Investment Advisory Agreement (and/or
Sub-Investment Advisory Agreement), the Custody Agreement, the Transfer Agency
and Registrar Agreement, the Administration Agreement, the Co-Administration
Agreement and the Shareholder Servicing Agreements. However, to the extent any
payments by the Company on behalf of a Fund to NBAI, TradeStreet, BONY, First
Data, Stephens or Servicing Agents; by NBAI, TradeStreet, BONY, First Data,
Stephens or Servicing Agents or any affiliate thereof, to any party, pursuant to
any agreement; or, generally, by the Company on behalf of a Fund to any party,
are deemed to be payments for the financing of any activity primarily intended
to result in the sale of the Shares within the context of Rule 12b-1 under the
1940 Act, then such payments shall be deemed to be approved pursuant to this
Plan as set forth herein without regard to Section 1.
With respect to Investor B Shares, actual distribution expenses
incurred by the Distributor (or sales support expenses incurred by Selling
Agents) in a given year may exceed the sum of the fees received by the
Distributor pursuant to this Plan and payments received by the Distributor
pursuant to contingent deferred sales charges. Any such excess may be recovered
by the Distributor, and retained by it or paid over to Selling Agents, as
applicable, in future years as long as this Plan is in effect. If this Plan is
terminated or not continued, the Company shall not be obligated to pay the
Distributor (or Selling Agents) for any expenses not previously reimbursed by
the Company or recovered through contingent deferred sales charges.
Notwithstanding anything herein to the contrary, no Fund shall be
obligated to make any payments under this Plan that exceed the maximum amounts
payable under Article III, Section 26 of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
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Section 5. Reports of Distributor. So long as this Plan is in effect,
the Distributor shall provide to the Company's Officers and Board of Directors,
and the Directors shall review at least quarterly, a written report of the
amounts expended by it pursuant to the Distribution Agreement, or by Selling
Agents pursuant to Sales Support Agreements, and the purposes for which such
expenditures were made.
Section 6. Approval of Plan. This Plan will become effective
immediately, as to any Fund's Investor B Shares, upon its approval by (a) a
majority of the outstanding Investor B Shares of such Fund, and (b) a majority
of the Board of Directors, including a majority of the Directors who are not
"interested persons" (as defined in the 1940 Act) of the Company and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreements entered into in connection with this Plan, pursuant to a vote cast in
person at a meeting called for the purpose of voting on the approval of this
Plan.
Section 7. Continuance of Plan. This Plan shall continue in effect for
so long as its continuance is specifically approved at least annually by the
Company's Board of Directors in the manner described in Section 6.
Section 8. Amendments. This Plan may be amended at any time by the
Board of Directors provided that (a) any amendment to increase materially the
costs which a Fund's Investor B Shares may bear for distribution pursuant to
this Plan shall be effective only upon approval by a vote of a majority of the
outstanding Investor B Shares of such Fund, and (b) any material amendments of
the terms of this Plan shall become effective only upon approval as provided in
Section 6 hereof.
Section 9. Termination. This Plan is terminable, as to a Fund's
Investor B Shares, without penalty at any time by (a) a vote of a majority of
the Directors who are not "interested persons" (as defined in the 1940 Act) of
the Company and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements entered into in connection with this
Plan, or (b) a vote of a majority of the outstanding Investor B Shares of such
Fund.
Section 10. Selection/Nomination of Directors. While this Plan is in
effect, the selection and nomination of those Directors who are not "interested
persons" (as defined in the 1940 Act) of the Company shall be committed to the
discretion of such non-interested Directors.
Section 12. Records. The Company will preserve copies of this Plan, and
any Agreements and written reports regarding this Plan presented to the Board of
Directors for a period of not less than six years.
Section 13. Miscellaneous. The captions in this Plan are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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EXHIBIT A
NATIONS LIFEGOAL FUNDS, INC.
The term "Fund" used in the Plan shall refer to the following Funds of
the Company:
Nations LifeGoal Growth Portfolio
Nations LifeGoal Balanced Growth Portfolio
Nations LifeGoal Income and Growth Portfolio
Dated: October 2, 1996
Amended:
4
EXHIBIT 99.M4
NATIONS LIFEGOAL FUNDS, INC.
DISTRIBUTION PLAN
INVESTOR C SHARES
This Distribution Plan (this "Plan") has been adopted by the Board of
Directors of Nations LifeGoal Funds, Inc. (the "Company") in conformance with
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act").
Section 1. Payments for Distribution-Related Services. The Company may
pay its Distributor for certain expenses that are incurred in connection with
the support and distribution of Investor C Shares ("Shares") of the LifeGoal
portfolios (each a "Fund"), as listed in Exhibit A. Payments by the Company
under the Plan will be calculated daily and paid monthly at a rate or rates set
from time to time by the Company's Board of Directors, provided that no rate set
by the Board for any Fund may exceed the annual rate of: 0.75% of the average
daily net asset value of Investor C Shares of the Funds. For purposes of
determining the payments payable under this Plan, the net asset value of the
outstanding Shares of the respective Funds shall be computed in the manner
specified in the Company's then current prospectuses and statement of additional
information as amended or supplemented from time to time for such Shares.
Section 2. Expenses Covered by Plan. Payments to the Distributor under
Section 1 of this Plan will be used by the Distributor (i) to compensate banks,
broker/dealers or other financial institutions that have entered into Sales
Support Agreements with the Distributor ("Selling Agents") for providing
distribution assistance relating to Shares, (ii) for promotional activities
intended to result in the sale of Shares such as by paying for the preparation,
printing and distribution of prospectuses for other than current Shareholders,
and (iii) to compensate Selling Agents for providing distribution services with
regard to their Customers who are, from time to time, beneficial, and record
owners of Shares.
Section 3. Distribution and Sales Support Agreements. Any officer of
the Company is authorized to execute and deliver, in the name and on behalf of
the Company, a written agreement with the Distributor in a form duly approved
from time to time by the Company's Board of Directors. Such agreement shall
authorize the Distributor to enter into written Sales Support Agreements, in
substantially the form attached hereto as Exhibit B ("Agreements"), with Selling
Agents.
As used herein, promotional activities include, but are not limited to,
advertising via radio, television, newspapers, magazines and otherwise;
preparing, printing and mailing sales materials, brochures and prospectuses
(except for prospectuses used for regulatory purposes or for distribution to
existing shareholders).
Section 4. Limitations on Payments. Payment made by a particular Fund
under Section 1 must be for distribution or sales support services rendered for
or on behalf of such Fund. However, joint distribution or sales support
financing with respect to the Funds (which financing may also involve other
investment portfolios or companies that are affiliated persons of such a
1
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person, or affiliated persons of the Distributor) shall be permitted in
accordance with applicable regulations of the Securities and Exchange Commission
("SEC") as in effect from time to time.
Upon proper authorization by the Company's Directors in accordance with
Rule 12b-1 under the Act, expenses covered by this Plan may also include other
expenses the Distributor (or any other person) may incur in connection with the
distribution of the Company's Shares including, without limitation, expenditures
for telephone facilities and in-house telemarketing, or in connection with
shareholder servicing. Distribution service fees will not be used to pay any
interest expenses, carrying charges or other financing costs (except to the
extent permitted by the SEC). Distribution service fees will not be used to pay
any general or administrative expenses of the Distributor.
Except for the payments specified in Section 1, no additional payments
are to be made by the Company on behalf of the Funds with respect to the Shares
under this Plan, provided that the Funds shall not be precluded from making the
payments such Fund is otherwise obligated to make (i) to NationsBanc Advisors,
Inc. ("NBAI") and/or TradeStreet Investment Associates, Inc. ("TradeStreet")
pursuant to the Investment Advisory Agreement and the Sub-Investment Advisory
Agreement, (ii) to The Bank of New York ("BONY") pursuant to the Custody
Agreement, (iii) to First Data Investor Services Group, Inc. ("First Data"),
pursuant to the Transfer Agency and Registrar Agreement, (iv) to Stephens Inc.
("Stephens"), pursuant to the Administration Agreement, (v) to First Data
pursuant to the Co-Administration Agreement, (vi) to Servicing Agents pursuant
to Shareholder Servicing Agreements and (vii) for the expenses otherwise
incurred by a Fund and the Company on behalf of the Shares in the normal conduct
of such Fund's business pursuant to the Investment Advisory Agreement (and/or
Sub-Investment Advisory Agreement), the Custody Agreement, the Transfer Agency
and Registrar Agreement, the Administration Agreement, the Co-Administration
Agreement and the Shareholder Servicing Agreements. However, to the extent any
payments by the Company on behalf of a Fund to NBAI, TradeStreet, BONY, First
Data, Stephens or Servicing Agents; by NBAI, TradeStreet, BONY, First Data,
Stephens or Servicing Agents or any affiliate thereof, to any party, pursuant to
any agreement; or, generally, by the Company on behalf of a Fund to any party,
are deemed to be payments for the financing of any activity primarily intended
to result in the sale of the Shares within the context of Rule 12b-1 under the
1940 Act, then such payments shall be deemed to be approved pursuant to this
Plan as set forth herein without regard to Section 1.
With respect to Shares, actual distribution expenses incurred by the
Distributor (or sales support expenses incurred by the Selling Agents) in a
given year may exceed the sum of the fees received by the Distributor pursuant
to this Plan and payments received by the Distributor pursuant to contingent
deferred sales charges. Any such excess may be recovered by the Distributor, and
retained by it or paid over to the Selling Agents, as applicable, in future
years as long as this Plan is in effect. If this Plan is terminated or not
continued, the Company shall not be obligated to pay the Distributor (or Selling
Agents) for any expenses not previously reimbursed by the Company or recovered
through contingent deferred sales charges.
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Notwithstanding anything herein to the contrary, no Fund shall be
obligated to make any payments under this Plan that exceed the maximum amounts
payable under Article III, Section 26 of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
Section 5. Reports of Distributor. So long as this Plan is in effect,
the Distributor shall provide to the Company's Officers and Board of Directors,
and the Directors shall review, at least quarterly, a written report of the
amounts expended by it pursuant to the Distribution Agreement, or by Selling
Agents pursuant to Sales Support Agreements, and the purposes for which such
expenditures were made.
Section 6. Approval of Plan. The Plan will become effective
immediately, as to any Fund's Shares, upon its approval by (a) a majority of the
outstanding Shares of such Fund, and (b) a majority of the Board of Directors,
including a majority of the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Company and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements entered
into in connection with this Plan, pursuant to a vote cast in person at a
meeting called for the purpose of voting on the approval of this Plan.
Section 7. Continuance of Plan. The Plan shall continue in effect for
so long as its continuance is specifically approved at least annually by the
Company's Board of Directors in the manner described in Section 6.
Section 8. Amendments. The Plan may be amended at any time by the Board
of Directors provided that (a) any amendment to increase materially the costs
which a Fund's Shares may bear for distribution pursuant to this Plan shall be
effective only upon approval by a vote of a majority of the outstanding Shares
of such Fund, and (b) any material amendments of the terms of this Plan shall
become effective only upon approval as provided in Section 6 hereof.
Section 9. Termination. The Plan is terminable, as to a Fund's Shares,
without penalty at any time by (a) a vote of a majority of the Directors who are
not "interested persons" (as defined in the 1940 Act) of the Company and who
have no direct or indirect financial interest in the operation of this Plan or
in any agreements entered into in connection with this Plan, or (b) a vote of a
majority of the outstanding Shares of such Fund.
Section 10. Selection/Nomination of Directors. While this Plan is in
effect, the selection and nomination of those Directors who are not "interested
persons" (as defined in the 1940 Act) of the Company shall be committed to the
discretion of such non-interested Directors.
Section 11. Records. The Company will preserve copies of this Plan,
Agreements, and any written reports regarding this Plan presented to the Board
of Directors for a period of not less than six years.
Section 12. Miscellaneous. The captions in this Plan are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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EXHIBIT A
NATIONS LIFEGOAL FUNDS, INC.
The term "Fund" used in the Plan shall refer to the following Funds of
the Company:
Nations LifeGoal Growth Portfolio
Nations LifeGoal Balanced Growth Portfolio
Nations LifeGoal Income and Growth Portfolio
Dated: October 2, 1996
Amended:
4
EXHIBIT 99.O
NATIONS LIFEGOAL FUNDS, INC.
RULE 18F-3 MULTI-CLASS PLAN
I. INTRODUCTION.
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the following sets forth the method for allocating
fees and expenses among each class of shares in the investment portfolios of
Nations LifeGoal Funds, Inc. (the "Company"). In addition, this Rule 18f-3
Multi-Class Plan (the "Plan") sets forth the maximum initial sales loads,
contingent deferred sales charges, Rule 12b-1 distribution fees, shareholder
servicing fees, conversion features, exchange privileges and other shareholder
services applicable to a particular class of shares of the portfolios. The Plan
also identifies expenses that may be allocated to a particular class of shares
to the extent that they are actually incurred in a different amount by class or
relate to a different kind or degree of services provided to the class.
The Company is an open-end series investment company registered under
the 1940 Act, the shares of which are registered on Form N-1A under the
Securities Act of 1933 (Registration Nos. 333-09703 and 811-07745). The Company
elects to offer multiple classes of shares in its investment portfolios pursuant
to the provisions of Rule 18f-3 and this Plan.
The Company currently consists of the following three separate
investment portfolios: LifeGoal Growth Portfolio, LifeGoal Balanced Growth
Portfolio and LifeGoal Income and Growth Portfolio.
The above-listed investment portfolios of the Company (the "Funds") are
authorized to issue the following classes of shares representing interests in
the Funds: Primary A Shares, Primary B Shares, Investor A Shares, Investor B
Shares and Investor C Shares;
II. ALLOCATION OF EXPENSES.
A. Pursuant to Rule 18f-3 under the 1940 Act, the Company shall
allocate to each class of shares in a Fund (i) any fees and expenses incurred by
the Company in connection with the distribution of such class of shares under a
distribution plan adopted for such class of shares pursuant to Rule 12b-1, and
(ii) any fees and expenses incurred by the Company under a shareholder servicing
plan in connection with the provision of shareholder services to the holders of
such class of shares.
B. In addition, pursuant to Rule 18f-3, the Company may allocate the
following fees and expenses, if any, to a particular class of shares in a single
Fund:
(i) transfer agent fees identified by the transfer agent as being
attributable to such class of shares;
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(ii) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses,
reports, and proxies to current shareholders of such class of
shares or to regulatory agencies with respect to such class of
shares;
(iii) blue sky registration or qualification fees incurred by such
class of shares;
(iv) Securities and Exchange Commission registration fees incurred by
such class of shares;
(v) the expense of administrative personnel and services (including,
but not limited to, those of a portfolio accountant, custodian or
dividend paying agent charged with calculating net asset values or
determining or paying dividends) as required to support the
shareholders of such class of shares;
(vi) litigation or other legal expenses relating solely to such class
of shares;
(vii) fees of the Company's Directors incurred as result of issues
relating to such class of shares;
(viii) independent accountants' fees relating solely to such class of
shares; and
(ix) any other fees and expenses, not including advisory or custodial
fees or other expenses related to the management of the Fund's
assets, relating to (as defined below) such class of shares.
C. For all purposes under this Plan, fees and expenses "relating
to" a class of shares are those fees and expenses that are actually incurred in
a different amount by the class or that relate to a different kind or degree of
services provided to the class. The proper officers of the Company shall have
the authority to determine whether any or all of the fees and expenses described
in Section B of this Part II should be allocated to a particular class of
shares. The Board of Directors will monitor any such allocations to ensure that
they comply with the requirements of the Plan.
D. Income, realized and unrealized capital gains and losses, and
any expenses of a Fund not allocated to a particular class of any such Fund
pursuant to this Plan shall be allocated to each class of the Fund on the basis
of the relative net assets, as defined in Rule 18f-3, of that class in relation
to the net assets of the Fund.
E. In certain cases, Banc of America Advisors, Inc., TradeStreet
Investment Associates, Inc., Bank of America, N.A., Stephens Inc., First Data
Investor Services Group, Inc., or another service provider for a Fund may waive
or reimburse all or a portion of the expenses of a specific class of shares of
the Fund. The Board of Directors will monitor any such waivers or
2
<PAGE>
reimbursements to ensure that they do not provide a means for
cross-subsidization between classes.
III. CLASS ARRANGEMENTS.
The following summarizes the maximum front-end sales charges,
contingent deferred sales charges, Rule 12b-1 distribution fees, shareholder
servicing fees, conversion features, exchange privileges and other shareholder
services applicable to each class of shares of the Company. Additional details
regarding such fees and services are set forth in the Funds' current
Prospectus(es) and Statement of Additional Information.
A. PRIMARY A SHARES.
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge: None
3. Maximum Rule 12b-1 Distribution Fees: None
4. Maximum Shareholder Servicing Fees: None
5. Conversion Features: None
6. Exchange Privileges:
(a) Primary A Shares of a Fund may be exchanged
for Primary A Shares of any other Nations
Fund. In some cases, the only Money Market
Fund option is Trust Class Shares of Nations
Reserves Money Market Funds.
(b) From time to time, the Board of Directors of
the Company may modify, or ratify
modifications to, the exchange privileges of
Primary A Shares of a Fund without amending
this Plan, provided that such exchange
privileges, as modified, are described in
the then-current prospectus for such shares
of such Fund.
7. Other Shareholder Services: None
B. PRIMARY B SHARES.
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge: None
3
<PAGE>
3. Maximum Rule 12b-1 Distribution Fees: None
4. Maximum Shareholder Administration Fees: Pursuant to a
Shareholder Administration Plan, the Primary B Shares of the
Funds each may pay shareholder administration fees of up to
0.60% of the average daily net assets of such shares,
provided that in no event may the portion of such fee that
constitutes a "service fee," as that term is defined in Rule
2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., exceed 0.25% of the average daily
net asset value of such Primary B Shares of a Fund.
5. Conversion Features: Primary B Shares of a Fund shall have
such conversion features, if any, as are determined by or
ratified by the Board of Directors of the Company and
described in the then-current prospectus for such shares of
such Fund.
6. Exchange Privileges:
(a) Primary B Shares of a Fund may be exchanged
for Primary B Shares of any other Nations Fund.
(b) From time to time, the Board of Directors of the
Company may modify, or ratify modifications to, the
exchange privileges of Primary B Shares of a Fund
without amending this Plan, provided that such
exchange privileges, as modified, are described in
the then-current prospectus for such shares of such
Fund.
7. Other Shareholder Services: None
C. INVESTOR A SHARES.
1. Maximum Initial Sales Load: maximum of 5.75%.
2. Contingent Deferred Sales Charge (as a percentage of the
lower of the original purchase price or redemption proceeds):
(a) 1.00% of purchases made before August 1, 1999 in
amounts over $1 million if redeemed within one year
of purchase, declining to 0.50% in the second year
after purchase and eliminated thereafter.
(b) 1.00% of purchases made on or after August 1, 1999 in
amounts over $1 million if redeemed within 18 months
of purchase and eliminated thereafter.
4
<PAGE>
3. Redemption Fee:
(a) 1.00% of the current net asset value of shares
purchased in amounts of $1 million or more between
July 31, 1997 and November 15, 1998, and redeemed
within 18 months of purchase.
(b) 1.00% of the current net asset value of shares
purchased by an employee benefit plan that initially
invested in Investor A Shares between July 31, 1997
and November 15, 1998, and redeemed within 18 months
of purchase in connection with redemption of all
Nations Funds holdings of the employee benefit plan.
4. Maximum Rule 12b-1 Distribution/Shareholder Servicing Fees:
Pursuant to a Shareholder Servicing and Distribution Plan
adopted under Rule 12b-1, Investor A Shares of each Fund may
pay a combined distribution and shareholder servicing fee of
up to 0.25% of the average daily net assets of such shares.
5. Conversion Features: Investor A Shares of a Fund shall have
such conversion features, if any, as are determined by or
ratified by the Board of Directors of the Company and
described in the then-current prospectus for such shares of
such Fund.
6. Exchange Privileges:
(a) Investor A Shares of a Fund may be exchanged for
Investor A Shares of any other Nations Fund, except
Index Funds.
(b) From time to time, the Board of Directors of the
Company may modify, or ratify modifications to, the
exchange privileges of Investor A Shares of a Fund
without amending this Plan, provided that such
exchange privileges, as modified, are described in
the then-current prospectus for such shares of such
Fund.
7. Other Shareholder Services. The Company offers a Systematic
Investment Plan, an Automatic Withdrawal Plan and an
Automatic Exchange Feature to holders of Investor A Shares of
the Funds.
D. INVESTOR B SHARES.
1. Maximum Initial Sales Load: None
5
<PAGE>
2. Contingent Deferred Sales Charge (as a percentage of the
lower of the purchase price or redemption proceeds): 5.00% if
redeemed within one year of purchase declining to 1.00% in
the sixth year after purchase and eliminated thereafter.
3. Maximum Rule 12b-1 Distribution Fees: Pursuant to a
Distribution Plan adopted under Rule 12b-1, Investor B Shares
of each Fund may pay distribution fees of up to 0.75% of the
average daily net assets of such shares.
4. Maximum Shareholder Servicing Fees: Pursuant to a Shareholder
Servicing Plan, Investor B Shares of each Fund may pay
shareholder servicing fees of up to 0.25% of the average
daily net assets of such shares.
5. Conversion Features: Investor B Shares of a Fund shall have
such conversion features, if any, as are determined by or
ratified by the Board of Directors of the Company and
described in the then-current prospectus for such shares of
such Fund.
6. Exchange Privileges:
(a) Investor B Shares of a Fund may be exchanged for
Investor B Shares of any other Nations Fund, except
Nations Funds Money Market Funds.
(b) Investor B Shares of a Fund may be exchanged for
Investor C Shares of any Nations Funds Money Market
Funds before October 1, 1999 or Investor B Shares of
any Nations Reserves Money Market Funds on or after
October 1, 1999.
(b) From time to time, the Board of Directors of the
Company may modify, or ratify modifications to, the
exchange privileges of Investor B Shares of a Fund
without amending this Plan, provided that such
exchange privileges, as modified, are described in
the then-current prospectus for such shares of such
Fund.
7. Other Shareholder Services. The Company offers a Systematic
Investment Plan, an Automatic Withdrawal Plan and an
Automatic Exchange Feature to holders of Investor B Shares of
the Funds.
E. INVESTOR C SHARES.
1. Maximum Initial Sales Load: None
6
<PAGE>
2. Contingent Deferred Sales Charge (as a percentage of the
lower of the purchase price or redemption proceeds): 1.00% if
redeemed within one year of purchase and eliminated
thereafter.
3. Maximum Rule 12b-1 Distribution Fees: Pursuant to a
Distribution Plan adopted under Rule 12b-1, Investor C Shares
of each Fund may pay distribution fees of up to 0.75% of the
average daily net assets of such shares.
4. Maximum Shareholder Servicing Fees: Pursuant to a Shareholder
Servicing Plan, Investor C Shares of each Fund may pay
shareholder servicing fees of up to 0.25% of the average
daily net assets of such shares.
5. Conversion Features: Investor C Shares of a Fund shall have
such conversion features, if any, as are determined by or
ratified by the Board of Directors of the Company and
described in the then-current prospectus for such shares of
such Fund.
6. Exchange Privileges:
(a) Investor C Shares of a Fund may be exchanged for
Investor C Shares of any other Nations Fund, except
Nations Funds Money Market Funds.
(b) Investor C Shares of a Fund may be exchanged for
Daily Shares of any Nations Funds Money Market Funds
before October 1, 1999 or Investor C Shares of any
Nations Reserves Money Market Funds on or after
October 1, 1999. .
(c) From time to time, the Board of Directors of the
Company may modify, or ratify modifications to, the
exchange privileges of Investor C Shares of a Fund
without amending this Plan, provided that such
exchange privileges, as modified, are described in
the then-current prospectus for such shares of such
Fund.
7. Other Shareholder Services. The Company offers a Systematic
Investment Plan, an Automatic Withdrawal Plan and an
Automatic Exchange Feature to holders of Investor C Shares of
the Funds.
IV. BOARD REVIEW.
The Board of Directors of the Company shall review this Plan as
frequently as it deems necessary. Prior to any material amendment(s) to this
Plan, the Company's Board of
7
<PAGE>
Directors, including a majority of the Directors who are not interested persons
of the Company, shall find that the Plan, as proposed to be amended (including
any proposed amendments to the method of allocating class and/or fund expenses),
is in the best interests of each class of shares of the Fund individually and
the Fund as a whole. In considering whether to approve any proposed amendment(s)
to the Plan, the Directors of the Company shall request and evaluate such
information as they consider reasonably necessary to evaluate the proposed
amendment(s) to the Plan.
Adopted: July 11, 1996
Last Amended: May 26, 1999
8
Exhibit 99.P
POWER OF ATTORNEY
Edmund L. Benson, III, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Robert M. Kurucza, Marco E. Adelfio,
Steven G. Cravath and Richard H. Blank, Jr., each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations LifeGoal Funds, Inc. (the "Company"), to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of any and all amendments to the Company's
Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a director
of the Company any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: July 31, 1996
/s/ Edmund L. Benson, III
--------------------------------
Edmund L. Benson, III
<PAGE>
Exhibit 99.P
POWER OF ATTORNEY
James Ermer, whose signature appears below, does hereby constitute
and appoint R. Gregory Feltus, Robert M. Kurucza, Marco E. Adelfio, Steven G.
Cravath and Richard H. Blank, Jr., each individually, his true and lawful
attorneys and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations LifeGoal Funds, Inc. (the "Company"), to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of any and all amendments to the Company's
Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a director
of the Company any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: July 31, 1996
/s/ James Ermer
--------------------------
James Ermer
<PAGE>
Exhibit 99.P
POWER OF ATTORNEY
William H. Grigg, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Robert M. Kurucza, Marco E. Adelfio,
Steven G. Cravath and Richard H. Blank, Jr., each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations LifeGoal Funds, Inc. (the "Company"), to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of any and all amendments to the Company's
Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a director
of the Company any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: July 31, 1996
/s/ William H. Grigg
------------------------------
William H. Grigg
<PAGE>
Exhibit 99.P
POWER OF ATTORNEY
Thomas F. Keller, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Robert M. Kurucza, Marco E. Adelfio,
Steven G. Cravath and Richard H. Blank, Jr., each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations LifeGoal Funds, Inc. (the "Company"), to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of any and all amendments to the Company's
Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a director
of the Company any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: July 31, 1996
/s/ Thomas F. Keller
--------------------------------
Thomas F. Keller
<PAGE>
Exhibit 99.P
POWER OF ATTORNEY
A. Max Walker, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Robert M. Kurucza, Marco E. Adelfio,
Steven G. Cravath and Richard H. Blank, Jr., each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations LifeGoal Funds, Inc. (the "Company"), to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of any and all amendments to the Company's
Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a director
and officer of the Company any and all such amendments filed with the Securities
and Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: July 31, 1996
/s/ A. Max Walker
-------------------------------
A. Max Walker
<PAGE>
Exhibit 99.P
POWER OF ATTORNEY
Charles B. Walker, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Robert M. Kurucza, Marco E. Adelfio,
Steven G. Cravath and Richard H. Blank, Jr., each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations LifeGoal Funds, Inc. (the "Company"), to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of any and all amendments to the Company's
Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a director
of the Company any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: July 31, 1996
/s/ Charles B. Walker
-------------------------------
Charles B. Walker
<PAGE>
Exhibit 99.P
POWER OF ATTORNEY
Thomas S. Word, Jr., whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Robert M. Kurucza, Marco E. Adelfio,
Steven G. Cravath and Richard H. Blank, Jr., each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations LifeGoal Funds, Inc. (the "Company"), to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of any and all amendments to the Company's
Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a director
of the Company any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: July 31, 1996
/s/ Thomas S.Word. Jr.
------------------------------
Thomas S. Word, Jr.
<PAGE>
Exhibit 99.P
POWER OF ATTORNEY
Richard H. Rose, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Robert M. Kurucza, Marco E. Adelfio,
Steven G. Cravath and Richard H. Blank, Jr., each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations LifeGoal Funds, Inc. (the "Company"), to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of any and all amendments to the Company's
Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as an officer
of the Company any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: July 31, 1996
/s/ Richard H. Rose, Jr.
--------------------------------
Richard H. Rose, Jr.
<PAGE>
Exhibit 99.P
POWER OF ATTORNEY
Carl E. Mundy, Jr., whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Robert M. Kurucza, Marco E. Adelfio,
Steven G. Cravath and Richard H. Blank, Jr., each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations LifeGoal Funds, Inc. (the "Company"), to
comply with the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended ("Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of any and all amendments to the Company's
Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as an officer
of the Company any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: July 31, 1996
/s/ Carl E. Mundy, Jr.
-------------------------------
Carl E. Mundy, Jr.
