<PAGE> 1
[GRAPHIC: FAMILY]
LifeGoal Income
and Growth Portfolio
LifeGoal Balanced
Growth Portfolio
LifeGoal Growth
Portfolio
LIFEGOAL PORTFOLIOS
Semiannual report for the period
ended September 30, 1999
Nations Funds
<PAGE> 2
This Report is submitted for the general information of shareholders of Nations
Funds. This material must be preceded or accompanied by a current Nations Funds
prospectus.
Nations Funds distributor: Stephens Inc., which is not affiliated with Bank of
America N.A., is not a bank, and securities offered by it are not guaranteed by
any bank or insured by the FDIC. Stephens Inc., member NYSE, SIPC.
Nations Funds investment adviser: Banc of America Advisors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 3
PRESIDENTS'
MESSAGE
DEAR SHAREHOLDER:
We're rapidly approaching the end of the year, and
the end of the twentieth century. While we all look
forward to the beginning of the next century, let's
first take a look back at the last six months and
then we'll discuss how Nations Funds is positioned as
we head into the year 2000.
RIDING THE WAVES IN THE U.S.
The last six months offered a snapshot of what we
often refer to as market volatility. And when we say
market volatility, we mean the ups and downs of the
U.S. stock market. Basically, what went up in the
second quarter of the year fell right back down in
the third quarter. During the spring, we witnessed
another Dow Jones Industrial Average* milestone --
crossing the 11,000 mark -- and we saw a broadening
in the stock market, as value stocks and
small-company stocks came back into favor. This was a
change from the past few years where rallies have
been led by a narrow group of large-company stocks.
However, strong economic growth -- combined with
continued low inflation and low unemployment --
caused the Federal Reserve Board to raise interest
rates twice by a total of 0.50%. These rate hikes (on
June 30 and August 24) caused the markets to resemble
the rough surf of the Atlantic during one of our many
hurricanes this past summer. (In fact, Hurricane
Floyd actually shut down Wall Street in mid-September
with torrential rains and high winds.) At any rate,
the stock market, as represented by the Standard &
Poor's 500 Composite Stock Price Index (S&P 500)**,
finished the third quarter at 5.36% (year-to-date
through September 30, 1999), 10% off its August high,
with the average stock in the S&P 500 off 20% from
its high.
A BRIGHTER PICTURE OVERSEAS
International stock markets performed well in the
second quarter and actually outperformed the U.S. for
the first time in a number of years. The Morgan
Stanley Capital International (MSCI) Europe,
Australasia and Far East (EAFE) Index gained 4.4% in
the third quarter. A resurgent Japanese economy
helped to push international equity markets higher.
This is yet another example of the importance of
diversification. Investors investing exclusively in
the U.S. could miss out on opportunities overseas.
One way to ensure that your portfolio is properly
diversified is to seek the professional advice of an
investment professional. An investment professional
can help explain the additional risks involved in
international investing, as well as educate you on
the potential rewards that have historically come
from a diversified portfolio including international
investments.
* The Dow Jones Industrial Average is a
price-weighted index of 30 of the largest, most
widely held stocks traded on the New York Stock
Exchange. It is unmanaged and unavailable for
investment.
** The Standard & Poor's 500 Composite Stock Price
Index is an unmanaged index of 500 widely held
common stocks. It is unavailable for investment.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
<PAGE> 4
PRESIDENTS'
MESSAGE continued...
STAY THE COURSE
While the ride has been bumpy over the last six
months, we believe the best course of action for an
investor is to stay focused on your long-term goals
and remain invested. We understand that Y2K has been
on investors' minds for quite some time now. As most
Americans have come to realize, substantial efforts
have been made by companies in the U.S. and abroad to
try to ensure that the Y2K problem will be avoided.
Regardless, Y2K will come and go and those investors
that stick to their long-term goals, as history has
shown, stand a better chance of attaining them.
WHAT'S NEW AT NATIONS FUNDS
We've made some great strides during the past six
months and are poised to make Nations Funds a
stronger presence in the mutual fund industry in the
new year. We completed the largest merger in mutual
fund history on May 21 when we combined Pacific
Horizon Funds with Nations Funds. Combining these two
entities provides you with more investment choices
and a broader range of investment expertise. This is
part of our ongoing commitment to providing you with
the best products and services, and helping you
pursue a lifetime of financial goals.
In fact, our selection of mutual funds continued to
grow as we introduced Nations Strategic Equity Fund,
a large-company stock fund managed for tax
efficiency, on August 1. This fund is managed by Bank
of America Investment Management -- a Nations Funds
Manager of Distinction(SM).
We look forward to the opportunities ahead of us in
the new year and to making your investment experience
with Nations Funds a successful one. Should you have
any questions or comments on your semiannual report,
please contact your investment professional or call
us at 1.800.321.7854. You can also visit us online at
www.nations-funds.com.
Once again, thank you for being a part of the Nations
Funds family.
Sincerely,
/s/ A. Max Walker
A. Max Walker
President and Chairman of the Board
/s/ Robert H. Gordon
Robert H. Gordon
President, Banc of America Advisors, Inc.
September 30, 1999
<PAGE> 5
Table
of
contents
<TABLE>
<S> <C>
NATIONS FUNDS SPECTRUM 2
FINANCIAL STATEMENTS
Statements of net assets
- Nations LifeGoal Income and Growth Portfolio 3
- Nations LifeGoal Balanced Growth Portfolio 4
- Nations LifeGoal Growth Portfolio 5
Statements of operations 6
Statements of changes in net assets 7
Schedules of capital stock activity 8
Financial highlights 12
Notes to financial statements 18
</TABLE>
<TABLE>
<S> <C>
---------------------------------------------------------------------------------
NATIONS FUNDS [Dalbar Logo]
RECOGNIZED FOR
OUTSTANDING DALBAR, Inc., is a well-respected research firm
CUSTOMER SERVICE that measures customer service levels and
establishes benchmarks in the financial services
In recognition of our industry.
commitment to retail
shareholders through
consistently providing
superior customer service,
Nations Funds was awarded
DALBAR Key Honors in 1997
and 1998.
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
THE NATIONS FUNDS FAMILY OF FUNDS
LOWER
RISK/
REWARD
POTENTIAL
MONEY
MARKET
FUNDS
Nations Prime Fund
Nations Government
Money Market Fund
Nations Treasury Fund
Nations Tax Exempt
Fund
FIXED
INCOME
FUNDS
INCOME FUNDS
Nations Diversified
Income Fund
Nations U.S. Government
Bond Fund
Nations Strategic
Fixed Income Fund
Nations Intermediate
Bond Fund
Nations Government
Securities Fund
Nations Short-
Intermediate
Government Fund
Nations Short-Term
Income Fund
TAX-EXEMPT
INCOME FUNDS
Nations Municipal
Income Fund
Nations State-Specific
Long-Term Municipal
Bond Funds (CA, FL, GA,
MD, NC, SC, TN, TX, VA)
Nations Intermediate
Municipal Bond Fund
Nations State-Specific
Intermediate Municipal
Bond Funds (FL, GA, MD,
NC, SC, TN, TX, VA)
Nations Short-Term
Municipal Income Fund
DOMESTIC
EQUITY
FUNDS
GROWTH FUNDS
Nations Small Company
Growth Fund
Nations Emerging
Growth Fund
Nations Marsico
Focused Equities Fund
Nations Disciplined
Equity Fund
Nations Capital
Growth Fund
Nations Strategic
Equity Fund
Nations Blue Chip Fund
GROWTH AND
INCOME FUNDS
Nations Marsico Growth
& Income Fund
Nations Equity
Income Fund
Nations Value Fund
Nations Asset
Allocation Fund
Nations Balanced
Assets Fund
Nations Capital
Income Fund
INTERNATIONAL
FUNDS
Nations Emerging
Markets Fund
Nations International
Growth Fund
Nations International
Equity Fund
Nations International
Value Fund
HIGHER
RISK/
REWARD
POTENTIAL
INDEX FUNDS
Nations Equity Index Fund
Nations Managed Index Fund
Nations Managed SmallCap Index Fund
Nations Managed SmallCap Value Index Fund
Nations Managed Value Index Fund
ASSET ALLOCATION PORTFOLIOS
Nations LifeGoal Balanced Growth Portfolio
Nations LifeGoal Growth Portfolio
Nations LifeGoal Income and Growth Portfolio
<PAGE> 7
NATIONS FUNDS
Nations LifeGoal Income and Growth Portfolio
STATEMENT OF NET ASSETS SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ----------------------------------------------------------
<C> <S> <C> <C>
INVESTMENT COMPANY SECURITIES -- 100.4%
24,514 Nations Disciplined Equity Fund..... $ 536
40,714 Nations International Value Fund.... 664
58,014 Nations Managed Index Fund.......... 1,116
703,898 Nations Short-Intermediate
Government Fund................... 2,816
651,588 Nations Short-Term Income Fund...... 6,280
-------
TOTAL INVESTMENTS
(Cost $11,497*).............. 100.4% 11,412
-------
OTHER ASSETS AND
LIABILITIES (NET).......... (0.4)%
Dividends receivable................ $ 46
Payable for Fund shares redeemed.... (3)
Investment advisory fee payable..... (8)
Shareholder servicing and
distribution fees payable......... (59)
Due to custodian.................... (11)
Distributions payable............... (13)
-------
TOTAL OTHER ASSETS AND
LIABILITIES (NET)................. (48)
-------
NET ASSETS................... 100.0% $11,364
=======
NET ASSETS CONSIST OF:
Undistributed net investment
income............................ $ 42
Accumulated net realized gain on
investments sold.................. 84
Net unrealized depreciation of
investments....................... (85)
Paid-in capital..................... 11,323
-------
NET ASSETS.......................... $11,364
=======
</TABLE>
<TABLE>
<CAPTION>
VALUE
- ----------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($4,927,574 / 465,082 shares
outstanding)...................... $10.60
=======
INVESTOR A SHARES:
Net asset value and redemption price
per share ($796,527 / 74,812
shares outstanding)............... $10.65
=======
Maximum sales charge................ 5.75%
Maximum offering price per share.... $11.30
INVESTOR B SHARES:
Net asset value and offering price
per share+ ($5,171,327 / 485,350
shares outstanding)............... $10.65
=======
INVESTOR C SHARES:
Net asset value and offering price
per share+ ($468,922 / 44,099
shares outstanding)............... $10.63
=======
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized depreciation of investment
securities was comprised of gross appreciation of $97 and gross depreciation
of $182 for Federal income tax purposes. At September 30, 1999, the aggregate
cost of securities for Federal income tax purposes was $11,497.
+ The redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE> 8
NATIONS FUNDS
Nations LifeGoal Balanced Growth Portfolio
STATEMENT OF NET ASSETS SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<C> <S> <C> <C>
INVESTMENT COMPANY SECURITIES -- 100.5%
104,097 Nations Disciplined Equity Fund........ $ 2,275
474,493 Nations Diversified Income Fund........ 4,641
170,631 Nations International Value Fund....... 2,783
184,379 Nations Managed Index Fund............. 3,546
211,164 Nations Small Company Growth Fund...... 2,865
862,090 Nations Strategic Fixed Income Fund.... 8,215
-------
TOTAL INVESTMENTS
(Cost $24,274*)............... 100.5% 24,325
-------
OTHER ASSETS AND
LIABILITIES (NET)............. (0.5)%
Receivable for Fund shares sold........ $ 4
Dividends receivable................... 69
Payable for Fund shares redeemed....... (30)
Investment advisory fee payable........ (16)
Shareholder servicing and distribution
fees payable......................... (120)
Due to custodian....................... (4)
Distributions payable.................. (15)
-------
TOTAL OTHER ASSETS AND
LIABILITIES (NET).................... (112)
-------
NET ASSETS...................... 100.0% $24,213
=======
NET ASSETS CONSIST OF:
Undistributed net investment income.... $ 185
Accumulated net realized loss on
investments sold..................... (49)
Net unrealized appreciation of
investments.......................... 51
Paid-in capital........................ 24,026
-------
NET ASSETS............................. $24,213
=======
</TABLE>
<TABLE>
<CAPTION>
VALUE
- -----------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($10,730,853 / 1,000,498 shares
outstanding)......................... $10.73
=======
PRIMARY B SHARES:
Net asset value, offering and
redemption price per share ($281,395
/ 26,187 shares outstanding)......... $10.75
=======
INVESTOR A SHARES:
Net asset value and redemption price
per share ($2,143,002 / 199,355
shares outstanding).................. $10.75
=======
Maximum sales charge................... 5.75%
Maximum offering price per share....... $11.41
INVESTOR B SHARES:
Net asset value and offering price per
share+ ($9,220,488 / 857,292 shares
outstanding)......................... $10.76
=======
INVESTOR C SHARES:
Net asset value and offering price per
share+ ($1,837,606 / 169,652 shares
outstanding)......................... $10.83
=======
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $650 and gross depreciation
of $599 for Federal income tax purposes. At September 30, 1999, the aggregate
cost of securities for Federal income tax purposes was $24,274.
+ The redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE> 9
NATIONS FUNDS
Nations LifeGoal Growth Portfolio
STATEMENT OF NET ASSETS SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<C> <S> <C> <C>
INVESTMENT COMPANY SECURITIES -- 100.7%
77,704 Nations Disciplined Equity Fund....... $ 1,698
138,069 Nations Emerging Growth Fund.......... 1,979
125,570 Nations International Value Fund...... 2,048
319,858 Nations Managed Index Fund............ 6,150
154,732 Nations Small Company Growth Fund..... 2,100
253,446 Nations Value Fund.................... 4,357
-------
TOTAL INVESTMENTS
(Cost $17,608*).............. 100.7% 18,332
-------
OTHER ASSETS AND LIABILITIES
(NET)........................ (0.7)%
Investment advisory fee payable....... $ (13)
Shareholder servicing and distribution
fees payable........................ (105)
Distributions payable................. (11)
-------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)............................... (129)
-------
NET ASSETS..................... 100.0% $18,203
=======
NET ASSETS CONSIST OF:
Net investment loss................... $ (19)
Accumulated net realized gain on
investments sold.................... 388
Net unrealized appreciation of
investments......................... 724
Paid-in capital....................... 17,110
-------
NET ASSETS............................ $18,203
=======
</TABLE>
<TABLE>
<CAPTION>
VALUE
- -----------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($6,184,663 / 502,041 shares
outstanding)........................ $12.32
=======
PRIMARY B SHARES:
Net asset value, offering and
redemption price per share ($6,766 /
551 shares outstanding)............. $12.28
=======
INVESTOR A SHARES:
Net asset value and redemption price
per share ($3,505,323 / 284,602
shares outstanding)................. $12.32
=======
Maximum sales charge.................. 5.75%
Maximum offering price per share...... $13.07
INVESTOR B SHARES:
Net asset value and offering price per
share+ ($7,670,263 / 626,841 shares
outstanding)........................ $12.24
=======
INVESTOR C SHARES:
Net asset value and offering price per
share+ ($836,089 / 68,531 shares
outstanding)........................ $12.20
=======
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $979 and gross depreciation
of $255 for Federal income tax purposes. At September 30, 1999, the aggregate
cost of securities for Federal income tax purposes was $17,608.
+ The redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 10
NATIONS FUNDS
STATEMENTS OF OPERATIONS (UNAUDITED)
For the six months ended September 30, 1999
<TABLE>
LIFEGOAL LIFEGOAL
INCOME AND BALANCED LIFEGOAL
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
INVESTMENT INCOME:
Dividends................................................... $ 295 $ 594 $ 53
-------------- -------------- --------------
EXPENSES:
Investment advisory fee..................................... 15 31 22
Shareholder servicing and distribution fees:
Primary B Shares.......................................... -- 1 --*
Investor A Shares......................................... 1 2 5
Investor B Shares......................................... 26 47 42
Investor C Shares......................................... 2 6 3
-------------- -------------- --------------
Total Expenses.......................................... 44 87 72
Fees waived by distributor.................................. -- --* --*
-------------- -------------- --------------
Net expenses............................................ 44 87 72
-------------- -------------- --------------
NET INVESTMENT INCOME/(LOSS)................................ 251 507 (19)
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on investments..................... 22 40 187
Capital gains distributions received........................ 6 9 252
Net unrealized appreciation/(depreciation) of investments
during the period......................................... (157) 10 77
-------------- -------------- --------------
Net realized and unrealized gain/(loss) on investments...... (129) 59 516
-------------- -------------- --------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 122 $ 566 $ 497
============== ============== ==============
</TABLE>
- ---------------
* Amount represents less than $500.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 11
NATIONS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
LIFEGOAL INCOME LIFEGOAL BALANCED LIFEGOAL GROWTH
AND GROWTH PORTFOLIO GROWTH PORTFOLIO PORTFOLIO
------------------------- ------------------------- ------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
9/30/99 YEAR ENDED 9/30/99 YEAR ENDED 9/30/99 YEAR ENDED
(UNAUDITED) 3/31/99 (UNAUDITED) 3/31/99 (UNAUDITED) 3/31/99
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Net investment income/(loss)........... $ 251 $ 242 $ 507 $ 469 $ (19) $ (27)
Net realized gain/(loss) on investments
during the period.................... 22 211 40 143 187 60
Capital gain distributions received.... 6 56 9 504 252 575
Net change in unrealized appreciation/
(depreciation) of investments during
the period........................... (157) 33 10 (240) 77 227
----------- ----------- ----------- ----------- ----------- -----------
Net increase/(decrease) in net assets
resulting from operations............ 122 542 566 876 497 835
Distributions to shareholders from net
investment income:
Primary A Shares..................... (131) (104) (221) (319) -- --
Primary B Shares..................... -- -- (4) (5) -- --
Investor A Shares.................... (20) (33) (26) (27) -- --
Investor B Shares.................... (82) (78) (104) (116) -- --
Investor C Shares.................... (8) (2) (23) (3) -- --
Distributions to shareholders in excess
of net investment income:
Primary A Shares..................... -- -- -- (12) -- (29)
Primary B Shares..................... -- -- -- --* -- --
Investor A Shares.................... -- -- -- (1) -- (18)
Investor B Shares.................... -- -- -- (4) -- (10)
Investor C Shares.................... -- -- -- --* -- --
Distributions to shareholders from net
realized gain on investments:
Primary A Shares..................... (69) (17) (165) (206) (86) (78)
Primary B Shares..................... -- -- (3) (5) --* --
Investor A Shares.................... (16) (12) (15) (28) (63) (98)
Investor B Shares.................... (64) (45) (112) (214) (151) (335)
Investor C Shares.................... (1) (2) (5) (14) (9) (18)
Net increase/(decrease) in net assets
from Portfolio share transactions.... (3,109) 12,592 (1,294) 19,424 1,309 8,463
----------- ----------- ----------- ----------- ----------- -----------
Net increase/(decrease) in net
assets............................... (3,378) 12,841 (1,406) 19,346 1,497 8,712
NET ASSETS:
Beginning of period.................... 14,742 1,901 25,619 6,273 16,706 7,994
----------- ----------- ----------- ----------- ----------- -----------
End of period.......................... $ 11,364 $ 14,742 $ 24,213 $ 25,619 $ 18,203 $ 16,706
=========== =========== =========== =========== =========== ===========
Undistributed net investment income/
(distributions in excess of net
investment income) at end of
period............................... $ 42 $ 32 $ 185 $ 56 $ (19) $ --
=========== =========== =========== =========== =========== ===========
</TABLE>
- ---------------
* Amount represents less than $500.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 12
NATIONS FUNDS
SCHEDULES OF CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
LIFEGOAL INCOME AND GROWTH PORTFOLIO
SIX MONTHS ENDED
SEPTEMBER 30, 1999 YEAR ENDED
(UNAUDITED) MARCH 31, 1999
------------------- -----------------
SHARES DOLLARS SHARES DOLLARS
------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold...................................................... 150 $ 1,616 1,215 $12,984
Issued as reinvestment of dividends....................... 18 189 11 114
Redeemed.................................................. (483) (5,236) (489) (5,201)
---- ------- ----- -------
Net increase/(decrease)................................... (315) $(3,431) 737 $ 7,897
==== ======= ===== =======
INVESTOR A SHARES:
Sold...................................................... 17 $ 181 128 $ 1,364
Issued as reinvestment of dividends....................... 3 35 4 42
Redeemed.................................................. (69) (749) (20) (213)
---- ------- ----- -------
Net increase/(decrease)................................... (49) $ (533) 112 $ 1,193
==== ======= ===== =======
INVESTOR B SHARES:
Sold...................................................... 95 $ 1,033 416 $ 4,427
Issued as reinvestment of dividends....................... 11 123 10 106
Redeemed.................................................. (62) (677) (98) (1,042)
---- ------- ----- -------
Net increase/(decrease)................................... 44 $ 479 328 $ 3,491
==== ======= ===== =======
INVESTOR C SHARES:
Sold...................................................... 36 $ 386 4 $ 45
Issued as reinvestment of dividends....................... 1 10 --* 3
Redeemed.................................................. (2) (20) (3) (37)
---- ------- ----- -------
Net increase/(decrease)................................... 35 $ 376 1 $ 11
==== ======= ===== =======
Total net increase/(decrease)............................. (285) $(3,109) 1,178 $12,592
==== ======= ===== =======
</TABLE>
- ---------------
* Amount represents less than $500 or 500 shares.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 13
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
LIFEGOAL BALANCED GROWTH PORTFOLIO
SIX MONTHS ENDED
SEPTEMBER 30, 1999 YEAR ENDED
(UNAUDITED) MARCH 31, 1999
------------------- -------------------
SHARES DOLLARS SHARES DOLLARS
--------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold...................................................... 287 $ 3,127 2,353 $25,445
Issued as reinvestment of dividends....................... 34 374 51 535
Redeemed.................................................. (695) (7,612) (1,039) (11,171)
---- ------- ------ -------
Net increase/(decrease)................................... (374) $(4,111) 1,365 $14,809
==== ======= ====== =======
PRIMARY B SHARES:
Sold...................................................... --* $ --* 22 $ 243
Issued as reinvestment of dividends....................... 1 7 1 10
Redeemed.................................................. -- -- -- --
---- ------- ------ -------
Net increase/(decrease)................................... 1 $ 7 23 $ 253
==== ======= ====== =======
INVESTOR A SHARES:
Sold...................................................... 88 $ 957 114 $ 1,232
Issued as reinvestment of dividends....................... 4 42 5 56
Redeemed.................................................. (13) (142) (43) (444)
---- ------- ------ -------
Net increase/(decrease)................................... 79 $ 857 76 $ 844
==== ======= ====== =======
INVESTOR B SHARES:
Sold...................................................... 127 $ 1,381 592 $ 6,244
Issued as reinvestment of dividends....................... 19 203 30 321
Redeemed.................................................. (113) (1,230) (248) (2,584)
---- ------- ------ -------
Net increase/(decrease)................................... 33 $ 354 374 $ 3,981
==== ======= ====== =======
INVESTOR C SHARES:
Sold...................................................... 145 $ 1,596 25 $ 273
Issued as reinvestment of dividends....................... 2 27 1 16
Redeemed.................................................. (2) (24) (69) (752)
---- ------- ------ -------
Net increase/(decrease)................................... 145 $ 1,599 (43) $ (463)
==== ======= ====== =======
Total net increase/(decrease)............................. (116) $(1,294) 1,795 $19,424
==== ======= ====== =======
</TABLE>
- ---------------
* Amount represents less than $500 or 500 shares.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 14
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
LIFEGOAL GROWTH PORTFOLIO
SIX MONTHS ENDED
SEPTEMBER 30, 1999 YEAR ENDED
(UNAUDITED) MARCH 31, 1999
------------------- -------------------
SHARES DOLLARS SHARES DOLLARS
--------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold...................................................... 251 $ 3,190 929 $10,881
Issued as reinvestment of dividends....................... 7 84 10 110
Redeemed.................................................. (109) (1,415) (609) (7,166)
---- ------- ---- -------
Net increase/(decrease)................................... 149 $ 1,859 330 $ 3,825
==== ======= ==== =======
PRIMARY B SHARES:
Sold...................................................... --* $ --* -- $ --
Issued as reinvestment of dividends....................... -- -- --* --*
Redeemed.................................................. -- -- -- --
---- ------- ---- -------
Net increase/(decrease)................................... --* $ --* -- $ --
==== ======= ==== =======
INVESTOR A SHARES:
Sold...................................................... 26 $ 336 213 $ 2,362
Issued as reinvestment of dividends....................... 5 63 10 113
Redeemed.................................................. (27) (340) (65) (746)
---- ------- ---- -------
Net increase/(decrease)................................... 4 $ 59 158 $ 1,729
==== ======= ==== =======
INVESTOR B SHARES:
Sold...................................................... 37 $ 470 354 $ 4,096
Issued as reinvestment of dividends....................... 11 141 28 333
Redeemed.................................................. (125) (1,588) (146) (1,652)
---- ------- ---- -------
Net increase/(decrease)................................... (77) $ (977) 236 $ 2,777
==== ======= ==== =======
INVESTOR C SHARES:
Sold...................................................... 40 $ 501 20 $ 226
Issued as reinvestment of dividends....................... 1 9 2 19
Redeemed.................................................. (11) (142) (10) (113)
---- ------- ---- -------
Net increase/(decrease)................................... 30 $ 368 12 $ 132
==== ======= ==== =======
Total net increase/(decrease)............................. 106 $ 1,309 736 $ 8,463
==== ======= ==== =======
</TABLE>
- ---------------
* Amount represents less than $500 or 500 shares.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 15
[This page intentionally left blank.]
11
<PAGE> 16
NATIONS FUNDS
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
NET INCREASE/
(DECREASE) IN
NET ASSET NET REALIZED NET ASSETS DISTRIBUTIONS DISTRIBUTIONS
VALUE NET AND UNREALIZED RESULTING FROM FROM NET IN EXCESS OF
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT NET INVESTMENT
OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME INCOME
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIFEGOAL INCOME AND GROWTH PORTFOLIO
PRIMARY A SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $10.86 $0.24 $(0.12) $0.12 $(0.24) --
Year ended 3/31/1999........ 10.70 0.35 0.37 0.72 (0.36) --
Year ended 3/31/1998(a)..... 9.97 0.43 0.89 1.32 (0.40) $(0.12)
Period ended 3/31/1997*..... 10.03 0.32 (0.06) 0.26 (0.32) --
INVESTOR A SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $10.89 $0.24 $(0.11) $0.13 $(0.23) --
Year ended 3/31/1999........ 10.71 0.36 0.35 0.71 (0.33) --
Year ended 3/31/1998(a)..... 9.97 0.41 0.89 1.30 (0.38) $(0.11)
Period ended 3/31/1997*..... 10.03 0.31 (0.06) 0.25 (0.31) --
INVESTOR B SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $10.89 $0.20 $(0.11) $0.09 $(0.19) --
Year ended 3/31/1999........ 10.70 0.28 0.35 0.63 (0.24) --
Period ended
3/31/1998(a)**............ 10.51 0.19 0.36 0.55 (0.22) $(0.07)
INVESTOR C SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $10.90 $0.19 $(0.12) $0.07 $(0.20) --
Year ended 3/31/1999........ 10.70 0.31 0.31 0.62 (0.22) --
Year ended 3/31/1998(a)..... 9.97 0.36 0.89 1.25 (0.35) $(0.10)
Period ended 3/31/1997*..... 10.03 0.31 (0.06) 0.25 (0.31) --
</TABLE>
- ---------------
* LifeGoal Income and Growth Portfolio Primary A, Investor A and Investor C
Shares commenced investment operations on October 2, 1996. Shares were
offered to the public on October 15, 1996.
** 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 net investment income has been calculated using the monthly
average shares method.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 17
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF RATIO OF
DISTRIBUTIONS NET ASSETS OPERATING NET INVESTMENT
FROM NET NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO
REALIZED TOTAL VALUE TOTAL PERIOD AVERAGE NET AVERAGE TURNOVER
CAPITAL GAINS DISTRIBUTIONS END OF PERIOD RETURN++ (000) ASSETS+++ NET ASSETS RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (0.14) $(0.38) $10.60 1.12% $4,928 0.25%+ 4.76%+ 24%
(0.20) (0.56) 10.86 6.98 8,489 0.25 3.99 107
(0.07) (0.59) 10.70 13.56 476 0.25 4.17 64
-- (0.32) 9.97 2.59 223 0.25+ 6.34+ 2
$ (0.14) $(0.37) $10.65 1.17% $ 796 0.50%+ 4.51%+ 24%
(0.20) (0.53) 10.89 6.92 1,347 0.50 3.74 107
(0.07) (0.56) 10.71 13.38 126 0.50 3.92 64
-- (0.31) 9.97 2.54 131 0.50+ 6.09+ 2
$ (0.14) $(0.33) $10.65 0.81% $5,171 1.25%+ 3.76%+ 24%
(0.20) (0.44) 10.89 6.16 4,806 1.25 2.99 107
(0.07) (0.36) 10.70 5.33 1,212 1.25+ 3.17+ 64
$ (0.14) $(0.34) $10.63 0.70% $ 469 1.25%+ 3.76%+ 24%
(0.20) (0.42) 10.90 6.02 100 1.25 2.99 107
(0.07) (0.52) 10.70 12.83 87 1.09 3.33 64
-- (0.31) 9.97 2.54 1 0.75+ 5.84+ 2
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 18
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
NET INCREASE/
(DECREASE) IN
NET ASSET NET REALIZED NET ASSETS DISTRIBUTIONS DISTRIBUTIONS
VALUE NET AND UNREALIZED RESULTING FROM FROM NET IN EXCESS OF
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT NET INVESTMENT
OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME INCOME
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIFEGOAL BALANCED GROWTH
PORTFOLIO
PRIMARY A SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $10.80 $0.24 -- $0.24 $(0.18) --
Year ended 3/31/1999........ 10.92 0.26 $ 0.23 0.49 (0.28) --
Year ended 3/31/1998(a)..... 9.95 0.33 1.74 2.07 (0.28) $(0.32)
Period ended 3/31/1997*..... 10.05 0.19 (0.10) 0.09 (0.19) --
PRIMARY B SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $10.82 $0.22 $(0.01) $0.21 $(0.15) --
Year ended 3/31/1999........ 10.94 0.23 0.20 0.43 (0.22) --
Period ended
3/31/1998(a)**............ 10.95 0.16 0.77 0.93 (0.20) $(0.24)
INVESTOR A SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $10.82 $0.22 $ 0.01 $0.23 $(0.17) --
Year ended 3/31/1999........ 10.94 0.25 0.21 0.46 (0.25) --
Year ended 3/31/1998(a)..... 9.95 0.28 1.79 2.07 (0.27) $(0.31)
Period ended 3/31/1997*..... 10.05 0.19 (0.10) 0.09 (0.19) --
INVESTOR B SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $10.82 $0.19 $ 0.01 $0.20 $(0.13) --
Year ended 3/31/1999........ 10.92 0.17 0.22 0.39 (0.16) --
Period ended
3/31/1998(a)**............ 10.88 0.11 0.87 0.98 (0.20) $(0.24)
INVESTOR C SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $10.92 $0.16 $ 0.02 $0.18 $(0.14) --
Year ended 3/31/1999........ 10.92 0.20 0.26 0.46 (0.13) --
Year ended 3/31/1998(a)..... 9.95 0.23 1.78 2.01 (0.25) $(0.29)
Period ended 3/31/1997*..... 10.05 0.19 (0.10) 0.09 (0.19) --
</TABLE>
- ---------------
* LifeGoal Balanced Growth Portfolio Primary A, Investor A and Investor C
Shares commenced investment operations on October 2, 1996. Shares were
offered to the public on October 15, 1996.
** LifeGoal Balanced Growth Portfolio Primary B and Investor B Shares
commenced investment operations on August 4, 1997 and August 13, 1997,
respectively.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ The Portfolio's expenses do not include the expenses of the underlying
funds.
(a) Per share net investment income has been calculated using the monthly
average shares method.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 19
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVER
AND/OR EXPENSE
REIMBURSEMENTS
---------------
RATIO OF RATIO OF RATIO OF
DISTRIBUTIONS NET ASSETS OPERATING NET INVESTMENT OPERATING
FROM NET NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO
REALIZED TOTAL VALUE TOTAL PERIOD AVERAGE NET AVERAGE TURNOVER AVERAGE
CAPITAL GAINS DISTRIBUTIONS END OF PERIOD RETURN++ (000) ASSETS+++ NET ASSETS RATE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$(0.13) $(0.31) $10.73 2.24% $10,731 0.25%+ 4.66%+ 27% 0.25%+
(0.33) (0.61) 10.80 4.77 14,844 0.25 2.77 121 --
(0.50) (1.10) 10.92 21.74 103 0.25 2.87 94 --
-- (0.19) 9.95 0.90 2,114 0.25+ 3.94+ 1 --
$(0.13) $(0.28) $10.75 1.96% $ 281 0.75%+ 4.16%+ 27% 0.85%+
(0.33) (0.55) 10.82 4.15 276 0.75 2.27 121 --
(0.50) (0.94) 10.94 9.24 26 0.75+ 2.37+ 94 --
$(0.13) $(0.30) $10.75 2.10% $ 2,143 0.50%+ 4.41%+ 27% 0.50%+
(0.33) (0.58) 10.82 4.44 1,308 0.50 2.52 121 --
(0.50) (1.08) 10.94 21.76 489 0.50 2.62 94 --
-- (0.19) 9.95 0.86 94 0.50+ 3.69+ 1 --
$(0.13) $(0.26) $10.76 1.81% $ 9,220 1.25%+ 3.66%+ 27% 1.25%+
(0.33) (0.49) 10.82 3.78 8,925 1.25 1.77 121 --
(0.50) (0.94) 10.92 9.70 4,917 1.25+ 1.87+ 94 --
$(0.13) $(0.27) $10.83 1.69% $ 1,838 1.25%+ 3.66%+ 27% 1.25%+
(0.33) (0.46) 10.92 4.43 266 1.25 1.77 121 --
(0.50) (1.04) 10.92 21.10 737 1.09 2.03 94 --
-- (0.19) 9.95 0.85 18 0.75+ 3.44+ 1 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 20
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
NET INCREASE/
(DECREASE)
NET ASSET NET REALIZED IN NET ASSETS DISTRIBUTIONS DISTRIBUTIONS
VALUE NET AND UNREALIZED RESULTING FROM FROM NET IN EXCESS OF
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT NET INVESTMENT
OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME INCOME
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIFEGOAL GROWTH PORTFOLIO
PRIMARY A SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $12.15 $ 0.19 $0.21 $0.40 -- --
Year ended 3/31/1999........ 12.49 0.04 0.31 0.35 -- $(0.09)
Year ended 3/31/1998(a)..... 10.15 0.08 2.87 2.95 $(0.01) (0.39)
Period ended 3/31/1997*..... 10.06 0.12 0.09 0.21 (0.12) --
PRIMARY B SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $12.14 $ 0.17 $0.21 $0.38 -- --
Year ended 3/31/1999........ 12.49 0.00 0.30 0.30 -- $(0.05)
Period ended
3/31/1998(a)**............ 12.25 0.01 0.70 0.71 $(0.01) (0.25)
INVESTOR A SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $12.16 $ 0.19 $0.20 $0.39 -- --
Year ended 3/31/1999........ 12.50 0.04 0.30 0.34 -- $(0.08)
Year ended 3/31/1998(a)..... 10.15 0.05 2.89 2.94 $(0.01) (0.37)
Period ended 3/31/1997*..... 10.06 0.12 0.09 0.21 (0.12) --
INVESTOR B SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $12.13 $ 0.15 $0.19 $0.34 -- --
Year ended 3/31/1999........ 12.49 (0.06) 0.31 0.25 -- $(0.01)
Period ended
3/31/1998(a)**............ 11.98 (0.02) 0.99 0.97 $(0.01) (0.24)
INVESTOR C SHARES
Six months ended
9/30/1999(a)
(unaudited)............... $12.09 $ 0.10 $0.24 $0.34 -- --
Year ended 3/31/1999........ 12.46 (0.05) 0.30 0.25 -- $(0.02)
Year ended 3/31/1998(a)..... 10.15 (0.02) 2.89 2.87 $(0.01) (0.34)
Period ended 3/31/1997*..... 10.06 0.11 0.09 0.20 (0.11) --
</TABLE>
- ---------------
* LifeGoal Growth Portfolio Primary A, Investor A and Investor C Shares
commenced investment operations on October 2, 1996. Shares were offered to
the public on October 15, 1996.
** LifeGoal Growth Portfolio Primary B and Investor B Shares commenced
investment operations on September 19, 1997 and August 12, 1997,
respectively.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ The Portfolio's expenses do not include the expenses of the underlying
funds.
(a) Per share net investment income has been calculated using the monthly
average shares method.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 21
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVER
AND/OR EXPENSE
REIMBURSEMENTS
--------------
RATIO OF RATIO OF RATIO OF
DISTRIBUTIONS NET ASSETS OPERATING NET INVESTMENT OPERATING
FROM NET NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO
REALIZED TOTAL VALUE TOTAL PERIOD AVERAGE NET AVERAGE TURNOVER AVERAGE
CAPITAL GAINS DISTRIBUTIONS END OF PERIOD RETURN++ (000) ASSETS+++ NET ASSETS RATE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$(0.23) $(0.23) $12.32 3.22% $6,185 0.25%+ 3.07%+ 16% 0.25%+
(0.60) (0.69) 12.15 3.04 4,291 0.25 0.46 159 --
(0.21) (0.61) 12.49 29.80 289 0.25 0.65 69 --
-- (0.12) 10.15 2.10 929 0.25+ 1.11+ 25 --
$(0.23) $(0.23) $12.28 2.97% $ 7 0.75%+ 2.57%+ 16% 0.85%+
(0.60) (0.65) 12.14 2.58 7 0.75 (0.04) 159 --
(0.21) (0.47) 12.49 6.24 6 0.75+ 0.15+ 69 --
$(0.23) $(0.23) $12.32 3.13% $3,505 0.50%+ 2.82%+ 16% 0.50%+
(0.60) (0.68) 12.16 2.87 3,404 0.50 0.21 159 --
(0.21) (0.59) 12.50 29.68 1,526 0.50 0.40 69 --
-- (0.12) 10.15 2.05 681 0.50+ 0.86+ 25 --
$(0.23) $(0.23) $12.24 2.72% $7,670 1.25%+ 2.07%+ 16% 1.25%+
(0.60) (0.61) 12.13 2.14 8,531 1.25 (0.54) 159 --
(0.21) (0.46) 12.49 8.55 5,829 1.25+ (0.35)+ 69 --
$(0.23) $(0.23) $12.20 2.73% $ 836 1.25%+ 2.07%+ 16% 1.25%+
(0.60) (0.62) 12.09 2.07 473 1.25 (0.54) 159 --
(0.21) (0.56) 12.46 28.89 342 1.09 (0.19) 69 --
-- (0.11) 10.15 2.01 82 0.75+ 0.61+ 25 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 22
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Nations LifeGoal Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Company offers three Portfolios: LifeGoal Income and
Growth Portfolio, LifeGoal Balanced Growth Portfolio and LifeGoal Growth
Portfolio (each a "Portfolio" and collectively, the "Portfolios"). The
Portfolios invest in other mutual funds (the "Underlying Funds") distributed by
Stephens Inc. ("Stephens") and advised by Banc of America Advisors, Inc.
("BAAI") (formerly known as NationsBanc Advisors, Inc.). The Portfolios offer
four classes of shares: Primary A Shares, Investor A Shares, Investor B Shares
and Investor C Shares. LifeGoal Balanced Growth Portfolio and LifeGoal Growth
Portfolio also offer Primary B Shares. Shareholders of a Portfolio have equal
voting rights on matters affecting all shareholders of the Portfolio. In
addition, each class of shares of a Portfolio has exclusive voting rights on
matters that relate solely to that class and separate voting rights on matters
in which the interests of one class differ from the interests of any other
class.
On October 15, 1996, the Company commenced the sale of its shares to the public.
On October 2, 1996, Stephens, the Company's distributor, made an initial capital
investment into each Portfolio, which was in turn invested into the Underlying
Funds. The operating results from October 2, 1996 through October 14, 1996 are
reflected in the beginning net asset value reported in the Financial highlights.
1. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Portfolios in the preparation of
their financial statements.
Securities Valuation: Investments in the Underlying Funds are valued at the net
asset value of each Primary A Share of the respective Underlying Fund determined
as of the close of the New York Stock Exchange on the valuation date.
Securities Transactions and Investment Income: Securities transactions are
accounted for on the trade date. Realized gains and losses are computed based on
the specific identification of securities sold. Distributions from the
Underlying Funds are recorded on the ex-dividend date. Each Portfolio's
investment income and realized and unrealized gains and losses are allocated
among its classes based upon the relative net assets of each class of shares.
Dividends and Distributions to Shareholders: It is the policy of each Portfolio
to declare and pay dividends from net investment income each calendar quarter.
Each Portfolio will distribute net realized capital gains (including net
short-term capital gains), at least annually after the fiscal year in which the
capital gains were earned, unless offset by any available capital loss
carryforward. Income distributions and capital gain distributions on a Portfolio
level are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles.
Federal Income Tax: Each Portfolio intends to continue to qualify as a
regulated investment company by complying with the applicable requirements of
the Internal Revenue Code of 1986, as amended, and by distributing substantially
all of its earnings to its shareholders. Therefore, no provision is made for
Federal income or excise taxes.
Expenses: General expenses of the Company are allocated to the relevant
Portfolios based upon relative net assets or other expense allocation
methodologies determined by the nature of the expense in accordance with
generally accepted accounting principles. Expenses directly attributable to a
Portfolio or class of shares are charged to such Portfolio or class. In
addition, the Portfolios indirectly bear their pro rata share of expenses of the
Underlying Funds.
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED
PARTY TRANSACTIONS
The Company, on behalf of the Portfolios, has entered into an investment
advisory agreement (the "Investment Advisory Agreement") with BAAI, a
wholly-owned subsidiary of Bank of America, N.A. ("Bank of America") (formerly
known as NationsBank, N.A.), which in turn is a wholly-owned banking subsidiary
of Bank of America Corporation, a bank holding company organized as a Delaware
corporation, pursuant to which BAAI provides investment advisory services to the
Portfolios. Under the Investment Advisory Agreement, BAAI is entitled to receive
an advisory fee, calculated daily and payable monthly, at the annual rate of
0.25% of each Portfolio's average daily net assets and has agreed to bear any
and all fees and expenses of the Portfolios (other than the investment advisory
fee payable under the Investment Advisory Agreement, taxes, brokerage fees
18
<PAGE> 23
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
and commissions, extraordinary expenses, and any applicable Rule 12b-1 fees,
shareholder servicing fees and/or shareholder administration fees).
The Company, on behalf of the Portfolios, has entered into a sub-advisory
agreement with BAAI and TradeStreet Investment Associates, Inc. ("TradeStreet"),
a wholly-owned subsidiary of Bank of America, pursuant to which TradeStreet is
entitled to receive a fee from BAAI at the annual rate of 0.05% of each
Portfolio's average daily net assets.
Stephens and BAAI serve as co-administrators of the Company. The Bank of New
York ("BNY") serves as sub-administrator of the Company pursuant to an agreement
with BAAI. Stephens and BAAI receive no compensation for their services as
co-administrators from the Portfolios. Bank of America serves as custodian of
the Company's assets.
First Data Investor Services Group, Inc., a wholly-owned subsidiary of First
Data Corporation, serves as the transfer agent for the Portfolios' shares. Bank
of America serves as sub-transfer agent for the Portfolios' Primary A and
Primary B Shares.
BAAI may, from time to time, voluntarily reduce its fee payable by each
Portfolio. For the six months ended September 30, 1999, BAAI did not waive any
fees.
As noted, Stephens serves as distributor of the Portfolios' shares. For the six
months ended September 30, 1999, the Portfolios were informed that the
distributor received $558,866 in front end sales charges for sales of Investor A
Shares and $62,746 in contingent deferred sales charges from redemption of
shares which were subject to such charges. A substantial portion of these fees
is paid to affiliates of Bank of America and BAAI.
Effective July 1, 1999, the Board of Directors of the Company, along with the
Boards of Trustees/Directors of the other open-end registered investment
companies in the Nations Funds family, approved a new compensation structure for
the unaffiliated Trustees/Directors. The new structure compensates the
unaffiliated Trustees/Directors for their services to the open-end registered
investment companies in the Nations Funds family as a whole, rather than to
particular registered investment companies, or series or portfolios thereof. As
of September 30, 1999, the open-end registered investment companies in the
Nations Funds family were Nations Fund Trust, Nations Fund, Inc., Nations
Reserves, Nations Annuity Trust, the Company and Nations Master Investment
Trust. Under the new structure, each unaffiliated Trustee/Director receives a
base retainer fee in the amount of $65,000 per year, in addition to $5,000 for
each in-person meeting attended and $1,000 for each telephonic meeting attended.
Each unaffiliated Trustee/Director will be compensated only for a maximum of six
in-person meetings per calendar year. The Chairman of the Boards receives an
additional fee of 20% of the base retainer fee and the Chairman of the Audit
Committee receives an additional fee of 10% of the base retainer fee. The
members of the Nominating Committee receive additional compensation at the rate
of $1,000 per meeting attended. Each unaffiliated Trustee/Director is also
reimbursed for expenses incurred in attending such meetings.
Prior to July 1, 1999, the Company paid each unaffiliated Director an annual fee
of $1,000 ($3,000 for the Chairman of the Board), plus $500 per Portfolio and an
additional $1,000 for each in-person board meeting, and $500 for each telephonic
board meeting attended. The Company also reimbursed expenses incurred by each
unaffiliated Director in attending such meetings.
A significant portion of each Portfolio's Primary A Shares represents
investments by fiduciary accounts of which Bank of America has either sole or
joint investment discretion.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS
The Company has adopted a shareholder administration plan ("Administration
Plan") for Primary B Shares of each Portfolio and shareholder servicing plans
and distribution plans for the Investor A, Investor B and Investor C Shares of
each Portfolio. The Administration Plan permits the Portfolios to compensate
institutions for shareholder administration services provided to their customers
that own Primary B Shares. The shareholder servicing plans permit the Portfolios
to compensate or reimburse servicing agents for shareholder services provided by
the servicing agents. The distribution plans, adopted pursuant to Rule 12b-1
under the 1940 Act, permit the Portfolios to compensate or reimburse the
distributor (and for Investor A Shares, the distributor and/or selling agents)
for activities or expenses primarily intended to result in the sale of the
classes' shares. Payments are made at an annual rate, as a percentage of average
daily net assets, set from time to time by the Board of Directors and are
charged as expenses of each Portfolio directly to the applicable class. A
substantial portion of the expenses incurred pursuant to these plans is paid to
affiliates of Bank of America and BAAI.
19
<PAGE> 24
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
At September 30, 1999, the rates in effect and plan limits, as a percentage of
average daily net assets, were as follows:
<TABLE>
<CAPTION>
CURRENT PLAN
RATE LIMITS
-----------------
<S> <C> <C>
Primary B Shareholder Administration
Plan............................... 0.50% 0.60%
Investor A Combined Shareholder
Servicing and Distribution Plan...... 0.25% 0.25%
Investor B and Investor C Shareholder
Servicing Plans.................... 0.25% 0.25%
Investor B and Investor C
Distribution Plans................. 0.75% 0.75%
</TABLE>
4. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of the Underlying Funds
for the six months ended September 30,1999 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
(000) (000)
-------------------
<S> <C> <C>
Income and Growth.................. $2,924 $6,162
Balanced Growth.................... 6,996 8,311
Growth............................. 4,179 2,972
</TABLE>
5. CAPITAL STOCK
At September 30, 1999, 1,200,000,000 shares of $.001 par value capital stock
were authorized for the Company. The Company's Articles of Incorporation
authorize the Board of Directors to classify or reclassify any authorized, but
unissued shares into one or more additional classes or series of shares. See
Schedules of capital stock activity.
6. RISK FACTORS OF THE PORTFOLIOS AND THE UNDERLYING FUNDS
Investing in the Underlying Funds through the Portfolios involves certain
additional expenses and possible risks that would not be present in a direct
investment in the Underlying Funds. Under certain circumstances, an Underlying
Fund may pay a redemption request by a Portfolio wholly or partly by a
distribution in kind of securities from its portfolio, instead of cash, in
accordance with the rules of the Securities and Exchange Commission. In such
cases, the Portfolios may hold securities distributed by an Underlying Fund
until BAAI determines that it is appropriate to dispose of such securities.
The Officers and Directors of the Company also serve as Officers and
Trustees/Directors of the Underlying Funds. In addition, BAAI and TradeStreet
are wholly-owned subsidiaries of Bank of America. Conflicts may arise as these
companies seek to fulfill their fiduciary responsibilities to both the
Portfolios and the Underlying Funds.
From time to time, one or more of the Underlying Funds a Portfolio invests in
may experience relatively large investments or redemptions due to reallocations
or rebalancings by the Portfolios as recommended by BAAI. In such event, the
Underlying Funds that experience redemptions as a result of the reallocations or
rebalancings may have to sell portfolio securities, and the Underlying Funds
that receive additional cash will have to invest such cash. While it is
impossible to predict the overall impact of these transactions over time, there
could be adverse effects on portfolio management to the extent that the
Underlying Funds may be required to sell securities or invest cash at times when
they would not otherwise have to do so.
These transactions could also have tax consequences if sales of securities
resulted in gains and could also increase transaction costs. BAAI, representing
the interests of the Underlying Funds, is committed to minimizing the impact of
Portfolio transactions on the Underlying Funds to the extent it is consistent
with pursuing the investment objectives of the Portfolios. BAAI may,
nevertheless, face conflicts of interest in fulfilling its responsibilities to
both the Portfolios and the Underlying Funds.
Investing in the Underlying Funds also presents certain risks. Each of the
Underlying Funds may invest in certain specified derivative securities,
including but not limited to: interest rate swaps, caps and floors for hedging
purposes; exchange-traded options; over-the-counter options executed with
primary dealers, including long calls and puts and covered calls and financial
futures and options. Certain of the Underlying Funds may invest in restricted
securities; instruments issued by trusts, partnerships or other issuers,
including pass-through certificates representing participations in, or debt
instruments backed by, the securities owned by such issuers. These Underlying
Funds also may engage in securities lending, reverse repurchase agreements and
dollar roll transactions. In addition, certain of the Underlying Funds may
invest in below-investment grade debt, debt obligations of foreign issuers and
stocks of foreign corporations, securities in foreign investment funds or trusts
and various other investment vehicles, each with inherent risks.
20
<PAGE> 25
P.O. Box 34602
Charlotte, NC 28234-4602
Toll free 1.800.982.2271
Nations Funds
SAR6 991407 (9/99)
