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International Fund
Prospectus -- Investor A, B and C Shares
July 19, 2000
International Fund
Nations Marsico International Opportunities Fund
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.
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NOT FDIC
INSURED
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May Lose Value
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No Bank Guarantee
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[Nations Funds Logo]
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An overview of the Fund
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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.
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You'll find Terms used in this prospectus on page 32.
Your investment in this Fund 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 Fund.
This booklet, which is called a prospectus, tells you about one of the Nations
Funds International Funds, Nations Marsico International Opportunities Fund.
Please read it carefully, because it contains information that's designed to
help you make informed investment decisions.
About the Fund
Nations Marsico International Opportunities Fund invests primarily in equity
securities of foreign companies. These companies are selected for their
long-term growth potential. The Fund is sub-advised by Marsico Capital
Management, Inc. (Marsico Capital) and employs Marsico Capital's hallmark
investment process, blending top-down economic analysis with bottom-up stock
selection.
Foreign securities have the potential to provide you with higher returns than
many other kinds of investments, but they involve special risks not associated
with investing in the U.S. stock market, which you need to be aware of before
you invest. There's always a risk that you'll lose money or you may not earn as
much as you expect.
Is this Fund right for you?
When you're choosing a Fund 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.
Nations Marsico International Opportunities Fund focuses on long-term growth.
It may be suitable for you if:
o you have longer-term investment goals
o it's part of a balanced portfolio
o you want to try to protect your portfolio against a loss of buying power
that inflation can cause over time
It may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with foreign securities
o you have short-term investment goals
o you're looking for a regular stream of income
You'll find a discussion of the Fund's principal investments, strategies and
risks in the Fund description that starts on page 4.
For more information
If you have any questions about the Fund, please call us at 1.800.321.7854 or
contact your investment professional.
You'll find more information about the Fund in the Statement of Additional
Information (SAI). The SAI includes more detailed information about the Fund's
investments, policies, performance and management, among other things. Please
turn to the back cover to find out how you can get a copy.
2
<PAGE>
What's inside
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Banc of America Advisors, Inc.
Banc of America Advisors, Inc. (BAAI) is the investment adviser to
the Fund. BAAI is responsible for the overall management and
supervision of the investment management of the Fund. BAAI and
Nations Funds have engaged a sub-adviser, which is responsible for
the day-to-day investment decisions for the Fund.
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You'll find more about BAAI and the sub-adviser starting on page
9.
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About the Fund
<TABLE>
<CAPTION>
<S> <C>
Equity Fund
Nations Marsico International Opportunities Fund 4
Sub-adviser: Marsico Capital Management, LLC
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Other important information 8
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How the Fund is managed 9
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About your investment
Information for investors
Choosing a share class 11
Buying, selling and exchanging shares 20
How selling and servicing agents are paid 28
Distributions and taxes 30
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Terms used in this prospectus 32
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Where to find more information back cover
</TABLE>
3
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About the International Fund
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About the sub-adviser
The Fund does not have its own investment adviser or sub-adviser
because it's a "feeder" fund. A feeder fund typically invests all
of its assets in another fund, which is called a "master
portfolio." Master Portfolio and Fund are sometimes used
interchangeably.
Marsico Capital is the Master Portfolio's sub-adviser. James
Gendelman is the portfolio manager and makes the day-to-day
investment decisions for the Master Portfolio.
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You'll find more about
Marsico Capital and James Gendelman on page 9.
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What is an international fund?
International equity funds invest in a diversified portfolio of
companies located in markets throughout the world. These companies
can offer investment opportunities that are not available in the
United States.
Nations Marsico International Opportunities Fund
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Investment objective
This Fund seeks long-term growth of capital.
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Principal investment strategies
The Fund invests all of its assets in Nations Marsico International
Opportunities Master Portfolio (the Master Portfolio). The Master
Portfolio has the same investment objective as the Fund.
The Master Portfolio normally invests at least 65% of its assets in common
stocks of foreign companies. While the Master Portfolio may invest in companies
of any size, it focuses on large companies. These companies are selected for
their long-term growth potential. The Master Portfolio normally invests in
issuers from at least three different countries not including the United States
and generally holds a core position of 35 to 50 common stocks. The Master
Portfolio may invest in common stocks of companies operating in emerging
markets.
The Master Portfolio also may invest in securities that aren't part of its
principal investment strategies, but it won't hold more than 10% of its assets
in any one type of these securities. These securities are described in the SAI.
Marsico Capital looks for companies with earnings growth potential that may not
be recognized by other investors, focusing on companies that have some of the
following characteristics:
o products, markets or technologies in flux that can result in extraordinary
growth
o strong brand franchises that can take advantage of a changing global
environment
o global reach that allows the company to generate sales and earnings both
in the United States and abroad. This can give the company added growth
potential and also means the company may be less affected by changes in
local markets
o movement with, not against, the major social, economic and cultural shifts
taking place in the world
Once an investment opportunity is identified, Marsico Capital uses a
disciplined analytical process to assess its potential as an investment. This
process includes a "top-down" analysis that takes into account economic factors
like interest rates, inflation, the regulatory environment, the industry and
global competition.
The process also includes a "bottom-up" analysis of a company's financial
situation, as well as individual company characteristics like commitment to
research, market franchise and quality of management.
4
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You'll find more about other risks of investing in this Fund
starting on page 8 and in the SAI.
Marsico Capital may sell a security when it believes there is a
deterioration in the company's financial situation, the security is
overvalued, when there is a negative development in the company's
competitive, regulatory or economic environment, or for other reasons.
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Risks and other things to consider
Nations Marsico International Opportunities Fund has the following
risks:
o Investment strategy risk - There is a risk that the value of the
Master Portfolio's investments will not rise as high as Marsico
Capital expects, or will fall.
o Stock market risk - The value of any stocks the Master Portfolio 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.
o Foreign investment risk - Because the Master Portfolio invests
primarily in foreign securities, it can be affected by the risks of
foreign investing. 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. If the Master Portfolio invests in
emerging markets there may be other risks involved, such as those of
immature economies and less developed and more thinly traded
securities markets.
o Investing in the Master Portfolio - Other mutual funds and eligible
investors can buy shares in the Master Portfolio. All investors in the
Master Portfolio invest under the same terms and conditions as the
Fund and pay a proportionate share of the Master Portfolio's expenses.
Other feeder funds that invest in the Master Portfolio may have
different share prices and returns than the Fund because different
feeder funds typically have varying sales charges, and ongoing
administrative and other expenses.
The Fund could withdraw its entire investment from the Master
Portfolio if it believes it's in the best interests of the Fund to do
so (for example, if the Master Portfolio changed its investment
objective). It is unlikely that this would happen, but if it did, the
Fund's portfolio could be less diversified and therefore less liquid,
and expenses could increase. The Fund might also have to pay
brokerage, tax or other charges.
5
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A look at the Fund's performance
Because the Fund will commence operations on August 1, 2000 and will not
have been in operation for a full calendar year, no performance
information is included in the prospectus.
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There are two kinds of fees -- shareholder fees you pay directly,
and annual fund operating expenses that are deducted from a fund's
assets.
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What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<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,
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none none none
Annual Fund operating expenses(4)
(Expenses that are deducted from the Fund's assets)
Management fees 0.80% 0.80% 0.80%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
Other expenses(5) 0.61% 0.61% 0.61%
---- ---- ----
Total annual Fund operating expenses 1.66% 2.41% 2.41%
==== ==== ====
</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. Please see page 13 for details.
(2)This charge decreases over time. Please see page 14 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 16 for details.
(4)These fees and expenses and the example below include the Fund's
portion of the fees and expenses deducted from the assets of the Master
Portfolio.
(5)Other expenses are based on estimates for the current fiscal year.
6
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This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's actual
expenses and performance.
Example
This example is intended to help you compare the cost of investing in
this Fund 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 Fund 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 Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C>
1 year 3 years
Investor A Shares $734 $1,069
Investor B Shares $744 $1,051
Investor C Shares $344 $ 751
</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>
<S> <C> <C>
1 year 3 years
Investor B Shares $244 $751
Investor C Shares $244 $751
</TABLE>
7
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Other important information
You'll find specific information about the Fund's principal investments,
strategies and risks in the description starting on page 4. The following are
some other risks and information you should consider before you invest:
o Changing investment objective and policies - The investment objective
and certain investment policies of the Fund can be changed without
shareholder approval. Other investment policies may be changed only
with shareholder approval.
o Holding other kinds of investments - The Master Portfolio may hold
investments that aren't part of its principal investment strategies.
Please refer to the SAI for more information. The portfolio manager
can also choose not to invest in specific securities described in this
prospectus and in the SAI.
o Foreign investment risk - A Fund that invests 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; difficulty 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 Smaller company risk - Smaller companies can experience tighter
markets and can have more limited managerial and financial resources
than larger companies. Consequently, the performance of smaller
companies can be more volatile and they may be more likely to
experience business failure, which tends to cause greater price swings
in the stocks of these companies that are held by the Master
Portfolio. In general, the smaller a company, the more these risks
increase.
o Investing defensively - The Master Portfolio may temporarily hold
investments that are not part of its investment objective or its
principal investment strategies to try to protect it during a market
or economic downturn or because of political or other conditions. A
Fund may not achieve its investment objective while it is investing
defensively.
o Portfolio turnover - A 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 Fund's returns. The Fund generally buys securities for capital
appreciation, investment income, or both, and doesn't engage in
short-term trading. The annual portfolio turnover rate for Nations
Marsico International Opportunities Fund is expected to be no more
than 150%.
8
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How the Fund is managed
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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 International Fund 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.
The Fund pays BAAI an annual fee for its investment advisory services. The fee
is calculated as a percentage of the average daily net assets of the Fund and
is paid monthly. BAAI uses part of this money to pay the investment sub-adviser
for the services it provides to the Fund.
The following chart shows the maximum advisory fee BAAI can receive:
Annual investment advisory fee, as a % of average daily net assets
<TABLE>
<CAPTION>
Maximum
advisory
fee
<S> <C>
Nations Marsico International Opportunities Fund(1) 0.80%
</TABLE>
(1)The Fund doesn't have its own investment adviser because it invests in
Nations Marsico International Opportunities Master Portfolio. BAAI is the
investment adviser to the Master Portfolio.
Investment sub-adviser
Nations Funds and BAAI have engaged an investment sub-adviser to provide
day-to-day portfolio management for the Fund. This sub-adviser functions under
the supervision of BAAI and the Boards of Trustees of Nations Funds.
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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 and, as of
April 30, 2000, had $15 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.
On June 28, 2000, Bank of America announced its intention to purchase the
remaining 50% equity interest in Marsico Capital. Subject to Board approval,
the existing investment sub-advisory arrangement with Marsico Capital will
continue on the same terms following this transaction.
Marsico Capital is the investment sub-adviser to Nations Marsico International
Opportunities Master Portfolio.
James G. Gendelman is the portfolio manager of Nations Marsico International
Opportunities Fund. Prior to joining Marsico Capital in May 2000, Mr.
Gendelman spent thirteen years as a Vice President of International Sales for
Goldman, Sachs & Co. He holds a Bachelors degree in Accounting from Michigan
State University and an MBA in Finance from the University of Chicago. Mr.
Gendelman was an accountant for Ernst & Young from 1983 to 1985.
9
<PAGE>
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Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Other service providers
The Fund is distributed and co-administered by Stephens Inc. (Stephens), a
registered broker/dealer. 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 Fund, and assists in overseeing the
administrative operations of the Fund. The Fund pays BAAI and Stephens a
combined fee of 0.22% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Fund, and is paid monthly.
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PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
PFPC Inc. (PFPC) is the transfer agent for the Fund's shares. Its
responsibilities include processing purchases, sales and exchanges, calculating
and paying distributions, keeping shareholder records, preparing account
statements and providing customer service.
10
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About your investment
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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.
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For more information about how to choose a share class, contact
your investment professional or call us at 1.800.321.7854.
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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.
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Choosing a share class
Before you can invest in the Fund, you'll need to choose a share class. There
are three classes of shares for the Fund offered by this prospectus.
Each class has its own sales charges and fees. The table below compares the
charges and fees and other features of the share classes.
<TABLE>
<CAPTION>
Investor A Investor B Investor C
Shares Shares Shares
<S> <C> <C> <C>
Maximum amount no limit $250,000 no limit
you can buy
Maximum front-end 5.75% none none
sales charge
Maximum deferred none(1) 5.00%(2) 1.00%(3)
sales charge
Redemption fee none none none
Maximum annual 0.25% distribution 0.75% distribution 0.75% distribution
distribution (12b-1)/service (12b-1) fee (12b-1) fee
and shareholder fee 0.25% service fee 0.25% service fee
servicing fees
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. Please see page 13 for details.
(2)This charge decreases over time. Please see page 14 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 16 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.
11
<PAGE>
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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
the Fund every business day.
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 Fund, 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.
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 Fund. 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 Fund, 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.
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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 --
generally the larger the investment, the smaller the percentage sales
charge.
12
<PAGE>
<TABLE>
<CAPTION>
Nations Marsico International Opportunities Fund
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.
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.
13
<PAGE>
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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 19
The CDSC you pay depends on the Fund you bought, when you bought your
shares, how much you bought in some cases, and how long you held them.
<TABLE>
<CAPTION>
Nations Marsico International Opportunities Fund
If you sell your shares
during the following year: You'll pay a CDSC of:
---------------------------------- ---------------------------------------------------------------------
Shares
you
bought Shares
Shares on or after you
you bought Shares you bought between 1/1/1996 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
------------ ------------------------------------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
$ 0- $250,000- $500,000-
$249,999 $499,999 $999,999
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.
14
<PAGE>
About the conversion feature
Investor B Shares generally convert automatically to Investor A Shares
according to the following schedule:
<TABLE>
<CAPTION>
Nations Marsico International Opportunities Fund
Will convert to Investor A Shares
Investor B Shares you bought after you've owned them for
<S> <C>
after November 15, 1998 eight years
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.
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.
15
<PAGE>
[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 19
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 in order 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.
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.
16
<PAGE>
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 in the Funds within 90 days of the
date of distribution
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
o registered personnel and employees of these broker/dealers and their
family members may buy Investor A Shares without paying a front-end
sales charge according to the internal policies and procedures of
the employing broker/dealer as long as these purchases are made for
their own investment purposes
o employees or partners of any service provider to the Fund
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
17
<PAGE>
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 Fund 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 Fund. 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. PFPC, Stephens or their agents
must receive your written request within 120 days after you sell your
shares.
In addition, you can buy Investor A Shares without paying a sales charge
if you buy the shares with proceeds from the redemption of shares of a
nonaffiliated mutual fund as long as the redemption of the nonaffiliated
fund shares occurred within 45 days prior to the purchase of the
Investor A Shares. We must receive a copy of the confirmation of the
redemption transaction in order for you to avoid paying the sales
charge.
18
<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 Fund 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. PFPC,
Stephens or their agents must receive your written request within 120
days after you sell your shares.
19
<PAGE>
[GRAPHIC]
Buying, selling and exchanging shares
[GRAPHIC]
When you sell shares of a mutual, fund, the fund is effectively
"buying" them back from you. This is called a redemption.
You can invest in the Fund 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 Fund also offers 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.
20
<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 invest in
o $1,000 for regular accounts Investor A and C Shares. You can invest up to
o $500 for traditional and Roth IRA $250,000 in Investor B Shares at a time.
accounts
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:
o $100 for all accounts
Using our minimum initial investment: You can buy shares monthly, twice a month or
Systematic o $100 quarterly, using automatic transfers from your
Investment Plan minimum additional investment: bank account.
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 you're
shares by telephone, otherwise there selling and send you or your selling agent the
are no limits to the amount you can balance, usually within three business days of
sell receiving your order.
o other restrictions may apply to If you paid for your shares with a check that
withdrawals from retirement plan wasn't certified, we'll hold the sale proceeds
accounts 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 $10,000
Automatic to set up the plan. You can make withdrawals
Withdrawal Plan 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 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 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.
You can exchange your Investor C Shares for:
o Investor C Shares of any other 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 Fund 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 Investor B
Automatic Shares. You must already have an investment in
Exchange Feature the Funds you want to exchange. You can make
exchanges monthly or quarterly.
-------------------- ---------------------------------------- ------------------------------------------------
</TABLE>
21
<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 the Fund's shares -- or its net
asset value per share. We calculate net asset value per share for each class of
the Fund at the end of each business day. First, we calculate the net asset
value for each class of the 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 the Fund
The value of the 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 the Fund. If
prices aren't readily available, or the value of a security has been materially
affected by events occuring after a foreign exchange closes, we'll base the
price of a security on its fair value. When a Fund uses fair value to price
securities it may value those securities higher or lower than another fund that
uses market quotation to price the same securities. 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 the Master
Portfolio 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, PFPC 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.
22
<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
the Fund 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 Fund. 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.
23
<PAGE>
[GRAPHIC]
For more information about telephone orders, see page 22.
Systematic Investment Plan
You can make regular purchases of $50 or more using automatic transfers from
your bank account to the Funds 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, PFPC 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 normally
send the sale proceeds by mail or wire them to your bank account
within three business days after the Fund 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 PFPC. 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.
24
<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 Fund is earning, you'll eventually use up your original investment.
[GRAPHIC]
You should make sure you understand the investment objectives and
policies of the Fund you're exchanging into. Please read its
prospectus carefully.
[GRAPHIC]
Exchanging shares
You can sell shares of the Fund to buy shares of another 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 Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o You may only make an exchange into a Fund that is legally sold in
your state of residence.
25
<PAGE>
o You generally may only make an exchange into a 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
PFPC has received the certificate and deposited the shares to your
account.
Exchanging Investor A Shares
You can exchange Investor A Shares of a Fund for Investor A Shares of any
other 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 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.
A CDSC may apply to the shares you receive from the exchange, and to
any Investor B Shares you receive from an exchange of these shares.
The CDSC will be based on the period from when you bought your
original Investor B Shares until you sell the shares you received from
the exchange.
Exchanging Investor B Shares
You can exchange Investor B Shares of a Fund for:
o Investor B Shares of any other 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.
26
<PAGE>
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 Fund for:
o Investor C Shares of any other 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 Fund 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 Fund 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.
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 PFPC in writing or call 1.800.321.7854.
o You must already have an investment in the 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.
o The rules for making exchanges apply to automatic exchanges.
27
<PAGE>
[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.
[GRAPHIC]
How selling and servicing agents are paid
Selling and servicing agents usually receive compensation based on your
investment in the Fund. 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 Fund. The amount of this commission depends on which share
class you choose:
o up to 4.25% 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.
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 Fund's 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 Fund pays 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.
28
<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 Fund
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, 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 Fund, is discretionary and may be
available only to selected selling and servicing agents. For example, Stephens
sometimes sponsors promotions involving Banc of America Investment Services,
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 and Stephens also may pay amounts from their own assets to selling or
servicing agents for related services they provide.
29
<PAGE>
[GRAPHIC]
The power of compounding
Reinvesting your distributions buys you more shares of the Fund --
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 Fund
intends to pay out a sufficient amount of its income and capital gain to its
shareholders so the Fund won't have to pay any income tax. When the Fund makes
this kind of a payment, it's split equally among all shares, and is called a
distribution.
The Fund distributes any net realized capital gain at least once a year. The
Fund declares and pays distributions of net investment income quarterly.
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 the Fund 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 Fund
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 the Fund 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 Fund that holds securities
with unrealized capital gain, you will, in effect, receive part of your
purchase back if and when the Fund sells those securities and distributes the
gain. This distribution is also subject to tax. Some Funds have built up, or
have the potential to build up, high levels of unrealized capital gain.
30
<PAGE>
[GRAPHIC]
This information is a summary of how federal income taxes may
affect your investment in the Fund. 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 a Fund's net investment income, net foreign
currency gain and any 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 a Fund's 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. Corporate shareholders won't be able to
deduct any distributions from a Fund when determining their taxable income.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
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're 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 Fund shares
will usually result in a taxable capital gain or loss, 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.
31
<PAGE>
[GRAPHIC]
This glossary includes explanations of the important terms that may
be used in this Prospectus.
[GRAPHIC]
Terms used in this prospectus
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.
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.
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.
32
<PAGE>
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 contract - 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.
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.
Over-the-counter market - a market where dealers trade securities through a
telephone or computer network rather than through a public stock exchange.
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.
Price-to-earnings ratio (P/E ratio) - the current price of a share divided by
its actual or estimated earnings per share. The P/E ratio is one measure of the
value of a company.
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.
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.
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.
33
<PAGE>
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.
34
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
[GRAPHIC]
Where to find more information
You'll find more information about the International Fund in the following
documents:
Annual and semi-annual reports
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the
independent accountants' reports. The annual report also includes a
discussion about the market conditions and investment strategies that
had a significant effect on the Fund's performance during the period
covered.
[GRAPHIC]
Statement of Additional Information
The SAI contains additional information about the Fund and its 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 Fund 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.nations-funds.com
Information about the Fund can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. Information on the operation
of the Public Reference Room may be obtained by calling the SEC at
1-202-942-8090. The reports and other information about the Fund are
available on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained,
after paying a duplicating fee, by electronic request at the following
E-mail address: [email protected], or by writing the SEC's Public
Reference Section, Washington, D.C. 20549-0102.
SEC file number:
Nations Funds Trust, 811-09645 [Nations Funds Logo]
INTROPIX -- 7/00
<PAGE>
[GRAPHIC]
International Fund
Prospectus -- Primary A Shares
July 19, 2000
International Fund
Nations Marsico International Opportunities Fund
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
--------------------
[Nations Funds Logo]
<PAGE>
An overview of the Fund
--------------------------------------------------------------------------------
[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 15.
Your investment in this Fund 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 Fund.
This booklet, which is called a prospectus, tells you about one of the Nations
Funds International Funds, Nations Marsico International Opportunities Fund.
Please read it carefully, because it contains information that's designed to
help you make informed investment decisions.
About the Fund
Nations Marsico International Opportunities Fund invests primarily in equity
securities of foreign companies. These companies are selected for their
long-term growth potential. The Fund is sub-advised by Marsico Capital
Management, Inc. (Marsico Capital) and employs Marsico Capital's hallmark
investment process, blending top-down economic analysis with bottom-up stock
selection.
Foreign securities have the potential to provide you with higher returns than
many other kinds of investments, but they involve special risks not associated
with investing in the U.S. stock market, which you need to be aware of before
you invest. There's always a risk that you'll lose money or you may not earn as
much as you expect.
Is this Fund right for you?
When you're choosing a Fund 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.
Nations Marsico International Opportunities Fund focuses on long-term growth.
It may be suitable for you if:
o you have longer-term investment goals
o it's part of a balanced portfolio
o you want to try to protect your portfolio against a loss of buying power
that inflation can cause over time
It may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with foreign securities
o you have short-term investment goals
o you're looking for a regular stream of income
You'll find a discussion of the Fund's principal investments, strategies and
risks in the Fund description that starts on page 4.
For more information
If you have any questions about the Fund, please call us at 1.800.765.2668 or
contact your investment professional.
You'll find more information about the Fund in the Statement of Additional
Information (SAI). The SAI includes more detailed information about the Fund's
investments, policies, performance and management, among other things. Please
turn to the back cover to find out how you can get a copy.
2
<PAGE>
What's inside
--------------------------------------------------------------------------------
[GRAPHIC]
Banc of America Advisors, Inc.
Banc of America Advisors, Inc. (BAAI) is the investment adviser to
the Fund. BAAI is responsible for the overall management and
supervision of the investment management of the Fund. BAAI and
Nations Funds have engaged a sub-adviser, which is responsible for
the day-to-day investment decisions for the Fund.
[GRAPHIC]
You'll find more about BAAI and the sub-adviser starting on page
8.
[GRAPHIC]
About the Fund
<TABLE>
<CAPTION>
<S> <C>
Equity Fund
Nations Marsico International Opportunities Fund 4
Sub-adviser: Marsico Capital Management, LLC
---------------------------------------------------------------
Other important information 7
---------------------------------------------------------------
How the Fund is managed 8
[GRAPHIC]
About your investment
Information for investors
Buying, selling and exchanging shares 10
Distributions and taxes 13
---------------------------------------------------------------
Terms used in this prospectus 15
---------------------------------------------------------------
Where to find more information back cover
</TABLE>
3
<PAGE>
About the International Fund
--------------------------------------------------------------------------------
[GRAPHIC]
About the sub-adviser
The Fund does not have its own investment adviser or sub-adviser
because it's a "feeder" fund. A feeder fund typically invests all
of its assets in another fund, which is called a "master
portfolio." Master Portfolio and Fund are sometimes used
interchangeably.
Marsico Capital is the Master Portfolio's sub-adviser. James
Gendelman is the portfolio manager and makes the day-to-day
investment decisions for the Master Portfolio.
[GRAPHIC]
You'll find more about Marsico Capital and James Gendelman on page
8.
[GRAPHIC]
What is an international fund?
International equity funds invest in a diversified portfolio of
companies located in markets throughout the world. These companies
can offer investment opportunities that are not available in the
United States.
Nations Marsico International Opportunities Fund
[GRAPHIC]
Investment objective
This Fund seeks long-term growth of capital.
[GRAPHIC]
Principal investment strategies
The Fund invests all of its assets in Nations Marsico International
Opportunities Master Portfolio (the Master Portfolio). The Master
Portfolio has the same investment objective as the Fund.
The Master Portfolio normally invests at least 65% of its assets in common
stocks of foreign companies. While the Master Portfolio may invest in companies
of any size, it focuses on large companies. These companies are selected for
their long-term growth potential. The Master Portfolio normally invests in
issuers from at least three different countries not including the United States
and generally holds a core position of 35 to 50 common stocks. The Master
Portfolio may invest in common stocks of companies operating in emerging
markets.
The Master Portfolio also may invest in securities that aren't part of its
principal investment strategies, but it won't hold more than 10% of its assets
in any one type of these securities. These securities are described in the SAI.
Marsico Capital looks for companies with earnings growth potential that may not
be recognized by other investors, focusing on companies that have some of the
following characteristics:
o products, markets or technologies in flux that can result in extraordinary
growth
o strong brand franchises that can take advantage of a changing global
environment
o global reach that allows the company to generate sales and earnings both
in the United States and abroad. This can give the company added growth
potential and also means the company may be less affected by changes in
local markets
o movement with, not against, the major social, economic and cultural shifts
taking place in the world
Once an investment opportunity is identified, Marsico Capital uses a
disciplined analytical process to assess its potential as an investment. This
process includes a "top-down" analysis that takes into account economic factors
like interest rates, inflation, the regulatory environment, the industry and
global competition.
The process also includes a "bottom-up" analysis of a company's financial
situation, as well as individual company characteristics like commitment to
research, market franchise and quality of management.
Marsico Capital may sell a security when it believes there is a deterioration
in the company's financial situation, the security is overvalued, when there is
a negative development in the company's competitive, regulatory or economic
environment, or for other reasons.
4
<PAGE>
[GRAPHIC]
You'll find more about other risks of investing in this Fund
starting on page 7 and in the SAI.
[GRAPHIC]
Risks and other things to consider
Nations Marsico International Opportunities Fund has the following
risks:
o Investment strategy risk - There is a risk that the value of the
Master Portfolio's investments will not rise as high as Marsico
Capital expects, or will fall.
o Stock market risk - The value of any stocks the Master Portfolio 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.
o Foreign investment risk - Because the Master Portfolio invests
primarily in foreign securities, it can be affected by the risks of
foreign investing. 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. If the Master Portfolio invests in
emerging markets there may be other risks involved, such as those of
immature economies and less developed and more thinly traded
securities markets.
o Investing in the Master Portfolio - Other mutual funds and eligible
investors can buy shares in the Master Portfolio. All investors in the
Master Portfolio invest under the same terms and conditions as the
Fund and pay a proportionate share of the Master Portfolio's expenses.
Other feeder funds that invest in the Master Portfolio may have
different share prices and returns than the Fund because different
feeder funds typically have varying sales charges, and ongoing
administrative and other expenses.
The Fund could withdraw its entire investment from the Master
Portfolio if it believes it's in the best interests of the Fund to do
so (for example, if the Master Portfolio changed its investment
objective). It is unlikely that this would happen, but if it did, the
Fund's portfolio could be less diversified and therefore less liquid,
and expenses could increase. The Fund might also have to pay
brokerage, tax or other charges.
5
<PAGE>
[GRAPHIC]
There are two kinds of fees -- shareholder fees you pay directly,
and annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's actual
expenses and performance.
[GRAPHIC]
A look at the Fund's performance
Because the Fund will commence operations on August 1, 2000 and will not
have been in operation for a full calendar year, no performance
information is included in this prospectus.
[GRAPHIC]
What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.80%
Other expenses(2) 0.61%
----
Total annual Fund operating expenses 1.41%
====
</TABLE>
(1) These fees and expenses and the example below include the Fund's
portion of the fees and expenses deducted from the assets of the Master
Portfolio.
(2) Other expenses are based on estimates for the current fiscal year.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund 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 Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years
<S> <C> <C>
Primary A Shares $144 $446
</TABLE>
6
<PAGE>
[GRAPHIC]
Other important information
You'll find specific information about the Fund's principal investments,
strategies and risks in the description starting on page 4. The following are
some other risks and information you should consider before you invest:
o Changing investment objective and policies - The investment objective
and certain investment policies of the Fund can be changed without
shareholder approval. Other investment policies may be changed only
with shareholder approval.
o Holding other kinds of investments - The Master Portfolio may hold
investments that aren't part of its principal investment strategies.
Please refer to the SAI for more information. The portfolio manager
can also choose not to invest in specific securities described in this
prospectus and in the SAI.
o Foreign investment risk - A Fund that invests 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; difficulty 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 Smaller company risk - Smaller companies can experience tighter
markets and can have more limited managerial and financial resources
than larger companies. Consequently, the performance of smaller
companies can be more volatile and they may be more likely to
experience business failure, which tends to cause greater price swings
in the stocks of these companies that are held by the Master
Portfolio. In general, the smaller a company, the more these risks
increase.
o Investing defensively - The Master Portfolio may temporarily hold
investments that are not part of its investment objective or its
principal investment strategies to try to protect it during a market
or economic downturn or because of political or other conditions. A
Fund may not achieve its investment objective while it is investing
defensively.
o Portfolio turnover - A 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 Fund's returns. The Fund generally buys securities for capital
appreciation, investment income, or both, and doesn't engage in
short-term trading. The annual portfolio turnover rate for Nations
Marsico International Opportunities Fund is expected to be no more
than 150%.
7
<PAGE>
[GRAPHIC]
Banc of America Advisors, Inc.
One Bank of America Plaza
Charlotte, North Carolina 28255
[GRAPHIC]
Marsico Capital
Management, LLC
1200 17th Street
Suite 1300
Denver, Colorado 80202
[GRAPHIC]
How the Fund is managed
Investment adviser
BAAI is the investment adviser to over 60 mutual fund portfolios in the Nations
Funds family, including the International Fund 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.
The Fund pays BAAI an annual fee for its investment advisory services. The fee
is calculated as a percentage of the average daily net assets of the Fund and
is paid monthly. BAAI uses part of this money to pay the investment sub-adviser
for the services it provides to the Fund.
The following chart shows the maximum advisory fee BAAI can receive:
Annual investment advisory fee, as a % of average daily net assets
<TABLE>
<CAPTION>
Maximum
advisory
fee
<S> <C>
Nations Marsico International Opportunities Fund1 0.80%
</TABLE>
(1) The Fund doesn't have its own investment adviser because it invests in
Nations Marsico International Opportunities Master Portfolio. BAAI is the
investment adviser to the Master Portfolio.
Investment sub-adviser
Nations Funds and BAAI have engaged an investment a sub-adviser to provide
day-to-day portfolio management for the Fund. This sub-adviser functions under
the supervision of BAAI and the Boards of Trustees of Nations Funds.
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 and, as of
April 30, 2000, had $15 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.
On June 28, 2000, Bank of America announced its intention to purchase the
remaining 50% equity interest in Marsico Capital. Subject to Board approval,
the existing investment sub-advisory arrangement with Marsico Capital will
continue on the same terms following this transaction.
Marsico Capital is the investment sub-adviser to Nations Marsico International
Opportunities Master Portfolio.
James G. Gendelman is the portfolio manager of Nations Marsico International
Opportunities Fund. Prior to joining Marsico Capital in May 2000, Mr.
Gendelman spent thirteen years as a Vice President of International Sales for
Goldman, Sachs & Co. He holds a Bachelors degree in Accounting from Michigan
State University and an MBA in Finance from the University of Chicago. Mr.
Gendelman was an accountant for Ernst & Young from 1983 to 1985.
8
<PAGE>
[GRAPHIC]
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
[GRAPHIC]
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
Other service providers
The Fund is distributed and co-administered by Stephens Inc. (Stephens), a
registered broker/dealer.
BAAI is also co-administrator of the Fund, and assists in overseeing the
administrative operations of the Fund. The Fund pays BAAI and Stephens a
combined fee of 0.22% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Fund and is paid monthly.
BAAI may pay amounts out of its own assets to Stephens or to selling or
servicing agents of the Fund for services they provide.
PFPC Inc. (PFPC) is the transfer agent for the Fund's shares. Its
responsibilities include processing purchases, sales and exchanges, calculating
and paying distributions, keeping shareholder records, preparing account
statements and providing customer service.
9
<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 Fund. 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 or services.
The Fund also offers 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 the Fund's shares -- or its net
asset value per share. We calculate net asset value per share for each class of
the Fund at the end of each business day. First, we calculate the net asset
value for each class of the 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.
10
<PAGE>
Valuing securities in the Fund
The value of the 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 the Fund. If
prices aren't readily available, or the value of a security has been materially
affected by events occurring after a foreign exchange closes, we'll base the
price of a security on its fair value. When a Fund uses fair value to price
securities it may value those securities higher or lower than another fund that
uses market quotations to price the same securities. 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 the Master
Portfolio 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, PFPC 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 Fund. 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, PFPC or their agents receive the
order.
o If shares were paid for with a check that wasn't certified, we'll
hold the sale proceeds when those shares are sold for at least 15
days after the trade date of the purchase, or until the check has
cleared.
11
<PAGE>
[GRAPHIC]
You should make sure you understand the investment objectives and
policies of the Fund you're exchanging into. Please read its
prospectus carefully.
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 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]
Exchanging shares
Investors can sell shares of the Fund to buy shares of another 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 the Fund 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.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
o Exchanges can generally only be made into a 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).
12
<PAGE>
[GRAPHIC]
The power of compounding
Reinvesting your distributions buys you more shares of the Fund --
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 Fund
intends to pay out a sufficient amount of its income and capital gain to its
shareholders so the Fund won't have to pay any income tax. When the Fund makes
this kind of a payment, it's split equally among all shares, and is called a
distribution.
The Fund distributes any net realized capital gain at least once a year. The
Fund declares and pays distributions of net investment income quarterly.
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 the Fund 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 Fund
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 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.
13
<PAGE>
[GRAPHIC]
This information is a summary of how federal income taxes may
affect your investment in the Fund. 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.
If you buy shares of the Fund 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 Fund that holds securities
with unrealized capital gain, you will, in effect, receive part of your
purchase back if and when the Fund sells those securities and realizes and
distributes the gain. This distribution is also subject to tax. Some Funds have
built up, or have the potential to build up, high levels of unrealized capital
gain.
How taxes affect your investment
Distributions that come from net investment income, net foreign currency gain
and any 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 Fund.
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 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.
14
<PAGE>
[GRAPHIC]
This glossary includes explanations of the important terms that may
be used in this Prospectus.
[GRAPHIC]
Terms used in this prospectus
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.
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.
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.
15
<PAGE>
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 contract - 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.
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.
Over-the-counter market - a market where dealers trade securities through a
telephone or computer network rather than through a public stock exchange.
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.
Price-to-earnings ratio (P/E ratio) - the current price of a share divided by
its actual or estimated earnings per share. The P/E ratio is one measure of the
value of a company.
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.
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.
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.
16
<PAGE>
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.
17
<PAGE>
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<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
[GRAPHIC]
Where to find more information
You'll find more information about the International Fund in the following
documents:
Annual and semi-annual reports
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the
independent accountants' reports. The annual report also includes a
discussion about the market conditions and investment strategies that
had a significant effect on the Fund's performance during the period
covered.
[GRAPHIC]
Statement of Additional Information
The SAI contains additional information about the Fund and its 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 Fund 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.nations-funds.com
Information about the Fund can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. Information on the operation
of the Public Reference Room may be obtained by calling the SEC at
1-202-942-8090. The reports and other information about the Fund are
available on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained,
after paying a duplicating fee, by electronic request at the following
E-mail address: [email protected], or by writing the SEC's Public
Reference Section, Washington, D.C. 20549-0102.
SEC file number:
Nations Funds Trust, 811-09645 [Nations Funds Logo]
INTROPPA -- 7/00
<PAGE>
[GRAPHIC]
State Municipal Bond Fund
Prospectus -- Investor A, B and C Shares
July 14, 2000
State Municipal Bond Fund
Nations Kansas Municipal Income Fund
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
------------------
[NATIONS FUND LOGO]
<PAGE>
An overview of the Fund
--------------------------------------------------------------------------------
[GRAPHIC]
Terms used in this prospectus
In this prospectus, we, us and our refer to the Nations Funds
family (Nations Funds or Nations Funds Family). 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 32.
Your investment in the Fund 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 Fund.
This booklet, which is called a prospectus, tells you about one of the Nations
Funds -- Nations Kansas Municipal Income Fund. Please read it carefully,
because it contains information that's designed to help you make informed
investment decisions.
About the Fund
Nations Kansas Municipal Income Fund invests most of its assets in securities
issued by the state of Kansas and is generally intended for investment by
residents of that state.
The Fund focuses on the potential to earn income that is free from federal and
state income tax by investing primarily in municipal securities.
Municipal securities also 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 municipal securities. There's always
a risk that you'll lose money or you may not earn as much as you expect.
Because Nations Kansas Municipal Income Fund invests primarily in securities
issued by the state of Kansas, the Fund is considered to be non-diversified.
This means the value of the Fund and the amount of interest it pays could also
be affected by the financial conditions of the state, its public authorities
and local governments.
Is this Fund right for you?
Not every fund is right for every investor. When you're choosing a fund 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.
Nations Kansas Municipal Income Fund may be suitable for you if:
o you're looking for income
o you want to reduce taxes on your investment
o you have longer-term investment goals
It may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with fixed income securities
You'll find a discussion of the Fund's principal investments, strategies and
risks in the Fund description that starts on page 5.
2
<PAGE>
For more information
If you have any questions about the Fund, please call us at 1.800.321.7854 or
contact your investment professional.
You'll find more information about the Fund in the Statement of Additional
Information (SAI). The SAI includes more detailed information about the Fund'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
the Fund. BAAI is responsible for the overall management and
supervision of the investment management of the Fund. BAAI and
Nations Funds have engaged a sub-adviser, which is responsible for
the day-to-day investment decisions for the Fund.
[GRAPHIC]
You'll find more about
BAAI and the sub-adviser
starting on page 10.
<TABLE>
<S> <C>
[GRAPHIC] About the Fund
State Municipal Bond Fund
Nations Kansas Municipal Income Fund 5
Sub-adviser: Banc of America Capital Management, Inc.
---------------------------------------------------------------------
Other important information 9
---------------------------------------------------------------------
How the Fund is managed 10
[GRAPHIC] About your investment
Information for investors
Choosing a share class 12
Buying, selling and exchanging shares 20
How selling and servicing agents are paid 28
Distributions and taxes 30
---------------------------------------------------------------------
Terms used in this prospectus 32
---------------------------------------------------------------------
Where to find more information back cover
</TABLE>
4
<PAGE>
About the State Municipal Bond Fund
--------------------------------------------------------------------------------
[GRAPHIC]
About the sub-adviser
Banc of America Capital Management, Inc. (BACAP) is this Fund's
sub-adviser. BACAP's Municipal Fixed Income Management Team makes
the day-to-day investment decisions for the Fund.
[GRAPHIC]
You'll find more about
BACAP on page 10.
[GRAPHIC]
This Fund at a glance
o Who should consider investing: Residents of Kansas
o Duration: 3 to 8 years
o Income potential: Moderate
o Risk potential: Moderate
[GRAPHIC]
Duration
Duration is a measure used to estimate how much the Fund's
portfolio will fluctuate in response to a change in interest
rates.
Nations Kansas Municipal Income Fund
[GRAPHIC] Investment objective
The Fund seeks high current income exempt from federal and Kansas
state income taxes consistent with moderate fluctuation of principal.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 80% of its assets in investment grade
intermediate-term municipal securities. The Fund also normally invests
at least 80% of its assets in securities that pay interest that is free
from federal income tax and Kansas state income tax.
The Fund may invest up to 20% of its assets in debt securities that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's average dollar-weighted maturity will be between three
and 10 years, and its duration will be between three and eight years.
When selecting individual investments, the team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and pre-refunded bonds (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change the
allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest in
securities with lower credit ratings if it believes that the potential for a
higher yield is substantial compared with the risk involved, and that the
credit quality is stable or improving. Structure analysis evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
The team also considers other factors. It reviews public policy issues that
may affect the municipal bond market. Securities with different coupon rates
may also represent good investment opportunities based on supply and demand
conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
5
<PAGE>
[GRAPHIC]
You'll find more about
other risks of investing
in this Fund starting on
page 8 and in the SAI.
[GRAPHIC] Risks and other things to consider
Nations Kansas Municipal Income Fund has the following risks:
o Investment strategy risk - The Fund is considered to be non-diversified
because it invests most of its assets in securities that pay interest
that is free from income tax in one state. The value of the Fund and the
amount of interest it pays could also be affected by the financial
conditions of the state, its public authorities and local governments.
o Interest rate risk - 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 - The Fund 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 is
generally not a factor for U.S. government obligations.
o Changing distribution levels - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o Holding cash - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the team believes
that attractive tax-exempt investments are not available. Any uninvested
cash the Fund holds does not earn income.
o Tax considerations - Most of the distributions paid by the Fund come from
interest on municipal securities, and are generally free from federal
income tax and Kansas state income tax, but may be subject to the federal
alternative minimum tax, and other state and local taxes. Any portion of
a distribution that comes from income paid by other kinds of securities
or from realized capital gains is generally subject to federal, state and
local taxes.
o State specific risk - State specific risk is the chance that the Fund,
because it invests primarily in securities issued by Kansas and its
municipalities, is more vulnerable to unfavorable developments in Kansas
than funds that invest in municipal bonds of many different states. For
example, the state's economy relies significantly on its agricultural
resources. Adverse conditions affecting the resources and the state's
agricultural industry could have a significant impact on Kansas municipal
securities.
[GRAPHIC] A look at the Fund's performance
Because the Fund has not been in operation for a full calendar year, no
performance information is included in the prospectus.
6
<PAGE>
[GRAPHIC]
There are two kinds of fees -- shareholder fees you pay directly,
and annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<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 3.25% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 3.00 %(2) 1.00 %(3)
Redemption fee, as a % of the amount sold none none none
Annual Fund operating expenses
(Expenses that are deducted from the Fund's assets)
Management fees 0.50 % 0.50 % 0.50 %
Distribution (12b-1) and shareholder
servicing fees 0.25 % 1.00 % 1.00 %
Other expenses(4) 0.39 % 0.39 % 0.39 %
------ -------- -------
Total annual Fund operating expenses 1.14 % 1.89 % 1.89 %
Fee waivers and/or reimbursements (0.29)% (0.29)% (0.29)%
------ -------- -------
Total net expenses(5) 0.85 % 1.60 % 1.60 %
====== ======== =======
</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. Please see page 13 for details.
(2) This charge decreases over time. Please see page 14 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 15 for details.
(4) Other expenses are based on estimated amounts for the current fiscal
year.
(5) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2001. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
7
<PAGE>
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Example
This example is intended to help you compare the cost of investing in
the Fund 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
Fund 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 Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2001 and
are not reflected in 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
<S> <C> <C>
Investor A Shares $409 $648
Investor B Shares $463 $766
Investor C Shares $263 $566
</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
<S> <C> <C>
Investor B Shares $163 $566
Investor C Shares $163 $566
</TABLE>
8
<PAGE>
[GRAPHIC] Other important information
You'll find specific information about the Fund'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 the Fund can be changed without
shareholder approval. Other investment policies may be changed only with
shareholder approval.
o Changing to a feeder fund - The Fund may become a feeder fund if the
Board of Trustees decides this would be in the best interests of
shareholders. Unlike traditional mutual funds, which invest in
individual securities, a "feeder fund" invests all of its assets in
another fund, called a "master portfolio." Other feeder funds generally
also invest in a master portfolio. The master portfolio invests in
individual securities and has the same investment objective, investment
strategies and principal risks as the feeder funds. This structure can
help reduce a feeder fund's expenses because its assets are combined
with those of other feeder funds. If a master portfolio doesn't attract
other feeder funds, however, a feeder fund's expenses could be higher
than those of a traditional mutual fund.
o Holding other kinds of investments - The Fund may hold investments that
aren't part of its principal investment strategies. Please refer to the
SAI for more information. The team can also choose not to invest in
specific securities described in this prospectus and in the SAI.
o Investing defensively - The Fund may temporarily hold investments that
are not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn or
because of political or other conditions. The Fund may not achieve its
investment objective while it is investing defensively.
o Portfolio turnover - A 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 Fund's
returns. The Fund generally buys securities for capital appreciation,
investment income, or both, and doesn't engage in short-term trading.
The annual portfolio turnover rate for Nations Kansas Municipal Income
Fund is expected to be no more than 50%.
9
<PAGE>
[GRAPHIC] How the Fund is 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 Fund 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 pay BAAI an annual fee for its investment advisory services. The
fee is calculated as a percentage of the average daily net assets of the Fund
and is paid monthly. BAAI uses part of this money to pay the investment
sub-adviser for the services it provides to the Fund.
BAAI has agreed to waive fees and/or reimburse expenses for the Fund until
July 31, 2001. You'll find a discussion of any waiver and/or reimbursement in
the Fund description. There is no assurance that BAAI will continue to waive
and/or reimburse any fees and/or expenses after this date.
The following chart shows the maximum advisory fees BAAI can receive:
Annual investment advisory fee, as a % of average daily net assets
<TABLE>
<CAPTION>
Maximum
advisory
fee
<S> <C>
Nations Kansas Municipal Income Fund 0.50%
</TABLE>
Investment sub-adviser
Nations Funds and BAAI have engaged an investment sub-adviser to provide
day-to-day portfolio management for the Fund. This sub-adviser functions under
the supervision of BAAI and the Board of Trustees of Nations Funds.
[GRAPHIC]
Banc of America Capital Management, Inc.
One Bank of America Plaza
Charlotte, North Carolina 28255
Banc of America Capital Management, Inc.
BACAP, the successor to TradeStreet Investment Associates, Inc., 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 $120 billion, BACAP has over 200 institutional
clients and is sub-adviser to more than 50 mutual funds in the Nations Funds
Family. BACAP takes a team approach to investment management. Each team has
access to the latest technology and analytical resources.
BACAP is the investment sub-adviser to Nations Kansas Municipal Income Fund.
BACAP's Municipal Fixed Income Management Team makes the day-to-day investment
decisions for the Fund.
10
<PAGE>
[GRAPHIC]
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Other service providers
The Fund is distributed and co-administered by Stephens Inc. (Stephens), a
registered broker/dealer.
BAAI is also co-administrator of the Fund, and assists in overseeing the
administrative operations of the Fund. The Fund pays BAAI and Stephens a
combined fee of 0.22% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Fund and is paid monthly.
[GRAPHIC]
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
PFPC Inc. (PFPC) is the transfer agent for the Fund's shares. Its
responsibilities include processing purchases, sales and exchanges,
calculating and paying distributions, keeping shareholder records, preparing
account statements and providing customer service.
11
<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 Fund, you'll need to choose a share class. There
are three classes of shares for the Fund offered by this prospectus.
Each class has its own sales charges and fees. The table below compares the
charges and fees and other features of the share classes.
<TABLE>
<CAPTION>
Investor A Investor B Investor C
Shares Shares Shares
<S> <C> <C> <C>
Maximum amount no limit $250,000 no limit
you can buy
Maximum front-end 3.25% none none
sales charge
Maximum deferred none(1) 3.00%(2) 1.00%(3)
sales charge
Redemption fee none none none
Maximum annual 0.25% 0.75 % 0.75%
distribution distribution distribution distribution
and shareholder (12b-1)/service fee (12b-1) fee and (12b-1) fee and
servicing fees 0.25% service fee 0.25% 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 13 for details.
(2) This charge decreases over time. Different charges apply to Investor B
Shares bought before January 1, 1996 and after July 31, 1997. Please see
page 14 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 15 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 Funds,
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.
12
<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 Fund.
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 Fund,
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 Fund 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 -- generally the larger the investment, the smaller the
percentage sales charge.
<TABLE>
<CAPTION>
Amount
retained
by selling
Sales charge Sales charge 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-$99,999 3.25% 3.36% 3.00%
$100,000- $249,999 2.50% 2.56% 2.25%
$250,000- $499,999 2.00% 2.04% 1.75%
$500,000- $999,999 1.50% 1.53% 1.25%
$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.
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%.
13
<PAGE>
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.
[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 18
The CDSC you pay depends on when you bought your shares, how much you
bought in some cases, and how long you held them.
<TABLE>
<CAPTION>
If you sell your shares
during the following year: You'll pay a CDSC of:
--------------------------------- ---------------------------------------------------------------------
Shares
you
bought Shares
Shares on or after you
you bought Shares you bought between 1/1/1996 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
------------ -------------------------- ------------- ---------
$500,000-
$0-$499,999 $999,999
<S> <C> <C> <C> <C> <C>
the first year you own them 3.0% 3.0% 2.0% none 4.0%
the second year you own them 3.0% 2.0% 1.0% none 3.0%
the third year you own them 2.0% 1.0% none none 3.0%
the fourth year you own them 1.0% none none none 2.0%
the fifth year you own them none none none none 2.0%
the sixth year you own them none none none none 1.0%
after six years of owning them 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.
14
<PAGE>
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
<S> <C>
after November 15, 1998 eight years
between August 1, 1997
and November 15, 1998
$ 0-$249,999 six years
$ 250,000-$499,999 six years
$ 500,000-$999,999 five years
before August 1, 1997 six 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.
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 18
15
<PAGE>
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 in order 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.
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.
16
<PAGE>
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 in the Funds 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
o registered personnel and employees of these broker/dealers and their
family members may buy Investor A Shares without paying a front-end sales
charge according to the internal policies and procedures of the employing
broker/dealer as long as these purchases are made for their own
investment purposes
o employees or partners of any service provider to the Funds
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)
17
<PAGE>
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 Fund 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 Fund. 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. PFPC, Stephens or their agents must
receive your written request within 120 days after you sell your shares.
In addition, you can buy Investor A Shares without paying a sales charge if
you buy the shares with proceeds from the redemption of shares of a
nonaffiliated mutual fund as long as the redemption of the nonaffiliated
fund shares occurred within 45 days prior to the purchase of the Investor A
Shares. We must receive a copy of the confirmation of the redemption
transaction in order for you to avoid paying the sales charge.
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
18
<PAGE>
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 if you exchange Investor B or Investor C Shares of a Nations Fund that
were bought through an employee benefit plan sponsored by Bank of America
for Investor A Shares of a Nations Fund
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 Corporation (and its predecessors) 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 Fund 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. PFPC, Stephens or their agents
must receive your written request within 120 days after you sell your
shares.
19
<PAGE>
[GRAPHIC]
Buying, selling and exchanging shares
[GRAPHIC]
When you sell shares of a mutual, fund, the fund is effectively
"buying" them back from you. This is called a redemption.
You can invest in the Fund 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 Fund also offers 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.
20
<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 invest in
o $1,000 for regular accounts Investor A and C Shares. You can invest up to
o $500 for traditional and Roth IRA $250,000 in Investor B Shares at a time.
accounts
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
Using our minimum additional investment:
Systematic o $100 for all accounts
Investment Plan minimum initial investment: You can buy shares monthly, twice a month or
o $100 quarterly, using automatic transfers from your
minimum additional investment: bank account.
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 you're
shares by telephone, otherwise there selling and send you or your selling agent the
are no limits to the amount you can balance, usually within three business days of
sell receiving your order.
o other restrictions may apply to If you paid for your shares with a check that
withdrawals from retirement plan wasn't certified, we'll hold the sale proceeds
accounts 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 $10,000
Automatic to set up the plan. You can make withdrawals
Withdrawal Plan 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 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 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.
You can exchange your Investor C Shares for:
o Investor C Shares of any other 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 Fund 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 Investor B
Automatic Shares. You must already have an investment in
Exchange Feature the Funds you want to exchange. You can make
exchanges monthly or quarterly.
</TABLE>
21
<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 the Fund's shares -- or its net
asset value per share. We calculate net asset value per share for each class
of the Fund at the end of each business day. First, we calculate the net asset
value for each class of the 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 the 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 value. We use the amortized cost method, which approximates market value,
to value short-term investments maturing in 60 days or less.
How orders are processed
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, PFPC 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.
22
<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 the Fund 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 purchased are recorded on the books of the Fund. We don't
issue certificates.
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.
23
<PAGE>
[GRAPHIC]
For more information
about telephone orders,
see page 22.
Systematic Investment Plan
You can make regular purchases of $50 or more using automatic transfers from
your bank account to the Funds 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, PFPC 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 normally
send the sale proceeds by mail or wire them to your bank account
within three business days after the Fund 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, whichever is later.
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 PFPC. 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.
24
<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 Fund is earning, you'll eventually use up your original investment.
[GRAPHIC]
You should make sure you understand the investment objectives and
policies of the Fund you're exchanging into. Please read its
prospectus carefully.
[GRAPHIC]
Exchanging shares
You can sell shares of the Fund to buy shares of another 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 Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o You may only make an exchange into a Fund that is legally sold in
your state of residence.
25
<PAGE>
o You generally may only make an exchange into a 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
PFPC has received the certificate and deposited the shares to your
account.
Exchanging Investor A Shares
You can exchange Investor A Shares of the Fund for Investor A Shares of
any other 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 Fund
you're exchanging.
o You won't pay a CDSC, if applicable, 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 Fund.
Exchanging Investor B Shares
You can exchange Investor B Shares of the Fund for:
o Investor B Shares of any other 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 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.
26
<PAGE>
Exchanging Investor C Shares
You can exchange Investor C Shares of the Fund for:
o Investor C Shares of any other 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 the Fund 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 Fund 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.
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 PFPC in writing or call 1.800.321.7854.
o If you set up your plan to exchange more than $50,000, you must have
your signature guaranteed.
o You must already have an investment in the Funds you want to
exchange.
o You can choose to have us transfer your money on or about the 1st or
the 15th day of the month.
o The rules for making exchanges apply to automatic exchanges.
27
<PAGE>
[GRAPHIC]
How selling and servicing agents are paid
Selling and servicing agents usually receive compensation based on your
investment in the Fund. The kind and amount of the compensation depends on the
share class in which you invest. 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 Fund. The amount of this commission depends on which share
class you choose:
o up to 4.25% 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 Fund's 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 Fund pays 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.
28
<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 Fund
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, 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 Fund, is discretionary and may be
available only to selected selling and servicing agents. For example, Stephens
sometimes sponsors promotions involving Banc of America Investment Services,
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 and Stephens may pay amounts from their own assets to selling or
servicing agents of the Fund for related services they provide.
29
<PAGE>
[GRAPHIC]
Distributions and taxes
[GRAPHIC]
The power of compounding
Reinvesting your distributions buys you more shares of the
Fund -- 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 Fund
intends to pay out a sufficient amount of its income and capital gain to its
shareholders so the Fund won't have to pay any income tax. When the Fund makes
this kind of a payment, it's split equally among all shares, and is called a
distribution.
The Fund distributes any net realized capital gain at least once a year. The
Fund declares distributions on net investment income daily and pays them
monthly.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day before the distribution is declared. Shares of
the Fund are eligible to receive distributions from the trade date of the
purchase, as long as it's at least one day before a distribution is declared,
up to the day before the shares are sold.
Different share classes of the Fund 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 Fund
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
1.800.321.7845.
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.
30
<PAGE>
If you buy shares of the Fund 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 the Fund that holds
securities with unrealized capital gain, you will, in effect, receive part of
your purchase back if and when the Fund sells those securities and realizes
and distributes the gain. This distribution is also subject to tax. Some Funds
have built up, or have the potential to build up, high levels of unrealized
capital gain.
[GRAPHIC]
This information is a summary of how federal income taxes may
affect your investment in the Fund. 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, net foreign currency gain
and any 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. Corporate shareholders won't be able to deduct any
distributions from the Fund when determining their taxable income.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
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 paid in securities or other property)
and exchanges of 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.
31
<PAGE>
[GRAPHIC]
Terms used in this prospectus
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.
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.
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.
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.
Duration - 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.
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.
High quality - includes municipal securities that are rated in the top two
highest short-term debt categories according to NRSROs such as S&P and
Moody's. The portfolio management team may consider an unrated municipal
security if it is determined to be of comparable quality, based upon
guidelines approved by the Fund's Board of Trustees. Please see the SAI for
more information about credit ratings.
32
<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.
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.
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.
Pre-refunded bond - a bond that is repaid before its maturity date. The
repayment is generally financed by a new issue. Issuers generally pre-refund
bonds during periods of lower interest rates to reduce their interest costs.
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.
33
<PAGE>
[GRAPHIC]
Where to find more information
You'll find more information about Nations Kansas Municipal Income Fund in the
following documents:
Annual and semi-annual reports
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the
independent accountants' reports. The annual report also includes a
discussion about the market conditions and investment strategies that
had a significant effect on the Fund's performance during the period
covered.
[GRAPHIC]
Statement of Additional Information
The SAI contains additional information about the Fund and its
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 Fund 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.nations-funds.com
Information about the Fund can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. Information on the operation
of the Public Reference Room may be obtained by calling the SEC at
1-202-942-8090. The reports and other information about the Fund are
available on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained,
after paying a duplicating fee, by electronic request at the following
E-mail address: [email protected], or by writing the SEC's Public
Reference Section, Washington, D.C. 20549-0102.
SEC file number:
[Nations Funds logo]
Nations Funds Trust, 811-09645
KANPROIX
<PAGE>
[GRAPHIC]
State Municipal Bond Fund
Prospectus -- Primary A Shares
July 14, 2000
State Municipal Bond Fund
Nations Kansas Municipal Income Fund
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
-----------------
[NATIONS FUNDS LOGO]
<PAGE>
An overview of the Fund
--------------------------------------------------------------------------------
[GRAPHIC]
Terms used in this prospectus
In this prospectus, we, us and our refer to the Nations Funds
family (Nations Funds or Nations Funds Family). 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 16.
Your investment in the Fund 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 Fund.
This booklet, which is called a prospectus, tells you about one of the Nations
Funds -- Nations Kansas Municipal Income Fund. Please read it carefully,
because it contains information that's designed to help you make informed
investment decisions.
About the Fund
Nations Kansas Municipal Income Fund invests most of its assets in securities
issued by the state of Kansas and is generally intended for investment by
residents of that state.
The Fund focuses on the potential to earn income that is free from federal and
state income tax by investing primarily in municipal securities.
Municipal securities also 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 municipal securities. There's always
a risk that you'll lose money or you may not earn as much as you expect.
Because Nations Kansas Municipal Income Fund invests primarily in securities
issued by the state of Kansas, the Fund is considered to be non-diversified.
This means the value of the Fund and the amount of interest it pays could also
be affected by the financial conditions of the state, its public authorities
and local governments.
Is this Fund right for you?
Not every fund is right for every investor. When you're choosing a fund 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.
Nations Kansas Municipal Income Fund may be suitable for you if:
o you're looking for income
o you want to reduce taxes on your investment
o you have longer-term investment goals
It may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with fixed income securities
You'll find a discussion of the Fund's principal investments, strategies and
risks in the Fund description that starts on page 5.
2
<PAGE>
For more information
If you have any questions about the Fund, please call us at 1.800.765.2668 or
contact your investment professional.
You'll find more information about the Fund in the Statement of Additional
Information (SAI). The SAI includes more detailed information about the Fund'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
the Fund. BAAI is responsible for the overall management and
supervision of the investment management of the Fund. BAAI and
Nations Funds have engaged a sub-adviser, which is responsible for
the day-to-day investment decisions for the Fund.
[GRAPHIC]
You'll find more about
BAAI and the sub-adviser
starting on page 9.
[GRAPHIC]
About the Fund
State Municipal Bond Fund
Nations Kansas Municipal Income Fund 5
Sub-adviser: Banc of America Capital Management, Inc.
--------------------------------------------------------------------
Other important information 8
--------------------------------------------------------------------
How the Fund is managed 9
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About your investment
Information for investors
Buying, selling and exchanging shares 11
Distributions and taxes 14
--------------------------------------------------------------------
Terms used in this prospectus 16
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Where to find more information back cover
4
<PAGE>
About the State Municipal Bond Fund
--------------------------------------------------------------------------------
[GRAPHIC]
About the sub-adviser
Banc of America Capital Management, Inc. (BACAP) is this Fund's
sub-adviser. BACAP's Municipal Fixed Income Management Team makes
the day-to-day investment decisions for the Fund.
[GRAPHIC]
You'll find more about
BACAP on page 10.
[GRAPHIC]
This Fund at a glance
o Who should consider investing: Residents of Kansas
o Duration: 3 to 8 years
o Income potential: Moderate
o Risk potential: Moderate
[GRAPHIC]
Duration
Duration is a measure used to estimate how much the Fund's
portfolio will fluctuate in response to a change in interest
rates.
Nations Kansas Municipal Income Fund
[GRAPHIC]
Investment objective
The Fund seeks high current income exempt from federal and Kansas state
income taxes consistent with moderate fluctuation of principal.
[GRAPHIC]
Principal investment strategies
The Fund normally invests at least 80% of its assets in investment
grade intermediate-term municipal securities. The Fund also normally
invests at least 80% of its assets in securities that pay interest that
is free from federal income tax and Kansas state income tax.
The Fund may invest up to 20% of its assets in debt securities that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's average dollar-weighted maturity will be between three
and 10 years, and its duration will be between three and eight years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and pre-refunded bonds (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change the
allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest in
securities with lower credit ratings if it believes that the potential for a
higher yield is substantial compared with the risk involved, and that the
credit quality is stable or improving. Structure analysis evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
The team also considers other factors. It reviews public policy issues that
may affect the municipal bond market. Securities with different coupon rates
may also represent good investment opportunities based on supply and demand
conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
5
<PAGE>
[GRAPHIC]
You'll find more about
other risks of investing
in this Fund starting on
page 8 and in the SAI.
[GRAPHIC]
Risks and other things to consider
Nations Kansas Municipal Income Fund has the following risks:
o Investment strategy risk - The Fund is considered to be
non-diversified because it invests most of its assets in securities
that pay interest that is free from income tax in one state. The value
of the Fund and the amount of interest it pays could also be affected
by the financial conditions of the state, its public authorities and
local governments.
o Interest rate risk - 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 - The Fund 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
is generally not a factor for U.S. government obligations.
o Changing distribution levels - The level of monthly income
distributions paid by the Fund depends on the amount of income paid by
the securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should not
affect the amount of income they pay.
o Holding cash - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o Tax considerations - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Kansas state income tax, but may be subject to
the federal alternative minimum tax, and other state and local taxes.
Any portion of a distribution that comes from income paid by other
kinds of securities or from realized capital gains is generally
subject to federal, state and local taxes.
o State specific risk - State specific risk is the chance that the Fund,
because it invests primarily in securities issued by Kansas and its
municipalities, is more vulnerable to unfavorable developments in
Kansas than funds that invest in municipal bonds of many different
states. For example, the state's economy relies significantly on its
agricultural resources. Adverse conditions affecting the resources and
the state's agricultural industry could have a significant impact on
Kansas municipal securities.
[GRAPHIC]
A look at the Fund's performance
Because the Fund has not been in operation for a full calendar year, no
performance information is included in the prospectus.
6
<PAGE>
[GRAPHIC]
There are two kinds of fees --
shareholder fees you pay directly, and annual fund operating
expenses that are deducted from a fund's assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC]
What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.39%
------
Total annual Fund operating expenses 0.89%
Fee waivers and/or reimbursements (0.29)%
------
Total net expenses(1) 0.60%
======
(1) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2001. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Example
This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund 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 Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2001
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Primary A Shares $61 $255 $465 $1,069
7
<PAGE>
[GRAPHIC]
Other important information
You'll find specific information about the Fund'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 the Fund can be changed without
shareholder approval. Other investment policies may be changed only with
shareholder approval.
o Holding other kinds of investments - The Fund may hold investments that
aren't part of its principal investment strategies. Please refer to the
SAI for more information. The team can also choose not to invest in
specific securities described in this prospectus and in the SAI.
o Investing defensively - The Fund may temporarily hold investments that
are not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn or
because of political or other conditions. The Fund may not achieve its
investment objective while it is investing defensively.
o Portfolio turnover - A 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 Fund's returns. The
Fund generally buys securities for capital appreciation, investment
income, or both, and doesn't engage in short-term trading. The annual
portfolio turnover rate for Nations Kansas Municipal Income Fund is
expected to be no more than 50%.
8
<PAGE>
[GRAPHIC]
How the Fund is 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 Fund 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 pay BAAI an annual fee for its investment advisory services. The
fee is calculated as a percentage of the average daily net assets of the Fund
and is paid monthly. BAAI uses part of this money to pay the investment
sub-adviser for the services it provides to the Fund.
BAAI has agreed to waive fees and/or reimburse expenses for the Fund until
July 31, 2001. You'll find a discussion of any waiver and/or reimbursement in
the Fund description. There is no assurance that BAAI will continue to waive
and/or reimburse any fees and/or expenses after this date.
The following chart shows the maximum advisory fees BAAI can receive:
Annual investment advisory fee, as a % of average daily net assets
Maximum
advisory
fee
Nations Kansas Municipal Income Fund 0.50%
9
<PAGE>
Investment sub-adviser
Nations Funds and BAAI have engaged an investment sub-adviser to provide
day-to-day portfolio management for the Fund. This sub-adviser functions under
the supervision of BAAI and the Board of Trustees of Nations Funds.
[GRAPHIC]
Banc of America Capital Management, Inc.
One Bank of America Plaza
Charlotte, North Carolina 28255
Banc of America Capital Management, Inc.
BACAP, the successor to TradeStreet Investment Associates, Inc., 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 $120 billion, BACAP has over 200 institutional
clients and is sub-adviser to more than 50 mutual funds in the Nations Funds
Family. BACAP takes a team approach to investment management. Each team has
access to the latest technology and analytical resources.
BACAP is the investment sub-adviser to Nations Kansas Municipal Income Fund.
BACAP's Municipal Fixed Income Management Team makes the day-to-day investment
decisions for the Fund.
[GRAPHIC]
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Other service providers
The Fund is distributed and co-administered by Stephens Inc. (Stephens), a
registered broker/dealer.
BAAI is also co-administrator of the Fund, and assists in overseeing the
administrative operations of the Fund. The Fund pays BAAI and Stephens a
combined fee of 0.22% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Fund and is paid monthly.
BAAI may pay amounts from its own assets to Stephens or to selling or
servicing agents of the Funds for services they provide.
[GRAPHIC]
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
PFPC Inc. (PFPC) is the transfer agent for the Fund's shares. Its
responsibilities include processing purchases, sales and exchanges,
calculating and paying distributions, keeping shareholder records, preparing
account statements and providing customer service.
10
<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 Fund. 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 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. Client accounts for
which the financial institution or intermediary no longer acts as
fiduciary, agent or custodian may no longer be eligible to purchase or
hold Primary A Class Shares.
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 or services.
The Fund also offers 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 the Fund's shares -- or its net
asset value per share. We calculate net asset value per share for each class
of the Fund at the end of each business day. First, we calculate the net asset
value for each class of the 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.
11
<PAGE>
Valuing securities in a Fund
The value of the 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 the Fund. If
prices aren't readily available, we'll base the price of a security on its
fair value. We use the amortized cost method, which approximates market value,
to value short-term investments maturing in 60 days or less.
How orders are processed
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, PFPC 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 Fund. 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, PFPC or their agents receive the
order.
o If shares were paid for with a check that wasn't certified, we'll
hold the sale proceeds when those shares are sold 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.
12
<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 Fund you're exchanging into. Please read its
prospectus carefully.
[GRAPHIC]
Exchanging shares
Investors can sell shares of the Fund to buy shares of another 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 the Fund 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.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
o Exchanges can generally only be made into a 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).
13
<PAGE>
[GRAPHIC]
Distributions and taxes
[GRAPHIC]
The power of compounding
Reinvesting your distributions buys you more shares of the
Fund -- 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 Fund
intends to pay out a sufficient amount of its income and capital gain to its
shareholders so the Fund won't have to pay any income tax. When the Fund makes
this kind of a payment, it's split equally among all shares, and is called a
distribution.
The Fund distributes any net realized capital gain at least once a year. The
Fund declares distributions on net investment income daily and pays them
monthly.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day before the distribution is declared. Shares of
the Fund are eligible to receive distributions from the trade date of the
purchase, as long as it's at least one day before a distribution is declared,
up to the day before the shares are sold.
Different share classes of the Fund 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 Fund
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.
14
<PAGE>
If you buy shares of a Fund 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 Fund that holds securities
with unrealized capital gain, you will, in effect, receive part of your
purchase back if and when the Fund sells those securities and realizes and
distributes the gain. This distribution is also subject to tax. Some Funds
have built up, or have the potential to build up, high levels of unrealized
capital gain.
[GRAPHIC]
This information is a summary of how federal income taxes may
affect your investment in the Fund. 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, net foreign currency gain
and any 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 Fund.
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 paid in securities or other property)
and exchanges of 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.
15
<PAGE>
[GRAPHIC]
Terms used in this prospectus
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.
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.
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.
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.
Duration - 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.
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.
High quality - includes municipal securities that are rated in the top two
highest short-term debt categories according to NRSROs such as S&P and
Moody's. The portfolio management team may consider an unrated municipal
security if it is determined to be of comparable quality, based upon
guidelines approved by the Fund's Board of Trustees. Please see the SAI for
more information about credit ratings.
16
<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.
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.
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.
Pre-refunded bond - a bond that is repaid before its maturity date. The
repayment is generally financed by a new issue. Issuers generally pre-refund
bonds during periods of lower interest rates to reduce their interest costs.
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.
17
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[GRAPHIC]
Where to find more information
You'll find more information about Nations Kansas Municipal Income Fund in the
following documents:
Annual and semi-annual reports
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the
independent accountants' reports. The annual report also includes a
discussion about the market conditions and investment strategies that
had a significant effect on the Fund's performance during the period
covered.
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Statement of Additional Information
The SAI contains additional information about the Fund and its
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 Fund 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.nations-funds.com
Information about the Fund can be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. Information on the operation
of the Public Reference Room may be obtained by calling the SEC at
1-202-942-8090. The reports and other information about the Fund are
available on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained,
after paying a duplicating fee, by electronic request at the following
E-mail address: [email protected], or by writing the SEC's Public
Reference Section, Washington, D.C. 20549-0102.
SEC file number:
Nations Funds Trust, 811-09645
KANPROPA [NATIONS FUNDS LOGO]
