As filed with the Securities and Exchange Commission
on December 15, 2000
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------------------------------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. ___ [ ]
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1940 [ ]
Amendment No. ___ [ ]
(Check appropriate box or boxes)
------------------------
NATIONS FUNDS TRUST
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
--------------------------
Registrant's Telephone Number, including Area Code: (800) 626-2275
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With copies to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster LLP
2000 Pennsylvania Ave., N.W.
Suite 5500
Washington, D.C. 20006
It is proposed that this filing will become effective on January 14, 2001.
No filing fee is required under the Securities Act of 1933 because an indefinite
number of shares of beneficial interest in the Registrant, without par value,
has previously been registered pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. The Registrant filed on June 28, 2000, the
notice required by Rule 24f-2 for its fiscal year ended March 31, 2000 (File
Nos. 333-89661; 811-9645).
<PAGE>
Nations Funds Trust
Cross-Reference Sheet
<TABLE>
<CAPTION>
PART A
Item No. Item Caption Prospectus Caption
<S> <C> <C> <C>
1 Beginning of Registration Statement COVER PAGE OF REGISTRATION STATEMENT;
and Outside Front Cover Page of CROSS-REFERENCE SHEET; FRONT COVER PAGE OF PROXY
Prospectus STATEMENT/PROSPECTUS
2 Beginning and Outside Back Cover TABLE OF CONTENTS
Page of Prospectus
3 Fee Table, Synopsis Information, APPENDIX I--EXPENSE SUMMARIES OF THE ACQUIRED FUNDS
and Risk Factors AND ACQUIRING FUNDS; SUMMARY--THE REORGANIZATION; FEE
TABLES; OVERVIEW OF THE REORGANIZATION AGREEMENTS;
FEDERAL INCOME TAX CONSEQUENCES; RISK FACTORS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
4 Information About the Transaction THE REORGANIZATION; DESCRIPTION OF THE
REORGANIZATION AGREEMENT; REASONS FOR THE
REORGANIZATION AGREEMENT; BOARD CONSIDERATION;
COMPARISON OF INVESTMENT OBJECTIVE, INVESTMENT
MANAGEMENT AND PRINCIPAL INVESTMENT STRATEGIES;
COMPARISON OF CORPORATE STRUCTURE; COMPARISON OF
ACQUIRED FUNDS AND ACQUIRING FUNDS PERFORMANCE;
COMPARISON OF ADVISORY AND OTHER SERVICE
ARRANGEMENTS AND FEES; COMPARISON OF PURCHASE,
REDEMPTION, DISTRIBUTION AND EXCHANGE POLICIES AND
OTHER SHAREHOLDER TRANSACTIONS AND SERVICES; FEDERAL
INCOME TAX CONSIDERATIONS; CAPITALIZATION
5 Information About the Registrant N/A
6 Information About the Fund Being ADDITIONAL INFORMATION ABOUT THE TRUST, THE COMPANY,
Acquired RESERVES AND NATIONS FUNDS TRUST
7 Voting Information VOTING MATTERS; GENERAL INFORMATION; QUORUM;
SHAREHOLDER APPROVAL; PRINCIPAL SHAREHOLDERS; ANNUAL
MEETINGS AND SHAREHOLDER MEETINGS
8 Interest of Certain Persons and NOT APPLICABLE
Experts
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
9 Additional Information Required for NOT APPLICABLE
Reoffering by Persons Deemed to be
Underwriters
PART B
------
Statement of Additional
Item No. Item Caption Information Caption
-------- ------------ -------------------
10 Cover Page COVER PAGE
11 Table of Contents TABLE OF CONTENTS
12 Additional Information About the INCORPORATION OF DOCUMENTS BY REFERENCE IN STATEMENT
Registrant OF ADDITIONAL INFORMATION
13 Additional Information About the INCORPORATION OF DOCUMENTS BY REFERENCE IN STATEMENT
Fund Being Acquired OF ADDITIONAL INFORMATION
14 Financial Statements EXHIBITS TO STATEMENT OF ADDITIONAL INFORMATION
PART C
------
Item No.
--------
15-17 Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of this
Registration Statement.
</TABLE>
<PAGE>
NATIONS FUND TRUST
NATIONS FUND, INC.
NATIONS RESERVES
One Bank of America Plaza
101 South Tryon Street
Charlotte, North Carolina 28255
Telephone: 800-653-9427
January 20, 2001
DEAR SHAREHOLDER:
We are pleased to invite you to special meetings of shareholders of
Nations U.S. Government Bond Fund, Nations Government Securities Fund, Nations
Balanced Assets Fund and Nations Asset Allocation Fund (each a "Fund" and
collectively, the "Funds") to be jointly held at 10:00 a.m., Eastern time, on
April 12, 2001, at One Bank of America Plaza, 101 South Tryon Street, 33rd
Floor, Charlotte, North Carolina (the "Meetings"). At the Meetings, you will be
asked to approve the proposed reorganization (the "Reorganization") of your
Fund into an acquiring mutual fund (each an "Acquiring Fund" and together, the
"Acquiring Funds") in Nations Funds Trust, another registered investment
company within the Nations Funds family.
If you own shares of Nations Government Securities Fund or Nations Asset
Allocation Fund, the investment objective, principal investment strategies and
investment risks of the Acquiring Fund are identical to those of your Fund. If
you own shares of Nations Balanced Assets Fund or Nations U.S. Government Bond
Fund, the investment objective, principal investment strategies and investment
risks of the Acquiring Fund are substantially similar to those of your Fund.
Immediately after the Reorganization there will be no change to the
investment adviser or sub-adviser who currently manage your Fund, except that
the Acquiring Fund for the Balanced Assets Fund utilizes a "multi-manager"
approach, which means that it is managed by more than one sub-adviser. In
addition, the Reorganization will result in Acquiring Fund total operating
expense ratios (before and after waivers and/or reimbursements) that are no
higher than are currently applicable to your Fund (assuming each Fund's
shareholders approve the Reorganization). The features and services that are
available to you today as a shareholder will continue to be available to you as
an Acquiring Fund shareholder after the Reorganization.
Management is proposing the Reorganization based on its belief that
combining like funds, which will result in higher asset levels (assuming each
Fund's shareholders approve the Reorganization), may lead to economies of scale
by eliminating certain duplicative costs associated with maintaining similar
funds as separate series.
The Reorganization offers several other benefits. First, the
Reorganization is one part of a broader initiative to streamline the operations
of the Nations Funds family, which currently consists of several registered
investment companies. Over time, management expects to reduce the number of
registered investment companies in the Nations Funds family without necessarily
impacting investment alternatives. Streamlining the Nations Funds family may
allow it and the Acquiring Funds to achieve cost savings by reducing
accounting, legal and securities registration costs. Also, the Acquiring Funds
will be part of a
<PAGE>
Delaware business trust, which generally is viewed as having more flexibility
in its operations than a Massachusetts business trust like Nations Reserves and
Nations Fund Trust, and a Maryland corporation like Nations Fund, Inc. Finally,
the Acquiring Funds also will have more flexibility in their investment
policies, including policies that permit them to adopt a "master-feeder"
structure. A master-feeder structure, if adopted in the future, would allow an
Acquiring Fund to access other distribution channels that might not otherwise
be available, thereby potentially achieving economies of scale and other
benefits that come from greater asset size.
If shareholder approval is obtained and the other conditions to the
Reorganization are satisfied, it is anticipated that each Fund would be
reorganized into its corresponding Acquiring Fund on or about June 8, 2001,
when Fund shares would be exchanged for shares of the same class of shares of
the corresponding Acquiring Fund of equal dollar value. The exchange in shares
in the Reorganization is expected to be tax-free under federal law.
None of the customary costs associated with this proxy solicitation will
be borne by the Funds or their shareholders.
THE BOARDS OF TRUSTEES OF NATIONS FUND TRUST AND NATIONS RESERVES AND THE
BOARD OF DIRECTORS OF NATIONS FUND, INC. UNANIMOUSLY RECOMMEND THAT YOU VOTE TO
APPROVE THE PROPOSED REORGANIZATION.
The formal Notice of Special Meetings, Combined Proxy Statement/Prospectus
and Proxy Ballot are enclosed. The proposed Reorganization and the reasons for
the unanimous recommendation of the Boards are discussed in more detail in the
enclosed materials, which you should read carefully. If you have any questions,
please do not hesitate to contact us at the toll-free number set forth above.
We look forward to your attendance at the Meetings or to receiving your
Proxy Ballot(s) so that your shares may be voted at the Meetings.
Sincerely,
A. MAX WALKER
President and Chairman of the
Boards of Trustees of Nations Fund
Trust and Nations Reserves and the
Board of Directors of Nations Fund,
Inc.
<PAGE>
YOUR VOTE IS IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES THAT YOU
OWN. PLEASE VOTE BY SUBMITTING YOUR PROXY BALLOT(S) TODAY, EITHER IN THE
ENCLOSED POSTAGE-PAID ENVELOPE OR BY FAX AT (704) 388-2641. YOU MAY ALSO SUBMIT
YOUR PROXY BY A TOLL-FREE PHONE CALL OR BY VOTING ON-LINE, AS INDICATED BELOW.
Two Quick And Easy Ways To Submit Your Proxy
As a valued Fund shareholder, your proxy vote is important to us. That's why
we've made it faster and easier to submit your proxy at your convenience, 24
hours a day. After reviewing the enclosed Combined Proxy
Statement/Prospectus ("Proxy Statement") select one of the following quick
and easy methods to submit your proxy -- accurately and quickly.
<TABLE>
<S> <C>
Vote on-line Vote By Toll-Free Phone Call
1. Read the enclosed Proxy Statement and have 1. Read the enclosed Proxy Statement and have
your Proxy Ballot(s)* at hand. your Proxy Ballot(s)* at hand.
2. Go to Web site www.proxyvote.com 2. Call toll-free 1-800-690-6903.
3. Enter the 12-digit Control Number found on 3. Enter the 12-digit Control Number found on
your Proxy Ballot(s). your Proxy Ballot(s).
4. Submit your proxy using the easy-to-follow 4. Submit your proxy using the easy-to-follow
instructions. instructions.
</TABLE>
* Do not mail the Proxy Ballot(s) if submitting your Proxy by Internet, fax or
telephone.
<PAGE>
NATIONS FUND TRUST, NATIONS FUND, INC. AND NATIONS RESERVES
One Bank of America Plaza
101 South Tryon Street
Charlotte, North Carolina 28255
800-653-9427
---------------------------------------------
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
To Be Held on April 12, 2001
---------------------------------------------
TO NATIONS BALANCED ASSETS FUND SHAREHOLDERS:
PLEASE TAKE NOTE THAT a special meeting of shareholders of Nations
Balanced Assets Fund of Nations Fund Trust (the "Trust") will be held at 10:00
a.m., Eastern time, on April 12, 2001, at One Bank of America Plaza, 101 South
Tryon Street, 33rd Floor, Charlotte, North Carolina, for the purpose of
considering and voting upon:
ITEM 1. A proposed agreement and plan of reorganization dated as of January
20, 2001 (the "Reorganization Agreement"), by and between the Trust, on
behalf of Nations Balanced Assets Fund, and Nations Funds Trust, on behalf
of a corresponding mutual fund (the "Acquiring Fund"). The Reorganization
Agreement provides for the transfer of the assets and liabilities of
Nations Balanced Assets Fund to the Acquiring Fund, in exchange for shares
of equal value of designated classes of the Acquiring Fund.
ITEM 2. Such other business as may properly come before the Meeting or any
adjournment(s).
Item 1 is described in the attached Combined Proxy Statement/Prospectus.
TO NATIONS U.S. GOVERNMENT BOND FUND AND NATIONS GOVERNMENT SECURITIES FUND
SHAREHOLDERS:
PLEASE TAKE NOTE THAT special meetings of shareholders of Nations U.S.
Government Bond Fund and Nations Government Securities Fund of Nations Fund,
Inc. (the "Company") will be held jointly at 10:00 a.m., Eastern time, on April
12, 2001, at One Bank of America Plaza, 101 South Tryon Street, 33rd Floor,
Charlotte, North Carolina, for the purpose of considering and voting upon:
ITEM 1. A proposed agreement and plan of reorganization dated as of January
20, 2001 (the "Reorganization Agreement"), by and between the Company, on
behalf of Nations U.S. Government Bond Fund and Nations Government
Securities Fund, and Nations Funds Trust, on behalf of a corresponding
mutual fund (the "Acquiring Fund"). The Reorganization Agreement provides
for the transfer of the assets and liabilities of Nations U.S. Government
Bond Fund and Nations Government Securities Fund to the Acquiring Fund, in
exchange for shares of equal value of designated classes of such Acquiring
Fund.
ITEM 2. Such other business as may properly come before the Meetings or
any adjournment(s).
Item 1 is described in the attached Combined Proxy Statement/Prospectus.
<PAGE>
TO NATIONS ASSET ALLOCATION FUND SHAREHOLDERS:
PLEASE TAKE NOTE THAT a special meeting of shareholders of Nations Asset
Allocation Fund of Nations Reserves ("Reserves") will be held at 10:00 a.m.,
Eastern time, on April 12, 2001, at One Bank of America Plaza, 101 South Tryon
Street, 33rd Floor, Charlotte, North Carolina, for the purpose of considering
and voting upon:
ITEM 1. A proposed agreement and plan of reorganization dated as of January
20, 2001 (the "Reorganization Agreement"), by and between Reserves, on
behalf of Nations Asset Allocation Fund, and Nations Funds Trust, on behalf
of a corresponding mutual fund (the "Acquiring Fund"). The Reorganization
Agreement provides for the transfer of the assets and liabilities of
Nations Asset Allocation Fund to the Acquiring Fund, in exchange for shares
of equal value of designated classes of the Acquiring Fund.
ITEM 2. Such other business as may properly come before the Meeting or any
adjournment(s).
Item 1 is described in the attached Combined Proxy Statement/Prospectus.
YOUR TRUSTEES/DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF
THE PROPOSALS.
Shareholders of record as of the close of business on January 15, 2001 are
entitled to notice of, and to vote at, the Meetings or any adjournment(s)
thereof.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY BALLOT(S), WHICH IS BEING SOLICITED BY
THE BOARDS OF TRUSTEES OF NATIONS FUND TRUST AND NATIONS RESERVES AND THE BOARD
OF DIRECTORS OF NATIONS FUND, INC. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETINGS. SHAREHOLDERS ALSO MAY SUBMIT THEIR PROXIES: 1) BY FAX AT (704)
388-2641; 2) BY TELEPHONE AT (800) 690-6903; OR 3) ON-LINE AT WEBSITE
WWW.PROXYVOTE.COM. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED
BY SUBMITTING TO NATIONS FUND TRUST, NATIONS FUND, INC. AND/OR NATIONS RESERVES
A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY DATED PROXY OR BY ATTENDING
THE MEETINGS AND VOTING IN PERSON.
By Order of the Board of Trustees/Directors,
RICHARD H. BLANK, JR.
Secretary of Nations Fund Trust, Nations Fund,
Inc. and
Nations Reserves
January 20, 2001
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
Dated January 20, 2001
NATIONS FUNDS TRUST
NATIONS FUND TRUST
NATIONS FUND, INC.
NATIONS RESERVES
One Bank of America Plaza
101 South Tryon Street
Charlotte, North Carolina 28255
1-800-653-9427
This Combined Proxy Statement/Prospectus ("Proxy/Prospectus") is furnished
in connection with the solicitation of proxies by the Board of Trustees of
Nations Fund Trust (the "Trust"), the Board of Directors of Nations Fund, Inc.
(the "Company") and the Board of Trustees of Nations Reserves ("Reserves") at
special meetings of shareholders of the following open-end management invesment
companies: Nations U.S. Government Bond Fund ("U.S. Government Bond Fund"),
Nations Government Securities Fund ("Government Securities Fund"), Nations
Balanced Assets Fund ("Balanced Assets Fund"), and Nations Asset Allocation
Fund ("Asset Allocation Fund") (each an "Acquired Fund" and collectively, the
"Acquired Funds"). The Board of Trustees of the Trust, the Board of Directors
of the Company and the Board of Trustees of Reserves are sometimes each
referred to as a "Board," or together as the "Boards." The special meetings and
any adjournment(s) are referred to as the "Meetings."
At the Meetings the Boards will propose that each Acquired Fund be
reorganized into a corresponding mutual fund (each, an "Acquiring Fund" and
together, the "Acquiring Funds") as set forth below.
<TABLE>
<CAPTION>
Will Be Reorganized into these
These Acquired Funds Acquiring Funds of Nations Funds Trust
---------------------------- -----------------------------------------
<S> <C> <C>
U.S. Government Bond Fund ---> Nations Government Securities Fund (new)
Primary A Shares Primary A Shares
Investor A Shares Investor A Shares
Investor B Shares Investor B Shares
Investor C Shares Investor C Shares
Government Securities Fund --->
Primary A Shares
Investor A Shares
Investor B Shares
Investor C Shares
Balanced Assets Fund ---> Nations Asset Allocation Fund (new)
Primary A Shares Primary A Shares
Investor A Shares Investor A Shares
Investor B Shares Investor B Shares
Investor C Shares Investor C Shares
Asset Allocation Fund --->
Primary A Shares
Investor A Shares
Investor B Shares
Investor C Shares
</TABLE>
1
<PAGE>
The Meetings have been called to consider the following proposals:
FOR BALANCED ASSETS FUND SHAREHOLDERS:
ITEM 1. A proposed agreement and plan of reorganization dated as of January
20, 2001, by and between the Trust, on behalf of Balanced Assets Fund, and
Nations Funds Trust, on behalf of a corresponding Acquiring Fund. The
reorganization agreement provides for the transfer of the assets and
liabilities of Balanced Assets Fund to the Acquiring Fund, in exchange for
shares of equal value of designated classes of such Acquiring Fund.
ITEM 2. Such other business as may properly come before the Meeting or any
adjournment(s).
FOR U.S. GOVERNMENT BOND FUND AND GOVERNMENT SECURITIES FUND SHAREHOLDERS:
ITEM 1. A proposed agreement and plan of reorganization dated as of January
20, 2001, by and between the Company, on behalf of U.S. Government Bond
Fund and Government Securities Fund, and Nations Funds Trust, on behalf of
a corresponding Acquiring Fund. The reorganization agreement provides for
the transfer of the assets and liabilities of U.S. Government Bond Fund and
Government Securities Fund to the Acquiring Fund, in exchange for shares of
equal value of designated classes of such Acquiring Fund.
ITEM 2. Such other business as may properly come before the Meetings or
any adjournment(s).
FOR ASSET ALLOCATION FUND SHAREHOLDERS:
ITEM 1. A proposed agreement and plan of reorganization dated as of January
20, 2001, by and between Reserves, on behalf of Asset Allocation Fund, and
Nations Funds Trust, on behalf of a corresponding Acquiring Fund. The
reorganization agreement provides for the transfer of the assets and
liabilities of Asset Allocation Fund to the Acquiring Fund, in exchange for
shares of equal value of designated classes of such Acquiring Fund.
ITEM 2. Such other business as may properly come before the Meeting or any
adjournment(s).
This Proxy/Prospectus sets forth concisely the information about the
proposed reorganization (the "Reorganization") of the Acquired Funds into
corresponding Acquiring Funds in Nations Funds Trust, another registered
investment company within the Nations Funds family, and the information about
the Acquiring Funds that a shareholder should know before deciding how to vote.
It is both a proxy statement for the Meetings and a prospectus offering shares
in Nations Government Securities Fund (new) ("Government Securities Fund
(new)") and Nations Asset Allocation Fund (new) ("Asset Allocation Fund
(new)"). This Proxy/Prospectus should be retained for future reference.
Additional information about the Acquiring Funds is available in their:
o Prospectuses;
o Statements of Additional Information, or SAIs; and
o Annual and Semi-Annual Reports to shareholders.
2
<PAGE>
All of this information is in documents filed with the Securities and
Exchange Commission (the "SEC") and is available upon oral or written request
and without charge. The information contained in the prospectuses for the
Acquiring Funds is legally deemed to be part of this Proxy/Prospectus and is
incorporated by reference. Copies of the applicable Acquiring Fund
prospectus(es) also accompany this Proxy/Prospectus. The annual reports to
shareholders for the fiscal year ended March 31, 2000, semi-annual reports to
shareholders for the fiscal period ended September 30, 2000 and the
prospectuses for the Acquired Funds previously have been mailed to
shareholders. The Statement of Additional Information relating to this Proxy/
Prospectus is incorporated by reference into this Proxy/Prospectus and is dated
January 20, 2001. Additional copies of any of these documents are available
without charge by writing the address given above or by calling
[1-800-321-7854]. These documents also are available on the website of the SEC
at www.sec.gov.
It is expected that this Proxy/Prospectus will be mailed to shareholders
on or about January 20, 2001.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROXY/PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY .................................................................................. 5
The Reorganization ...................................................................... 5
Fee Tables ............................................................................ 5
Overview of the Reorganization Agreements ............................................. 6
Overview of Investment Objective and Principal Investment Strategies .................. 6
Overview of Service Providers ......................................................... 7
Overview of Purchase, Redemption, Distribution, Exchange and Other Procedures ......... 7
Federal Income Tax Consequences ....................................................... 8
Principal Risk Factors ................................................................ 8
THE REORGANIZATION ....................................................................... 8
Description of the Reorganization Agreements ............................................ 8
Reasons for the Reorganization .......................................................... 9
Board Consideration ..................................................................... 10
Comparison of Investment Management, Investment Objective and Principal Investment 11
Strategies
Comparison of Investment Policies and Restrictions ...................................... 16
Comparison of Forms of Business Organization ............................................ 16
Comparison of Acquired Fund and Acquiring Fund Performance .............................. 17
Comparison of Advisory and Other Service Arrangements and Fees .......................... 17
Investment Advisory and Sub-Advisory Services and Fees ................................ 18
Administration Services ............................................................... 19
Distribution and Shareholder Servicing Arrangements ................................... 20
Comparison of Purchase, Redemption, Distribution and Exchange Policies and Other
Shareholder
Transactions and Services ............................................................. 21
Federal Income Tax Considerations ....................................................... 21
Capitalization .......................................................................... 23
VOTING MATTERS ........................................................................... 25
General Information ..................................................................... 25
Quorum .................................................................................. 26
Shareholder Approval .................................................................... 26
Principal Shareholders .................................................................. 26
Annual Meetings and Shareholder Meetings ................................................ 27
ADDITIONAL INFORMATION ABOUT THE TRUST, THE COMPANY, RESERVES
AND NATIONS FUNDS TRUST ................................................................. 27
FINANCIAL STATEMENTS ..................................................................... 28
OTHER BUSINESS ........................................................................... 28
SHAREHOLDER INQUIRIES .................................................................... 28
</TABLE>
APPENDICES
I. EXPENSE SUMMARIES OF THE ACQUIRED FUNDS AND ACQUIRING FUNDS
II. MANAGEMENT'S DISCUSSION OF ACQUIRED FUND PERFORMANCE
III. COMPARISON OF FUNDAMENTAL POLICIES AND LIMITATIONS OF THE ACQUIRED
FUNDS AND THE ACQUIRING FUNDS
4
<PAGE>
SUMMARY
The following is an overview of certain information relating to the
proposed Reorganization. More complete information is contained throughout the
Proxy/Prospectus and its Appendices.
The Reorganization
Fee Tables
The table shows, as of December 1, 2000: (i) the current annualized total
operating expense ratios of the Acquired Funds; and (ii) the pro forma
annualized total operating expense ratios of the Acquiring Funds based upon the
fee arrangements that will be in place upon consummation of the Reorganization.
The table shows that the total operating expense ratios (before and after
waivers and/or reimbursements) of the Acquiring Funds after the Reorganization
will be no higher than they are, for the Acquired Funds as of December 1, 2000,
(assuming each Acquired Fund's shareholders approve the Reorganization). It is
possible that one or both of the Acquired Funds will not approve their
respective Reorganization. The pro forma presentation is not shown here for
either of these scenarios because each such scenario would result in a shell
transaction only and the total operating expense ratios would remain as they
were before the Reorganization. Detailed pro forma expense information,
including these additional scenarios, is included in Appendix I.
Total Operating Expense Information
<TABLE>
<CAPTION>
Total Pro Forma
Operating Total Operating
Expense Ratios Expense Ratios
Before/After Before/After
Acquired Waivers and/or Waivers and/or
Fund/Share Class Reimbursements Combined Fund/Class Post-Reorganization Reimbursements
---------------------------- ---------------- ----------------------------------------- ----------------
<S> <C> <C> <C>
U.S. Government Bond Fund
Primary A shares 1.04%/0.78%
Investor A shares 1.29%/1.03%
Investor B shares 2.04%/1.78% Government Securities Fund (new)
Investor C shares 2.04%/1.78% Primary A shares 0.88%/0.78%
Government Securities Fund Investor A shares 1.13%/1.03%
Primary A shares 0.88%/0.78% Investor B shares 1.88%/1.78%
Investor A shares 1.13%/1.03% Investor C shares 1.88%/1.78%
Investor B shares 1.88%/1.78%
Investor C shares 1.88%/1.78%
Balanced Assets Fund
Primary A shares 1.19%/1.00%
Investor A shares 1.44%/1.25%
Investor B shares 2.19%/2.00% Asset Allocation Fund (new)
Investor C shares 2.19%/2.00% Primary A shares 1.00%/1.00%
Asset Allocation Fund Investor A shares 1.25%/1.25%
Primary A shares 1.00%/1.00% Investor B shares 2.00%/2.00%
Investor A shares 1.25%/1.25% Investor C shares 2.00%/2.00%
Investor B shares 2.00%/2.00%
Investor C shares 2.00%/2.00%
</TABLE>
5
<PAGE>
Overview of the Reorganization Agreements
The documents that govern the Reorganization are the agreements and plans
of reorganization (i) between the Trust, on behalf of the Balanced Assets Fund,
and Nations Funds Trust, on behalf of the corresponding Acquiring Fund; (ii)
between the Company, on behalf of the U.S. Government Bond Fund and the
Government Securities Fund and Nations Funds Trust, on behalf of the
corresponding Acquiring Fund; and (iii) between Reserves, on behalf of the
Asset Allocation Fund and Nations Funds Trust, on behalf of the corresponding
Acquiring Fund (each a "Reorganization Agreement" and collectively, the
"Reorganization Agreements"). The Reorganization Agreements are all
substantially identical and each provides for: (1) the transfer of all of the
assets and liabilities of each Acquired Fund to its corresponding Acquiring
Fund in exchange for shares of equal value of the same classes of the Acquiring
Fund; and (2) the distribution of the Acquiring Fund shares to the shareholders
of the corresponding Acquired Fund in liquidation of such Acquired Fund. The
Reorganization is subject to a number of conditions, including approval by
Acquired Fund shareholders.
As a result of the proposed Reorganization, an Acquired Fund shareholder
will become a shareholder of a corresponding Acquiring Fund and will hold,
immediately after the Reorganization, Acquiring Fund shares having a total
dollar value equal to the total dollar value of the shares of the Acquired Fund
that the shareholder held immediately before the Reorganization. The
Reorganization is expected to occur on June 8, 2001. The exchange of Acquired
Fund shares for corresponding Acquiring Fund shares by Acquired Fund
shareholders in the Reorganization is expected be tax-free under federal income
tax law and shareholders will not pay any sales charge on the exchange.
For more information about the Reorganization and the Reorganization
Agreements, see "The Reorganization -- Description of the Reorganization
Agreements."
Overview of Investment Objective and Principal Investment Strategies
<TABLE>
<S> <C>
Acquired Fund Investment Objective and Principal Investment Corresponding Acquiring Fund Investment Objective and
Strategy Principal Investment Strategy
------------------------------------------------------------- ------------------------------------------------------------
U.S. Government Bond Fund: seeks total return and Government Securities Fund (new): seeks high current
preservation of capital by investing in U.S. government income consistent with moderate fluctuation of principal;
securities and repurchase agreements collateralized by normally invests at least 65% of its assets in U.S.
such securities; normally invests at least 65% of its government obligations and repurchase agreements secured
assets in U.S. government obligations and repurchase by these securities.
agreements secured by these securities.
Balanced Assets Fund: seeks total return by investing in Asset Allocation Fund (new): seeks to obtain long-term
equity and fixed income securities; invests in a mix of growth from capital appreciation, and dividend and interest
equity and fixed income securities, as well as money income; invests in a mix of equity and fixed income
market instruments. securities, as well as cash equivalents, including U.S.
government obligations, commercial paper and other
short-term, interest-bearing instruments.
</TABLE>
The investment objective and principal investment strategies of the
Government Securities Fund (new) and the Asset Allocation Fund (new) are
identical to their corresponding Acquired Funds.
6
<PAGE>
One additional difference between the Balanced Assets Fund and the Asset
Allocation Fund (new). For the Balanced Assets Fund, which is sub-advised by a
single investment sub-adviser (Banc of America Capital Management, Inc.
("BACAP")), its corresponding Acquiring Fund utilizes a "multi-manager"
approach, which means that it is managed by more than one sub-adviser. BACAP
and Chicago Equity Partners LLC ("Chicago Equity") will each manage a portion
of the assets of the corresponding Acquiring Fund. Chicago Equity will manage
the equity portion of the Acquiring Fund and BACAP will manage the non-equity
portion of the Acquiring Fund. One effect of this is that, if the
Reorganization is approved by the Balanced Assets Fund shareholders, BACAP may
sell a portion of the Balanced Assets Fund's equity securities prior to the
Reorganization. This is because the equity portion of the Asset Allocation Fund
(new) consists primarily of common stocks of blue chip companies, whereas the
equity portion of the Balanced Assets Fund consists primarily of common stocks
believed to be undervalued.
Accordingly, although the Asset Allocation Fund (new) is expected to have
a portfolio of securities of similar type as those held by the Balanced Assets
Fund, it in some instances will not hold exactly the same securities. If BACAP
sells these securities in anticipation of the Reorganization, the Balanced
Assets Fund will incur brokerage commissions and such sales may result in
taxable capital gain or other distributions to the Balanced Assets Fund's
shareholders. The plan for the Balanced Assets Fund to sell securities prior to
the Reorganization could result in selling securities at a disadvantageous time
and could result in the Balanced Asset Fund realizing losses that would not
otherwise have been realized. The proceeds of any such sale are expected to be
held in temporary investments until the Reorganization.
For additional information about these and other similarities and
differences between the investment objectives and principal investment
strategies of the Acquired Funds and Acquiring Funds, see "The Reorganization
-- Comparison of the Investment Management, the Investment Objective and
Principal Investment Strategies."
Overview of Service Providers
With the exception of the investment sub-adviser of the Balanced Assets
Fund (discussed above), the Acquired Funds and their corresponding Acquiring
Funds have the same service providers, including Banc of
America Advisors, Inc. ("BAAI"), their investment adviser, as discussed under
"The Reorganization -- Comparison of Advisory and Other Service Arrangements
and Fees."
Overview of Purchase, Redemption, Distribution, Exchange and Other
Procedures
The purchase, redemption, distribution, exchange and other policies and
procedures of each share class of each Acquired Fund are identical to those of
the corresponding share class of the corresponding Acquiring Fund. For more
information concerning these policies and procedures, see "The Reorganization
-- Comparison Purchase, Redemption, Distribution and Exchange Policies and
other Shareholder Transactions and Services."
7
<PAGE>
Federal Income Tax Consequences
The Reorganization is not expected to result in the recognition of gain or
loss, for federal income tax purposes, by the Acquired Funds, the Acquiring
Funds or their respective shareholders. However, the sale of securities by any
Acquired Fund prior to the Reorganization, whether in the ordinary course of
business or in anticipation of the Reorganization, could result in taxable
distributions to such fund's shareholders. See "The Reorganization -- Federal
Income Tax Considerations" for additional information. Since their inception,
each of the Acquired Funds and Acquiring Funds believes it has qualified as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, each believes it has been, and expects to
continue to be, relieved of any federal income tax liability on its taxable
income distributed to shareholders.
Principal Risk Factors
Investments in the Acquiring Funds will involve substantially similar
risks to those of the corresponding Acquired Funds. For a complete description
of the Acquired Funds' and the Acquiring Funds' investment strategies and
restrictions, see the Acquired Funds' and the Acquiring Funds' Prospectuses and
Statements of Additional Information.
THE REORGANIZATION
Description of the Reorganization Agreements
The Reorganization Agreements are the governing documents of the
Reorganization. Among other things, each provides for (i) the transfer of all
of the assets and liabilities of each Acquired Fund to its corresponding
Acquiring Fund in exchange for shares of equal value of the same classes of the
Acquiring Fund; and (ii) the distribution of such Acquiring Fund shares to
shareholders of the respective Acquired Funds in liquidation of that Acquired
Fund. The completion of the Reorganization is conditioned upon the Trust, the
Company, Reserves and Nations Funds Trust receiving an opinion from Morrison &
Foerster LLP that the exchange of shares contemplated under the Reorganization
will be tax-free under federal income tax law. Each Reorganization Agreement
includes a number of other conditions for completion of the Reorganization,
sets forth representations and warranties of the parties and describes the
mechanics of the transaction.
The Reorganization Agreements also provide that the Reorganization may be
abandoned at any time before the closing of the Reorganization (the "Closing")
upon the mutual consent of the Trust, the Company and/or Reserves and Nations
Funds Trust. At any time before or (to the extent permitted by law) after
approval of the Reorganization Agreement by Acquired Fund shareholders: (i) the
parties may, by written agreement authorized by the respective Board of the
Trust, the Company and/or Reserves and the Board of Trustees of Nations Funds
Trust and with or without the approval of their shareholders, amend any of the
provisions of the respective Reorganization Agreement and (ii) either party may
waive any default by the other party or the failure to satisfy any of the
conditions to its obligations (the waiver to be in writing and authorized by
the respective Board of the Trust, the Company and/or Reserves or the Board of
Trustees of Nations Funds Trust with or without the approval of the parties'
shareholders). Additionally, the
8
<PAGE>
Reorganization Agreement with the Company provides that the Reorganization of
the Government Securities Fund is not conditioned upon the Reorganization of
the U.S. Government Bond Fund and vice versa.
Upon completion of the Reorganization, all outstanding shares of each
Acquired Fund will be canceled. Exchange or redemption requests received
thereafter will be deemed to be exchange or redemption requests for shares of
the corresponding Acquiring Fund. At Closing, the assets of each Acquired Fund
will be transferred to the corresponding Acquiring Fund as described above.
The Reorganization Agreement provides that BAAI and/or its affiliates will
bear all customary expenses associated with the Reorganization. The Acquired
Funds will not bear any of these costs.
A copy of each Reorganization Agreement is available at no charge by
calling or writing the Trust, the Company and/or Reserves at the toll-free
number or address listed on the first page of the Proxy/Prospectus. Copies of
the Reorganization Agreements are also available at the SEC's website
(www.sec.gov).
Reasons for the Reorganization
The Reorganization offers several benefits to Acquired Fund shareholders:
o With respect to all of the Acquired Funds, the Reorganization is part of
a broader initiative to streamline the operations of the Nations Funds
family, which currently consists of several registered investment
companies. Over time, management expects to reduce the number of
registered investment companies in the Nations Funds family without
necessarily impacting investment alternatives. Management believes that if
it were permitted to operate the same number of mutual funds with fewer
registered investment companies, certain efficiencies and benefits to
shareholders in the Nations Funds family should accrue over the long term.
These benefits may include, among other things, cost savings relating to
the potential reduction of certain accounting, legal and securities
registration costs.
o With respect to the U.S. Government Bond Fund and the Balanced Assets
Fund only, the primary reason for the Reorganization is management's
belief that the interests of the shareholders of such Acquired Funds would
likely be better served if they participated in the Reorganization,
thereby enabling shareholders to own shares of the corresponding Acquiring
Funds with their significantly larger asset size (assuming each Acquired
Fund's shareholders approve the Reorganization), while at the same time
allowing such Acquired Fund shareholders to remain invested in a similar
mutual fund in the Nations Funds family. Because the corresponding
Acquiring Funds would have a significantly higher asset size than each
Acquired Fund standing alone, they would have total operating expense
ratios that would be no higher than that of the corresponding Acquired
Funds (before and after waivers and/or reimbursements) (assuming each
Acquired Fund's shareholders approve the Reorganization). Accordingly,
management, including the Boards of the Trust and the Company, believes
that the proposed Reorganization should benefit the U.S. Government Bond
Fund and the Balanced Assets Fund shareholders by, among other things: (i)
offering actual or potential reductions in total operating expense ratios
for such Acquired Fund shareholders; and (ii) offering shareholders the
opportunity to remain invested in either the same or a generally similar
mutual fund in the Nations Funds family.
9
<PAGE>
o The Acquiring Funds will be part of a Delaware business trust, which
generally is viewed as having more flexibility in its operations than a
Massachusetts business trust like the Trust and Reserves and a Maryland
corporation like the Company. Specifically, the Acquiring Funds would have
greater flexibility in their investment policies, including policies that
permit them to adopt a "master-feeder" structure. A master-feeder
structure, if adopted in the future, would allow the Acquiring Funds to
combine their assets with those of other similar funds, thereby
potentially achieving economies of scale and other benefits that come from
greater asset size. Also, as part of Nations Funds Trust, the Acquiring
Funds would be governed under a more flexible charter document which could
be amended by Nations Funds Trust's Board without the necessity of
soliciting shareholders, thereby otherwise saving costs relating to proxy
solicitations on certain routine matters.
o Neither Acquired Fund nor Acquiring Fund shareholders are expected to
bear any customary costs associated with the Reorganization, including
solicitation costs.
Board Consideration
The Boards of the Trust, the Company and Reserves each unanimously voted
to approve the respective Reorganization Agreement at meetings held on August
23, 2000. During deliberations, each Board (with the advice and assistance of
independent counsel), as applicable, reviewed and considered, among other
things: (1) the various aspects of the Reorganization and the Reorganization
Agreement; (2) the U.S. Government Bond Fund's and the Balanced Assets Fund's
current asset levels; (3) the investment advisory and other fees paid by the
Acquired Funds, and the historical and projected expense ratios for the
Acquired Funds, as compared with those of their corresponding Acquiring Funds;
(4) the expected cost-savings for all of the Acquired Fund's shareholders; (5)
the investment objectives, principal investment strategies and risks of the
Acquired Funds and their relative compatibility with those of their
corresponding Acquiring Funds; (6) the historical investment performance
records of the Acquired Funds and the Acquiring Funds; (7) the fact that
Acquired Fund shareholders would experience no change in shareholder services
with respect to their class of shares; (8) the Reorganization as part of a
broader initiative to streamline the operations of the Nations Funds family;
(9) the fact that the Acquiring Funds as part of Nations Funds Trust would have
greater flexibility in their investment policies and would be governed under a
more flexible charter document which could be amended by the Board without the
necessity of soliciting shareholders, thereby otherwise saving costs relating
to proxy solicitations on certain routine matters; (10) the anticipated
tax-free nature of the exchange of shares in the Reorganization; (11) the fact
that the customary costs associated with the Reorganization would not be borne
by Acquired Fund or Acquiring Fund shareholders; (12) potential benefits of the
Reorganization, if any, to other persons, including BAAI and its affiliates
(e.g., the benefit of consolidating resources within BAAI and its affiliates);
and (13) the fact that moving from a single adviser to a multi-manager approach
in the case of the Balanced Assets Fund may cause a repositioning in that
Acquired Fund's portfolio prior to the Reorganization, thereby causing such
Acquired Fund to experience increased brokerage commissions and also possibly
causing the Acquired Fund to make taxable capital gain or other distributions
to its shareholders.
Based upon their evaluation of the information presented to it, and in
light of their fiduciary duties under federal and state law, the Boards of the
Trust, the Company and Reserves, including all of the non-interested
10
<PAGE>
Trustees/Directors of each such Board, determined that participation in the
Reorganization, as contemplated by the respective Reorganization Agreement, was
in the best interests of each Acquired Fund, and that the shares of each
Acquired Fund would not be diluted as a result of the Reorganization.
Similarly, the Board of Trustees of Nations Funds Trust, including all of the
non-interested Trustees, also evaluated the Reorganization and based upon its
evaluation of the information presented to it, and in light of its fiduciary
duties under federal and state law, determined that participation in the
Reorganization, as contemplated by each Reorganization Agreement, was in the
best interests of the Acquiring Funds and that the shares of the Acquiring
Funds would not be diluted as a result of the Reorganization.
THE BOARDS OF THE TRUST, THE COMPANY AND RESERVES UNANIMOUSLY RECOMMEND
THAT ACQUIRED FUND SHAREHOLDERS VOTE TO APPROVE THE REORGANIZATION AGREEMENT.
Comparison of Investment Management, Investment Objective and Principal
Investment Strategies
The investment objective and principal investment strategies of the
Government Securities Fund and the Asset Allocation Fund and their
corresponding Acquiring Funds are identical because these Acquiring Funds were
created to continue the business of their corresponding Acquired Funds. The
investment objective and principal investment strategies of the U.S. Government
Bond Fund and the Balanced Assets Fund and their corresponding Acquiring Funds
are substantially similar. The chart below compares these investment objectives
and principal investment strategies in greater detail. Additional information
of the Acquired Funds' and Acquiring Funds' investment objectives and principal
investment strategies is contained in their Prospectuses and Statements of
Additional Information.
Although the U.S. Government Bond Fund employs identical investment
strategies as its Acquiring Fund and the Balanced Assets Fund generally employs
similar investment strategies as its Acquiring Fund, there is one primary
difference between the Balanced Assets Fund and its corresponding Acquiring
Fund:
o The Investment Sub-Adviser -- As described in the chart below, unlike the
Balanced Assets Fund, which is sub-advised solely by BACAP, its
corresponding Acquiring Fund will utilize a "multi-manager" approach,
where BACAP and Chicago Equity each manage a portion of the assets of the
Acquiring Fund.
<TABLE>
<CAPTION>
U.S. Government Bond Fund Corresponding Acquiring Fund
----------------------------------------- ----------------------------------------
<S> <C> <C>
Investment BAAI is the Acquired Fund's investment BAAI is the Acquiring Fund's investment
Management adviser. BACAP is the Acquired Fund's adviser. BACAP is the Acquiring Fund's
investment sub-adviser. BACAP's Fixed investment sub-adviser. BACAP's Fixed
Income Management Team makes the Income Management Team makes the
day-to-day investment decisions for the day-to-day investment decisions for the
Acquired Fund. Acquiring Fund.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Bond Fund Corresponding Acquiring Fund
------------------------------------------------ -----------------------------------------------
<S> <C> <C>
Investment The Acquired Fund seeks total return and The Acquiring Fund seeks high current
Objective preservation of capital by investing in U.S. income consistent with moderate
government securities and repurchase fluctuation of principal.
agreements collateralized by such
securities.
Principal The Acquired Fund normally invests at The Acquiring Fund normally invests at
Investment least 65% of its assets in U.S. government least 65% of its assets in U.S. government
Strategies obligations and repurchase agreements obligations and repurchase agreements
secured by these securities. secured by these securities.
The Acquired Fund may also invest in the The Acquiring Fund may also invest in the
following securities rated investment grade following securities rated investment grade
at the time of investment: at the time of investment:
o mortgage-related securities issued by o mortgage-related securities issued by
governments, their agencies or governments, their agencies or
instrumentalities, or corporations. instrumentalities, or corporations.
o asset-backed securities or municipal o asset-backed securities or municipal
securities. securities.
o corporate debt securities, including o corporate debt securities, including
bonds, notes and debentures. bonds, notes and debentures.
The Acquired Fund may also invest in The Acquiring Fund may also invest in
securities that aren't part of its principal securities that aren't part of its principal
investment strategies, but it won't hold investment strategies, but it won't hold
more than 10% of its assets in any one more than 10% of its assets in any one
type of these securities. These securities are type of these securities. These securities are
described in the SAI. described in the SAI.
Normally the Acquired Fund's average Normally the Acquiring Fund's average
dollar-weighted maturity will be between dollar-weighted maturity will be between
five and 30 years. five and 30 years.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Bond Fund Corresponding Acquiring Fund
------------------------------------------------- ------------------------------------------------
<S> <C> <C>
When selecting individual investments, the When selecting individual investments, the
team: team:
o looks at a fixed income security's o looks at a fixed income security's
potential to generate both income and potential to generate both income and
price appreciation price appreciation
o allocates assets primarily among U.S. o allocates assets primarily among U.S.
government obligations, including government obligations, including
securities issued by government agencies, securities issued by government agencies,
mortgage-backed securities and U.S. mortgage-backed securities and U.S.
Treasury securities, based on how they Treasury securities, based on how they
have performed in the past, and on how have performed in the past, and on how
they are expected to perform under they are expected to perform under
current market conditions. The team may current market conditions. The team may
change the allocations when market change the allocations when market
conditions change conditions change
o selects securities using structure analysis, o selects securities using structure analysis,
which evaluates the characteristics of a which evaluates the characteristics of a
security, including its call features, security, including its call features,
coupons and expected timing of cash coupons and expected timing of cash
flows. flows.
The team may sell a security when it The team may sell a security when it
believes the security is overvalued, there is believes the security is overvalued, there is
a deterioration in the security's credit rating a deterioration in the security's credit rating
or in the issuer's financial situation, when or in the issuer's financial situation, when
other investments are more attractive, or other investments are more attractive, or
for other reasons. for other reasons.
</TABLE>
<TABLE>
<CAPTION>
Balanced Assets Fund Corresponding Acquiring Fund
--------------------------------------------- --------------------------------------------
<S> <C> <C>
Investment BAAI is the Acquired Fund's investment BAAI is the Acquiring Fund's investment
Management adviser. BACAP is the Acquired Fund's adviser. The Acquiring Fund is managed by
investment sub-adviser. BACAP's Value two sub-advisers: BACAP and Chicago
Strategies Team makes the day-to-day Equity. Chicago Equity's Equity
investment decisions for the equity portion Management Team makes the day-to-day
of the Acquired Fund. BACAP's Fixed investment decisions for the equity portion
Income Management Team makes the of the Acquiring Fund. BACAP's Fixed
day-to-day investment decisions for the Income Management Team makes the
fixed income and money market portions day-to-day investment decisions for the
of the Acquired Fund. fixed income and money market portions
of the Acquiring Fund.
Investment The Acquired Fund seeks total return by The Acquiring Fund seeks to obtain
Objective investing in equity and fixed income long-term growth from capital appreciation,
securities. and dividend and interest income.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Balanced Assets Fund Corresponding Acquiring Fund
------------------------------------------------ -----------------------------------------------
<S> <C> <C>
Principal The Acquired Fund invests in a mix of The Acquiring Fund invests in a mix of
Investment equity and fixed income securities, as well equity and fixed income securities, as well
Strategies as money market instruments. as cash equivalents, including U.S.
Government obligations, commercial paper
and other short-term, interest-bearing
instruments.
Equity securities the Acquired Fund invests The equity securities the Acquiring Fund
in are primarily common stock of invests in are primarily common stock of
established companies believed to be blue chip companies. These companies are
financially strong. well established, nationally known
companies that have a long record of
profitability and a reputation for quality
management, products and services.
Fixed income securities normally make up The fixed income securities the Acquiring
at least 25% of the Acquired Fund's assets. Fund invests in are primarily investment
Fixed income securities the Acquired Fund grade bonds and notes. The Acquiring
invests in are primarily bonds, notes and Fund normally invests at least 25% of its
mortgage-backed and asset-backed assets in senior securities. The Acquiring
securities issued by U.S. companies and Fund may also invest up to 35% of its
government entities. Money market assets in mortgaged-backed and
instruments the Acquired Fund invests in asset-backed securities.
are primarily cash equivalents, including
U.S. government obligations, commercial
paper and other short-term interest-bearing
instruments.
The Acquired Fund may also invest in The Acquiring Fund may also invest in
securities that aren't part of its principal securities that aren't part of its principal
investment strategies, but it won't hold investment strategies, but it won't hold
more than 10% of its assets in any one more than 10% of its assets in any one
type of these securities. These securities are type of these securities. These securities are
described in the SAI. described in the SAI.
The team uses asset allocation as its The teams use asset allocation as their
primary investment approach. The team primary investment approach. The teams
allocates assets among the three asset allocate assets among the three asset
classes based on its assessment of the classes based on their assessment of the
expected risks and returns of each class. expected risks and returns of each class.
The team evaluates:
o current economic and financial market
conditions, including trends in interest
rates, in the United States and abroad
o earning and dividend prospects for
common stocks
o the overall stability of financial markets
The team may change the Acquired Fund's
asset allocation to try to increase returns
and reduce risk.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Balanced Assets Fund Corresponding Acquiring Fund
----------------------------------------------- ----------------------------------------------
<S> <C> <C>
The team identifies individual investments For the equity portion of the Acquiring
using the following process: Fund, the Equity Management Team uses
quantitative analysis to analyze
o For the equity portion of the Acquired fundamental information about securities
Fund, the team evaluates the overall and identify value. Starting with a universe
economy, industry conditions, and the of approximately 2000 common stocks, the
financial condition and management of team uses a multi-factor computer model to
each company, using a process called rank securities, based on the following
fundamental analysis. criteria, among others:
o For the fixed income portion of the o changes in actual and expected earnings
Acquired Fund, the team looks for o unexpected changes in earnings
securities rated investment grade at the o price-to-earnings ratio
time of investment. The team may o dividend discount model
choose unrated securities if it believes o price-to-cash flow
they are of comparable quality to
investment grade securities at the time of
investment.
o For the money market portion of the
Acquired Fund, the team chooses
high-quality securities primarily to
provide liquidity.
The team may use various tax strategies, The Equity Management Team tries to
consistent with the Acquired Fund's manage risk by matching the market
investment objective, to try to reduce the capitalization, style and industry weighting
amount of capital gains distributed to characteristics of the S&P SuperComposite
shareholders. For example, the team: 1500. The Equity Management Team
focuses on selecting individual stocks to try
o may limit the number of buy and sell to provide higher returns than the S&P
transactions it makes SuperComposite 1500 while maintaining a
level of risk similar to the index.
o will try to sell shares that have the
lowest tax burden on shareholders
o may offset capital gains by selling
securities to realize a capital loss
While the Acquired Fund tries to manage
its capital gain distributions, it will not be
able to completely avoid making taxable
distributions. These strategies also may be
affected by changes in tax laws and
regulations, or by court decisions.
The team may sell a security when the The teams may sell a security when the
Acquired Fund's asset allocation changes, Acquired Fund's asset allocation changes,
there is a deterioration in the issuer's there is a deterioration in the issuer's
financial situation, when the teams believes financial situation, when the team believe
other investments are more attractive, or other investments are more attractive, or
for other reasons. for other reasons.
</TABLE>
15
<PAGE>
Comparison of Investment Policies and Restrictions
The Acquiring Funds will have a more streamlined set of fundamental and
non-fundamental investment policies and restrictions. Some of each Acquired
Fund's current investment policies and restrictions may limit its portfolio
manager from investing in a security that is both consistent with the
investment objective of such Acquired Fund and also a good investment. One
reason for changing some of these investment policies is to remove restrictions
that unnecessarily hamper the portfolio manager's investment discretion. Many
of these restrictions were put in place by the Acquired Funds as a result of
the directives of various state securities commissions. Changes to federal
securities laws have superseded these directives. Another reason is
management's desire to migrate towards uniform investment policies for all
funds in the Nations Funds family.
One of the differences between the Acquiring Funds' fundamental policies
and those of the Acquired Funds is that the Acquiring Funds will have the
ability under its fundamental policies to invest all of its assets in a master
portfolio rather than in individual securities.
For a detailed comparison of the fundamental investment policies and
limitations of the Acquired Funds and the Acquiring Funds, see Appendix III to
this Proxy/Prospectus.
Comparison of Forms of Business Organization
Federal securities laws largely govern the way that mutual funds operate,
but they do not cover every aspect of a fund's existence and operation. State
law and a fund's governing documents fill in most of the gaps and typically
create additional operational rules and restrictions that funds must follow. As
noted, the Trust and Reserves are Massachusetts business trusts and the Company
is a Maryland corporation. The proposed Reorganization would reorganize each
Acquired Fund into series of Nations Funds Trust, which is a Delaware business
trust. While there are few differences between these forms of organization, one
advantage to a Delaware business trust is its potentially greater flexibility.
Generally, under Delaware business trust law, a mutual fund's governing
instrument, called a declaration of trust, may establish the way it will
operate with few state law requirements or prohibitions. Thus, mutual funds
organized in Delaware generally have more flexibility in their operations and
certainty about any operational restrictions.
The following discussion outlines some of the differences between the
state law and documents currently governing the Acquired Funds of the Trust,
the Company and Reserves and those which apply to the Acquiring Funds as series
of Nations Funds Trust.
o The Board of Trustees. Maryland corporations such as the Company, are
governed by a Board of Directors. The Acquiring Funds, as series of
Nations Funds Trust will be governed by a Board of Trustees. The Board of
Nations Funds Trust will have eleven Trustees, ten of whom currently serve
as Trustees of the Trust and Reserves and as Directors of the Company,
with the eleventh currently serving in an advisory capacity to the Boards
of the Trust, the Company and Reserves.
16
<PAGE>
o Governing Documents. Maryland corporations are typically governed by
organizational documents called articles of incorporation and by-laws.
Massachusetts and Delaware business trusts are governed by similar sets of
documents, typically called a declaration of trust and by-laws. These
governing documents are generally similar, although there are some
differences. For example, in order for the Company to dissolve under
Maryland law, a majority of all outstanding shares of the Company
generally must approve such a dissolution. In contrast, the Declaration of
Trust of Nations Funds Trust provides that Nations Funds Trust, or any
series of Nations Funds Trust, may be dissolved at any time by the Board
of Nations Funds Trust with written notice to shareholders. In addition,
Nations Funds Trust's Declaration of Trust, as permitted by Delaware law,
provides that shareholders of series of Nations Funds Trust would be
entitled to vote on mergers, acquisitions and consolidations involving
such series, only to the extent required by federal securities law. By
limiting mandatory shareholder votes to those matters expressly required
under the federal securities laws, the Acquiring Funds will save costs by
not having to schedule special shareholder meetings and solicit
shareholder proxies. Although as shareholders of an Acquiring Fund of
Nations Funds Trust shareholders may no longer have certain rights it is
anticipated that the Acquiring Funds would benefit from a reduction in
expenses associated with potential proxy solicitations on these matters.
In general, however, the attributes of a share of common stock in the case
of a Maryland corporation such as the Company and a share of beneficial
interest in the case of a Massachusetts business trust, are comparable to
those of a share of beneficial interest of a Delaware business trust such
as Nations Funds Trust, i.e., shares of all are entitled to one vote per
share held and fractional votes for fractional shares held.
o Shareholder Liability. Under Maryland law, shareholders are not
personally liable for the debts of a fund. Under Massachusetts law,
shareholders may, under certain circumstances, be held personally liable
for the debts and obligations of a Massachusetts business trust. In
contrast, under Delaware law, shareholders of a Delaware business trust
like Nations Funds Trust are not liable for the debts and obligations of
such trust.
Comparison of Acquired Fund and Acquiring Fund Performance
A comparison of the performance of the Government Securities Fund and its
Acquiring Fund, and the Asset Allocation Fund and its Acquiring Fund is not
provided because each such Acquiring Fund was created to continue the business
of its corresponding Acquired Fund. A comparison of the performance of the U.S.
Government Bond Fund and its Acquiring Fund, and the Balanced Assets Fund and
its Acquiring Fund is not provided because each such Acquiring Fund does not
yet have any historical performance with which to make a comparison.
Comparison of Advisory and Other Service Arrangements and Fees
The Acquired Funds and the Acquiring Funds have the same service
providers. Immediately after the Reorganization, these service providers are
expected to continue to serve the Acquiring Funds in the capacities indicated
below, with the exceptions shown below.
17
<PAGE>
Service Providers for the Acquired Funds and the Acquiring Funds
Investment Adviser BAAI
Investment Sub-Adviser BACAP, except the Asset Allocation Fund and
the Asset Allocation Fund (new) which are
managed by both BACAP and Chicago Equity
Distributor Stephens Inc. ("Stephens")
Co-Administrator BAAI
Co-Administrator Stephens
Sub-Administrator The Bank of New York
Custodian The Bank of New York
Transfer Agent PFPC Inc.
Sub-Transfer Agent Bank of America, N.A. ("Bank of America")
(for Primary A shares only)
Independent Accountants PricewaterhouseCoopers LLP
Investment Advisory and Sub-Advisory Services and Fees
BAAI serves as the investment adviser for each Acquired Fund and each
Acquiring Fund. Each Acquired Fund and each Acquiring Fund pay an advisory fee,
computed daily and paid monthly, to BAAI based on each such Fund's average
daily net assets. Currently the maximum advisory fee rate for each of the
Balanced Assets Fund and the Asset Allocation Fund is 0.65%.1 The maximum
advisory fee rate for each of the U.S. Government Bond Fund and the Government
Securities Fund is 0.50%.2 The maximum advisory fee rate for each of the
Acquiring Funds is the same as its corresponding Acquired Fund. BACAP is the
sub-adviser for each Acquired Fund except for the Asset Allocation Fund which
is co-sub-advised by BACAP and Chicago Equity. BAAI pays BACAP, and in the case
of the Asset Allocation Fund, BACAP and Chicago Equity, sub-advisory fees,
computed daily and paid monthly, at the maximum annual rate of 0.25% for each
of the Balanced Assets Fund and the Asset Allocation Fund, and 0.15% for each
of the U.S. Government Bond Fund and the Government Securities Fund of the
Acquired Funds' and the corresponding Acquiring Funds' average daily net assets
managed by such sub-adviser. BAAI, BACAP and Chicago Equity are registered
investment advisers, and BAAI and BACAP are wholly-owned subsidiaries of Bank
of America. Currently, BAAI advises over 70 mutual funds in the Nations Funds
family and BACAP has over 200 institutional clients and sub-advises more than
50 mutual funds in the Nations Funds family.
--------
1 Currently, BAAI is under a contractual commitment to cap Fund level expenses
for the Balanced Assets Fund until July 31, 2001. The waivers and/or
reimbursements necessary to maintain those expense levels may come from BAAI's
advisory fees, administration fees and/or other fees and expenses (excluding
Rule 12b-1/shareholder servicing fees), at BAAI's discretion. After July 31,
2001, it is possible that all waivers and/or reimbursements could be
discontinued.
2 Currently, BAAI is under a contractual commitment to cap Fund level expenses
for the U.S. Government Bond Fund until July 31, 2001. The waivers and/or
reimbursements necessary to maintain those expense levels may come from BAAI's
advisory fees, administration fees and/or other fees and expenses (excluding
Rule 12b-1/shareholder servicing fees), at BAAI's discretion. After July 31,
2001, it is possible that all waivers and/or reimbursements could be
discontinued. In addition, BAAI is under a contractual commitment to cap the
advisory fee rate for the Government Securities Fund at 0.40% until July 31,
2001. After July 31, 2001, it is possible that such commitment could be
discontinued.
18
<PAGE>
The following table shows the investment advisory fees, both before and
after waivers, for the Acquired Funds and their corresponding Acquiring Funds
(as of December 1, 2000) (assuming each Acquired Fund's shareholders approve
the Reorganization). It is possible that one or both of the Acquired Funds will
not approve their respective Reorganization. The pro forma presentation is not
shown here for either of these scenarios because each such scenario would
result in a shell transaction only and the total operating expense ratios would
remain as they were before the Reorganization. Detailed pro forma advisory fee
information, including these addition scenarios, is included in Appendix I.
Investment Advisory Fee Information
<TABLE>
<CAPTION>
Pro Forma
Advisory Fees Advisory Fees
Before/After Before/After
Acquired Fund Waivers Acquiring Fund Waivers
------------------------------ --------------- ---------------------------------- ----------------
<S> <C> <C> <C>
U.S. Government Bond Fund 0.50%/0.24% Government Securities Fund (new) 0.50%/0.40%
Government Securities Fund 0.50%/0.40% Government Securities Fund (new) 0.50%/0.40%
Balanced Assets Fund 0.65%/0.46% Asset Allocation Fund (new) 0.65%/0.65%
Asset Allocation Fund 0.65%/0.65% Asset Allocation Fund (new) 0.65%/0.65%
</TABLE>
BAAI, the Acquired Funds and Acquiring Funds are currently seeking an
exemptive order from the SEC that would permit BAAI to engage a different or
additional sub-adviser for a fund to continue the engagement of a sub-adviser
who has experienced a change in its ownership or corporate structure or under
an agreement that has materially changed, with the approval of the respective
Board, but without submitting the sub-advisory change to a vote of the fund's
shareholders, under certain circumstances. If this exemptive order is granted
and the proposed Reorganization is approved, BAAI, the Acquired Funds or
Acquiring Funds will inform shareholders of any such sub-advisory change, which
may include: (i) engaging new or additional sub-advisers, (ii) terminating or
replacing one or more sub-advisers, or (iii) materially amending an existing
sub-advisory agreement. Until this exemptive order is granted and the proposed
Reorganization is approved, consistent with applicable law, the Acquired Funds
will continue to submit any such sub-advisory changes to the Acquired Funds'
shareholders for approval.
Administration Services
Stephens and BAAI are the co-administrators for the Acquired Funds and
Acquiring Funds. Stephens and BAAI provide the Acquired Funds and Acquiring
Funds with administrative services, including, among other things, general
supervision of their non-investment operations, preparation of proxy statements
and shareholder reports and general supervision of data completion in
connection with preparing periodic reports to the respective Boards of the
Trust, the Company, Reserves and Nations Funds Trust. For these services and
the assumption of expenses, Stephens and BAAI are entitled to a monthly fee, in
the aggregate, at the annual rate of 0.22% of the Acquired Funds' and
corresponding Acquiring Funds' average daily net assets in the case of the U.S.
Government Bond Fund and the Government Securities Fund, and 0.23% of the
Acquired Funds' and corresponding Acquiring Funds' average daily net assets in
the case of the Balanced Assets Fund and the Asset Allocation Fund.
19
<PAGE>
Distribution and Shareholder Servicing Arrangements
Shares of the Acquired Funds and Acquiring Funds are distributed by
Stephens, a broker-dealer registered under the Securities Exchange Act of 1934,
as amended (the "1934 Act").
Primary A Shares
Primary A shares are not subject to any distribution or shareholder
servicing fees and, accordingly, the Acquired Funds and the Acquiring Funds
have not adopted any related plans.
Investor A Shares
Pursuant to combined distribution and shareholder servicing plans adopted
pursuant to Rule 12b-1 under the 1940 Act by the Acquired Funds and Acquiring
Funds for their Investor A shares, the Acquired Funds and Acquiring Funds may
compensate Stephens for any activities or expenses primarily intended to result
in the sale of Investor A shares, including sales related services provided by
banks, broker/dealers or other financial institutions ("Selling Agents") that
have entered into a sales support agreement with Stephens. In addition, the
Acquired Funds and Acquiring Funds may compensate or reimburse broker/dealers,
banks and other financial institutions ("Servicing Agents") which provide
shareholder support services to their customers who own Investor A shares. This
shareholder servicing and distribution plan provides that the Acquired Funds
and Acquiring Funds may pay Stephens, Selling Agents that have entered into a
sales support agreement with Stephens, or Servicing Agents that have entered
into a Shareholder Servicing Agreement with the Acquired Funds and Acquiring
Funds up to 0.25% (on an annualized basis) of the average daily net asset value
of the Investor A shares of the Acquired Funds and Acquiring Funds.
Investor B Shares and Investor C Shares
The Acquired Funds and Acquiring Funds have adopted distribution plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Investor B Shares
and Investor C Shares of the Acquired Funds and Acquiring Funds. Pursuant to
these distribution plans, the Acquired Funds and Acquiring Funds may pay
Stephens for expenses incurred in connection with the marketing or distribution
of the Acquired Funds' and Acquiring Funds' shares, including sales related
services provided by selling agents that have entered into a sales support
agreement with Stephens. Payments under these distribution plans will be
calculated daily and paid monthly and may not exceed 0.75% on an annualized
basis of the average daily net asset value of the Investor B Shares and
Investor C Shares of the Acquired Funds and Acquiring Funds. The Acquired Funds
and Acquiring Funds have also adopted shareholder servicing plans with respect
to the Investor B Shares and Investor C Shares of the Acquired Funds and
Acquiring Funds. Pursuant to these shareholder servicing plans, the Acquired
Funds and Acquiring Funds may compensate or reimburse Servicing Agents that
provide shareholder support services to their customers who own shares of the
Acquired Funds or Acquiring Funds. Payments under these shareholder servicing
plans will be calculated daily and paid monthly and may not exceed 0.25% (on an
annual basis) of the average daily net assets of the Investor B Shares and
Investor C Shares.
20
<PAGE>
Comparison of Purchase, Redemption, Distribution and Exchange Policies and
Other Shareholder Transactions and Services
As a result of the Reorganization, Acquired Fund shareholders will hold
shares of the same class of Acquiring Fund they held in each Acquired Fund. For
example, an Acquired Fund shareholder who owns Investor A shares will,
immediately after the Reorganization, hold Investor A shares in the
corresponding Acquiring Fund. Accordingly, all of the purchase, redemption,
distribution, exchange policies and other shareholder transactions and services
applicable to a shareholder's share class will remain unaffected and unchanged
by the Reorganization. As noted, no sales charge or sales load will be imposed
in connection with the exchange of shares in the Reorganization.
Federal Income Tax Considerations
As noted, the exchange of shares in the Reorganization is expected to be
tax free under federal income tax law. The following discussion summarizes the
material federal income tax consequences of the Reorganization that are
applicable to Acquired Fund shareholders. It is based on the Code, applicable
Treasury Regulations, judicial authority, and administrative rulings and
practice, all as of the date of this Proxy/
Prospectus and all of which are subject to change, including changes with
retroactive effect. The discussion below does not address any state, local or
foreign tax consequences of the Reorganization. An Acquired Fund shareholder's
tax treatment may vary depending upon its particular situation. An Acquired
Fund shareholder also may be subject to special rules not discussed below if
you are a certain kind of shareholder, including: an insurance company; a
tax-exempt organization; a financial institution or broker-dealer; a person who
is neither a citizen nor resident of the United States or entity that is not
organized under the laws of the United States or political subdivision thereof;
a holder of Acquired Fund shares as part of a hedge, straddle or conversion
transaction; or a person that does not hold Acquired Fund shares as a capital
asset at the time of the Reorganization.
Neither the Trust, the Company, Reserves nor Nations Funds Trust has
requested or will request an advance ruling from the Internal Revenue Service
as to the federal income tax consequences of the Reorganization or any related
transaction. The Internal Revenue Service may adopt positions contrary to that
discussed below and such positions could be sustained. An Acquired Fund
shareholder is urged to consult with his or her own tax advisors and financial
planners as to the particular tax consequences of the Reorganization to the
Acquired Fund shareholder, including the applicability and effect of any state,
local or foreign laws, and the effect of possible changes in applicable tax
laws.
The obligation of the Acquired Funds and the Acquiring Funds to consummate
the Reorganization is conditioned upon the receipt by the Trust, the Company,
Reserves and Nations Funds Trust of an opinion of Morrison & Foerster LLP
reasonably acceptable to the Trust, the Company, Reserves and Nations Funds
Trust substantially to the effect that, on the basis of the representations set
forth or referred to in the opinion, the Reorganization will be treated for
federal income tax purposes as a tax-free reorganization under Section 368(a)
of the Code and that the Acquired Funds and the Acquiring Funds will each be
parties to a
21
<PAGE>
reorganization within the meaning of Section 368(b) of the Code. Provided that
the Reorganization so qualifies and the Acquired Funds and the Acquiring Funds
are so treated:
o Neither the Acquired Funds nor the Acquiring Funds will recognize any
gain or loss as a result of the Reorganization.
o An Acquired Fund shareholder will not recognize any gain or loss as a
result of the receipt of Acquiring Fund shares in exchange for such
shareholder's Acquired Fund shares pursuant to the Reorganization.
o An Acquired Fund shareholder's aggregate tax basis for the Acquiring Fund
shares received pursuant to the Reorganization will equal such
shareholder's aggregate tax basis in Acquired Fund shares held immediately
before the Reorganization.
o An Acquired Fund shareholder's holding period for the Acquiring Fund
shares received pursuant to the Reorganization will include the period
during which the Acquired Fund shares are held.
The tax opinion of Morrison & Foerster LLP described above is based upon
facts, representations and assumptions to be set forth or referred to in the
opinion and the continued accuracy and completeness of representations made by
the Trust, the Company and Reserves, on behalf of their respective Acquired
Funds, and Nations Funds Trust, on behalf of the Acquiring Funds, including
representations in certificates to be delivered to Morrison & Foerster LLP by
the management of each of the Trust, the Company, Reserves and Nations Funds
Trust, which if incorrect in any material respect would jeopardize the
conclusions reached by Morrison & Foerster LLP in the opinion. In addition, in
the event that the Trust, the Company, Reserves and/
or Nations Funds Trust are unable to obtain the tax opinion, they are permitted
under the Reorganization Agreements to waive the receipt of such tax opinion as
a condition to their obligation to consummate the Reorganization.
In addition, in order to qualify as a tax-free reorganization under the
Code, each Acquiring Fund will be required to hold a certain percentage of the
assets of its corresponding Acquired Fund for a period of time as defined in
the Code. This provision may require the investment sub-adviser of an Acquiring
Fund to retain a security longer than it would absent such requirement.
Regardless of whether the acquisition of the assets and liabilities of
each Acquired Fund by the corresponding Acquiring Fund qualifies as a tax-free
reorganization as described above, the sale of securities by the Acquired Fund
prior to the Reorganization, whether in the ordinary course of business or in
anticipation of the Reorganization, could result in a taxable distribution to
Acquired Fund shareholders.
Since its formation, each Acquired Fund and Acquired Fund believes it has
qualified as a separate "regulated investment company" under the Code.
Accordingly, each Acquired Fund and Acquiring Fund believes it has been, and
expects to continue to be, relieved of federal income tax liability on its
taxable income distributions to its shareholders.
22
<PAGE>
Capitalization
The following tables show the total net assets, number of shares
outstanding and net asset value per share of each Acquired Fund and Acquiring
Fund. This information is generally referred to as the "capitalization." The
term "pro forma capitalization" means the expected capitalization of each
Acquiring Fund after it has combined with its corresponding Acquired Fund,
i.e., as if the Reorganization had already occurred.
These capitalization tables are based on figures as of September 30, 2000.
The ongoing investment performance and daily share purchase and redemption
activity of the Acquired Funds and Acquiring Funds affects capitalization.
Therefore, the capitalization on the Closing date may vary from the
capitalization shown in the following tables.
The table below shows the capitalization relating to the reorganization of
the U.S. Government Bond Fund and Government Securities Fund into the
Government Securities Fund (new).
<TABLE>
<CAPTION>
Total Net Assets Shares Outstanding Net Asset Value Per Share
---------------------- --------------------- --------------------------
<S> <C> <C> <C>
U.S. Government Bond Fund $55,630,974.00 5,746,515 $ 9.68
(Fund A) (Primary A shares) (Primary A shares) (Primary A shares)
$2,607,193.00 268,667 $ 9.70
(Investor A shares) (Investor A shares) (Investor A shares)
$8,645,303.00 893,173 $ 9.68
(Investor B shares) (Investor B shares) (Investor B shares)
$721,153.00 74,478 $ 9.68
(Investor C shares) (Investor C shares) (Investor C shares)
Government Securities Fund $151,990,440.00 16,035,375 $ 9.48
(Fund B) (Primary A shares) (Primary A shares) (Primary A shares)
$53,237,827.00 5,623,627 $ 9.47
(Investor A shares) (Investor A shares) (Investor A shares)
$24,939,807.00 2,631,264 $ 9.48
(Investor B shares) (Investor B shares) (Investor B shares)
$267,593.00 28,342 $ 9.44
(Investor C shares) (Investor C shares) (Investor C shares)
Government Securities Fund (new) $0.00 0 $ 0.00
(Fund C) (Primary A shares) (Primary A shares) (Primary A shares)
$0.00 0 $ 0.00
(Investor A shares) (Investor A shares) (Investor A shares)
$0.00 0 $ 0.00
(Investor B shares) (Investor B shares) (Investor B shares)
$0.00 0 $ 0.00
(Investor C shares) (Investor C shares) (Investor C shares)
Pro Forma Combined Fund $55,630,974.00 5,746,515 $ 9.68
(Fund A + Fund C) (Primary A shares) (Primary A shares) (Primary A shares)
$2,607,193.00 268,667 $ 9.70
(Investor A shares) (Investor A shares) (Investor A shares)
$8,645,303.00 893,173 $ 9.68
(Investor B shares) (Investor B shares) (Investor B shares)
$721,153.00 74,478 $ 9.68
(Investor C shares) (Investor C shares) (Investor C shares)
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Shares Outstanding Net Asset Value Per Share
---------------------- --------------------- --------------------------
<S> <C> <C> <C>
Pro Forma Combined Fund $151,990,440.00 16,035,375 $ 9.48
(Fund B + Fund C) (Primary A shares) (Primary A shares) (Primary A shares)
$53,237,827.00 5,623,627 $ 9.47
(Investor A shares) (Investor A shares) (Investor A shares)
$24,939,807.00 2,631,264 $ 9.48
(Investor B shares) (Investor B shares) (Investor B shares)
$267,593.00 28,342 $ 9.44
(Investor C shares) (Investor C shares) (Investor C shares)
Pro Forma Combined Fund $207,621,414.00 21,900,993 $ 9.48
(Fund A + Fund B + Fund C) (Primary A shares) (Primary A shares) (Primary A shares)
$55,845,020.00 5,897,045 $ 9.47
(Investor A shares) (Investor A shares) (Investor A shares)
$33,585,110.00 3,542,733 $ 9.48
(Investor B shares) (Investor B shares) (Investor B shares)
$988,746.00 104,740 $ 9.44
(Investor C shares) (Investor C shares) (Investor C shares)
</TABLE>
The table below shows the capitalization relating to the reorganization of
the Balanced Assets Fund and Asset Allocation Fund into the Asset Allocation
Fund (new).
<TABLE>
<CAPTION>
Total Net Assets Shares Outstanding Net Asset Value Per Share
---------------------- ----------------------- --------------------------
<S> <C> <C> <C>
Balanced Assets Fund $34,074,802.00 3,334,901 $10.22
(Fund A) (Primary A shares) (Primary A shares) (Primary A shares)
$10,069,608.00 986,444 $10.21
(Investor A shares) (Investor A shares) (Investor A shares)
$45,489,386.00 4,464,564 $10.19
(Investor B shares) (Investor B shares) (Investor B shares)
$876,088.00 86,290 $10.15
(Investor C shares) (Investor C shares) (Investor C shares)
Asset Allocation Fund $17,934,129.00 754,634.00 $23.77
(Fund B) (Primary A shares) (Primary A shares) (Primary A shares)
$277,103,861.00 11,663,078 $23.76
(Investor A shares) (Investor A shares) (Investor A shares)
$123,134,728.00 5,207,504 $23.65
(Investor B shares) (Investor B shares) (Investor B shares)
$2,723,922.00 115,060 $23.67
(Investor C shares) (Investor C shares) (Investor C shares)
Asset Allocation Fund (new) $0.00 0 $0.00
(Fund C) (Primary A shares) (Primary A shares) (Primary A shares)
$0.00 0 $0.00
(Investor A shares) (Investor A shares) (Investor A shares)
$0.00 0 $0.00
(Investor B shares) (Investor B shares) (Investor B shares)
$0.00 0 $0.00
(Investor C shares) (Investor C shares) (Investor C shares)
Pro Forma Combined Fund $34,074,802.00 3,334,901 $10.22
(Fund A + Fund C) (Primary A shares) (Primary A shares) (Primary A shares)
$10,069,608.00 986,444 $10.21
(Investor A shares) (Investor A shares) (Investor A shares)
$45,489,368.00 4,464,564 $10.19
(Investor B shares) (Investor B shares) (Investor B shares)
$876,088.00 86,290 $10.15
(Investor C shares) (Investor C shares) (Investor C shares)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Shares Outstanding Net Asset Value Per Share
---------------------- --------------------- --------------------------
<S> <C> <C> <C>
Pro Forma Combined Fund $17,934,129.00 754,634 $23.77
(Fund B + Fund C) (Primary A shares) (Primary A shares) (Primary A shares)
$277,103,861.00 11,663,078 $23.76
(Investor A shares) (Investor A shares) (Investor A shares)
$123,134,728.00 5,207,504 $23.65
(Investor B shares) (Investor B shares) (Investor B shares)
$2,723,922.00 115,060 $23.67
(Investor C shares) (Investor C shares) (Investor C shares)
Pro Forma Combined Fund $52,008,931.00 2,188,007 $23.77
(Fund A + Fund B + Fund C) (Primary A shares) (Primary A shares) (Primary A shares)
$287,173,469.00 12,086,425 $23.76
(Investor A shares) (Investor A shares) (Investor A shares)
$168,624,096.00 7,129,983 $23.65
(Investor B shares) (Investor B shares) (Investor B shares)
$3,600,010.00 152,092 $23.67
(Investor C shares) (Investor C shares) (Investor C shares)
</TABLE>
VOTING MATTERS
General Information
This Proxy/Prospectus is being furnished in connection with the
solicitation of proxies for the Meetings by, and on behalf of, the Boards. It
is expected that the solicitation of proxies will be primarily by mail.
Officers and service contractors of the Trust, the Company and Reserves also
may solicit proxies by telephone or otherwise. In this connection, the Trust,
the Company and Reserves have retained ADP Proxy Services to assist in the
solicitation of proxies. Shareholders may submit their proxy: (1) by mail, by
marking, signing, dating and returning the enclosed proxy ballot(s) in the
enclosed postage-paid envelope; (2) by fax, by marking, signing, dating and
faxing the enclosed proxy ballot(s) to ADP Proxy Services at (704) 388-2641;
(3) by phone at (800) 690-6903; or 4) by on-line voting at www.proxyvote.com.
Any shareholder submitting a proxy may revoke it at any time before it is
exercised at the Meetings by submitting to the Trust, the Company and/or
Reserves a written notice of revocation addressed to the Trust, the Company
and/or Reserves at the address shown on the cover page of this
Proxy/Prospectus, or a subsequently executed proxy or by attending the Meetings
and voting in person.
Any expenses incurred as a result of hiring ADP Proxy Services or any
other proxy solicitation agent will be borne by BAAI and/or its affiliates.
Only shareholders of record at the close of business on January 15, 2001
will be entitled to vote at the Meetings. On that date, xxx,xxx,xxx shares of
the U.S. Government Bond Fund, xxx,xxx,xxx shares of the Government Securities
Fund, xxx,xxx,xxx shares of the Balanced Assets Fund and xxx,xxx,xxx shares of
the Asset Allocation Fund were outstanding and entitled to be voted. Each whole
and fractional share of an Acquired Fund is entitled to a whole or fractional
vote.
If the accompanying proxy ballot(s) is executed and returned in time for
the Meetings, the shares covered thereby will be voted in accordance with the
proxy on all matters that may properly come before the Meetings.
25
<PAGE>
Quorum
A quorum is constituted with respect to the Acquired Funds by the presence
in person or by proxy of the holders of more than one-half of the outstanding
shares of each Acquired Fund entitled to vote at the Meetings. For purposes of
determining the presence of a quorum for transacting business at the Meetings,
abstentions will be treated as shares that are present at the Meetings but
which have not been voted. Accordingly, abstentions will have the effect of a
"no" vote for purposes of obtaining the requisite approvals of each
Reorganization Agreement. Broker "non-votes" (that is, proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owners or other persons entitled to vote shares on a particular
matter with respect to which the brokers or nominees do not have discretionary
power) will be treated the same as abstentions.
In the event that a quorum is not present at the Meetings, or in the event
that a quorum is present at the Meetings but sufficient votes to approve any
Reorganization Agreement are not received by an Acquired Fund, one or more
adjournment(s) may be proposed to permit further solicitation of proxies under
Massachusetts law and the Trust's and Reserves's charter documents, a meeting
may be adjourned for a reasonable period in order to obtain a requisite vote.
Under Maryland state law, any adjourned session or sessions may be held after
the date set for the original Meetings of the U.S. Government Bond Fund and the
Government Securities Fund without notice except announcement at the Meetings,
provided that the Meetings are not adjourned beyond the 120th day from January
15, 2001 (which is the record date). Any such adjournment(s) will require the
affirmative vote of a majority of those shares affected by the adjournment(s)
that are represented at the Meetings in person or by proxy. If a quorum is
present, the persons named as proxies will vote those proxies which they are
entitled to vote FOR the particular proposal for which a quorum exists in favor
of such adjournment(s), and will vote those proxies required to be voted
AGAINST such proposal against any adjournment(s).
Shareholder Approval
Each Reorganization Agreement is being submitted for approval at the
Meetings by each respective Acquired Fund's shareholders pursuant to the
charter documents of the Trust, the Company and Reserves, and were unanimously
approved by their respective Boards at meetings held on August 23, 2000. Each
Reorganization Agreement must be approved by a majority of the shares of each
respective Acquired Fund present at the Meetings in person or by proxy. The
Reorganization of any Acquired Fund is not conditioned upon the Reorganization
of any other Acquired Fund. Accordingly, it is possible that one or more
Acquired Fund(s)' shareholders will not approve the Reorganization and such
Acquired Fund(s) will not be reorganized. In this event, the Board will
consider what further action is appropriate.
A vote of the shareholders of the Acquiring Funds is not being solicited,
since their approval or consent is not necessary for the Reorganization.
Principal Shareholders
The table below shows the name, address and share ownership of each person
known to the Trust, the Company and Reserves to have ownership with respect to
5% or more of a class of an Acquired Fund as of January 15, 2001. Each
shareholder is known to own as of record the shares indicated below. Any
shareholder known to the Trust, the Company and/or Reserves to own such shares
beneficially is designated by an asterisk.
26
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Class; Amount of Percentage Percentage Fund Post
Fund Name and Address Shares Owned of Class of Fund Closing
------ ------------------ ------------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
[TBD]
</TABLE>
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a
company is presumed to "control" such company. Accordingly, to the extent that
a shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class, or is identified as the holder of record of
more than 25% of a class and has voting and/or investment power, it may be
presumed to control such class. As of January 15, 2001, Bank of America had
voting control of [ ]% of the U.S. Government Bond Fund's outstanding
shares, [ ]% of the Government Securities Fund's outstanding shares, [
]% of the Balanced Assets Fund's outstanding shares, and [ ]% of the Asset
Allocation Fund's outstanding shares. Accordingly, the Bank of America may be
considered to "control" such Acquired Funds. The address of Bank of America is:
1401 Elm Street, 11th Floor, Dallas, TX 75202-2911. Bank of America's control
is likely to increase the chance that the Acquired Funds' shareholders will
approve the proposed items.
As of January 15, 2001, the officers and Trustees/Directors of each of the
Trust, the Company and Reserves, as a group, owned less than 1% of any class of
an Acquired Fund.
Annual Meetings and Shareholder Meetings
Neither the Trust, the Company nor Reserves presently holds annual
meetings of shareholders for the election of Trustees/Directors and other
business unless otherwise required by the 1940 Act.
ADDITIONAL INFORMATION ABOUT THE TRUST, THE COMPANY, RESERVES AND NATIONS FUNDS
TRUST
Additional information about the Acquired Funds and Acquiring Funds is
included in their Prospectuses and Statements of Additional Information dated
August 1, 2000, as supplemented, for the Acquired Funds and dated December 27,
2000 for the Acquiring Funds, copies of which, to the extent not included
herewith, may be obtained without charge by writing or calling the Trust, the
Company, Reserves and/or Nations Funds Trust at the address and telephone
number set forth on the first page of this Proxy/Prospectus. The proxy
materials, reports and other information filed by the Trust, the Company and
Reserves can be inspected and copied at the public reference facilities
maintained by the SEC located at 450 5th Street N.W., Washington, D.C. 20549,
and 7 World TradeCenter, Suite 1300, New York, NY 10048. Copies of such
material also can be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549 at prescribed rates. In addition, the SEC maintains a
web site (www.sec.gov) that contains reports, other information and proxy
statements filed by the Trust, the Company and Reserves.
27
<PAGE>
Officers of the Trust, the Company and Reserves are elected by, and serve
at the pleasure of, the Boards of the Trust, the Company and Reserves,
respectively. Officers of the Trust, the Company and Reserves receive no
remuneration from the Trust, the Company and Reserves, respectively, for their
services in such capacities.
FINANCIAL STATEMENTS
The audited financial statements and financial highlights for shares of
the Acquired Funds for the annual period ended March 31, 2000, and unaudited
financial statements for shares of the Acquired Funds for the semi-annual
period ended September 30, 2000, are incorporated by reference in their
prospectuses or statements of additional information, or in the statement of
additional information related to this Proxy/
Prospectus.
The annual financial statements and financial highlights of the Acquired
Funds for the year ended March 31, 2000 have been audited by
PricewaterhouseCoopers LLP, independent accountants, to the extent indicated in
their reports thereon and have been incorporated by reference in the Statement
of Additional Information to this Proxy/Prospectus, in reliance upon such
reports given upon the authority of such firm as an expert in accounting and
auditing.
OTHER BUSINESS
The Boards know of no other business to be brought before the Meetings.
However, if any other matters properly come before the Meetings, it is the
intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Trust, the Company and/or
Reserves in writing at the address, or by phone at the phone number, on the
cover page of this Proxy/Prospectus.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETINGS ARE REQUESTED
TO MARK, SIGN AND DATE THE ENCLOSED PROXY BALLOT(S) AND RETURN IT IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SHAREHOLDERS ALSO MAY SUBMIT PROXIES BY FAX, TELEPHONE OR ON-LINE.
THE TRUST, THE COMPANY AND/OR RESERVES WILL FURNISH, WITHOUT CHARGE,
COPIES OF THE MARCH 31, 2000 ANNUAL REPORT AND THE SEPTEMBER 30, 2000
SEMI-ANNUAL REPORT TO ANY SHAREHOLDER UPON REQUEST ADDRESSED TO: NATIONS FUND
TRUST, NATIONS FUND, INC. OR NATIONS RESERVES, ONE BANK OF AMERICA PLAZA, 101
SOUTH TRYON STREET, CHARLOTTE, N.C. 28255 OR BY TELEPHONE AT 1-800-321-7854.
28
<PAGE>
APPENDIX I
Expense Summaries of Acquired Funds and Acquiring Funds
The following tables describe the fees and expenses associated with
holding Acquired Fund and Acquiring Fund shares. In particular, the tables (a)
compare the fees and expenses as of December 1, 2000, for each class of each
Acquired Fund and the corresponding class of the Acquiring Fund, and (b) show
the estimated fees and expenses for each combined Acquiring Fund on a pro forma
basis after giving effect to the Reorganization.
The fund operating expense levels shown in this Proxy/Prospectus assume
current net asset levels; pro forma expense levels shown should not be
considered an actual representation of future expenses or performance. Such pro
forma expense levels project anticipated levels but may be greater or less than
those shown.
I-1
<PAGE>
U.S. GOVERNMENT BOND FUND
Primary A Shares
<TABLE>
<CAPTION>
Government
Securities Fund (new)
Pro Forma
U.S. Government (After
Bond Fund Reorganization)
----------------- ----------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases ......... none none
Maximum deferred sales charge (load) ..................... none none
Annual Fund Operating Expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees .......................................... 0.50% 0.50%
Other expenses ........................................... 0.54% 0.54%
----- ------
Total annual Fund operating expenses ..................... 1.04% 1.04%
Fee waivers and/or reimbursements ........................ (0.26)% (0.26)%
----- ------
Total net expenses(2,3) .................................. 0.78% 0.78%
===== ======
</TABLE>
--------
1 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
2 Nations U.S. Government Bond 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, so that the Fund's total net expenses, by class, are no
higher than those of the corresponding class of Nations Government
Securities Fund. 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.
3 Administration fees of 0.05% are voluntarily waived by the co-administrator;
however, there is no guarantee that this waiver will continue for any
specified period of time. This waiver is not reflected in the table above.
The total net expense ratio including this waiver is 0.73%
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
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 cost may be higher or lower, based on these
assumptions, your costs would be:
Primary A Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
U.S. Government Bond Fund .............................................. $80 $305 $549 $1,247
Government Securities Fund (new) Pro Forma (after reorganization) ...... $80 $305 $549 $1,247
</TABLE>
I-2
<PAGE>
GOVERNMENT SECURITIES FUND
Primary A Shares
<TABLE>
<CAPTION>
Government
Securities Fund (new)
Pro Forma
Government (After
Securities Fund Reorganization)
----------------- ----------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases .............. none none
Maximum deferred sales charge (load) .......................... none none
Annual Fund Operating Expenses(1)
(Expenses that are deducted from the Fund's assets) .........
Management fees ............................................... 0.50% 0.50%
Other expenses ................................................ 0.38% 0.38%
----- ------
Total annual Fund operating expenses .......................... 0.88% 0.88%
Fee waivers and/or reimbursements ............................. (0.10)% (0.10)%
----- ------
Total net expenses(2,3) ....................................... 0.78% 0.78%
===== ======
</TABLE>
--------
1 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
2 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.
3 Administration fees of 0.05% are voluntarily waived by the co-administrator;
however, there is no guarantee that this waiver will continue for any
specified period of time. This waiver is not reflected in the table above.
The total net expense ratio including this waiver is 0.73%.
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
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 cost may be higher or lower, based on these
assumptions, your costs would be:
Primary A Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Government Securities Fund ............................................. $80 $271 $478 $1,075
Government Securities Fund (new) Pro Forma (after reorganization) ...... $80 $271 $478 $1,075
</TABLE>
I-3
<PAGE>
U.S. GOVERNMENT BOND FUND AND
GOVERNMENT SECURITIES FUND
Primary A Shares
<TABLE>
<CAPTION>
Government
Securities Fund (new)
Pro Forma
U.S. Government Government (After
Bond Fund Securities Fund Reorganization)
----------------- ----------------- ----------------------
<S> <C> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases ......... none none none
Maximum deferred sales charge (load) ..................... none none none
Annual Fund Operating Expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees .......................................... 0.50 % 0.50 % 0.50 %
Other expenses ........................................... 0.54 % 0.38 % 0.38 %
----- ----- -----
Total annual Fund operating expenses ..................... 1.04 % 0.88 % 0.88 %
Fee waivers and/or reimbursements ........................ (0.26)% (0.10)% (0.10)%
------ ------ ------
Total net expenses(2) .................................... 0.78%(3) 0.78%(4) 0.78%(4)
======== ======== =======
</TABLE>
--------
1 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
2 Administration fees of 0.05% are voluntarily waived by the co-administrator;
however, there is no guarantee that this waiver will continue for any
specified period of time. This waiver is not reflected in the table above.
The total net expense ratio including this waiver is 0.73%.
3 Nations U.S. Government Bond 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, so that the Fund's total net expenses, by class, are no
higher than those of the corresponding class of Nations Government
Securities Fund. 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.
4 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.
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
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 cost may be higher or lower, based on these
assumptions, your costs would be:
Primary A Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
U.S. Government Bond Fund .............................................. $80 $305 $549 $1,247
Government Securities Fund ............................................. $80 $271 $478 $1,075
Government Securities Fund (new) Pro Forma (after reorganization) ...... $80 $271 $478 $1,075
</TABLE>
I-4
<PAGE>
U.S. GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
Investor A Shares
Government
Securities Fund (new)
Pro Forma
U.S. Government (After
Bond Fund Reorganization)
----------------- ----------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of offering
price ............................................................. 4.75% 4.75%
Maximum deferred sales charge as a % of net asset value1 ........... none none
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets)
Management fees .................................................... 0.50% 0.50%
Distribution (12b-1) and shareholder servicing fees ................ 0.25% 0.25%
Other expenses ..................................................... 0.54% 0.54%
----- ------
Total annual Fund operating expenses ............................... 1.29% 1.29%
Fee waivers and/or reimbursements .................................. (0.26)% (0.26)%
----- ------
Total net expenses(3,4) ............................................ 1.03% 1.03%
===== ======
</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 the Acquired Fund's or Acquiring Fund's prospectus for more
details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 Nations U.S. Government Bond 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, so that the Fund's total net expenses, by class, are no
higher than those of the corresponding class of Nations Government
Securities Fund. 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.
4 Administration fees of 0.05% are voluntarily waived by the co-administrator;
however, there is no guarantee that this waiver will continue for any
specified period of time. This waiver is not reflected in the table above.
The total net expense ratio including this waiver is 0.98%.
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 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor A Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
U.S. Government Bond Fund ................................................. $575 $841 $1,126 $1,939
Government Securities Fund (new) Pro Forma (after reorganization) ......... $575 $841 $1,126 $1,939
</TABLE>
I-5
<PAGE>
GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
Investor A Shares
Government
Securities Fund (new)
Government Pro Forma
Securities (After
Fund Reorganization)
---------------- ------------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of offering price 4.75% 4.75%
Maximum deferred sales charge as a % of net asset value(1) ................ none none
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets)
Management fees ........................................................... 0.50% 0.50%
Distribution (12b-1) and shareholder servicing fees ....................... 0.25% 0.25%
Other expenses ............................................................ 0.38% 0.38%
------ ------
Total annual Fund operating expenses ...................................... 1.13% 1.13%
Fee waivers and/or reimbursements ......................................... (0.10)% (0.10)%
------ ------
Total net expenses(3,4).................................................... 1.03% 1.03%
====== ======
</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 the Acquired Fund's or Acquiring Fund's prospectus for more
details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 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.
4 Administration fees of 0.05% are voluntarily waived by the co-administrator;
however, there is no guarantee that this waiver will continue for any
specified period of time. This waiver is not reflected in the table above.
The total net expense ratio including this waiver is 0.98%.
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 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor A Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Government Securities Fund ................................................ $575 $808 $1,060 $1,778
Government Securities Fund (new) Pro Forma (after reorganization) ......... $575 $808 $1,060 $1,778
</TABLE>
I-6
<PAGE>
U.S. GOVERNMENT BOND FUND AND
GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
Investor A Shares
Government
Securities Fund (new)
Government Pro Forma
U.S. Government Securities (After
Bond Fund Fund Reorganization)
----------------- ------------ ----------------------
<S> <C> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of
offering price ................................................. 4.75 % 4.75 % 4.75 %
Maximum deferred sales charge as a % of net asset value(1) ....... none none none
Annual Fund Operating Expenses(2)
(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 % 0.25 % 0.25 %
Other expenses ................................................... 0.54 % 0.38 % 0.38 %
----- ----- -----
Total annual Fund operating expenses ............................. 1.29 % 1.13 % 1.13 %
Fee waivers and/or reimbursements ................................ (0.26)% (0.10)% (0.10)%
------ ------ -----
Total net expenses(3) .............................................. 1.03 %(4) 1.03 %(5) 1.03 %(5)
======== ====== =====
</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 the Acquired Fund's or Acquiring Fund's prospectus for more
details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 Administration fees of 0.05% are voluntarily waived by the co-administrator;
however, there is no guarantee that this waiver will continue for any
specified period of time. This waiver is not reflected in the table above.
The total net expense ratio including this waiver is 0.98%.
4 Nations U.S. Government Bond 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, so that the Fund's total net expenses, by class, are no
higher than those of the corresponding class of Nations Government
Securities Fund. 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.
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.
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 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor A Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
U.S. Government Bond Fund ................................................. $575 $841 $1,126 $1,939
Government Securities Fund ................................................ $575 $808 $1,060 $1,778
Government Securities Fund (new) Pro Forma (after reorganization) ......... $575 $808 $1,060 $1,778
</TABLE>
I-7
<PAGE>
U.S. GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
Investor B Shares
Government
Securities Fund (new)
Pro Forma
U.S. Government (After
Bond Fund Reorganization)
----------------- ----------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of offering
price ............................................................. none none
Maximum deferred sales charge as a % of net asset value(1) ......... 5.00 % 5.00 %
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets)
Management fees .................................................... 0.50 % 0.50 %
Distribution (12b-1) and shareholder servicing fees ................ 1.00 % 1.00 %
Other expenses ..................................................... 0.54 % 0.54 %
----- ------
Total annual Fund operating expenses ............................... 2.04 % 2.04 %
Fee waivers and/or reimbursements .................................. (0.26)% (0.26)%
----- ------
Total net expenses(3,4)............................................. 1.78 % 1.78 %
===== ======
</TABLE>
--------
1 This charge decreases over time. Please see the Acquired Fund's or Acquiring
Fund's prospectus for more details. Different charges apply to Investor B
Shares bought before January 1, 1996 and after July 31, 1997. Please see the
Acquired Fund's or Acquiring Fund's prospectus for more details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 Nations U.S. Government Bond 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, so that the Fund's total net expenses, by class, are no
higher than those of the corresponding class of Nations Government
Securities Fund. 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.
4 Administration fees of 0.05% are voluntarily waived by the co-administrator;
however, there is no guarantee that this waiver will continue for any
specified period of time. This waiver is not reflected in the table above.
The total net expense ratio including this waiver is 1.73%.
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 B 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor B Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
U.S. Government Bond Fund ................................................. $681 $915 $1,274 $2,155
Government Securities Fund (new) Pro Forma (after reorganization) ......... $681 $915 $1,274 $2,155
</TABLE>
I-8
<PAGE>
GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
Investor B Shares
Government
Securities Fund (new)
Pro Forma
Government (After
Securities Fund Reorganization)
----------------- ----------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of offering price none none
Maximum deferred sales charge as a % of net asset value(1)................. 5.00% 5.00%
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets) .....................
Management fees ........................................................... 0.50% 0.50%
Distribution (12b-1) and shareholder servicing fees ....................... 1.00% 1.00%
Other expenses ............................................................ 0.38% 0.38%
----- ------
Total annual Fund operating expenses ...................................... 1.88% 1.88%
Fee waivers and/or reimbursements ......................................... (0.10)% (0.10)%
----- ------
Total net expenses(3,4) ..................................................... 1.78% 1.78%
===== ======
</TABLE>
--------
1 This charge decreases over time. Please see the Acquired Fund's or Acquiring
Fund's prospectus for more details. Different charges apply to Investor B
Shares bought before January 1, 1996 and after July 31, 1997. Please see the
Acquired Fund's or Acquiring Fund's prospectus for more details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 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.
4 Administration fees of 0.05% are voluntarily waived by the co-administrator;
however, there is no guarantee that this waiver will continue for any
specified period of time. This waiver is not reflected in the table above.
The total net expense ratio including this waiver is 1.73%.
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 B 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor B Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Government Securities Fund ............................................... $681 $881 $1,207 $1,997
Government Securities Fund (new) Pro Forma (after reorganization) ........ $681 $881 $1,207 $1,997
</TABLE>
I-9
<PAGE>
U.S. GOVERNMENT BOND FUND AND
GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
Investor B Shares
Government
Securities Fund (new)
Pro Forma
U.S. Government Government (After
Bond Fund Securities Fund Reorganization)
----------------- ----------------- ----------------------
<S> <C> <C> <C>
Shareholder Fees
(Fees paid directly from your investment) ......................
Maximum sales charge (load) imposed on purchases, as a %
of offering price .............................................. none none none
Maximum deferred sales charge as a % of net asset value(1) ......... 5.00 % 5.00 % 5.00 %
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets) ............
Management fees .................................................. 0.50 % 0.50 % 0.50 %
Distribution (12b-1) and shareholder servicing fees .............. 1.00 % 1.00 % 1.00 %
Other expenses ................................................... 0.54 % 0.38 % 0.38 %
----- ----- -----
Total annual Fund operating expenses ............................. 2.04 % 1.88 % 1.88 %
Fee waivers and/or reimbursements ................................ (0.26)% (0.10)% (0.10)%
------ ------ -----
Total net expenses3 .............................................. 1.78 %(4) 1.78 %(5) 1.78 %(5)
======== ======== =====
</TABLE>
--------
1 This charge decreases over time. Please see the Acquired Fund's or Acquiring
Fund's prospectus for more details. Different charges apply to Investor B
Shares bought before January 1, 1996 and after July 31, 1997. Please see the
Acquired Fund's or Acquiring Fund's prospectus for more details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 Administration fees of 0.05% are voluntarily waived by the co-administrator;
however, there is no guarantee that this waiver will continue for any
specified period of time. This waiver is not reflected in the table above.
The total net expense ratio including this waiver is 1.73%.
4 Nations U.S. Government Bond 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, so that the Fund's total net expenses, by class, are no
higher than those of the corresponding class of Nations Government
Securities Fund. 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.
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.
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 B 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor B Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
U.S. Government Bond Fund ................................................. $681 $915 $1,274 $2,155
Government Securities Fund ................................................ $681 $881 $1,207 $1,997
Government Securities Fund (new) Pro Forma (after reorganization) ......... $681 $881 $1,207 $1,997
</TABLE>
I-10
<PAGE>
U.S. GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
Investor C Shares
Government
Securities Fund (new)
Pro Forma
U.S. Government (After
Bond Fund Reorganization)
----------------- ----------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment) ......................
Maximum sales charge (load) imposed on purchases, as a % of
offering price ................................................. none none
Maximum deferred sales charge as a % of net asset value(1) ....... 1.00 % 1.00 %
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets) ............
Management fees .................................................. 0.50 % 0.50 %
Distribution (12b-1) and shareholder servicing fees .............. 1.00 % 1.00 %
Other expenses ................................................... 0.54 % 0.54 %
----- ------
Total annual Fund operating expenses ............................. 2.04 % 2.04 %
Fee waivers and/or reimbursements ................................ (0.26)% (0.26)%
----- ------
Total net expenses(3,4)........................................... 1.78 % 1.78 %
===== ======
</TABLE>
--------
1 This charge applies to investors who buy Investor C Shares and sell them
within one year of buying them. Please see the Acquired Fund's or Acquiring
Fund's prospectus for more details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 Nations U.S. Government Bond 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, so that the Fund's total net expenses, by class, are no
higher than those of the corresponding class of Nations Government
Securities Fund. 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.
4 Administration fees of 0.05% are voluntarily waived by the co-administrator;
however, there is no guarantee that this waiver will continue for any
specified period of time. This waiver is not reflected in the table above.
The total net expense ratio including this waiver is 1.73%.
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 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 cost may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- ----------- ---------
Investor C Shares
<S> <C> <C> <C> <C>
U.S. Government Bond Fund ................................................. $281 $615 $ 1,074 $2,348
Government Securities Fund (new) Pro Forma (after reorganization) ......... $281 $615 $ 1.074 $2,348
</TABLE>
I-11
<PAGE>
GOVERNMENT SECURITIES FUND
Investor C Shares
<TABLE>
<CAPTION>
Government
Securities Fund (new)
Pro Forma
Government (After
Securities Fund Reorganization)
----------------- ----------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment) ...............................
Maximum sales charge (load) imposed on purchases, as a % of offering price none none
Maximum deferred sales charge as a % of net asset value(1) ................ 1.00 % 1.00 %
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets) .....................
Management fees ........................................................... 0.50 % 0.50 %
Distribution (12b-1) and shareholder servicing fees ....................... 1.00 % 1.00 %
Other expenses ............................................................ 0.38 % 0.38 %
----- ------
Total annual Fund operating expenses ...................................... 1.88 % 1.88 %
Fee waivers and/or reimbursements ......................................... (0.10)% (0.10)%
----- ------
Total net expenses(3,4).................................................... 1.78 % 1.78 %
===== ======
</TABLE>
--------
1 This charge applies to investors who buy Investor C Shares and sell them
within one year of buying them. Please see the Acquired Fund's or Acquiring
Fund's prospectus for more details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 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.
4 Administration fees of 0.05% are voluntarily waived by the co-administrator;
however, there is no guarantee that this waiver will continue for any
specified period of time. This waiver is not reflected in the table above.
The total net expense ratio including this waiver is 1.73%.
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 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor C Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Government Securities Fund ............................................... $281 $560 $964 $2,095
Government Securities Fund (new) Pro Forma (after reorganization) ........ $281 $560 $964 $2,095
</TABLE>
I-12
<PAGE>
U.S. GOVERNMENT BOND FUND AND
GOVERNMENT SECURITIES FUND
Investor C Shares
<TABLE>
<CAPTION>
Government
Securities Fund (new)
Government Pro Forma
U.S. Government Securities (After
Bond Fund Fund Reorganization)
----------------- ------------ ----------------------
<S> <C> <C> <C>
Shareholder Fees
(Fees paid directly from your investment) ......................
Maximum sales charge (load) imposed on purchases, as a % of
offering price ................................................. none none none
Maximum deferred sales charge as a % of net asset value(1) ....... 1.00 % 1.00 % 1.00 %
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets) ............
Management fees .................................................. 0.50 % 0.50 % 0.50 %
Distribution (12b-1) and shareholder servicing fees .............. 1.00 % 1.00 % 1.00 %
Other expenses ................................................... 0.54 % 0.38 % 0.38 %
----- ----- -----
Total annual Fund operating expenses ............................. 2.04 % 1.88 % 1.88 %
Fee waivers and/or reimbursements ................................ (0.26) % (0.10)% (0.10)%
------ ------ ------
Total net expenses(3) ............................................ 1.78 %(4) 1.78 %(5) 1.78 %(5)
======== ======== ======
</TABLE>
--------
1 This charge applies to investors who buy Investor C Shares and sell them
within one year of buying them. Please see the Acquired Fund's or Acquiring
Fund's prospectus for more details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 Administration fees of 0.05% are voluntarily waived by the co-administrator;
however, there is no guarantee that this waiver will continue for any
specified period of time. This waiver is not reflected in the table above.
The total net expense ratio including this waiver is 1.73%.
4 Nations U.S. Government Bond 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, so that the Fund's total net expenses, by class, are no
higher than those of the corresponding class of Nations Government
Securities Fund. 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.
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.
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 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 cost may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
Investor C Shares
<S> <C> <C> <C> <C>
U.S. Government Bond Fund ................................................. $281 $615 $1,074 $2,348
Government Securities Fund ................................................ $281 $560 $ 964 $2,095
Government Securities Fund (new) Pro Forma (after reorganization) ......... $281 $560 $ 964 $2,095
</TABLE>
I-13
<PAGE>
BALANCED ASSETS FUND
Primary A Shares
<TABLE>
<CAPTION>
Asset Allocation
Fund (new) Pro Forma
Balanced (After
Assets Fund Reorganization)
------------- ---------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment) ...................
Maximum sales charge (load) imposed on purchases .............. none none
Maximum deferred sales charge (load) .......................... none none
Annual Fund Operating Expenses(1)
(Expenses that are deducted from the Fund's assets) .........
Management fees ............................................... 0.65 % 0.65 %
Other expenses ................................................ 0.54 % 0.54 %
----- -----
Total annual Fund operating expenses .......................... 1.19 % 1.19 %
=====
Fee waivers and/or reimbursements ............................. (0.19)% (0.19)%
----- -----
Total net expenses(2) ......................................... 1.00 % 1.00 %
===== =====
</TABLE>
--------
1 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service fees.
2 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 so that
the Fund's total net expenses, by class, are no higher than those of the
corresponding class of Nations Asset Allocation Fund. The figure shown here
is after waivers and/or reimbursements. There is no guarantee that those
waivers and/or reimbursements will continue after this date.
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
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 cost may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
Primary A Shares
<S> <C> <C> <C> <C>
Balanced Assets Fund .................................................. $102 $359 $636 $1,426
Asset Allocation Fund (new) Pro Forma (after reorganization) .......... $102 $359 $636 $1,426
</TABLE>
I-14
<PAGE>
ASSET ALLOCATION FUND
Primary A Shares
<TABLE>
<CAPTION>
Asset Allocation
Asset Fund (new) Pro Forma
Allocation (After
Fund Reorganization)
------------ ---------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases ......... none none
Maximum deferred sales charge (load) ..................... none none
Annual Fund Operating Expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees .......................................... 0.65% 0.65%
Other expenses ........................................... 0.35% 0.35%
----- -----
Total annual Fund operating expenses ..................... 1.00% 1.00%
===== =====
</TABLE>
--------
1 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
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 cost may be higher or lower, based on these
assumptions, your costs would be:
Primary A Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Asset Allocation Fund ................................................. $102 $318 $552 $1,225
Asset Allocation Fund (new) Pro Forma (after reorganization) .......... $102 $318 $552 $1,225
</TABLE>
I-15
<PAGE>
BALANCED ASSETS FUND AND
ASSET ALLOCATION FUND
Primary A Shares
<TABLE>
<CAPTION>
Asset Allocation
Asset Fund (new) Pro Forma
Balanced Allocation (After
Assets Fund Fund Reorganization)
------------- ------------ ---------------------
<S> <C> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases ......... none none none
Maximum deferred sales charge (load) ..................... none none none
Annual Fund Operating Expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees .......................................... 0.65 % 0.65% 0.65%
Other expenses ........................................... 0.54 % 0.35% 0.35%
----- ----- -----
Total annual Fund operating expenses ..................... 1.19 % 1.00% 1.00%
===== =====
Fee waivers and/or reimbursements ........................ (0.19)% N/A N/A
------
Total net expenses ....................................... 1.00 %(2) N/A N/A
========
</TABLE>
--------
1 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
2 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 so that
the Fund's total net expenses, by class, are no higher than those of the
corresponding class of Nations Asset Allocation Fund. 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.
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
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 cost may be higher or lower, based on these
assumptions, your costs would be:
Primary A Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced Assets Fund .................................................. $102 $359 $636 $1,426
Asset Allocation Fund ................................................. $102 $318 $552 $1,225
Asset Allocation Fund (new) Pro Forma (after reorganization) .......... $102 $318 $552 $1,225
</TABLE>
I-16
<PAGE>
BALANCED ASSETS FUND
<TABLE>
<CAPTION>
Investor A Shares
Asset Allocation
Fund (new) Pro Forma
Balanced (After
Shareholder Fees Assets Fund Reorganization)
------------ ---------------
<S> <C> <C>
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of offering price 5.75 % 5.75 %
Maximum deferred sales charge as a % of net asset value(1) ................ none none
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets)
Management fees ........................................................... 0.65 % 0.65 %
Distribution (12b-1) and shareholder servicing fees ....................... 0.25 % 0.25 %
Other expenses ............................................................ 0.54 % 0.54 %
------ -----
Total annual Fund operating expenses ...................................... 1.44 % 1.44 %
=====
Fee waivers and/or reimbursements ......................................... (0.19)% (0.19)%
------ -----
Total net expenses(3)...................................................... 1.25 % 1.25 %
====== =====
</TABLE>
--------
1 A 1.00% maximum deferred sales charge applies to investors who buy $1 million
or more of Investor A Shares and sell them within eighteen months of buying
them. Different charges may apply to purchases made prior to August 1, 1999.
Please see the Acquired Fund's or Acquiring Fund's prospectus for more
details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 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 so that
the Fund's total net expenses, by class, are no higher than those of the
corresponding class of Nations Asset Allocation Fund. 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.
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 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor A Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced Assets Fund .................................................. $695 $988 $1,301 $2,188
Asset Allocation Fund (new) Pro Forma (after reorganization) .......... $695 $988 $1,301 $2,188
</TABLE>
I-17
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
Investor A Shares
Asset Allocation
Asset Fund (new) Pro Forma
Allocation (After
Fund Reorganization)
------------ ---------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of offering
price ............................................................ 5.75% 5.75%
Maximum deferred sales charge as a % of net asset value(1) ........... none none
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets)
Management fees .................................................... 0.65% 0.65%
Distribution (12b-1) and shareholder servicing fees ................ 0.25% 0.25%
Other expenses ..................................................... 0.35% 0.35%
----- -----
Total annual Fund operating expenses ............................... 1.25% 1.25%
===== =====
</TABLE>
--------
1 A 1.00% maximum deferred sales charge applies to investors who buy $1 million
or more of Investor A Shares and sell them within eighteen months of buying
them. Different charges may apply to purchases made prior to August 1, 1999.
Please see the Acquired Fund's or Acquiring Fund's prospectus for more
details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
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 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor A Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Asset Allocation Fund ................................................. $695 $949 $1,223 $2,002
Asset Allocation Fund (new) Pro Forma (after reorganization) .......... $695 $949 $1,223 $2,002
</TABLE>
I-18
<PAGE>
BALANCED ASSETS FUND AND
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
Investor A Shares
Asset Allocation
Asset Fund (new) Pro Forma
Balanced Allocation (After
Assets Fund Fund Reorganization)
------------- ------------ ---------------------
<S> <C> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of
offering price .................................................. 5.75 % 5.75% 5.75%
Maximum deferred sales charge as a % of net asset value(1) ....... none none none
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets)
Management fees .................................................. 0.65 % 0.65% 0.65%
Distribution (12b-1) and shareholder servicing fees .............. 0.25 % 0.25% 0.25%
Other expenses ................................................... 0.54 % 0.35% 0.35%
----- ----- -----
Total annual Fund operating expenses ............................. 1.44 % 1.25% 1.25%
===== =====
Fee waivers and/or reimbursements ................................ (0.19)% N/A N/A
------
Total net expenses ............................................... 1.25 %(3) N/A N/A
======
</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 the Acquired Fund's or Acquiring Fund's prospectus for more
details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 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 so that
the Fund's total net expenses, by class, are no higher than those of the
corresponding class of Nations Asset Allocation Fund. 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.
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 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor A Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced Assets Fund .................................................. $695 $988 $1,301 $2,188
Asset Allocation Fund ................................................. $695 $949 $1,223 $2,002
Asset Allocation Fund (new) Pro Forma (after reorganization) .......... $695 $949 $1,223 $2,002
</TABLE>
I-19
<PAGE>
BALANCED ASSETS FUND
<TABLE>
<CAPTION>
Investor B Shares
Asset Allocation
Fund (new) Pro Forma
Balanced (After
Assets Fund Reorganization)
------------- ---------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of offering price none none
Maximum deferred sales charge as a % of net asset value(1) ................ 5.00 % 5.00 %
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets)
Management fees ........................................................... 0.65 % 0.65 %
Distribution (12b-1) and shareholder servicing fees ....................... 1.00 % 1.00 %
Other expenses ............................................................ 0.54 % 0.54 %
----- -----
Total annual Fund operating expenses ...................................... 2.19 % 2.19 %
=====
Fee waivers and/or reimbursements ......................................... (0.19)% (0.19)%
----- -----
Total net expenses(3) ....................................................... 2.00 % 2.00 %
===== =====
</TABLE>
--------
1 This charge decreases over time. Please see the Acquired Fund's or Acquiring
Fund's prospectus for more details. Different charges apply to Investor B
Shares bought before January 1, 1996 and after July 31, 1997. Please see the
Acquired Fund's or Acquiring Fund's prospectus for more details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 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 so that
the Fund's total net expenses, by class, are no higher than those of the
corresponding class of Nations Asset Allocation Fund. 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.
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 B 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor B Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced Assets Fund .................................................. $703 $967 $1,357 $2,319
Asset Allocation Fund (new) Pro Forma (after reorganization) .......... $703 $967 $1,357 $2,319
</TABLE>
I-20
<PAGE>
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
Investor B Shares
Asset Allocation
Asset Fund (new) Pro Forma
Allocation (After
Fund Reorganization)
------------ ---------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of offering
price ............................................................ none none
Maximum deferred sales charge as a % of net asset value(1) ......... 5.00% 5.00%
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets)
Management fees .................................................... 0.65% 0.65%
Distribution (12b-1) and shareholder servicing fees ................ 1.00% 1.00%
Other expenses ..................................................... 0.35% 0.35%
----- -----
Total annual Fund operating expenses ............................... 2.00% 2.00%
===== =====
</TABLE>
--------
1 This charge decreases over time. Please see the Acquired Fund's or Acquiring
Fund's prospectus for more details. Different charges apply to Investor B
Shares bought before January 1, 1996 and after July 31, 1997. Please see the
Acquired Fund's or Acquiring Fund's prospectus for more details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
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 B 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor B Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Asset Allocation Fund ................................................. $703 $927 $1,278 $2,134
Asset Allocation Fund (new) Pro Forma (after reorganization) .......... $703 $927 $1,278 $2,134
</TABLE>
I-21
<PAGE>
BALANCED ASSETS FUND AND
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
Investor B Shares
Asset Allocation
Asset Fund (new) Pro Forma
Balanced Allocation (After
Assets Fund Fund Reorganization)
------------- ------------ ---------------------
<S> <C> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of
offering price .................................................. none none none
Maximum deferred sales charge as a % of net asset value(1) ....... 5.00 % 5.00% 5.00%
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets)
Management fees .................................................. 0.65 % 0.65% 0.65%
Distribution (12b-1) and shareholder servicing fees .............. 1.00 % 1.00% 1.00%
Other expenses ................................................... 0.54 % 0.35% 0.35%
----- ----- -----
Total annual Fund operating expenses ............................. 2.19 % 2.00% 2.00%
===== =====
Fee waivers and/or reimbursements ................................ (0.19)% N/A N/A
------
Total net expenses ............................................... 2.00 %(3) N/A N/A
========
</TABLE>
--------
1 This charge decreases over time. Please see the Acquired Fund's or Acquiring
Fund's prospectus for more details. Different charges apply to Investor B
Shares bought before January 1, 1996 and after July 31, 1997. Please see the
Acquired Fund's or Acquiring Fund's prospectus for more details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 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 so that
the Fund's total net expenses, by class, are no higher than those of the
corresponding class of Nations Asset Allocation Fund. 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.
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 B 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor B Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced Assets Fund .................................................. $703 $967 $1,357 $2,319
Asset Allocation Fund ................................................. $703 $927 $1,278 $2,134
Asset Allocation Fund (new) Pro Forma (after reorganization) .......... $703 $927 $1,278 $2,134
</TABLE>
I-22
<PAGE>
BALANCED ASSETS FUND
Investor C Shares
<TABLE>
<CAPTION>
Asset Allocation
Fund (new) Pro Forma
Balanced (After
Assets Fund Reorganization)
------------- ---------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of offering
price ............................................................ none none
Maximum deferred sales charge as a % of net asset value(1) ......... 1.00 % 1.00 %
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets) ..............
Management fees .................................................... 0.65 % 0.65 %
Distribution (12b-1) and shareholder servicing fees ................ 1.00 % 1.00 %
Other expenses ..................................................... 0.54 % 0.54 %
----- -----
Total annual Fund operating expenses ............................... 2.19 % 2.19 %
=====
Fee waivers and/or reimbursements .................................. (0.19)% (0.19)%
----- -----
Total net expenses(3) .............................................. 2.00 % 2.00 %
===== =====
</TABLE>
--------
1 This charge applies to investors who buy Investor C Shares and sell them
within one year of buying them. Please see the Acquired Fund's or Acquiring
Fund's prospectus for more details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 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, 2000 so that
the Fund's total net expenses, by class, are no higher than those of the
corresponding class of Nations Asset Allocation Fund. 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.
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 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 cost may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
Investor C Shares
<S> <C> <C> <C> <C>
Balanced Assets Fund .................................................. $303 $667 $1,157 $2,509
Asset Allocation Fund (new) Pro Forma (after reorganization) .......... $303 $667 $1,157 $2,509
</TABLE>
I-23
<PAGE>
ASSET ALLOCATION FUND
Investor C Shares
<TABLE>
<CAPTION>
Asset Allocation
Fund (new) Pro Forma
Asset (After
Allocation Fund Reorganization)
----------------- ---------------------
<S> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of
offering price ................................................. none none
Maximum deferred sales charge as a % of net asset value(1) ....... 1.00% 1.00%
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets) ............
Management fees .................................................. 0.65% 0.65%
Distribution (12b-1) and shareholder servicing fees .............. 1.00% 1.00%
Other expenses ................................................... 0.35% 0.35%
----- -----
Total annual Fund operating expenses ............................. 2.00% 2.00%
===== =====
</TABLE>
--------
1 This charge applies to investors who buy Investor C Shares and sell them
within one year of buying them. Please see the Acquired Fund's or Acquiring
Fund's prospectus for more details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
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 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 cost may be higher or lower, based on these
assumptions, your costs would be:
Investor C Shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Asset Allocation Fund ................................................. $303 $627 $1,078 $2,327
Asset Allocation Fund (new) Pro Forma (after reorganization) .......... $303 $627 $1,078 $2,327
</TABLE>
I-24
<PAGE>
BALANCED ASSETS FUND AND
ASSET ALLOCATION FUND
Investor C Shares
<TABLE>
<CAPTION>
Asset Allocation
Asset Fund (new) Pro Forma
Balanced Allocation (After
Assets Fund Fund Reorganization)
------------- ------------ ---------------------
<S> <C> <C> <C>
Shareholder Fees
(Fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases, as a % of
offering price ................................................. none none none
Maximum deferred sales charge as a % of net asset value(1) ......... 1.00 % 1.00% 1.00%
Annual Fund Operating Expenses(2)
(Expenses that are deducted from the Fund's assets) ............
Management fees .................................................. 0.65 % 0.65% 0.65%
Distribution (12b-1) and shareholder servicing fees .............. 1.00 % 1.00% 1.00%
Other expenses ................................................... 0.54 % 0.35% 0.35%
----- ----- -----
Total annual Fund operating expenses ............................. 2.19 % 2.00% 2.00%
===== =====
Fee waivers and/or reimbursements ................................ (0.19)% N/A N/A
------
Total net expenses ............................................... 2.00 %(3) N/A N/A
========
</TABLE>
--------
1 This charge applies to investors who buy Investor C Shares and sell them
within one year of buying them. Please see the Acquired Fund's or Acquiring
Fund's prospectus for more details.
2 The figures contained in the above table are based on amounts incurred during
the Fund's most recent fiscal year and have been adjusted, as necessary to
reflect current service provider fees.
3 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 so that
the Fund's total net expenses, by class, are no higher than those of the
corresponding class of Nations Asset Allocation Fund. The figure shown here
is after wiavers and/or reimbursements. There is no guarantee that these
waivers and/or reimbursements will continue after this date.
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 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 cost may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
Investor C Shares
<S> <C> <C> <C> <C>
Balanced Assets Fund .................................................. $303 $667 $1,157 $2,509
Asset Allocation Fund ................................................. $303 $627 $1,078 $2,327
Asset Allocation Fund (new) Pro Forma (after reorganization) .......... $303 $627 $1,078 $2,327
</TABLE>
I-25
<PAGE>
APPENDIX II
Management's Discussion of Acquired Fund Performance
Nations Balanced Assets Fund
Investment Strategies Team commentary*
Portfolio Management
The Fund is managed by the Investment Strategies Team of Banc of America
Capital Management, Inc., investment sub-adviser to the Fund.
Investment Objective
The Fund seeks total return by investing in equity and fixed income securities.
Performance Review
For the 12-month period ended March 31, 2000, Nations Balanced Assets Fund
Investor A Shares provided shareholders with a total return of 0.47%.**
In the following interview, the team shares its views on Nations Balanced
Assets Fund's performance for the 12-month period ended March 31, 2000 and its
outlook for the future.
Please describe the Fund's Investment philosophy and style.
The Fund seeks to provide shareholders with the potential for solid returns
with reduced overall portfolio risk. It allocates its assets among a
diversified portfolio of stocks, fixed-income securities and money market
instruments -- all of which have different return/risk characteristics. The
Fund invests primarily in stocks of high-quality companies with long-term
fundamentals believed favorable and trading at we think are attractive
valuations. Its fixed income holdings consist of investment-grade securities.
Management of the equity portion of the Fund is based on the premise that
companies' stock prices are more volatile than their underlying business
fundamentals and that active security selection improves performance over time.
We also believe that proprietary research is a critical component of investment
success and, that opportunities are best uncovered by a constant search for new
information. In addition, we believe that the reward for assuming risk varies
over time. As a result, in our view, dynamic risk management should increase
performance consistency.
Within this framework, the Fund's equity style is a value approach where the
management team seeks superior returns by investing in sound, proven businesses
that are thought to be inexpensive relative to their intrinsic value. This
approach also reflects a long-term view of value investing with its potential
long-term rewards. The management of the fixed income portion is based on our
belief that returns and consistency of returns are enhanced through a
disciplined risk management process that seeks to control interest rate risk and
emphasizes a quantitative approach to sector allocation, sector rotation and
relative value security selection.
Please comment on Fund performance for the period.
Nations Balanced Assets Fund offers investors the opportunity to invest in the
stocks of high-quality companies with long-term fundamentals believed
favorable, selling at what we think are attractive valuation levels. The fixed
income portion consists of high-quality securities. Over the reporting period,
the stock market did little to reward investors with a valuation focus, while
the bond market suffered through one of its worst declines in the last 10
years. The Fund's return reflects these occurrences. However, we believe that
investors with a long-term horizon should benefit with solid returns from the
strategies represented by both the equity and fixed income portions of the
portfolio while incurring reduced overall portfolio risk.
*The outlook for this Fund may differ from that presented for other Nations
Funds mutual funds.
**The performance shown does not reflect the maximum front-end sales charge of
5.75%, which may apply to purchases of Investor A Shares. For standardized
performance, please refer to the Performance table. The performance shown
includes the effect of fee waivers by the investment adviser and the
co-administrator, which have the effect of increasing total return.
Source for all statistical data -- Banc of America Capital Management, Inc.
Past performance is no guarantee of future results.
II-1
<PAGE>
Nations Balanced Assets Fund
Investment Strategies Team commentary continued
What was the investment environment for the Fund during the fiscal year?
The stock market was, once again, dominated by growth stocks, particularly
technology and communications services companies. In fact, the market propelled
a very narrow group of large capitalization, high price-to-earnings stocks
forward, leaving more undervalued companies we consider to have more attractive
valuation measures in their wake. Momentum investing carried the day, as
investors continued to flock to very highly valued technology and communication
stocks. Many of these companies did not fit the valuation criteria used in the
equity portion of Nations Balanced Assets Fund, which maintains a focus on
value measures.
The bond market experienced one of its most volatile periods in history because
of a confluence of factors. These factors included: the combination of a strong
U.S. economy, fears of a Y2K disaster, the announcement of a U.S. Treasury debt
reduction program, the dramatic increase in oil prices, and the recent proposal
to eliminate the implied government guarantee on some government agency
securities. In general, interest rates rose and bond prices declined.
What factors affected the performance in the stock portion of the portfolio?***
As might be expected, the technology stocks in the portfolio performed the
best, rising 93.4% compared to 78.4% for the technology sector of the Standard
& Poor's 500 Composite Stock Price Index (S&P 500 Index).+ However, we believed
it was prudent to continue to take profits in these companies as they reached
the price objectives we had set. Consequently, we reduced the weighting in the
sector throughout the year. At year-end March 31, 2000, the Fund's technology
weighting was 16.7%, compared to a 34.0% weight for the technology sector of
the S&P 500 Index. This decision hurt performance, but was in keeping with the
Fund's investment strategy. The Fund's holdings during the year included Apple
Computer Inc., which gained 278%, and Sun Microsystems which gained nearly
200%. Currently, our holdings include International Business Machines
Corporation, Xerox Corporation and Pitney Bowes, Inc. -- more traditional,
undervalued companies selling substantially below their fair value, in our
opinion, with catalysts for improvement over the next 12 to 18 months.
The financial sector's weighting was 16.2% at the end of the period and
represented the second largest portion of the Fund's equity assets. This sector
within the S&P 500 Index declined about 1% for the period, as interest rates
continued to move upward. We believe valuations are compelling, particularly in
the large, money center banks, Citigroup Inc. and Chase Manhattan Corporation;
Mellon Financial Corporation, the well diversified, regional bank holding
company; and Paine Webber Group, Inc., a brokerage firm we think undervalued.
***Portfolio holdings and characteristics are subject to change and may not be
representative of current holdings and characteristics.
+The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 widely held common stocks. It is unavailable for investment.
II-2
<PAGE>
Nations Balanced Assets Fund
Investment Strategies Team commentary continued
What factors affected the performance of the bond portion of the portfolio?
Despite the volatility, we remained faithful to our strategy of seeking to
maximize the yield of the portfolio while minimizing its risk relative to the
benchmark. While this may cause some interim performance volatility, we believe
the strategy will produce superior returns over time. Our strategic
overweighting of the corporate bond and mortgage-backed securities sectors
helped performance in a difficult environment.
What investment opportunities do you anticipate in the equity market during the
next year, and how have you positioned the portfolio to take advantage of these
opportunities?
First, we believe the tremendous increase in the value of technology stocks will
dissipate over the coming year as stocks in this sector are now selling, on
average, at incredibly high levels relative to what we think are their
sustainable growth rates. Therefore, we have underweighted the technology sector
relative to the market (S&P 500 Index), and have major representation in just
those stocks that we believe should continue to perform well with strong
dominance in their respective markets -- IBM, Xerox and Pitney Bowes.
Second, we have overweighted the financial sector. When viewed from a
demographic as well as from a bottom-up, valuation approach, we think these
companies represent substantial opportunity for the long-term investor.
Third, we anticipate improvement in the economies of our global trading
partners, Europe, Asia (ex-Japan) and Latin America in 2000 and beyond. We have
invested in commodity-like companies, such as Alcoa Inc., Nucor Corporation and
Weyerhaeuser Company and multi-national conglomerates such as United
Technologies Corporation, Honeywell International Inc., Rockwell International
Corporation and Emerson Electric Company. These stocks appear to be selling
substantially below their potential earnings power and dividend-paying
capabilities.
What investment opportunities do you anticipate in the fixed income market, and
how are you positioning the portfolio?
On the fixed income side, our expectations are for the Federal Reserve Board to
raise the Federal Funds rate to slow the U.S. economy at least one more time --
to 6.25%. While there is a risk of additional rate increases, the recent
volatility in the stock market should help to dampen consumer confidence and
U.S. GDP (gross domestic product) growth.
The yield advantages -- or "spreads" -- of corporate, mortgage-backed and
asset-backed securities over the yields of U.S. Treasuries are higher than at
any point since the recession of 1991. We expect to continue to add incremental
exposure to corporate bonds, mortgage-backed and asset-backed securities as
these yield advantages grow larger. We believe that once the markets stabilize,
these sectors will enhance the return potential of the portfolio.
II-3
<PAGE>
Nations Balanced Assets Fund
--------------------------------------------------------------------------------
Portfolio breakdown (as a % of net assets as of 3/31/00)
(PIE CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS.)
2.2% Telecommunications
2.5% Oil - International
2.6% Computer related
3.3% Federal Home Loan
Mortgage Corporation
(FHLMC) certificates
3.8% Banking and finance
4.5% Banking
5.4% Utilities - telephone
6.5% Financial Services
8.7% Commercial
mortgage-backed
securities
9.5% Federal National Mortgage
Association (FNMA)
certificates
51.0% Other
Portfolio holdings were current as of March 31, 2000, are subject to change and
may not be representative of current holdings.
Top 10 holdings
--------------------------------------------------------------------------------
1 Exxon Mobil Corporation 1.6%
--------------------------------------------------------------------------------
2 Chase Manhattan Corporation 1.6%
--------------------------------------------------------------------------------
3 Citigroup Inc. 1.4%
--------------------------------------------------------------------------------
4 United Technologies Corporation 1.3%
--------------------------------------------------------------------------------
5 Honeywell International Inc. 1.2%
--------------------------------------------------------------------------------
6 Briston-Meyers Squibb Company 1.2%
--------------------------------------------------------------------------------
7 Lincoln National Corporation Ltd. 1.2%
--------------------------------------------------------------------------------
8 Mellon Financial Corporation 1.2%
--------------------------------------------------------------------------------
9 Ford Motor Company 1.2%
--------------------------------------------------------------------------------
10 Target Corporation 1.1%
--------------------------------------------------------------------------------
The top 10 holdings are presented to illustrate examples of the industries and
securities in which the Fund may invest.
II-4
<PAGE>
Nations Balanced Assets Fund
Performance
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
Investor A Shares at MOP* (as of 3/31/00)
Assumes the reinvestment of all distributions.
(BAR GRAPH APPEARS HERE WITH THE FOLLOWING PLOT POINTS.)
Nations Lipper Standard & Lehman
Balanced Balanced Poor's Aggregate
Assets Funds 500 Bond
Fund Universe Index Index
Oct. 2
1992 10000 10000 10000 10000
10372 10396 10504 10027
10800 10830 10963 10441
11067 11003 11017 10718
11310 11387 11301 10998
1993 11361 11548 11563 11004
11014 11178 11125 10688
10668 11058 11172 10578
11078 11387 11718 10643
1994 11001 11269 11716 10683
11623 11984 12857 11222
12585 12862 14085 11905
13254 13575 15204 12138
1995 13867 14146 16120 12655
14328 14523 16985 12431
14710 14875 17748 12502
15043 15279 18296 12734
1996 15858 16114 19820 13116
15072 16118 20351 13042
17697 17786 23907 13521
19095 18992 25695 13970
1997 19244 19233 26432 14380
20916 20706 30120 14605
20592 20932 31114 14947
15734 19590 28018 15579
1998 20835 21817 33986 15632
20630 22044 35682 15554
21589 23005 38197 15417
20352 22021 35810 15522
1999 20810 23699 41138 15503
Mar. 31
2000 20725 24310 42080 15846
(BAR GRAPH APPEARS HERE WITH THE FOLLOWING PLOT POINTS.)
Investor A Shares at NAV** (as of 3/31/00)
Assumes the reinvestment of all distributions.
Nations Lipper Standard & Lehman
Balanced Balanced Poor's Aggregate
Assets Funds 500 Bond
Fund Universe Index Index
Oct. 2
1992 9425 10000 10000 10000
9776 10396 10504 10027
10179 10830 10963 10441
10431 11003 11017 10718
10659 11387 11301 10998
1993 10726 11548 11563 11004
10381 11178 11125 10688
10050 11058 11172 10578
10441 11387 11718 10643
1994 10369 11269 11716 10683
10955 11984 12857 11222
11862 12862 14085 11905
12491 13575 15204 12138
1995 13070 14146 16120 12655
13504 14523 16985 12431
13864 14875 17748 12502
14178 15279 18296 12734
1996 14946 16114 19820 13116
15148 16118 20351 13042
16679 17786 23907 13521
17997 18992 25695 13970
1997 18137 19233 26432 14380
19713 20706 30120 14605
19408 20932 31114 14947
17657 19590 28018 15579
1998 19637 21817 33986 15632
19444 22044 35682 15554
20348 23005 38197 15417
19182 22021 35810 15522
1999 19614 23699 41138 15503
Mar. 31
2000 19533 24310 42080 15846
Average annual total return
Investor A Shares
Since Inception NAV** MOP*
(10/2/92 through
3/31/00) 10.22% 9.35%
The charts to the left show the growth in value of a hypothetical $10,000
investment in Investor A Shares of Nations Balanced Assets Fund from the
Inception of the share class. Figures for the Standard & Poor's 500 Composite
Stock Price Index (Standard & Poor's 500 Index), an unmanaged index of 500
widely held common stocks, include reinvestment of dividends. Figures for the
Lehman Aggregate Bond Index, which is an unmanaged index comprised of the
Government Corporate Bond Index, the Asset-Backed Securities Index and the
Mortgage-Backed Securities Index and includes U.S. Treasury issues, agency
issues, corporate bond issues and mortgage-backed issues include reinvestment of
dividends. Funds included in the Lipper Balanced Funds Universe have a primary
objective of conserving principal by maintaining at all times a balanced
portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges
around 60%/40%. It is not possible to invest in the indexes or Lipper Universe.
The performance of Primary A, Investor B and Investor C Shares may vary based on
the differences in sales loads and fees paid by the shareholders investing in
each class.
II-5
<PAGE>
Nations Balanced Assets Fund
continued
--------------------------------------------------------------------------------
Total return (as of 3/31/00)
<TABLE>
<CAPTION>
Primary A Investor A Investor B Investor C
NAV** MOP* NAV** CDSC*** NAV** CDSC***
Inception date 9/30/92 10/2/92 6/7/93 10/2/92
----------------------- ----------- -------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year performance 0.73% 0.47% -5.28% -0.30% -5.20% -0.27% -1.25%
----------------------- ----- ----- ------- ------- ------- ------- -------
Average annual returns
3 years 9.07% 8.85% 6.72% 8.07% 7.28% 8.09% 8.09%
5 years 12.49% 12.27% 10.94% 11.55% 11.31% 11.59% 11.59%
Since inception 10.46% 10.22% 9.35% 9.44% 9.44% 9.49% 9.49%
</TABLE>
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary
with market conditions, and the principal value of shares, when redeemed, may
be worth more or less than their original cost. Average annual returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of distributions.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 5.75%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
The performance shown includes the effect of fee waivers by the investment
adviser and the co-administrator, which have the effect of increasing total
return.
II-6
<PAGE>
Nations Asset Allocation Fund
Equity Management Team and Fixed Income
Management Team commentary*
Portfolio Management
The Fund is managed by the Equity Management Team of Chicago Equity Partners
Corporation and the Fixed Income Management Team of Banc of America Capital
Management, Inc., investment sub-advisers to the Fund.
Investment Objective
The Fund seeks to obtain long-term growth from capital appreciation, and
dividend and interest income.
Performance Review
For the 12-month period ended March 31, 2000, Nations Asset Allocation Fund
Investor A Shares provided shareholders with a total return of 10.65%.**
In the following interview, the teams share their views on Nations Asset
Allocation Fund's performance for the 12-month period ended march 31, 2000 and
their outlook for the future.
Please describe the Fund's investment philosophy and style.
Within the stock component of the Fund, our intent is to stay neutral to the
market in terms of sector weightings and market capitalization. The Fund
primarily invests in large-capitalization common stocks represented in the
Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index) as well as
common stocks represented in the Standard & Poor's MidCap 400 Index and the
Standard & Poor's SmallCap 600 Index.*** We believe investment across the
large-, mid- and small-cap market segments allows for greater diversification
and potentially lower volatility and higher returns.
We focus on individual stock selections. Our risk-controlled strategy is
intended to ensure that the Fund is able to fully benefit from the market's
advances, despite the major disparities in performance between sectors and the
recent narrowness of the market. Within the framework of our disciplined
process, we select securities that display what we think are attractive
valuations, while exhibiting positive momentum and solid earnings quality.
The fixed income portion of the Fund is composed of investment grade
securities. The management of the fixed income portion is based on the belief
that returns and consistency of returns are enhanced through a disciplined risk
management process that seeks to control interest rate risk and emphasizes a
quantitative approach to sector allocation, sector rotation and relative value
security selection.
*The outlook for this Fund may differ from that presented for other Nations
Funds mutual funds.
**The performance shown does not reflect the maximum front-end sales charge of
5.75%, which may apply to purchases of Investor A Shares. For standardized
performance, please refer to the Performance table.
***The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index
of 500 widely held common stocks. It is unavailable for investment.
The Standard & Poor's MidCap 400 Index is a market-value weighted index that
measures the market value of 400 domestic stocks chosen for market size,
liquidity and industry representation. It is unmanaged and unavailable for
investment.
The Standard & Poor's SmallCap 600 Index is a market-capitalization-weighted
index consisting of 600 common stocks that capture the economic and industry
characteristics of small-company stock performance. It is unmanaged and
unavailable for investment.
Source for all statistical data -- Banc of America Capital Management, Inc. and
Chicago Equity Partners Corporation.
Past performance is no guarantee of future results.
II-7
<PAGE>
Nations Asset Allocation Fund
Equity Management Team and Fixed Income
Management Team commentary continued
Please comment on the Fund's performance
For the 12 months ended March 31, 2000, the Fund (Investor A Shares) had a
total return of 10.65%. The Fund measures its performance against two
benchmarks, the S&P 500 Index and the Lehman Aggregate Bond Index+, which
returned 17.94% and 1.88%, respectively. The Fund's asset allocation as of
March 31, 2000, was 59% to equity, 23% to fixed income and 18% to cash and cash
equivalents.++
What particular equity sectors or stocks proved favorable for the Fund, and
what sectors proved unfavorable?
The Fund benefited primarily from its holdings in the technology sector. In the
large-cap segment, QUALCOMM Inc., Oracle Corporation and Cisco Systems, Inc.
produced triple-digit returns as investors flocked towards the "new economy"
companies. The same story was true for mid- and small-company stocks, with
companies such as PMC-Sierra, Inc., Three-five Systems, Inc. and Qlogic
Corporation each returning above 700%. Sectors that lagged were health care and
transportation. Price-cutting hurt the profits of major drug companies while
higher energy costs adversely affected transportation companies.
What factors affected the performance of the bond portion of the portfolio?
Despite the bond market's volatility, we remained faithful to our strategy of
maximizing the yield of the portfolio while minimizing its risk relative to the
benchmark. While this may cause some interim performance volatility, we believe
the strategy will produce superior returns over time. The portfolio's strategic
overweighting of the corporate bond and mortgage-backed securities sectors
helped performance in a difficult environment.
What economic factors most influenced the Fund's performance?
Rising interest rates most influenced performance. The U.S. economy remained
healthy throughout the year, but fears of rising inflation helped increase
interest rates as the year wore on. Investors remained cautious on the outlook
for continued economic growth, specifically for the "old economy" stocks, as
they appeared more affected by the volatility of interest rates than their "new
economy" brethren.
What is your outlook for the year ahead in the equity market?
As we enter the tenth year of economic prosperity, the U.S. economy remains
remarkably healthy in spite of higher interest rates and tight labor
conditions. We anticipate that the U.S. economy will continue to grow, though
we believe the growth to be more moderate than in recent months.
+The Lehman Aggregate Bond Index is an unmanaged index composed of the
Government Corporate Bond Index, the Asset-Backed Securities Index and the
Mortgage-Backed Securities Index and includes U.S. Treasury issues, agency
issues, corporate bond issues and mortgage-backed issues. It includes
reinvestment of dividends and is unavailable for investment.
++Portfolio holdings and characteristics are subject to change and may not be
representative of current holdings and characteristics.
II-8
<PAGE>
Nations Asset Allocation Fund
Equity Management Team and Fixed Income
Management Team commentary continued
In the stock market, the S&P 500 Index has recorded a record 20%annual return
for the last five years and most prognosticators believe that pace will not
continue. The continued discrepancies in valuations between the largest 50
stocks and the rest of the stock market defy historical averages. We believe
these discrepancies favoring the largest stocks are unlikely to be sustained.
Of course, neither we nor anyone else can predict exact changes in the markets.
We plan to continue our diversification strategy of investing in large-, mid-
and small-cap stocks. Our goal is to add value through security selection,
while attempting to neutralize risk factors such as market timing and sector
rotation, for which there is not adequate compensation by the market.
What investment opportunities do you anticipate in the fixed income market, and
how are you positioning the portfolio?
On the fixed income side, our expectations are for the Federal Reserve Board to
continue to raise interest rates to slow the U.S. economy at least one more
time -- to 6.25%. While there is a risk of additional rate increases, the
recent volatility in the stock market should help to dampen consumer confidence
and U.S. GDP (gross domestic product) growth.
The yield advantages -- or "spreads" -- of corporate, mortgage-backed and
asset-backed securities over the yields of U.S. Treasuries are higher than at
any point since the recession of 1991. We expect to continue to add incremental
exposure to corporate bonds, mortgage-backed and asset-backed securities as
these yield advantages grow larger. We believe that once the markets stabilize,
these sectors could enhance the returns of the portfolio.
II-9
<PAGE>
Nations Asset Allocation Fund
--------------------------------------------------------------------------------
Portfolio breakdown (as a % of net assets as of 3/31/00)
(PIE CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS.)
3.2% U.S. Treasury strips
3.7% Drugs
4.0% Banking and finance
4.3% Banking
4.3% Computer related
4.5% Utilities - Telephone
4.7% Semiconductors
5.3% Computer software
7.5% Commercial mortgage-
backed securities
8.1% Federal National Mortgage
Association (FNMA)
certificates
50.4% Other
Portfolio holdings were current
as of March 31, 2000, are
subject to change and may not be
representative of current holdings.
Top 10 holdings
--------------------------------------------------------------------------------
1 Cisco Systems, Inc. 2.6%
--------------------------------------------------------------------------------
2 Microsoft Corporation 2.3%
--------------------------------------------------------------------------------
3 General Electric Company 1.9%
8.000% 11/01/29 1.8%
--------------------------------------------------------------------------------
4 Intel Corporation 1.4%
--------------------------------------------------------------------------------
5 Citigroup Inc. 1.4%
--------------------------------------------------------------------------------
6 Wal-Mart Stores, Inc. 1.3%
6.500% 04/01/29 1.2%
--------------------------------------------------------------------------------
7 MCI Worldcom, Inc. 1.2%
--------------------------------------------------------------------------------
8 Oracle Corporation 1.1%
--------------------------------------------------------------------------------
9 Texas Instruments Inc. 1.1%
--------------------------------------------------------------------------------
10 Chase Manhattan Corporation 1.1%
--------------------------------------------------------------------------------
The top 10 holdings are presented to illustrate
examples of the industries and securities in which
the Fund may invest.
II-10
<PAGE>
Nations Asset Allocation Fund
Performance
--------------------------------------------------------------------------------
Growth of a $10,000 investment
Investor A Shares at MOP* (as of 3/31/00)
Assumes the reinvestment of all distributions.
(BAR GRAPH APPEARS HERE WITH THE FOLLOWING PLOT POINTS.)
Nations Lipper Standard & Lehman
Asset Balanced Poor's Aggregate
Allocation Funds 500 Bond
Fund Universe Index Index
Jan. 8
1994 10000 10000 10000 10000
9650 9679 9621 9713
9526 9575 9661 9613
9850 9860 10134 9672
9862 9758 10132 9708
10609 10377 11119 10198
11453 11138 12180 10819
11986 11755 13149 11031
1995 12516 12249 13940 11501
12837 12575 14689 11297
13132 12881 15349 11361
13525 13230 15823 11572
14476 13954 17141 11919
14612 13956 17600 11852
16308 15401 20675 12287
17143 16445 22221 12695
1997 17569 16654 22859 13068
19072 17930 26048 13272
19721 18125 26908 13583
18865 16963 24230 14157
21274 18892 29391 14205
21859 19088 30858 14134
22508 19921 33034 14010
21628 19068 30969 14105
1999 23638 20521 35577 14088
Mar. 31
2000 24186 21051 36392 14400
Investor A Shares at NAV** (as of 3/31/00)
Assumes the reinvestment of all distributions.
(BAR GRAPH APPEARS HERE WITH THE FOLLOWING PLOT POINTS.)
Nations Lipper Standard & Lehman
Asset Balanced Poor's Aggregate
Allocation Funds 500 Bond
Fund Universe Index Index
Jan. 8
1994 9425 10000 10000 10000
9095 9679 9621 9713
8978 9575 9661 9613
9284 9860 10134 9672
9295 9758 10132 9708
9999 10377 11119 10198
10795 11138 12180 10819
11297 11755 13149 11031
1995 11796 12249 13940 11501
12099 12575 14689 11297
12377 12881 15349 11361
12747 13230 15823 11572
13644 13954 17141 11919
13772 13956 17600 11852
15371 15401 20675 12287
16158 16445 22221 12695
1997 16558 16654 22859 13068
17976 17930 26048 13272
18587 18125 26908 13583
17780 16963 24230 14157
20051 18892 29391 14205
20602 19088 30858 14134
21214 19921 33034 14010
20385 19068 30969 14105
1999 22278 20521 35577 14088
Mar. 31
2000 22795 21051 36392 14400
Average annual total return
Investor A Shares
Since Inception NAV** MOP*
(1/8/94 through
3/31/00) 15.32% 14.22%
The charts to the left show the growth in value of a hypothetical $10,000
investment in Investor A Shares of Nations Asset Allocation Fund from the
inception of the share class. Figures for the Standard & Poor's 500 Composite
Stock Price Index (Standard & Poor's 500 Index), an unmanaged index of 500
widely held common stocks, include reinvestment of dividends. Figures for the
Lehman Aggregate Bond Index, which is an unmanaged index comprised of the
Government/Corporate Bond Index, the Asset-Backed Securities Index and the
Mortgage-Backed Securities Index and includes U.S. Treasury issues, agency
issues, corporate bond issues, and mortgage-backed issues, include reinvestment
of dividends. Funds included in the Lipper Balanced Funds Universe have a
primary objective of conserving principal by maintaining at all times a balanced
portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges
around 60%/40%. It is not possible to invest in the indexes or Lipper Universe.
The performance of Primary A, Investor B, Investor C and Seafirst Shares may
vary based on the differences in sales loads and fees paid by the shareholders
investing in each class.
II-11
<PAGE>
Nations Asset Allocation Fund
continued
--------------------------------------------------------------------------------
Total return (as of 3/31/00)
<TABLE>
<CAPTION>
Primary A+ Seafirst Investor A Investor B++ Investor C
NAV** MOP* NAV** CDSC*** NAV** CDSC***
Inception date 5/21/99 3/7/88 1/8/94 7/15/98 11/11/96
----------------------- ------------ ---------- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year performance 12.18% 10.92% 10.65% 4.27% 9.77% 4.77% 9.75% 8.75%
----------------------- ----- ----- ----- ----- ----- ----- ----- -----
Average annual returns
3 years 18.84% 18.44% 18.30% 15.99% 17.82% 17.10% 17.48% 17.48%
5 years 18.24% 18.03% 17.92% 16.53% 17.64% 17.43%
10 years 13.44%
Since Inception 15.57% 13.37% 15.32% 14.22% 15.09% 15.09% 16.05% 16.05%
</TABLE>
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary
with market conditions, and the principal value of shares, when redeemed, may
be worth more or less than their original cost. Average annual returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of distributions.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 5.75%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
+Primary A Shares commenced operations on May 21, 1999 and have no performance
prior to that date. Performance prior to May 21, 1999 is that of Investor A
Shares at NAV, which reflects shareholder servicing and/or 12b-1 fees of 0.25%.
These fees are not applicable to Primary A Shares.
++Investor B Shares commenced operations on July 15, 1998 and have no
performance prior to that date. Performance prior to July 15, 1998 is that of
Investor A Shares at NAV, which reflects shareholder servicing and/or 12b-1
fees of 0.25%. If Investor B Shares had been reflected, total returns would
have been lower.
The performance shown includes the effect of fee waivers by the investment
adviser and the co-administrator, which have the effect of increasing total
return.
II-12
<PAGE>
Nations Government
Securities Fund
Fixed Income Management Team commentary*
Portfolio Management
The Fund is managed by the Fixed Income Management Team of Banc of America
Capital Management, Inc., investment sub-adviser to the Fund.
Investment Objective
The Fund seeks high current income consistent with moderate fluctuation of
principal.
Performance Review
For the 12-month period ended March 31, 2000, Nations Government Securities
Fund Investor A Shares provided shareholders with a total return of 0.80%.**
In the following interview, the team shares its views on Nations Government
Securities Fund's performance for the 12-month period ended March 31, 2000 and
their outlook for the future.
Please describe the Fund's investment style and philosophy.
We believe returns and consistency of returns are enhanced through a
disciplined risk management process that seeks to control interest rate risk
and emphasizes a quantitative approach to sector allocation, sector rotation
and relative value security selection. Simply put, we believe that if we
maximize the yield of the portfolio and match its duration -- or interest-rate
sensitivity -- to an appropriate benchmark, the higher yield should enhance the
return of the portfolio. At the same time, we believe the neutral duration of
the portfolio compared to the benchmark will lessen unnecessary portfolio
performance volatility.
The goal of Nations Government Securities Fund is to outperform the Lehman
Government Bond Index.*** The Index is comprised of all U.S. Treasury and
agency issues with maturities longer than one year and it has an average
duration of 5.35 years.
Our strategy is focused on adding yield to the portfolio by maintaining a large
exposure to agency mortgage-backed securities and under-weighting U.S. Treasury
and agency securities. The security selection process is relative value
oriented and is based upon both quantitative and fundamental analyses of the
mortgage market.
What were economic and market conditions like during the reporting period?
A combination of factors created one of the most volatile periods in fixed
income history. These included a strong U.S. economy, fears of a Y2K disaster,
the announcement of the U.S. Treasury debt reduction program, the dramatic
increase in oil prices, and the recent proposal to eliminate the implied
government guarantees on some mortgage-related securities.
The Federal Reserve Board (the Fed), citing tight labor markets and continued
strength in the U.S. economy, raised short-term rates a total of five times
over the past year, from 4.75% to 6.00%. This pushed the yields on most
longer-maturity securities higher, although long-term Treasury yields did
decline late in the period on news of the government's debt reduction program.
*The outlook for this Fund may differ from that presented for other Nations
Funds mutual funds.
**The performance shown does not reflect the maximum front-end sales charge of
4.75%, which may apply to purchases of Investor A Shares. For standardized
performance, please refer to the Performance table. The performance shown
includes the effects of fee waivers by the investment adviser, which has the
effect of increasing total return.
***The Lehman Government Bond Index is unmanaged and represents the return of
government bonds with an average maturity of approximately nine years. It is
unavailable for investment.
Source for all statistical data -- Banc of America Capital Management, Inc.
Past performance is no guarantee of future results.
II-13
<PAGE>
Nations Government
Securities Fund
Fixed Income Management Team commentary continued
With uncertainty comes volatility among securities with credit risk. The
corporate bond sector had poor total returns relative to comparable duration
U.S. Treasury securities. The other sectors of the fixed income markets also
suffered, but their yield advantages were enough to offset the decline in their
prices relative to U.S. Treasury securities.
How did you manage the Fund in this environment?
Despite the volatility, we remained faithful to our strategy of maximizing the
yield of the portfolio while minimizing its risk relative to the benchmark.
While this may cause some interim performance volatility, we believe the
strategy will produce top-quartile returns over a three-to-five year period.
What investment decisions contributed to the Fund's performance and did any
decisions hold back performance?+
The Fund's strategic overweighting of the spread sectors -- or sectors with
higher yields than U.S. Treasury securities -- managed to overcome the marginal
spread widening that occurred over the period. However, the consistent
overweighting of spread product and lack of U.S. Treasury exposure made it
difficult to take advantage of short-term trading opportunities in the agency
and commercial mortgage markets.
What economic developments do you anticipate during the rest of 2000?
We forecast that the Fed will raise interest rates to slow the U.S. economy at
least one more time. While there is a risk of additional rate increases, the
recent volatility in the stock market should help to dampen consumer confidence
and U.S. GDP (gross domestic product) growth.
The biggest issues facing fixed income investors over the next year are the
combination of a shrinking U.S. Treasury market and the potential that U.S.
government-sponsored agencies may lose their implied government guarantees.
How is the Fund positioned in this environment?
Because our process involves taking a consistent level of market exposure while
remaining duration neutral to the Fund's benchmark, we do not have to rely on
historically inaccurate economic forecasting techniques to position the
portfolio.
Spreads between the yields on U.S. Treasuries and the yields on corporate,
mortgage-backed and asset-backed securities have widened to levels that we have
not seen since the recession of 1991. While we anticipate that spreads will be
under pressure for the remainder of the year, we will continue to add
incremental exposure to these markets as spreads widen. Once the markets
stabilize, spreads should revert to more reasonable levels and we are
optimistic the Fund's exposure to mortgage-backed securities should enhance the
returns of the portfolio.
+Portfolio characteristics are subject to change and may not be representative
of current characteristics.
II-14
<PAGE>
Nations Government
Securities Fund
--------------------------------------------------------------------------------
Portfolio breakdown (as a % of net assets as of 3/31/00)
(PIE CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS.)
0.7% Asset-backed securities
20.1% U.S. Treasury
obligations
77.3% Mortgage-backed
securities
1.9% Other
Portfolio holdings were current
as of March 31, 2000, are
subject to change and may not be
representative of current holdings.
Top 10 holdings
--------------------------------------------------------------------------------
1 Government National Mortgage Association
(GNMA) Certificates, 6.500% 05/15/29 8.4%
--------------------------------------------------------------------------------
2 Government National Mortgage Association
(GNMA) Certificates, 8.000% 11/15/29 5.2%
--------------------------------------------------------------------------------
3 Federal Home Loan Mortgage Corporation
(FHLMC) Certificates, 6.500% 09/15/25 5.1%
--------------------------------------------------------------------------------
4 Federal National Mortgage Association
(FNMA) Certificates, 8.000% 10/01/29 3.4%
--------------------------------------------------------------------------------
5 Federal National Mortgage Association
(FNMA) Certificates, 6.565% 07/01/16 3.3%
--------------------------------------------------------------------------------
6 Federal National Mortgage Association
(FNMA) Certificates, 6.000% 06/01/29 3.2%
--------------------------------------------------------------------------------
7 Federal National Mortgage Association
(FNMA) Certificates, 5.625% 05/14/04 2.7%
--------------------------------------------------------------------------------
8 Federal National Mortgage Association
(FNMA) Certificates, 6.500% 03/01/29 2.4%
--------------------------------------------------------------------------------
9 Government National Mortgage Association
(GNMA) Certificates, 6.500% 01/15/29 2.3%
--------------------------------------------------------------------------------
10 Government National Mortgage Association
(GNMA) Certificates, 6.000% 07/15/29 2.3%
--------------------------------------------------------------------------------
The top 10 holdings are presented to illustrate examples of the industries and
securities in which the Fund may invest.
II-15
<PAGE>
Nations Government
Securities Fund
Performance
--------------------------------------------------------------------------------
Growth of a $10,000 investment
Investor A Shares at MOP* (as of 3/31/00)
Assumes the reinvestment of all distributions.
(BAR CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS.)
Salomon Lehman Nations Lehman
Brothers Intermediate Government Government
Mortgage Treasury Securities Bond
Index Index Fund Index
Apr. 17
1991 10000 10000 9525 10000
10202 10167 9624 10135
10767 10651 10121 10713
1991 11243 11170 10619 11287
11184 11047 10429 11484
11634 11477 10837 11939
11977 11988 11186 12529
1992 12071 11944 11159 12534
12425 12394 11491 13101
12688 12640 11728 13479
12803 12908 12002 13917
1993 12919 12927 12009 13870
12647 12685 11644 13452
12579 12616 11440 13299
12680 12711 11375 13355
1994 12735 12697 11372 13402
13408 13222 11930 14033
14102 13842 12475 14903
14387 14052 12682 15167
1995 14872 14527 13077 15860
14817 14424 12807 15501
14918 14518 12786 15576
15233 14768 12992 15837
1996 15673 15107 13373 16300
15692 15097 13167 16168
16263 15515 13628 16729
16731 15914 13975 17289
1997 17124 16268 14482 17863
17404 16514 14666 18133
17701 16818 15044 18612
18165 17634 15694 19641
1998 18319 17671 15664 19625
18504 17605 15421 19345
18428 17574 15196 19180
18604 17762 15292 19307
1999 18656 17742 15149 19187
Mar. 31
2000 18932 18058 15545 19830
Investor A Shares at NAV** (as of 3/31/00)
Assumes the reinvestment of all distributions.
(BAR CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS.)
Nations Lehman Salomon Lehman
Government Intermediate Brothers Government
Securities Treasury Mortgage Bond
Funds Index Index Index
Apr. 17
1991 10000 10000 10000 10000
10104 10167 10202 10135
10625 10651 10767 10713
1991 11148 11170 11243 11287
10949 11047 11184 11484
11378 11477 11634 11939
11744 11988 11977 12529
1992 11716 11944 12071 12534
12064 12394 12425 13101
12312 12640 12688 13479
12601 12908 12803 13917
1993 12608 12927 12919 13870
12225 12685 12647 13452
12011 12616 12579 13299
11942 12711 12680 13355
1994 11939 12697 12735 13402
12525 13222 13408 14033
13097 13842 14102 14903
13315 14052 14387 15167
1995 13729 14527 14872 15860
13448 14424 14817 15501
13423 14518 14918 15576
13639 14768 15233 15837
1996 14040 15107 15673 16300
13824 15097 15692 16168
14308 15515 16263 16729
14671 15914 16731 17289
1997 15204 16268 17124 17863
15397 16514 17404 18133
15794 16818 17701 18612
16477 17634 18165 19641
1998 16445 17671 18319 19625
16190 17605 18504 19345
15954 17574 18428 19180
16054 17762 18604 19307
1999 15905 17742 18656 19187
Mar. 31
2000 16320 18058 18932 19830
Average annual total return
Investor A Shares
Since Inception NAV** MOP*
(4/17/91 through
3/31/00) 5.62% 5.05%
The charts to the left show the growth in value of a hypothetical $10,000
investment in Investor A Shares of Nations Government Securities Fund from the
inception of the share class. Figures for the Lehman Intermediate Treasury Index
track the market value of U.S. Treasury securities with maturities of 3 to 10
years. The Salomon Brothers Mortgage Index is comprised of 30-year and 15-year
GNMA, FNMA, and FHLMC securities and FNMA and FHLMC balloon mortgages. Figures
for the Lehman Government Bond Index represent the return of government bonds
with an average maturity of approximately nine years and include reinvestment of
dividends. All of the indices are unmanaged and unavailable for investment. The
performance of Primary A, Investor B and Investor C Shares may vary based on the
differences in sales loads and fees paid by the shareholders investing in each
class.
II-16
<PAGE>
Nations Government
Securities Fund
continued
--------------------------------------------------------------------------------
Total return (as of 3/31/00)
<TABLE>
<CAPTION>
Primary A Investor A Investor B Investor C
NAV** MOP* NAV** CDSC*** NAV** CDSC***
Inception date 4/11/91 4/17/91 6/7/93 7/6/92
----------------------- ----------- ------------------------ ------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year performance 1.12% 0.80% -3.97% 0.22% -3.59% -0.22% -1.17%
----------------------- ---- ---- ------- ---- ------- ------- -------
Average annual returns
3 years 5.97% 5.69% 3.98% 5.09% 4.17% 4.95% 4.95%
5 years 5.71% 5.44% 4.41% 4.91% 4.75% 4.85% 4.85%
Since inception 5.87% 5.62% 5.05% 3.83% 3.83% 4.07% 4.07%
</TABLE>
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary
with market conditions, and the principal value of shares, when redeemed, may
be worth more or less than their original cost. Average annual returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of distributions.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 4.75%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
The performance shown includes the effect of fee waivers by the investment
adviser, which have the effect of increasing total return.
The annual reports for the fiscal year ended March 31, 1999 and prior years
compare the Fund's performance to the Lehman Intermediate Treasury Index and
the Salomon Brothers Mortgage Index. Fund management believes the Lehman
Government Bond Index is a more appropriate benchmark because the composition
of the Index more closely resembles the composition of the Fund.
II-17
<PAGE>
Nations U.S. Government
Bond Fund
Fixed Income Management Team commentary*
Portfolio Management
The Fund is managed by the Fixed Income Management Team of Banc of America
Capital Management, Inc., investment sub-adviser to the Fund.
Investment Objective
The Fund seeks total return and preservation of capital by investing in U.S.
government securities and repurchase agreements collateralized by such
securities or instrumentalities.
Performance Review
For the 12-month period ended March 31, 2000, Nations U.S. Government Bond Fund
Investor A Shares provided shareholders with a total return of -0.80%.**
In the following interview, the team shares its views on Nations U.S.
Government Bond Fund's performance for the 12-month period ended March 31, 2000
and its outlook for the future.
Please describe the Fund's investment style and philosophy.
We believe returns and consistency of returns are enhanced through a
disciplined risk management process that seeks to control interest rate risk
and emphasizes a quantitative approach to sector allocation, sector rotation
and relative value security selection. Simply put, we believe that if we
maximize the yield of the portfolio and match its duration -- or interest-rate
sensitivity -- to an appropriate benchmark, its higher yield should enhance the
return of the portfolio, while the neutral duration of the portfolio compared
to the benchmark will lessen unnecessary portfolio performance volatility.
The investment goal of Nations U.S. Government Fund is to outperform the Lehman
Government Bond Index. The Index is comprised of all U.S. Treasury and agency
issues with maturities longer than one year and it has an average duration of
5.35 years. We think this index is well matched to the Lipper General U.S.
Government Funds Universe.***
Our strategy is focused on adding yield to the portfolio by maintaining a large
exposure to agency mortgage-backed securities and under-weighting U.S. Treasury
and agency securities. The security selection process searches for relative
value and is based upon both quantitative and fundamental analyses of the
mortgage market.
What were economic and market conditions like during the reporting period?
A combination of factors created one of the most volatile periods in fixed
income history. These included a strong U.S. economy, fears of a Y2K disaster,
the announcement of the U.S. Treasury debt reduction program, the dramatic
increase in oil prices, and the recent proposal to eliminate the implied
government guarantees on some mortgage-related securities.
The Federal Reserve Board (the Fed), citing tight labor markets and continued
strength in the U.S. economy, raised short-term rates a total of five times
over the past year, from 4.75% to 6.00%. This pushed the yields on most
longer-maturity securities higher, although long-term U.S. Treasury yields did
decline late in the period on news of the government's debt reduction program.
*The outlook for this Fund may differ from that presented for other Nations
Funds mutual funds.
**The performance shown does not reflect the maximum front-end sales charge of
4.75%, which may apply to purchases of Investor A Shares. For standardized
performance, please refer to the Performance table. The performance shown
includes the effects of fee waivers by the investment adviser, which has the
effect of increasing total return.
***Lipper, Inc. is an independent mutual fund performance monitor. Funds in the
Lipper General U.S. Government Funds Universe invest at least 65% of their
assets in U.S. government and agency issues.
Source for all statistical data -- Banc of America Capital Management, Inc.
Past performance is no guarantee of future results.
II-18
<PAGE>
Nations U.S. Government
Bond Fund
Fixed Income Management Team commentary continued
With uncertainty comes volatility among securities with credit risk. The
corporate bond sector had poor total returns relative to comparable duration
U.S. Treasury securities. The other sectors of the fixed income markets also
suffered, but their yield advantages were enough to offset the decline in their
prices relative to U.S. Treasury securities.
How did you manage the Fund in this environment?
The investment strategy for the Fund changed in mid-February of this year from
one of active duration management to a strategy that seeks relative value, with
neutral interest rate sensitivity relative to the Fund's benchmark. The Fund's
investment strategy is now identical to that of Nations Government Securities
Fund.
What investment decisions contributed to the Fund's performance, and what
decisions hindered performance?+
With the exception of the fourth quarter of 1999, Treasury securities
outperformed spread sectors -- those sectors that offered yield advantages or
"spreads" above the yield of Treasuries. During the period, the portfolio was
systematically overweighted in U.S. Treasury securities, which helped
performance. Prior to the change in strategy the duration of the portfolio was
consistently long relative to both the Lipper General U.S. Government Funds
Universe and the Lehman Government Bond Index. This caused substantial
volatility in the Fund and detracted from performance.
What economic developments do you anticipate during the rest of 2000?
We forecast that the Fed will raise interest rates in an effort to slow the
U.S. economy at least one more time. While there is a risk of additional rate
increases, the recent volatility in the stock market should help to dampen
consumer confidence and U.S. GDP (gross domestic product) growth.
The biggest issues facing fixed income investors over the next year are the
combination of a shrinking U.S. Treasury market and the potential that U.S.
government-sponsored agencies may lose their implied government guarantees.
How is the Fund positioned in this environment?
Because our process involves taking a consistent level of market exposure while
remaining duration neutral to the Fund's benchmark, we do not have to rely on
historically inaccurate economic forecasting techniques to position the
portfolio.
Spreads between the yields on Treasuries and the yields on corporate,
mortgage-backed, and asset-backed securities have widened to levels that we
have not seen since the recession of 1991. While we anticipate that spreads
will be under pressure for the remainder of the year, we will continue to add
incremental exposure to these markets as spreads widen. Once the markets
stabilize, spreads should revert to more reasonable levels and we are
optimistic that our exposure to mortgage-backed securities should enhance the
returns of the portfolio.
+Portfolio characteristics are subject to change and may not be representative
of current characteristics.
II-19
<PAGE>
Nations U.S. Government
Bond Fund
--------------------------------------------------------------------------------
Portfolio breakdown (as a % of net assets as of 3/31/00)
(PIE CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS.)
12.2% U.S. government and
agency obligations
37.9% Mortgage-backed
securities
48.3% U.S. Treasury
obligations
1.6% Other
Portfolio holdings were current
as of March 31, 2000, are
subject to change and may not be
representative of current holdings.
Top 10 holdings
--------------------------------------------------------------------------------
1 Federal Home Loan Mortgage Corporation
(FHLMC) Certificates, 5.75% 04/15/08 11.2%
--------------------------------------------------------------------------------
2 Federal Home Loan Mortgage Corporation
(FHLMC) Certificates, 5.75% 07/15/03 8.4%
--------------------------------------------------------------------------------
3 Federal National Mortgage Association
(FNMA) Certificates, 6.00% 03/01/13 7.8%
--------------------------------------------------------------------------------
4 Federal Home Loan Mortgage Corporation
(FHLMC) Certificates, 6.00% 09/01/13 6.4%
--------------------------------------------------------------------------------
5 Federal National Mortgage Association
(FNMA) Certificates, 6.00% 03/01/13 5.4%
--------------------------------------------------------------------------------
6 Federal National Mortgage Association
(FNMA) Certificates, 6.00% 11/01/28 4.4%
--------------------------------------------------------------------------------
7 Government National Mortgage Association
(GNMA) Certificates, 7.50% 04/15/29 3.0%
--------------------------------------------------------------------------------
8 Government National Mortgage Association
(GNMA) Certificates, 7.50% 04/15/29 2.3%
--------------------------------------------------------------------------------
9 Federal Home Loan Bank
(FHLB) Certificates, 5.13% 09/15/03 1.2%
--------------------------------------------------------------------------------
10 Federal National Mortgage Association
(FNMA) Certificates, 6.00% 05/01/13 0.6%
--------------------------------------------------------------------------------
The top 10 holdings are presented to illustrate
examples of the industries and securities in which
the Fund may invest.
II-20
<PAGE>
Nations U.S. Government
Bond Fund
Performance
--------------------------------------------------------------------------------
Growth of a $10,000 investment
Investor A Shares at MOP* (as of 3/31/00)
Assumes the reinvestment of all distributions.
(BAR CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS.)
Nations Lehman
U.S. Government Government
Bond Bond
Fund Index
Feb. 7
1995 9525 10000
9750 10279
10453 10916
10639 11110
1995 11149 11617
10832 11355
10901 11409
11041 11601
1996 11346 11940
11274 11843
11616 12254
11925 12664
1997 12259 13085
12345 13282
12696 13633
13272 14387
1998 13255 14375
13034 14170
12819 14049
12866 14142
1999 12653 14054
Mar. 31
2000 12930 14525
Investor A Shares at MOP* (as of 3/31/00)
Assumes the reinvestment of all distributions.
(BAR CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS.)
Nations Lehman
U.S. Government Government
Bond Bond
Fund Index
Feb. 7
1995 10000 10000
10236 10279s
10974 10916
11169 11110
11705 11617
11372 11355
11445 11409
1996 11591 11601
11912 11940
11836 11843
12196 12254
12520 12664
12871 13085
12961 13282
1998 13329 13633
13934 14387
13916 14375
13684 14170
13458 14049
13508 14142
13284 14054
Mar. 31
2000 13575 14525
Average annual total return
Investor A Shares
Since Inception NAV** MOP*
(2/7/95 through
3/31/00) 6.12% 5.13%
The charts to the left show the growth in value of a hypothetical $10,000
investment in Investor A Shares of Nations U.S. Government Bond Fund from the
inception of the share class. Figures for the Lehman Government Bond Index, an
unmanaged index, represent the return of government bonds with an average
maturity of approximately nine years and include reinvestment of dividends. It
is unavailable for investment. The performance of Primary A, Investor B and
Investor C Shares may vary based on the differences in sales loads and fees paid
by the shareholders investing in each class.
--------------------------------------------------------------------------------
Total return (as of 3/31/00)
<TABLE>
<CAPTION>
Primary A Investor A Investor B Investor C
NAV** MOP* NAV** CDSC*** NAV** CDSC***
Inception date 11/7/94 2/7/95 11/10/94 9/19/97
----------------------- ----------- ------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year performance -0.55% -0.80% -5.49% -1.48% -5.26% -1.67% -2.62%
----------------------- ------ ------ ------ ------ ------ ------ ------
Average annual returns
3 years 4.97% 4.67% 3.00% 4.07% 3.19%
5 years 6.05% 5.80% 4.78% 5.09% 4.94%
Since inception 7.34% 6.12% 5.13% 6.34% 6.34% 2.67% 2.67%
</TABLE>
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary
with market conditions, and the principal value of shares, when redeemed, may
be worth more or less than their original cost. Average annual returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of distributions.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 4.75%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
The performance shown includes the effect of fee waivers by the investment
adviser, which have the effect of increasing total return.
II-21
<PAGE>
APPENDIX III
Comparison of Fundamental Policies and Limitations of the Acquired Funds
and the Acquiring Funds
Fundamental Investment Policies and Limitations
The Acquired Funds may not: The Acquiring Funds may not:
<TABLE>
<CAPTION>
<S> <C>
1. Except for the Asset Allocation Fund, underwrite 1. Underwrite any issue of securities within the
securities issued by any other person, except to meaning of the 1933 Act except when it might
the extent that the purchase of securities and the technically be deemed to be an underwriter
later disposition of such securities in accordance either (a) in connection with the disposition of
with the Fund's investment program may be a portfolio security, or (b) in connection with
deemed an underwriting. This restriction shall not the purchase of securities directly from the
limit a Fund's ability to invest in securities issuer thereof in accordance with its
issued by other registered investment companies. investment objective. This restriction shall not
limit the Fund's ability to invest in securities
The Asset Allocation Fund may not underwrite issued by other registered investment companies.
any issue of securities within the meaning of the
1933 Act except when it might technically be
deemed to be an underwriter either (a) in
connection with the disposition of a portfolio
security, or (b) in connection with the purchase
of securities directly from the issuer thereof in
accordance with its investment objective.
2. Except for the Asset Allocation Fund, invest in 2. Purchase or sell real estate, except a Fund
real estate or real estate limited partnership may purchase securities of issuers which deal
interests. (A Fund may, however, purchase and or invest in real estate and may purchase
sell securities secured by real estate or interests securities which are secured by real estate or
therein or issued by issuers which invest in real interests in real estate.
estate or interests therein.) This restriction does
not apply to real estate limited partnerships listed
on a national stock exchange (e.g., the New York
Stock Exchange).
The Asset Allocation Fund may not purchase or
sell real estate, except a Fund may purchase
securities of issuers which deal or invest in real
estate and may purchase securities which are
secured by real estate or interests in real estate.
</TABLE>
III-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
3. Except for the Asset Allocation Fund, purchase or 3. Purchase or sell commodities, except that a Fund may
sell commodity contracts except that each Fund may, to the extent consistent with its investment
to the extent appropriate under its investment objective, invest in securities of companies that
policies, purchase publicly traded securities of purchase or sell commodities or which invest in such
companies engaging in whole or in part in such programs, and purchase and sell options, forward
activities, may enter into futures contracts and contracts, futures contracts, and options on futures
related options, may engage in transactions on a contracts. This limitation does not apply to foreign
when-issued or forward commitment basis, and may currency transactions including without limitation
enter into forward currency contracts in accordance forward currency contracts.
with its investment policies.
The Asset Allocation Fund may not purchase or sell
commodities, except that a Fund may to the extent
consistent with its investment objective, invest in
securities of companies that purchase or sell
commodities or which invest in such programs, and
purchase and sell options, forward contracts, futures
contracts, and options on futures contracts. This
limitation does not apply to foreign currency
transactions including without limitation forward
currency contracts.
4. Except for the Asset Allocation Fund, make loans, 4. Make loans, except to the extent permitted by the
except that a Fund may purchase and hold debt 1940 Act, the rules and regulations thereunder and
instruments (whether such instruments are part of a any exemptive relief obtained by the Funds.
public offering or privately placed), may enter into
repurchase agreements and may lend portfolio
securities in accordance with its investment
policies.
The Asset Allocation Fund may not make loans, except
to the extent permitted by the 1940 Act.
5. The Government Securities Fund and Balanced Assets 5. Borrow money or issue senior securities except to the
Fund may not borrow money or issue senior securities extent permitted by the 1940 Act, the rules and
as defined in the 1940 Act except that (a) a Fund may regulations thereunder and any exemptive relief
borrow money from banks for temporary or emergency obtained by the Funds.
purposes in amounts up to one-third of the value of
such Fund's total assets at the time of borrowing,
provided that borrowings in excess of 5% of the value
of such Fund's total assets will be repaid
</TABLE>
III-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
prior to the purchase of additional portfolio
securities by such Fund, (b) a Fund may enter into
commitments to purchase securities in accordance with
the Fund's investment program, including delayed
delivery and when-issued securities, which
commitments may be considered the issuance of senior
securities, and (c) a Fund may issue multiple classes
of shares in accordance with SEC regulations or
exemptions under the 1940 Act. The purchase or sale
of futures contracts and related options shall not be
considered to involve the borrowing of money or
issuance of senior securities. Each Fund may enter
into reverse repurchase agreements or dollar roll
transactions. The purchase or sale of futures
contracts and related options shall not be considered
to involve the borrowing of money or issuance of
senior securities.
The U.S. Government Bond Fund may not borrow money
except as a temporary measure for extraordinary or
emergency purposes or except in connection with
reverse repurchase agreements and mortgage rolls;
provided that the respective Fund will maintain asset
coverage of 300% for all borrowings.
The Asset Allocation Fund may not borrow money, issue
senior securities or mortgage, pledge or hypothecate
its assets except to the extent permitted under the
1940 Act.
</TABLE>
III-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
6. The Government Securities Fund and the Balanced 6. Purchase securities (except securities issued or
Assets Fund may not purchase securities of any one guaranteed by the U.S. Government, its agencies or
issuer (other than securities issued or guaranteed by instrumentalities) of any one issuer if, as a result,
the U.S. Government, its agencies or more than 5% of its total assets will be invested in
instrumentalities or securities of other investment the securities of such issuer or it would own more
companies) if, immediately after such purchase, more than 10% of the voting securities of such issuer,
than 5% of the value of such Fund's total assets except that (a) up to 25% of its total assets may be
would be invested in the securities of such issuer, invested without regard to these limitations and (b)
except that up to 25% of the value of the Fund's a Fund's assets may be invested in the securities of
total assets may be invested without regard to these one or more management investment companies to the
limitations and with respect to 75% of such Fund's extent permitted by the 1940 Act, the rules and
assets, such Fund will not hold more than 10% of the regulations thereunder and any exemptive relief
voting securities of any issuer. obtained by the Funds.
The U.S. Government Bond Fund may not purchase
securities of any one issuer (other than securities
issued or guaranteed by the U.S. Government, its
agencies or instrumentalists or certificates of
deposit for any such securities) if, immediately
after such purchase, more than 5% of the value of the
Fund's total assets would be invested in the
securities of such issuer, or more than 10% of the
issuer's outstanding voting securities would be owned
by the Fund or the Company; except that up to 25% of
the value of a Fund's total assets may be invested
without regard to the foregoing limitations. For
purposes of this limitation, (a) a security is
considered to be issued by the entity (or entities)
whose assets and revenues back the security and (b) a
guarantee of a security shall not be deemed to be a
security issued by the guarantor when the value of
securities issued and guaranteed by the guarantor,
and owned by the Fund, does not exceed 10% of the
value of the Fund's total assets. The Fund will
maintain asset coverage of 300% or maintain a
segregated account with its custodian bank in which
it will maintain cash, U.S. Government Securities or
other liquid high grade debt obligations equal in
value to its borrowing.
</TABLE>
III-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
The Asset Allocation Fund may not purchase securities
(except securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) of any
one issuer if, as a result, more than 5% of its total
assets will be invested in the securities of such
issuer or it would own more than 10% of the voting
securities of such issuer, except that (a) up to 25%
of its total assets may be invested without regard to
these limitations and (b) the Fund's assets may be
invested in the securities of one or more diversified
management investment companies to the extent
permitted by the 1940 Act.
7. The Government Securities Fund and the Balanced 7. Purchase any securities which would cause 25% or more
Assets Fund may not purchase any securities which of the value of its total assets at the time of
would cause 25% or more of the value of the Fund's purchase to be invested in the securities of one or
total assets at the time of such purchase to be more issuers conducting their principal business
invested in the securities of one or more issuers activities in the same industry, provided that: (a)
conducting their principal activities in the same there is no limitation with respect to obligations
industry, provided that this limitation does not issued or guaranteed by the U.S. Government, any
apply to investments in U.S. Government Obligations. state or territory of the United States, or any of
In addition, this limitation does not apply to their agencies, instrumentalities or political
investments by "money market funds" as that term is subdivisions, and (b) notwithstanding this limitation
used under the 1940 Act, in obligations of domestic or any other fundamental investment limitation,
banks. assets may be invested in the securities of one or
more management investment companies to the extent
The U.S. Government Bond Fund may not purchase any permitted by the 1940 Act, the rules and regulations
securities which would cause 25% or more of the value thereunder and any exemptive relief obtained by the
of the Fund's total assets at the time of purchase to Funds.
be invested in the securities of one or more issuers
conducting their principal business activities in the
same industry, provided that: (a) there is no
limitation with respect to (i) instruments issued or
guaranteed by the United States, any state, territory
or possession of the United States, the District of
Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions and
</TABLE>
III-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(ii) repurchase agreements secured by the instruments
described in clause (i); (b) wholly-owned finance
companies will be considered to be in the industries
of their parents if their activities are primarily
related to financing the activities of the parents;
and (c) utilities will be divided according to their
services, for example, gas, gas transmission,
electric and gas, electric and telephone will each be
considered a separate industry.
The Asset Allocation Fund may not purchase any
securities which would cause 25% or more of the value
of its total assets at the time of purchase to be
invested in the securities of one or more issuers
conducting their principal business activities in the
same industry, provided that: (a) there is no
limitation with respect to obligations issued or
guaranteed by the U.S. Government, any state or
territory of the United States, or any of their
agencies, instrumentalities or political
subdivisions, and (b) notwithstanding this limitation
or any other fundamental investment limitation,
assets may be invested in the securities of one or
more diversified management investment companies to
the extent permitted by the 1940 Act and the rules
and regulations thereunder.
8. Except for the Asset Allocation Fund, purchase any
securities on margin (except for such short-term
credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell
any securities short (except against the box.) For
purposes of this restriction, the deposit or payment
by the Fund of initial or maintenance margin
connection with futures contracts and related options
and options on securities is not considered to be the
purchase of a security on margin.
</TABLE>
III-6
<PAGE>
Statement of Additional Information
Dated December 15, 2000
NATIONS FUND TRUST
NATIONS FUND, INC.
NATIONS RESERVES
NATIONS FUNDS TRUST
One Bank of America Plaza
101 South Tryon Street, 33rd Floor
Charlotte, North Carolina 28255
1-800-321-7854
(April 12, 2001 Special Meetings of Shareholders of Nations
U.S. Government Bond Fund, Nations Government Securities Fund, Nations Balanced
Assets Fund and Nations Asset Allocation Fund)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Proxy/Prospectus dated the date hereof, for the
Special Meetings of Shareholders of the Acquired Funds to be held on April 12,
2001. Copies of the Proxy/Prospectus may be obtained at no charge by writing or
calling Nations Fund Trust, Nations Fund, Inc. and Nations Reserves at the
address or telephone number set forth above. Unless otherwise indicated,
capitalized terms used herein and not otherwise defined have the same meanings
as are given to them in the Proxy/Prospectus.
Incorporation of Documents by Reference in Statement of Additional Information
Further information about the Primary A Shares, Investor A Shares,
Investor B Shares, and Investor C Shares of Nations U.S. Government Bond Fund,
Nations Government Securities Fund, Nations Balanced Assets Fund and Nations
Asset Allocation Fund is contained in and incorporated herein by reference to
the Statement of Additional Information for the Acquired Funds dated August 1,
2000, as supplemented.
The audited financial statements and related Report of Independent
Accountants for the year ended March 31, 2000 and for the six months ended
September 30, 2000 for Nations U.S. Government Bond Fund, Nations Government
Securities Fund, Nations Balanced Assets Fund and Nations Asset Allocation Fund
are incorporated herein by reference. No other parts of the annual and
semi-annual reports are incorporated herein by reference.
1
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
General Information...........................................................3
Introductory Note to Pro Forma Financial Information..........................4
</TABLE>
2
<PAGE>
General Information
The Reorganization contemplates the transfer of the assets and
liabilities of the Acquired Funds to the Acquiring Funds in exchange for shares
of designated classes of the corresponding Acquiring Funds of equal value.
The shares issued by an Acquiring Fund will have an aggregate dollar
value equal to the aggregate dollar value of the shares of each corresponding
Acquired Fund that are outstanding immediately before the closing of the
Reorganization.
Immediately after the Closing, the Acquired Funds will distribute the
shares of their corresponding Acquiring Fund received in the Reorganization to
its shareholders in liquidation of such Acquired Fund. Each shareholder owning
shares of an Acquired Fund at the Closing will receive shares of the designated
class of the corresponding Acquiring Fund, and will receive any unpaid dividends
or distributions that were declared before the Closing on the Acquired Funds'
shares. Nations Funds Trust will establish an account for each former
shareholder of the Acquired Funds reflecting the number of Acquiring Fund shares
distributed to that shareholder. If the Reorganization Agreements are approved
and consummated, the Acquired Funds will transfer all of their assets and
liabilities, as of the Closing, and all outstanding shares of the Acquired Funds
will be redeemed and canceled in exchange for shares of the corresponding
Acquiring Fund.
For further information about the transaction, see the
Proxy/Prospectus.
3
<PAGE>
Introductory Note to Pro Forma Financial Information
The following unaudited pro forma information gives effect to the
proposed transfer of the assets and liabilities of the Acquired Funds to the
Acquiring Funds accounted for as if the transfer had occurred as of September
30, 2000. In addition, the pro forma combined statement of operations has been
prepared as if the transfer had occurred at the beginning of the fiscal year
ended September 30, 2000 and based upon the proposed fee and expense structure
of the Acquiring Funds. The pro forma combined statement of operations has been
prepared by adding the statement of operations for the fiscal year ended
March 31, 2000 for the Acquired Funds to the statement of operations for the
corresponding Acquiring Funds and making adjustments for changes in the expense
structure of the combined fund.
The financial statements present the reorganization of Nations Balanced
Assets Fund and Nations Asset Allocation Fund, and Nations U.S. Government Bond
Fund and Nations Government Securities Fund into two newly created shell funds
of Nations Funds Trust, respectively. It is possible that one or both of the
Acquired Funds will not approve their respective reorganization. The pro forma
presentation is not shown for either of these scenarios because each such
scenario would result in a shell transaction only, and the pro forma
presentation would be identical to the existing historical financial information
of that fund.
The pro forma financial information should be read in conjunction with
the historical financial statements and notes thereto of the Acquired Funds and
the Acquiring Funds included or incorporated herein by reference in this
Statement of Additional Information. The combination of the above Acquired Funds
and the Acquiring Funds will be accounted for as a tax-free reorganization.
4
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited)
September 30, 2000
Nations Nations
Balanced Asset Nations Nations
Assets Allocation Combined Pro Balanced Asset Combined
Fund Fund Forma Assets Allocation Pro
Principal Principal Principal Fund Fund Forma
amount amount amount Value Value Value
(000) (000) (000) Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asset-backed securities - 0.7%
Asset-backed - Auto loans - 0.1%
$ -- $ 167 $ 167 AESOP Funding II LLC, Series 1997-1A, Class A1,
6.220% 10/20/01 $ -- $ 167 $ 167
250 250 Premier Auto Trust, Series 1998-1, Class B,
5.920% 10/06/04 247 247
----------------------------------
247 167 414
----------------------------------
Asset-backed - Home equity loans - 0.6%
500 500 ContiMortgage Home Equity Loan Trust, Series 1998-1,
Class A4,
6.280% 01/15/13 494 494
423 423 CS First Boston Mortgage Securities Corporation, Series
1996-2, Class A4,
6.620% 02/25/18 420 420
650 650 EQCC Home Equity Loan Trust, Series 1997-2, Class A6,
6.720% 02/15/12 650 650
787 787 First Plus Home Loan Trust, Series 1996-3, Class A6,
7.600% 09/20/14 786 786
650 650 First Plus Home Loan Trust, Series 1997-1, Class A6,
6.950% 12/10/15 648 648
100 100 IMC Home Equity Loan Trust, Series 1997-5, Class A7,
6.900% 01/20/22 99 99
241 241 IMC Home Equity Loan Trust, Series 1997-7, Class A3,
6.540% 11/20/12 240 240
----------------------------------
660 2,677 3,337
----------------------------------
Total asset-backed securities 907 2,844 3,751
(Cost $912 and $2,870, respectively) ----------------------------------
Shares Shares Shares
---------------------------------
Common stocks - 61.6%
Aerospace and defense - 0.8%
2,400 2,400 Alliant Techsystems Inc. 197 197
28,100 28,100 Boeing Company 1,771 1,771
25,612 25,612 Honeywell International Inc. 912 912
14,100 14,100 Northrop Grumman Corporation 1,281 1,281
----------------------------------
912 3,249 4,161
----------------------------------
Airlines - 0.1%
12,300 12,300 Delta Air Lines, Inc. 546 546
1,500 1,500 Forward Air Corporation 53 53
1,800 1,800 Northwest Airlines Corporation 44 44
----------------------------------
643 643
----------------------------------
Apparel and textiles - 0.1%
800 800 Columbia Sportswear Company 37 37
3,200 3,200 Jones Apparel Group, Inc. 85 85
1,050 1,050 Kenneth Cole Productions, Inc. 37 37
9,500 9,500 Liz Claiborne Inc. 365 365
2,800 2,800 Reebok International, Ltd. 53 53
1,700 1,700 Timberland Company, Class A 70 70
----------------------------------
647 647
----------------------------------
Automotive - 0.7%
5,475 5,475 ArvinMeritor, Inc. 80 80
2,600 2,600 Copart, Inc. 36 36
67,042 67,042 Ford Motor Company 1,696 1,696
12,825 12,825 General Motors Corporation 834 834
1,100 1,100 Gentex Corporation 28 28
13,350 13,350 Johnson Controls Inc. 710 710
4,050 4,050 Lear Corporation 83 83
2,100 2,100 Mascotech, Inc. 35 35
2,200 2,200 Oshkosh Truck Corporation 85 85
1,800 1,800 Superior Industries International 54 54
2,300 2,300 Tower Automotive Inc. 22 22
----------------------------------
710 2,953 3,663
----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited)(Continued)
September 30, 2000
Nations Nations
Nations Nations Balanced Asset Combined
Balanced Asset Assets Allocation Pro
Assets Allocation Combined Pro Fund Fund Forma
Fund Fund Forma Value Value Value
Shares Shares Shares Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stocks - (continued)
Beverages - 1.0%
800 800 Adolph Coors Company, Class B $ - $ 51 $ 51
50,600 50,600 Anheuser-Busch Companies, Inc. 2,140 2,140
14,500 14,500 Coca-Cola Company 799 799
2,500 2,500 Constellation Brands, Inc. 136 136
46,300 46,300 PepsiCo, Inc. 2,130 2,130
----------------------------------
5,256 5,256
----------------------------------
Broadcasting and cable - 1.3%
2,200 2,200 Hispanic Broadcasting Corporation 61 61
25,000 25,000 Time Warner Inc. 1,956 1,956
5,200 5,200 Univision Communications, Inc. 194 194
40,067 40,067 Viacom Inc., Class B 2,345 2,345
51,300 51,300 Walt Disney Company 1,962 1,962
2,650 2,650 Westwood One, Inc. 57 57
----------------------------------
6,575 6,575
----------------------------------
Chemicals - Basic - 0.5%
11,500 11,500 Air Products & Chemicals Inc. 414 414
9,393 9,393 E.I. duPont de Nemours and Company 389 389
9,600 9,600 Eastman Chemical Company 355 355
16,700 16,700 Praxair Inc. 624 624
15,400 15,400 Union Carbide Corporation 581 581
----------------------------------
2,363 2,363
----------------------------------
Chemicals - Specialty - 0.1%
6,000 6,000 Albemarle Corporation 121 121
3,300 3,300 Arch Chemicals Inc. 60 60
3,600 3,600 Cabot Corporation 114 114
6,200 6,200 Cytec Industries Inc. 208 208
1,500 1,500 OM Group, Inc. 65 65
2,200 2,200 Scotts Company, Class A 74 74
----------------------------------
642 642
----------------------------------
Commercial banking - 4.3%
4,220 4,220 Associated Banc-Corp 111 111
2,800 2,800 Astoria Financial Corporation 108 108
27,187 22,762 49,949 Chase Manhattan Corporation 1,256 1,051 2,307
30,886 134,566 165,452 Citigroup Inc. 1,669 7,274 8,943
4,100 4,100 City National Corporation 158 158
4,500 4,500 Cullen Frost Bankers Inc. 146 146
10,900 10,900 Dime Bancorp, Inc. 235 235
2,600 2,600 Downey Financial Corporation 103 103
2,100 2,100 First Midwest Bancorp, Inc. 56 56
2,300 2,300 First Virginia Banks Inc. 98 98
5,900 5,900 FirstFed Financial Corporation 136 136
63,943 63,943 FleetBoston Financial Corporation 2,494 2,494
5,100 5,100 Hibernia Corporation 62 62
2,600 2,600 Hudson United Bancorp 72 72
6,225 5,300 11,525 J.P. Morgan & Company Inc. 1,017 866 1,883
1,700 1,700 MAF Bancorp Inc. 42 42
33,900 33,900 Mellon Financial Corporation 1,572 1,572
3,000 3,000 Mercantile Bankshares Corporation 109 109
2,800 2,800 National Commerce Bancorp 56 56
9,600 9,600 North Fork Bancorporation, Inc. 208 208
19,200 19,200 PNC Bank Corporation 1,248 1,248
1,800 1,800 Silicon Valley Bancshares 105 105
2,300 2,300 Southwest Bancorp of Texas 75 75
5,100 5,100 TCF Financial Corporation 192 192
27,125 27,125 Wells Fargo Company 1,246 1,246
2,000 2,000 Whitney Holding Corporation 73 73
----------------------------------
5,188 16,650 21,838
----------------------------------
Commercial services - 0.5%
1,200 1,200 Administaff, Inc. 91 91
2,800 2,800 ADVO Inc. 92 92
1,800 1,800 Apollo Group Inc., Class A 72 72
2,900 2,900 Catalina Marketing Corporation 109 109
1,500 1,500 ChoicePoint Inc. 69 69
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited)(Continued)
September 30, 2000
Nations Nations
Nations Nations Balanced Asset Combined
Balanced Asset Assets Allocation Pro
Assets Allocation Combined Pro Fund Fund Forma
Fund Fund Forma Value Value Value
Shares Shares Shares Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stocks - (continued)
Commercial services - (continued)
1,900 1,900 Cintas Corporation $ - $ 83 $ 83
4,300 4,300 Comdisco, Inc. 82 82
3,900 3,900 eLoyalty Corporation 50 50
1,000 1,000 F.Y.I. Incorporated 37 37
3,900 3,900 Fiserv, Inc. 233 233
1,200 1,200 Heidrick & Struggles International, Inc. 62 62
600 600 Learning Tree International, Inc. 29 29
3,100 3,100 Manpower Inc. 99 99
8,500 8,500 Omnicom Group Inc. 619 619
1,700 1,700 Quanta Services, Inc. 47 47
2,100 2,100 Rent-A-Center, Inc. 73 73
5,200 5,200 Robert Half International Inc. 180 180
1,000 1,000 SCP Pool Corporation 30 30
1,800 1,800 SEI Investment Company 127 127
800 800 Startek, Inc. 23 23
1,100 1,100 Teletech Holdings Inc. 27 27
2,400 2,400 Tetra Tech Inc. 69 69
4,300 4,300 True North Communications 154 154
2,700 2,700 Viad Corporation 72 72
----------------------------------
2,529 2,529
----------------------------------
Computer services - 0.9%
37,100 37,100 America Online Inc. 1,995 1,995
19,100 19,100 Automatic Data Processing Inc. 1,277 1,277
2,000 2,000 CSG Systems International, Inc. 58 58
600 600 Fair, Issac and Company Inc. 26 26
3,600 3,600 MarchFirst, Inc. 56 56
14,100 14,100 Paychex, Inc. 740 740
3,600 3,600 Sapient Corporation 146 146
3,100 3,100 Sungard Data Systems, Inc. 133 133
----------------------------------
4,431 4,431
----------------------------------
Computers and office equipment - 4.2%
22,300 22,300 Apple Computer Inc. 574 574
3,150 3,150 Avocent Corporation 174 174
45,700 45,700 Dell Computer Corporation 1,408 1,408
49,000 49,000 EMC Corporation 4,856 4,856
7,000 20,600 27,600 Hewlett-Packard Company 679 1,998 2,677
10,950 11,000 21,950 International Business Machines Corporation 1,232 1,238 2,470
23,000 23,000 Jabil Circuit, Inc. 1,305 1,305
8,600 8,600 NCR Corporation 325 325
9,200 9,200 Network Appliance, Inc. 1,172 1,172
7,000 7,000 Palm, Inc. 371 371
3,400 3,400 PerkinElmer, Inc. 355 355
1,000 1,000 Radisys Corporation 51 51
4,500 4,500 Sanmina Corporation 421 421
9,000 9,000 Solectron Corporation 415 415
37,850 37,850 Sun Microsystems, Inc. 4,418 4,418
2,587 2,587 Symbol Technologies, Inc. 93 93
2,100 2,100 Tech Data Corporation 90 90
400 400 Tektronix, Inc. 31 31
1,700 1,700 Zebra Technologies Corporation 82 82
----------------------------------
1,911 19,377 21,288
----------------------------------
Conglomerates - 1.0%
14,200 14,200 Dover Corporation 667 667
1,800 1,800 Dycom Industries, Inc. 75 75
900 900 Insituform Technologies Inc., Class A 30 30
500 500 SPX Corporation 71 71
10,200 10,200 Textron Inc. 470 470
1,000 1,000 The Shaw Group Inc. 71 71
40,200 40,200 Tyco International Ltd. 2,085 2,085
25,525 25,525 United Technologies Corporation 1,768 1,768
----------------------------------
5,237 5,237
----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited)(Continued)
September 30, 2000
Nations Nations
Nations Nations Balanced Asset Combined
Balanced Asset Assets Allocation Pro
Assets Allocation Combined Pro Fund Fund Forma
Fund Fund Forma Value Value Value
Shares Shares Shares Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stocks - (continued)
Consumer credit and mortgages - 1.3%
20,850 18,000 38,850 American Express Company $ 1,267 $ 1,094 $ 2,361
29,200 29,200 Fannie Mae 2,088 2,088
2,500 2,500 Greenpoint Financial Corporation 74 74
26,525 23,200 49,725 MBNA Corporation 1,021 893 1,914
2,000 2,000 Metris Companies Inc. 79 79
2,600 2,600 Providian Financial Corporation 330 330
----------------------------------
2,288 4,558 6,846
----------------------------------
Department and discount stores - 1.1%
10,100 10,100 Kohls Corporation 583 583
22,600 22,600 Sears, Roebuck and Company 733 733
91,200 91,200 Wal-Mart Stores, Inc. 4,388 4,388
----------------------------------
5,704 5,704
----------------------------------
Diversified electronics - 0.1%
2,200 2,200 Aeroflex, Inc. 107 107
2,300 2,300 Anixter International Inc. 67 67
2,000 2,000 Harman International Industries 78 78
1,200 1,200 Helix Technology Corporation 36 36
1,900 1,900 Kent Electronics Corporation 45 45
2,700 2,700 Waters Corporation 241 241
----------------------------------
574 574
----------------------------------
Diversified manufacturing - 2.2%
2,800 2,800 Belden Inc. 66 66
14,125 14,125 Eastman Kodak Company 577 577
164,000 164,000 General Electric Company 9,461 9,461
3,000 3,000 Harsco Corporation 66 66
2,000 2,000 Nordson Corporation 57 57
3,600 3,600 Plexus Corporation 254 254
9,400 9,400 Procter & Gamble Company 630 630
----------------------------------
1,207 9,904 11,111
----------------------------------
Electric power - Non nuclear - 2.5%
4,500 4,500 Allegheny Energy, Inc. 172 172
4,100 4,100 Allete 91 91
18,200 18,200 Ameren Corporation 762 762
3,800 3,800 Calpine Corporation 397 397
6,800 6,800 Conectiv, Inc. 122 122
25,150 25,150 Consolidated Edison, Inc. 858 858
14,400 14,400 Dominion Resources, Inc. 836 836
15,100 15,100 Duke Energy Corporation 1,295 1,295
7,200 7,200 Dynegy Inc. 410 410
6,600 6,600 Energy East Corporation 149 149
14,000 18,500 32,500 FPL Group Inc. 921 1,216 2,137
2,200 2,200 Idacorp, Inc. 102 102
2,610 2,610 NSTAR 105 105
26,300 26,300 PECO Energy Company 1,592 1,592
2,100 2,100 Pinnacle West Capital Corporation 107 107
5,400 5,400 Public Service Company of New Mexico 140 140
49,975 5,200 55,175 TECO Energy, Inc. 1,437 150 1,587
1,800 1,800 The Montana Power Company 60 60
1,700 1,700 UIL Holdings Corporation 87 87
25,400 25,400 Unicom Corporation 1,427 1,427
3,400 3,400 UniSource Energy Corporation 56 56
5,300 5,300 UtiliCorp United Inc. 137 137
----------------------------------
4,814 7,815 12,629
----------------------------------
Electrical equipment - 0.2%
1,900 1,900 AMETEK, Inc. 40 40
2,500 2,500 C&D Technologies, Inc. 142 142
13,500 13,500 Emerson Electric Company 905 905
2,000 2,000 Littelfuse, Inc. 59 59
700 700 Park Electrochemical Corporation 39 39
----------------------------------
905 280 1,185
----------------------------------
Exploration and production - 0.0%
1,700 1,700 Stone Energy Corporation 94 94
----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited)(Continued)
September 30, 2000
Nations Nations
Nations Nations Balanced Asset Combined
Balanced Asset Assets Allocation Pro
Assets Allocation Combined Pro Fund Fund Forma
Fund Fund Forma Value Value Value
Shares Shares Shares Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stocks - (continued)
Finance - Miscellaneous - 0.3%
6,800 6,800 AmeriCredit Corporation $ - $ 196 $ 196
6,500 6,500 Concord EFS, Inc. 231 231
22,250 22,250 Freddie Mac 1,203 1,203
----------------------------------
1,203 427 1,630
----------------------------------
Food and drug stores - 0.2%
3,000 3,000 Casey's General Stores, Inc. 39 39
20,600 20,600 Safeway, Inc. 961 961
1,800 1,800 Whole Foods Market Inc. 97 97
----------------------------------
1,097 1,097
----------------------------------
Food products - 1.3%
5,000 5,000 Bestfoods 364 364
42,850 40,000 82,850 ConAgra Inc. 860 803 1,663
1,391 1,391 Hain Celestial Group, Inc. 49 49
23,550 23,550 H.J. Heinz Company 873 873
29,450 29,450 Kellogg Company 712 712
3,500 3,500 McCormick and Company, Inc. 104 104
2,400 2,400 Michael Foods Inc. 56 56
6,500 6,500 Nabisco Group Holdings Corporation 185 185
2,600 2,600 Performance Food Group Company 98 98
11,400 11,400 Quaker Oats Company 901 901
7,500 7,500 Smithfield Foods Inc. 197 197
2,800 2,800 Suiza Foods Corporation 142 142
18,200 18,200 SYSCO Corporation 843 843
9,600 9,600 Unilever NV, ADR 463 463
----------------------------------
2,445 4,205 6,650
----------------------------------
Health services - 0.4%
2,400 2,400 Cerner Corporation 111 111
3,000 3,000 Coventry Health Care Inc. 45 45
1,100 1,100 Express Scripts Inc., Class A 79 79
1,300 1,300 Invacare Corporation 42 42
3,600 3,600 Lincare Holdings Inc. 103 103
2,900 2,900 Orthodontic Centers of America 97 97
500 500 Quest Diagnostics Inc. 57 57
5,300 5,300 Trigon Healthcare, Inc. 279 279
8,900 8,900 UnitedHealth Group Inc. 880 880
1,400 1,400 Universal Health Services Inc., Class B 120 120
750 750 Wellpoint Health Networks Inc. 72 72
----------------------------------
1,885 1,885
----------------------------------
Heavy machinery - 0.5%
2,700 2,700 Briggs & Stratton Corporation 102 102
20,500 20,500 Caterpillar Inc. 692 692
13,500 13,500 Deere & Company 449 449
6,400 6,400 JLG Industries Inc. 78 78
20,575 16,500 37,075 Parker Hannifin Corporation 694 557 1,251
1,500 1,500 Toro Company 47 47
----------------------------------
1,386 1,233 2,619
----------------------------------
Household products - 0.7%
18,700 18,700 Avon Products, Inc. 764 764
1,500 1,500 Blyth Industries, Inc. 35 35
4,400 4,400 Church & Dwight Company, Inc. 81 81
8,700 8,700 Colgate-Palmolive Company 411 411
28,100 28,100 Kimberly-Clark Corporation 1,569 1,569
13,100 13,100 The Clorox Company 518 518
----------------------------------
3,378 3,378
----------------------------------
Housing and furnishing - 0.3%
3,500 3,500 American Standard Companies Inc. 156 156
4,796 4,796 D.R. Horton Inc. 82 82
1,500 1,500 Lennar Corporation 45 45
4,100 4,100 M.D.C. Holdings, Inc. 107 107
5,200 5,200 Mohawk Industries Inc. 113 113
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited)(Continued)
September 30, 2000
Nations Nations
Nations Nations Balanced Asset Combined
Balanced Asset Assets Allocation Pro
Assets Allocation Combined Pro Fund Fund Forma
Fund Fund Forma Value Value Value
Shares Shares Shares Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stocks - (continued)
Housing and furnishing - (continued)
3,800 3,800 Pulte Corporation $ - $ 125 $ 125
1,400 1,400 Salton, Inc. 45 45
23,300 23,300 Stanley Works 537 537
3,700 3,700 The Ryland Group, Inc. 115 115
1,800 1,800 Toll Brothers, Inc. 62 62
----------------------------------
537 850 1,387
----------------------------------
Insurance - 2.7%
19,500 19,500 American General Corporation 1,521 1,521
22,000 15,150 37,150 American International Group, Inc. 2,105 1,450 3,555
1,300 1,300 Arthur J. Gallagher & Company 77 77
18,400 18,400 AXA Financial, Inc. 937 937
8,925 8,000 16,925 CIGNA Corporation 932 835 1,767
1,696 1,696 Delphi Financial Group Inc., Class A 69 69
3,600 3,600 Everest Re Group Ltd. 178 178
2,900 2,900 Fidelity National Financial, Inc. 72 72
30,700 30,700 Hartford Financial Services Group, Inc. 2,240 2,240
12,500 28,500 41,000 MGIC Investment Corporation 764 1,742 2,506
7,500 7,500 Old Republic International Corporation 180 180
2,700 2,700 PMI Group, Inc. 183 183
2,400 2,400 Radian Group Inc. 162 162
1,600 1,600 RenaissanceRe Holdings Ltd. 102 102
----------------------------------
3,801 9,748 13,549
----------------------------------
Integrated oil - 3.8%
2,200 2,200 AGL Resources Inc. 44 44
12,200 12,200 Anadarko Petroleum Corporation 811 811
16,600 16,600 Apache Corporation 981 981
11,500 11,500 BP Amoco plc, ADR 610 610
12,675 29,000 41,675 Chevron Corporation 1,081 2,472 3,553
29,188 29,188 Conoco, Inc. 786 786
2,100 2,100 EOG Resources, Inc. 82 82
23,041 78,407 101,448 Exxon Mobil Corporation 2,053 6,988 9,041
1,600 1,600 Murphy Oil Corporation 104 104
2,500 2,500 Newfield Exploration Company 117 117
30,700 30,700 Occidental Petroleum Corporation 670 670
3,200 3,200 Pogo Producing Company 81 81
14,850 14,850 Royal Dutch Petroleum Company 890 890
3,200 3,200 Ultramar Diamond Shamrock Corporation 81 81
18,025 18,025 Unocal Corporation 639 639
23,475 23,475 USX-Marathon Group Inc. 666 666
5,500 5,500 Vintage Petroleum, Inc. 125 125
----------------------------------
6,870 12,411 19,281
----------------------------------
Investment services - 2.2%
2,800 2,800 A.G. Edwards, Inc. 146 146
400 400 Dain Rauscher Corporation 37 37
2,000 2,000 Eaton Vance Corporation 102 102
1,100 1,100 Jefferies Group, Inc. 30 30
1,900 1,900 Legg Mason Inc. 110 110
14,300 14,300 Lehman Brothers Holdings Inc. 2,113 2,113
15,050 23,000 38,050 Merrill Lynch & Company Inc. 993 1,518 2,511
15,250 27,500 42,750 Morgan Stanley Dean Witter & Company 1,395 2,515 3,910
1,600 1,600 Raymond James Financial, Inc. 53 53
15,300 15,300 State Street Corporation 1,989 1,989
2,900 2,900 Waddell & Reed Financial, Inc. 90 90
----------------------------------
2,388 8,703 11,091
----------------------------------
Lodging and recreation - 0.4%
3,500 3,500 Aztar Corporation 54 54
4,050 4,050 Brunswick Corporation 74 74
4,000 4,000 Darden Restaurants Inc. 83 83
18,100 18,100 Harley-Davidson Inc. 867 867
12,400 12,400 Marriott International Inc., Class A 452 452
1,500 1,500 MeriStar Hospitality Corporation 30 30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited)(Continued)
September 30, 2000
Nations Nations
Nations Nations Balanced Asset Combined
Balanced Asset Assets Allocation Pro
Assets Allocation Combined Pro Fund Fund Forma
Fund Fund Forma Value Value Value
Shares Shares Shares Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stocks - (continued)
Lodging and recreation - (continued)
9,900 9,900 Park Place Entertainment Corporation $ - $ 150 $ 150
2,200 2,200 Polaris Industries Inc. 78 78
700 700 Sabre Holdings Corporation 20 20
2,900 2,900 Winnebago Industries 36 36
----------------------------------
1,844 1,844
----------------------------------
Medical devices and supplies - 2.1%
28,375 28,375 Abbott Laboratories 1,350 1,350
2,000 2,000 ADAC Laboratories Designs 42 42
14,800 14,800 Baxter International Inc. 1,181 1,181
1,900 1,900 Beckman Coulter, Inc. 147 147
26,850 26,850 Biomet, Inc. 940 940
1,400 1,400 C.R. Bard, Inc. 59 59
11,250 17,000 28,250 Cardinal Health, Inc. 992 1,499 2,491
1,100 1,100 Coherent Inc. 75 75
2,500 2,500 Cooper Companies Inc. 88 88
2,500 2,500 Datascope Corporation 84 84
800 800 Diagnostic Products Corporation 43 43
30,300 30,300 Johnson & Johnson 2,846 2,846
2,600 2,600 Minimed Inc. 232 232
7,100 7,100 PE Corp-PE Biosystems Group 827 827
1,337 1,337 Priority Healthcare Corporation= 102 102
1,900 1,900 Respironics, Inc. 32 32
1,900 1,900 Stryker Corporation 82 82
1,000 1,000 Techne Corporation 112 112
1,800 1,800 Varian Medical Systems, Inc. 81 81
----------------------------------
2,342 8,472 10,814
----------------------------------
Metals and mining - 0.4%
6,200 6,200 AK Steel Holding Corporation 58 58
15,200 15,200 Barrick Gold Corporation 232 232
2,100 2,100 Carpenter Technology Corporation 61 61
10,850 10,850 Minnesota Mining & Manufacturing Company 989 989
700 700 Mueller Industries Inc. 16 16
2,800 2,800 Precision Castparts Corporation 107 107
1,400 1,400 Quanex Corporation 27 27
3,700 3,700 Reliance Steel & Aluminum Company 78 78
2,200 2,200 Texas Industries Inc. 70 70
28,000 28,000 USX - U.S. Steel Group Inc. 425 425
----------------------------------
989 1,074 2,063
----------------------------------
Natural gas distribution - 0.7%
23,300 23,300 Coastal Corporation 1,727 1,727
13,600 13,600 El Paso Energy Corporation 838 838
5,100 5,100 Energen Corporation 152 152
8,200 8,200 Enron Corporation 719 719
2,200 2,200 Equitable Resources Inc. 139 139
3,650 3,650 KeySpan Corporation 146 146
3,100 3,100 Northwest Natural Gas Company 71 71
----------------------------------
838 2,954 3,792
----------------------------------
Networking and telecommunications equipment - 3.7%
1,300 1,300 Adaptive Broadband Corporation 25 25
200 200 ADC Telecommunications, Inc. 5 5
2,400 2,400 ADTRAN, Inc. 102 102
800 800 Advanced Fibre Communications, Inc. 30 30
2,000 2,000 Brocade Communications Systems, Inc. 472 472
700 700 Brooktrout Inc. 23 23
1,800 1,800 C-COR Electronics 28 28
2,850 2,850 Cable Design Technologies Corporation 69 69
4,400 4,400 CIENA Corporation 540 540
145,100 145,100 Cisco Systems, Inc. 8,017 8,017
6,300 6,300 Comverse Technology, Inc. 680 680
8,500 8,500 Corning Inc. 2,525 2,525
2,600 2,600 DMC Stratex Networks, Inc. 42 42
1,500 1,500 Foundry Networks, Inc. 100 100
9,200 9,200 JDS Uniphase Corporation 871 871
1,800 1,800 Juniper Networks, Inc. 394 394
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited)(Continued)
September 30, 2000
Nations Nations
Nations Nations Balanced Asset Combined
Balanced Asset Assets Allocation Pro
Assets Allocation Combined Pro Fund Fund Forma
Fund Fund Forma Value Value Value
Shares Shares Shares Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stocks - (continued)
Networking and telecommunications equipment - (continued)
57,700 57,700 Nortel Networks Corporation $ - $ 3,437 $ 3,437
3,000 3,000 Plantronics Inc. 114 114
2,600 2,600 Polycom, Inc. 174 174
2,800 2,800 Powerwave Technologies, Inc. 106 106
1,000 1,000 Proxim, Inc. 45 45
700 700 Rainbow Technologies, Inc. 25 25
12,200 12,200 Scientific-Atlanta, Inc. 776 776
900 900 Terayon Communication Systems, Inc. 31 31
800 800 ViaSat Inc. 18 18
1,300 1,300 Westell Technologies, Inc. 17 17
----------------------------------
18,666 18,666
----------------------------------
Oilfield services - 0.6%
24,050 24,050 ENSCO International Inc. 921 921
3,500 3,500 Helmerich & Payne, Inc. 126 126
4,000 4,000 Hughes Supply Inc. 78 78
4,800 4,800 Noble Drilling Corporation 241 241
5,300 5,300 Offshore Logistics Inc. 95 95
10,100 10,100 Schlumberger Ltd. 831 831
2,600 2,600 Smith International, Inc. 212 212
900 900 Swift Energy Company 37 37
1,800 1,800 UTI Energy Corporation 80 80
2,200 2,200 Varco International, Inc. 46 46
4,200 4,200 Weatherford International, Inc. 181 181
----------------------------------
2,848 2,848
----------------------------------
Packaging and containers - 0.0%
1,300 1,300 AptarGroup Inc. 31 31
----------------------------------
Paper and forest products - 0.2%
12,600 12,600 Bowater Incorporated 585 585
3,100 3,100 Buckeye Technologies Inc. 64 64
1,600 1,600 Georgia - Pacific Corporation (Timber Group) 43 43
5,304 5,304 International Paper Company 152 152
3,600 3,600 United Stationers Inc. 97 97
7,400 7,400 Weyerhaeuser Company 299 299
----------------------------------
1,240 1,240
----------------------------------
Pharmaceuticals - 4.3%
13,000 13,000 Allergan, Inc. 1,098 1,098
1,900 1,900 Alpharma Inc., Class A 116 116
18,300 18,300 Amgen Inc. 1,278 1,278
1,500 1,500 Barr Laboratories, Inc. 99 99
3,666 3,666 Bindley Western Industries 117 117
7,200 7,200 Biogen, Inc. 439 439
24,150 41,500 65,650 Bristol-Myers Squibb Company 1,380 2,370 3,750
1,200 1,200 Cephalon, Inc. 58 58
5,500 5,500 Chiron Corporation 248 248
2,300 2,300 COR Therapeutics, Inc. 143 143
2,100 2,100 Dura Pharmaceuticals Inc. 74 74
7,100 7,100 Eli Lilly and Company 576 576
200 200 Enzo Biochem, Inc. 10 10
2,700 2,700 Forest Laboratories, Inc. 310 310
2,800 2,800 Genzyme Corporation 191 191
1,200 1,200 Gilead Sciences, Inc. 132 132
1,900 1,900 ICN Pharmaceuticals Incorporated 63 63
900 900 IDEC Pharmaceuticals Corporation 158 158
2,000 2,000 Incyte Pharmaceuticals, Inc. 82 82
2,350 2,350 IVAX Corporation 108 108
1 1 King Pharmaceuticals, Inc. -
2,000 2,000 Medicis Pharmaceutical Corporation, Class A 123 123
58,400 58,400 Merck & Company, Inc. 4,346 4,346
1,300 1,300 Millennium Pharmaceuticals, Inc. 190 190
3,100 3,100 NBTY, Inc. 20 20
600 600 Noven Pharmaceuticals, Inc. 26 26
119,800 119,800 Pfizer Inc. 5,383 5,383
700 700 Protein Design Labs, Inc. 84 84
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited)(Continued)
September 30, 2000
Nations Nations
Nations Nations Balanced Asset Combined
Balanced Asset Assets Allocation Pro
Assets Allocation Combined Pro Fund Fund Forma
Fund Fund Forma Value Value Value
Shares Shares Shares Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stocks - (continued)
Pharmaceuticals - (continued)
1,000 1,000 Regeneron Pharmaceuticals, Inc. $ - $ 33 $ 33
49,700 49,700 Schering-Plough Corporation 2,311 2,311
200 200 Sepracor Inc. 25 25
1,400 1,400 Syncor International Corporation 52 52
2,200 2,200 Vertex Pharmaceuticals, Inc. 186 186
----------------------------------
1,380 20,449 21,829
----------------------------------
Publishing and advertising - 0.5%
12,900 12,900 Dow Jones & Company, Inc. 780 780
1,000 1,000 Harcourt General Inc. 59 59
1,600 1,600 Harte-Hanks, Inc. 44 44
1,700 1,700 John H. Harland Company 26 26
12,700 12,700 McGraw-Hill Companies, Inc. 807 807
12,300 12,300 New York Times Company, Class A 484 484
1,200 1,200 Penton Media Inc. 33 33
4,250 4,250 Readers Digest Association, Inc. 150 150
2,100 2,100 Scholastic Corporation 167 167
38 38 The Washington Post Company 20 20
----------------------------------
780 1,790 2,570
----------------------------------
Railroads, trucking and shipping - 0.4%
3,500 3,500 American Freightways Corporation 56 56
4,500 4,500 Arkansas Best Corporation 69 69
1,500 1,500 C.H. Robinson Worldwide, Inc. 85 85
1,600 1,600 CNF Transportation Inc. 36 36
2,400 2,400 Expeditors International of Washington, Inc. 108 108
21,725 21,725 FedEx Corporation 963 963
2,300 2,300 GATX Corporation 96 96
1,800 1,800 Heartland Express Inc. 31 31
2,600 2,600 Kirby Corporation 51 51
3,600 3,600 Roadway Express, Inc. 65 65
15,600 15,600 Union Pacific Corporation 606 606
----------------------------------
963 1,203 2,166
----------------------------------
Restaurants - 0.3%
3,800 3,800 Brinker International, Inc. 114 114
3,800 3,800 CEC Entertainment Inc. 122 122
4,500 4,500 Jack in the Box Inc. 96 96
8,500 8,500 McDonald's Corporation 257 257
5,500 5,500 Ruby Tuesday Inc. 62 62
16,000 16,000 Starbucks Corporation 641 641
----------------------------------
257 1,035 1,292
----------------------------------
Semiconductors - 3.3%
1,900 1,900 Actel Corporation 68 68
3,000 3,000 Alliance Semiconductor Corporation 60 60
2,500 2,500 Alpha Industries, Inc. 85 85
14,500 14,500 Altera Corporation 692 692
13,100 13,100 Analog Devices, Inc. 1,082 1,082
22,900 22,900 Applied Materials, Inc. 1,357 1,357
1,700 1,700 Applied Micro Circuits Corporation 352 352
2,900 2,900 Arrow Electronics, Inc. 99 99
4,800 4,800 Atmel Corporation 73 73
2,200 2,200 Avnet, Inc. 62 62
5,500 5,500 Broadcom Corporation, Class A 1,341 1,341
2,000 2,000 Cognex Corporation 79 79
1,300 1,300 Credence Systems Corporation 39 39
3,600 3,600 Cypress Semiconductor Corporation 150 150
2,900 2,900 Dallas Semiconductor Corporation 95 95
1,600 1,600 Electro Scientific Industries, Inc. 56 56
2,100 2,100 General Semiconductor, Inc. 26 26
78,650 78,650 Intel Corporation 3,268 3,268
9,450 3,300 12,750 Intergrated Device Technology, Inc. 855 299 1,154
2,400 2,400 International Rectifier Corporation 121 121
4,400 4,400 KEMET Corporation 122 122
6,900 6,900 KLA-Tencor Corporation 284 284
700 700 Lattice Semiconductor Corporation 38 38
7,600 7,600 Linear Technology Corporation 492 492
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited)(Continued)
September 30, 2000
Nations Nations
Nations Nations Balanced Asset Combined
Balanced Asset Assets Allocation Pro
Assets Allocation Combined Pro Fund Fund Forma
Fund Fund Forma Value Value Value
Shares Shares Shares Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stocks - (continued)
Semiconductors - (continued)
1,300 1,300 Micrel Inc. $ - $ 87 $ 87
4,725 4,725 Microchip Technology Inc. 156 156
14,000 14,000 Micron Technology, Inc. 644 644
7,500 7,500 National Semiconductor Corporation 302 302
2,200 2,200 Nvidia Corporation 180 180
2,300 2,300 PMC - Sierra, Inc. 495 495
1,700 1,700 QLogic Corporation 150 150
1,300 1,300 Sawtek, Inc. 50 50
2,075 2,075 SDL, Inc. 642 642
1,600 1,600 Semtech Corporation 69 69
2,800 2,800 Silicon Valley Group, Inc. 74 74
1,100 1,100 Technitrol Inc. 111 111
5,900 5,900 Teradyne, Inc. 207 207
29,300 29,300 Texas Instruments Inc. 1,382 1,382
2,600 2,600 TranSwitch Corporation 166 166
2,600 2,600 TriQuint Semiconductor, Inc. 95 95
4,350 4,350 Vishay Intertechnology, Inc. 134 134
10,100 10,100 Xilinx, Inc. 865 865
----------------------------------
855 16,149 17,004
----------------------------------
Software - 3.5%
3,600 3,600 Adobe Systems Inc. 559 559
1,000 1,000 Affiliated Computer Services, Inc. 50 50
1,800 1,800 Aspen Technology, Inc. 81 81
2,300 2,300 Avid Technology, Inc. 32 32
2,750 2,750 BroadVision, Inc. 71 71
7,200 7,200 Cadence Design Systems, Inc. 185 185
2,550 2,550 Dendrite International, Inc. 68 68
2,800 2,800 DST Systems, Inc. 329 329
1,600 1,600 Electronic Arts Inc. 79 79
19,775 19,775 Electronic Data Systems Corporation 820 820
1,800 1,800 FileNET Corporation 33 33
19,425 16,775 36,200 First Data Corporation 759 655 1,414
900 900 HNC Software Inc. 74 74
1,600 1,600 Hyperion Solutions Corporation 41 41
11,300 11,300 Intuit Inc. 644 644
800 800 J.D.Edwards and Company 21 21
2,000 2,000 Jack Henry & Associates 87 87
1,200 1,200 Macromedia Inc. 97 97
300 300 Mercury Interactive Corporation 47 47
83,400 83,400 Microsoft Corporation 5,029 5,029
1,400 1,400 National Instruments Corporation 62 62
58,400 58,400 Oracle Corporation 4,598 4,598
1,000 1,000 Project Software & Development, Inc. 16 16
4,200 4,200 Rational Software Corporation 291 291
2,000 2,000 RSA Security Inc. 86 86
6,200 6,200 Siebel Systems, Inc. 690 690
5,500 5,500 Sybase, Inc. 127 127
2,250 2,250 Symantec Corporation 99 99
1,300 1,300 The BISYS Group, Inc. 101 101
2,100 2,100 Veritas DGC Inc. 61 61
6,900 6,900 VERITAS Software Corporation 980 980
1,700 1,700 Verity, Inc. 61 61
11,300 11,300 Yahoo! Inc. 1,028 1,028
----------------------------------
1,579 16,382 17,961
----------------------------------
Specialty stores - 1.2%
3,700 3,700 Abercrombie & Fitch Company 71 71
23,600 23,600 Bed Bath & Beyond, Inc. 576 576
13,100 13,100 Best Buy Company, Inc. 833 833
3,700 3,700 BJ's Wholesale Club, Inc. 126 126
3,000 3,000 CDW Computer Centers, Inc. 207 207
2,100 2,100 Cost Plus, Inc. 63 63
1,700 1,700 Dollar Tree Stores, Inc. 69 69
1,600 1,600 Dress Barn Inc. 34 34
1,400 1,400 Footstar Inc. 45 45
37,750 37,750 Home Depot Inc. 2,002 2,002
1,500 1,500 Insight Enterprises Inc. 41 41
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited)(Continued)
September 30, 2000
Nations Nations
Nations Nations Balanced Asset Combined
Balanced Asset Assets Allocation Pro
Assets Allocation Combined Pro Fund Fund Forma
Fund Fund Forma Value Value Value
Shares Shares Shares Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stocks - (continued)
Specialty stores - (continued)
41,200 41,200 Limited Inc. $ - $ 909 $ 909
2,500 2,500 Linens 'N Things Inc. 64 64
1,600 1,600 Michaels Stores Inc. 64 64
4,600 4,600 Pier 1 Imports Inc. 62 62
1,600 1,600 Talbots, Inc. 106 106
6,200 6,200 The Men's Wearhouse Inc. 176 176
20,900 20,900 Tiffany & Company 806 806
2,700 2,700 Zale Corporation 88 88
----------------------------------
6,342 6,342
----------------------------------
Telecommunications services - 3.3%
67,350 67,350 BellSouth Corporation 2,711 2,711
2,500 2,500 Broadwing Inc. 64 64
14,800 14,800 Nextel Communications, Inc. 692 692
49,300 49,300 Qwest Communications International, Inc. 2,369 2,369
22,325 79,966 102,291 SBC Communications Inc. 1,116 3,999 5,115
3,500 3,500 TALK.com, Inc. 15 15
1,600 1,600 Telephone and Data Systems, Inc. 177 177
18,165 49,239 67,404 Verizon Communications 880 2,385 3,265
85,286 85,286 WorldCom, Inc. 2,591 2,591
----------------------------------
1,996 15,003 16,999
----------------------------------
Tobacco - 0.7%
39,200 49,600 88,800 Philip Morris Companies Inc. 1,154 1,460 2,614
1 2,200 2,201 R.J. Reynolds Tobacco Holdings, Inc. 0 71 71
40,850 40,850 UST Inc. 934 934
----------------------------------
2,088 1,531 3,619
----------------------------------
Utilities - Miscellaneous - 0.7%
30,175 30,175 American Water Works Company, Inc. 832 832
44,775 44,775 AT&T Corporation 1,315 1,315
19,650 19,650 NICOR Inc. 711 711
1,800 1,800 Philadelphia Suburban Corporation 42 42
31,500 31,500 Sprint Corporation (FON Group) 923 923
----------------------------------
3,781 42 3,823
----------------------------------
Total common stocks
(Cost $48,551 and $194,715, respectively) 54,413 260,473 314,886
----------------------------------
Convertible preferred stocks - 0.0%
(Cost $245)
Packaging and containers - 0.0%
4,845 4,845 Sealed Air Corporation 218 218
----------------------------------
Principal Principal Principal
amount amount amount
(000) (000) (000)
---------------------------------
Corporate bonds and notes - 14.7%
Aerospace and defense - 0.4%
Raytheon Company:
$ - $ 1,770 $ 1,770 7.900% 03/01/03 1,800 1,800
250 250 6.750% 08/15/07 237 237
----------------------------------
237 1,800 2,037
----------------------------------
Automotive - 0.2%
1,200 1,200 Delphi Automotive Systems Corporation,
6.125% 05/01/04 1,145 1,145
----------------------------------
Beverages - 0.2%
1,035 1,035 Pepsi Bottling Holdings, Inc.,
5.375% 02/17/04 987 987
----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited) (continued)
September 30, 2000
Nations Nations
Balanced Asset Nations Nations
Assets Allocation Combined Pro Balanced Asset Combined
Fund Fund Forma Assets Allocation Pro
Principal Principal Principal Fund Fund Forma
amount amount amount Value Value Value
(000) (000) (000) Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Corporate bonds and notes - (continued)
Broadcasting and cable - 1.2%
$ - $ 1,150 $ 1,150 British Sky Broadcasting Group plc,
6.875% 02/23/09 $ - $ 998 $ 998
500 1,750 2,250 Clear Channel Communications, Inc.,
7.875% 06/15/05 510 1,785 2,295
1,200 1,200 Cox Radio, Inc.,
6.250% 05/15/03 1,172 1,172
520 520 Time Warner Inc.,
8.110% 08/15/06 542 542
1,500 1,500 USA Networks, Inc.,
6.750% 11/15/05 1,459 1,459
----------------------------------
1,052 5,414 6,466
----------------------------------
Chemicals - Specialty - 0.3%
325 325 Equistar Chemicals, L.P.,
8.500% 02/15/04 323 323
1,500 1,500 Praxair, Inc.,
6.750% 03/01/03 1,487 1,487
----------------------------------
323 1,487 1,810
----------------------------------
Commercial banking - 0.8%
1,425 1,425 Chase Manhattan Corporation,
5.750% 04/15/04 1,369 1,369
500 500 FCB/NC Capital Trust I, Gtd. Notes,
8.050% 03/01/28 416 416
1,600 1,600 First Union Corporation,
7.550% 08/18/05 1,620 1,620
750 750 Popular, Inc., MTN,
6.375% 09/15/03 736 736
250 250 Union Planters Capital Trust,
8.200% 12/15/26 214 214
----------------------------------
1,366 2,989 4,355
----------------------------------
Commercial services - 0.6%
450 1,650 2,100 Comdisco, Inc.,
9.500% 08/15/03 453 1,662 2,115
650 650 Service Corporation International,
6.000% 12/15/05 369 369
500 260 760 Xerox Capital Trust I, Gtd. Notes,
8.000% 02/01/27 357 186 543
----------------------------------
1,179 1,848 3,027
----------------------------------
Computer services - 0.1%
350 350 Computer Sciences Corporation,
7.500% 08/08/05 354 354
----------------------------------
Computers and office equipment - 0.3%
350 1,200 1,550 Compaq Computer Corporation,
7.450% 08/01/02 351 1,205 1,556
----------------------------------
Conglomerates - 0.2%
250 1,000 1,250 USA Waste Services Inc.,
7.000% 07/15/28 205 819 1,024
250 250 Waste Management, Inc.,
6.125% 07/15/01 244 244
----------------------------------
449 819 1,268
----------------------------------
Consumer credit and mortgages - 0.3%
1,725 1,725 Capital One Bank,
8.250% 06/15/05 1,751 1,751
----------------------------------
Diversified manufacturing - 0.3%
Tyco International Group SA:
500 500 6.375% 06/15/05 486 486
1,200 1,200 7.000% 06/15/28 1,059 1,059
----------------------------------
486 1,059 1,545
----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited) (continued)
September 30, 2000
Nations Nations
Balanced Asset Nations Nations
Assets Allocation Combined Pro Balanced Asset Combined
Fund Fund Forma Assets Allocation Pro
Principal Principal Principal Fund Fund Forma
amount amount amount Value Value Value
(000) (000) (000) Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Corporate bonds and notes - (continued)
Electric power - Non nuclear - 0.3%
$ - $ 1,300 $ 1,300 Consumers Energy Company,
6.200% 05/01/03 $ - $ 1,237 $ 1,237
135 135 SCANA Corporation,
6.050% 01/13/03 132 132
----------------------------------
1,369 1,369
----------------------------------
Energy - Miscellaneous - 0.6%
180 800 980 PDV America Inc., Gtd. Sr. Notes,
7.875% 08/01/03 173 768 941
500 1,650 2,150 USX Corporation,
6.650% 02/01/06 484 1,599 2,083
----------------------------------
657 2,367 3,024
----------------------------------
Finance - Miscellaneous - 3.4%
500 1,400 1,900 Case Credit Corporation,
6.125% 02/15/03 463 1,295 1,758
1,800 1,800 Caterpillar Financial Services Corporation,
6.875% 08/01/04 1,780 1,780
200 200 CIT Group, Inc.,
7.375% 03/15/03 200 200
1,050 1,050 Crown Cork & Seal Financial plc,
6.750% 12/15/03 940 940
500 500 ERAC USA Finance Company,
6.625% 02/15/05 478 478
500 1,695 2,195 Finova Capital Corporation,
7.250% 11/08/04 377 1,277 1,654
1,500 1,500 Ford Motor Credit Company,
7.600% 08/01/05 1,617 1,617
500 1,060 1,560 General Motors Acceptance Corporation,
6.150% 04/05/07 467 991 1,458
1,680 1,680 Heller Financial, Inc.,
6.000% 03/19/04 1,617 1,617
1,725 1,725 Household Finance Corporation,
8.000% 05/09/05 1,782 1,782
1,200 1,200 Newcourt Credit Group Inc.,
6.875% 02/16/05 1,185 1,185
1,250 1,250 Paine Webber Group, Inc.,
6.375% 05/15/04 1,220 1,220
1,600 1,600 Washington Mutual, Inc.,
7.500% 08/15/06 1,603 1,603
----------------------------------
1,985 15,307 17,292
----------------------------------
Food and drug stores - 0.7%
1,500 1,500 Nabisco Inc.,
6.125% 02/01/33 1,438 1,438
500 1,700 2,200 Safeway Inc., Sr. Notes,
7.250% 09/15/04 499 1,697 2,196
----------------------------------
499 3,135 3,634
----------------------------------
Health services - 0.1%
60 215 275 HCA-The Healthcare Corporation,
8.750% 09/01/10 61 220 281
----------------------------------
Heavy machinery - 0.3%
1,500 1,500 Thermo Electron Corporation,
7.625% 10/30/08 1,428 1,428
----------------------------------
Housing and furnishing - 0.3%
1,350 1,350 Hanson Overseas B.V.,
7.375% 01/15/03 1,349 1,349
----------------------------------
Insurance - 0.3%
1,675 1,675 American General Finance Corporation,
7.450% 01/15/05 1,692 1,692
----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited) (continued)
September 30, 2000
Nations Nations
Balanced Asset Nations Nations
Assets Allocation Combined Pro Balanced Asset Combined
Fund Fund Forma Assets Allocation Pro
Principal Principal Principal Fund Fund Forma
amount amount amount Value Value Value
(000) (000) (000) Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Corporate bonds and notes - (continued)
Integrated oil - 0.3%
$ - $ 1,500 $ 1,500 Occidental Petroleum Corporation, Sr. Notes,
7.650% 02/15/06 $ - $ 1,520 $ 1,520
----------------------------------
Investment services - 1.6%
500 500 Aristar, Inc.,
8.250% 06/15/05 518 518
500 1,650 2,150 Bear Stearns Companies, Inc.,
7.800% 08/15/07 506 1,670 2,176
480 480 Donaldson Lufkin and Jenrette,
5.875% 04/01/02 472 472
500 500 Goldman Sachs Group, LP,
6.625% 12/01/04 492 492
1,300 1,300 Lehman Brothers Holdings Inc.,
6.625% 04/01/04 1,274 1,274
1,500 1,500 MCN Investment Corporation,
6.890% 01/16/02 1,492 1,492
500 500 Morgan Stanley Dean Witter and Company,
7.750% 06/15/05 515 515
1,300 1,300 Salomon Smith Barney Holdings, Inc.,
6.250% 05/15/03 1,280 1,280
----------------------------------
2,503 5,716 8,219
----------------------------------
Metals and mining - 0.1%
385 385 Alcoa, Inc.,
7.375% 08/01/10 388 388
----------------------------------
Natural gas pipelines - 0.8%
500 1,815 2,315 KN Energy, Inc.,
6.450% 03/01/03 491 1,782 2,273
1,700 1,700 Williams Companies, Inc.,
6.500% 08/01/06 1,631 1,631
----------------------------------
491 3,413 3,904
----------------------------------
Pharmaceuticals - 0.3%
1,500 1,500 Pharmacia Corporation,
6.600% 12/01/28 1,335 1,335
----------------------------------
Telecommunications services - 0.7%
1,650 1,650 AirTouch Communications, Inc.,
6.350% 06/01/05 1,598 1,598
1,400 1,400 MCI Worldcom, Inc.,
6.400% 08/15/05 1,363 1,363
500 75 575 Sprint Capital Corporation,
6.875% 11/15/28 432 65 497
----------------------------------
432 3,026 3,458
----------------------------------
Total corporate bonds and notes
(Cost $13,343 and $63,290, respectively) 12,813 62,381 75,194
----------------------------------
Foreign bonds and notes - 1.0%
2,275 2,275 AT&T Canada Inc.,
8.680% 06/15/08 1,855 1,855
395 395 AT &T Canada Inc., Sr. Notes,
7.650% 09/15/06 399 399
1,000 1,000 Banco Latinoamericano,
7.200% 05/28/02 983 983
500 500 Corp Andina De Fomento,
8.875% 06/01/05 522 522
1,463 1,463 Pemex Finance Ltd.,
5.720% 11/15/03 1,429 1,429
70 70 Tyco International Group SA,
6.875% 01/15/29 61 61
----------------------------------
Total foreign bonds and notes
(Cost $892 and $4,403, respectively) 921 4,328 5,249
----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited) (continued)
September 30, 2000
Nations Nations
Balanced Asset Nations Nations
Assets Allocation Combined Pro Balanced Asset Combined
Fund Fund Forma Assets Allocation Pro
Principal Principal Principal Fund Fund Forma
amount amount amount Value Value Value
(000) (000) (000) Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities - 20.2%
Commercial mortgage-backed securities - 8.0%
$ - $ 750 $ 750 Commercial Mortgage Acceptance Corporation,
Series 1999-C1, Class A2,
7.030% 05/15/09 $ - $ 743 $ 743
1,239 1,239 Criimi Mae CMBS Corporation, Series 1998-1,
Class A1,
5.697% 10/20/01 1,217 1,217
1,880 1,880 CS First Boston Mortgage Securities Corporation,
Series 1998-C1, Class A1B,
6.480% 05/17/08 1,806 1,806
2,735 2,735 DLJ Commercial Mortgage Corporation, Series
1998-CG1, Class A1B,
6.410% 05/10/08 2,623 2,623
750 2,600 3,350 DLJ Commercial Mortgage Corporation, Series
1999-CG1, Class A1B,
6.460% 01/10/09 719 2,493 3,212
750 750 DLJ Commercial Mortgage Corporation, Series
1999-CG2, Class A1B,
7.300% 06/10/09 756 756
750 750 DLJ Commercial Mortgage Corporation, Series
1999-CG3, Class A1B,
7.340% 09/10/09 752 752
1,000 1,000 DLJ Commercial Mortgage Corporation, Series
2000-CF1, Class A1B,
7.620% 05/10/10 1,027 1,027
750 2,300 3,050 First Union National Bank Commercial Mortgage,
Series 1999-C4, Class A2,
7.390% 11/15/09 761 2,333 3,094
440 440 First Union-Chase Commercial Mortgage, Series
1999-C2, Class A2,
6.645% 04/15/09 428 428
750 2,650 3,400 GMAC Commercial Mortgage Securities Inc.,
Series 1999-C1, Class A2,
6.175% 05/15/33 704 2,485 3,189
2,600 2,600 GMAC Commercial Mortgage Securities Inc.,
Series 1999-C2, Class A2,
6.945% 09/15/33 2,561 2,561
800 800 Heller Financial Commercial Mortgage Asset
Corporation, Series 2000-PH1,
Class A2,
7.750% 11/15/09 828 828
6,596 6,596 JP Morgan Commercial Mortgage Finance Corporation,
Series 1997-C4,
Class X, Interest only,
1.290% 12/26/28 364 364
2,750 2,750 Mortgage Capital Funding, Inc., Series 1998-MC2,
Class A2,
6.423% 05/18/08 2,629 2,629
2,050 2,050 Nomura Asset Securities Corporation, Series
1998-D6, Class A1B,
6.590% 03/17/28 1,990 1,990
2,000 2,000 PNC Mortgage Acceptance Corporation, Series
1999-CM1, Class A1B,
7.330% 10/10/09 2,018 2,018
800 1,750 2,550 Prudential Securities Secured Financing
Corporation, Series 1999-C2, Class A2,
7.193% 04/15/09 802 1,753 2,555
2,715 2,715 Prudential Securities Secured Financing
Corporation, Series 1999-NRF1,
Class A2,
6.480% 01/15/09 2,601 2,601
760 1,715 2,475 Salomon Brothers Mortgage Securities, Series
2000-C1, Class A2,
7.520% 12/18/09 775 1,748 2,523
1,600 1,600 Salomon Brothers Mortgage Securities, Series
2000-C2, Class A2,
7.455% 04/18/10 1,623 1,623
702 168 870 Salomon Brothers Mortgage Securities, Series
2000-NL1, Class A1,
6.601% 04/15/08 687 165 852
42,911 42,911 Vendee Mortgage Trust, Series 1998-1, Class 2, IO,
.453% 09/15/27 748 748
46,495 46,495 Vendee Mortgage Trust, Series 1998-3, Class 1, IO,
.314% 03/15/29 608 608
----------------------------------
7,212 33,535 40,747
----------------------------------
Federal Home Loan Mortgage Corporation (FHLMC) Certificates - 1.8%
64 64 8.000% 01/01/04 65 65
400 400 6.500% 04/01/09 - 397 397
1,554 1,554 6.500% 07/01/10 1,533 1,533
70 70 8.000% 07/01/10 71 71
2,909 2,909 6.500% 06/01/14 2,853 2,853
7 7 10.500% 04/01/19 8 8
827 827 8.000% 09/01/25 841 841
3,070 3,070 7.000% 10/01/29 3,006 3,006
438 438 8.000% 06/01/30 444 444
----------------------------------
1,356 7,862 9,218
----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited) (continued)
September 30, 2000
Nations Nations
Balanced Asset Nations Nations
Assets Allocation Combined Pro Balanced Asset Combined
Fund Fund Forma Assets Allocation Pro
Principal Principal Principal Fund Fund Forma
amount amount amount Value Value Value
(000) (000) (000) Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities - (continued)
Federal Housing Authority (FHA) Certificates - 0.4%
$ - $ 275 $ 275 7.000% 01/15/27 $ - $ 271 $ 271
593 593 6.750% 01/01/40 558 558
419 419 7.000% 01/01/40 400 400
287 287 6.850% 02/01/40 271 271
640 640 6.530% 10/01/40 592 592
----------------------------------
2,092 2,092
----------------------------------
Federal National Mortgage Association (FNMA) Certificates - 8.1%
191 191 6.500% 01/01/06 188 188
1,130 1,130 6.500% 08/01/10 1,117 1,117
174 174 6.500% 10/01/10 172 172
536 536 8.500% 08/01/11 552 552
440 440 7.500% 10/01/11 444 444
1,974 1,974 6.500% 02/01/13 1,941 1,941
828 828 6.500% 03/01/15 812 812
430 430 10.000% 09/01/18 460 460
286 286 7.000% 01/25/21 282 282
5,081 5,081 6.500% 12/01/27 4,883 4,883
2,574 2,574 7.000% 05/01/28 2,524 2,524
2,459 2,459 7.000% 08/01/28 2,415 2,415
180 180 6.000% 02/01/29 168 168
691 691 6.500% 02/01/29 663 663
3,512 3,512 6.500% 07/01/29 3,379 3,379
2,627 2,627 7.000% 07/01/29 2,575 2,575
3,174 3,174 7.000% 10/01/29 3,110 3,110
6,493 6,493 8.000% 11/01/29 6,583 6,583
1,427 7,794 9,221 6.500% 05/01/30 1,371 7,487 8,858
529 529 7.354% 08/01/36 544 544
----------------------------------
10,088 31,582 41,670
----------------------------------
Government National Mortgage Association (GNMA) Certificates - 1.6%
802 802 6.750% 09/15/01 759 759
410 410 6.600% 11/15/01 383 383
15 15 10.000% 02/15/16 16 16
124 124 9.000% 10/15/19 129 129
97 97 9.000% 11/15/19 101 101
468 468 9.000% 12/15/19 489 489
151 151 9.000% 01/15/20 157 157
464 464 7.500% 12/15/23 467 467
1,934 1,934 8.000% 07/15/27 1,969 1,969
336 336 8.000% 09/15/27 343 343
192 192 7.000% 11/15/27 189 189
90 90 8.000% 04/15/28 91 91
2,592 2,592 8.000% 06/15/28 2,639 2,639
305 305 6.550% 03/15/40 285 285
----------------------------------
467 7,550 8,017
----------------------------------
Government National Mortgage Association II (GNMA) Certificates - 0.3%
494 494 6.650% 01/15/34 469 469
1,193 1,193 7.375% 10/15/34 1,187 1,187
----------------------------------
1,656 1,656
----------------------------------
Total mortgage-backed securities
(Cost $18,922 and $85,189, respectively) 19,123 84,277 103,400
----------------------------------
U.S. Treasury obligations - 1.4%
U.S. Treasury strips - 1.4%
1,250 1,250 Interest only 05/15/20 381 381
3,720 14,885 18,605 Principal only 11/15/21 1,038 4,154 5,192
490 490 Principal only 08/15/26 106 106
610 6,000 6,610 Principal only 02/15/27 128 1,259 1,387
----------------------------------
Total U.S. Treasury obligations
(Cost $1,188 and $5,483, respectively) 1,272 5,794 7,066
----------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund/Nations Asset Allocation Fund
Pro Forma Combining Schedule of Investments (unaudited) (continued)
September 30, 2000
Nations Nations
Nations Nations Balanced Asset Combined
Balanced Asset Assets Allocation Pro
Assets Allocation Combined Pro Fund Fund Forma
Fund Fund Forma Value Value Value
Shares Shares Shares Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment companies - 0.4%
(Cost $1,913 and $11, respectively)
1,913,000 11,000 1,924,000 Nations Cash Reserves# $ 1,913 $ 11 $ 1,924
----------------------------------
Total investments - 100.0%
(Cost $85,721 and $356,206, respectively) $ 91,362 $ 420,326 $511,688
----------------------------------
</TABLE>
# Money market mutual fund registered under the Investment Company Act of 1940,
as amended, and sub-advised by Banc of America Capital Management, Inc.
<PAGE>
Nations Balanced Assets Fund / Nations Asset AllocationFund
Pro Forma Combining Statement of Net Assets (unaudited)
September 30, 2000
<TABLE>
<CAPTION>
Nations Balanced Nations Asset Adjustments to Pro Forma
Assests Fund Allocation Fund Pro Forma Combined
(in 000's) (in 000's) (in 000's) (in 000's)
---------------------------------------------------- --------------
<S> <C> <C> <C> <C>
Total Investments $ 91,362 $ 420,326 $ - $ 511,688
Other Assets and Liabilities:
Receivable for investment securities sold 7,168 2,140 9,308
Receivable for Fund shares sold - 415 415
Dividends receivable 86 205 291
Interest receivable 346 1,585 1,931
Receivable for variation margin - 36 36
Variation margin/due to broker - (28) (28)
Collateral for securities loaned (206) - (206)
Payable for Fund shares redeemed (164) (709) (873)
Investment advisory fee payable (29) (228) (257)
Administration fee payable (17) (81) (98)
Shareholder servicing and distribution
fees payable (40) (162) (202)
Due to custodian (31) (98) (129)
Payable for investment securities purchased (7,890) (2,373) (10,263)
Accrued Trustees' fees and expenses (33) (16) (49)
Accrued expenses and other liabilities (42) (115) (157)
------------------------------------------------ --------------
Total Other Assets and Liabilities (852) 571 - (281)
------------------------------------------------ --------------
Net Assets $ 90,510 $ 420,897 $ - $ 511,407
================================================ ==============
Net Assets by Class:
Primary A $ 34,074,802 $ 17,934,129 $ - $ 52,008,931
Investor A 10,069,608 277,103,861 - 287,173,469
Investor B 45,489,368 123,134,728 - 168,624,096
Investor C 876,088 2,723,922 - 3,600,010
------------------------------------------------ --------------
$ 90,509,866 $ 420,896,640 $ - $ 511,406,506
------------------------------------------------ --------------
Shares Outstanding by Class:
Primary A 3,334,901 754,634 (1,901,380) (a) 2,188,155
Investor A 986,444 11,663,078 (562,639) (a) 12,086,883
Investor B 4,464,564 5,207,504 (2,541,123) (a) 7,130,945
Investor C 86,290 115,060 (49,277) (a) 152,073
------------------------------------------------ --------------
8,872,199 17,740,276 (5,054,419) 21,558,056
------------------------------------------------ --------------
Net Asset Value per Share by Class:
Primary A $ 10.22 $ 23.77 $ - $ 23.77
Investor A $ 10.21 $ 23.76 $ - $ 23.76
Investor B $ 10.19 $ 23.65 $ - $ 23.65
Investor C $ 10.15 $ 23.67 $ - $ 23.67
</TABLE>
(a) Reflects the issuance of Nations Asset Allocation Fund shares to holders of
shares of Nations Balanced Assets Fund.
See Notes to Pro Forma Financial Statements
<PAGE>
Nations Balanced Assets Fund / Nations Asset Allocation Fund
Pro Forma Combining Statement of Operations (unaudited)
Twelve Month Period Ending September 30, 2000
<TABLE>
<CAPTION>
Nations Balanced Nations Asset Adjustments to Pro Forma
Assests Fund Allocation Fund Pro Forma Combined
(in 000's) (in 000's) (in 000's) (in 000's)
---------------------------------------------------- --------------
<S> <C> <C> <C> <C>
Investment Income:
Interest $ 3,446 $ 4,790 $ - $ 8,236
Dividends (net of foreign withholding taxes
of $3 and $14, respectively) 1,112 9,371 - 10,483
Securities lending 7 - - 7
------------------------------------------------ --------------
Total Investment Income 4,565 14,161 - 18,726
------------------------------------------------ --------------
Expenses:
Investment advisory fee 680 2,778 - 3,458
Administration fee 241 903 - 1,144
Transfer agent fee 40 130 - 170
Custodian fees 16 48 - 64
Legal and audit fees 81 95 (81)(a) 95
Registration and filing fees 38 126 (38)(a) 126
Trustees' fees and expenses 19 20 (19)(a) 20
Interest expense 1 1 - 2
Printing expense 50 81 - 131
Other 88 107 (88)(a) 107
------------------------------------------------ --------------
Subtotal 1,254 4,289 (226) 5,317
------------------------------------------------ --------------
Shareholder servicing and distribution fees:
Investor A Shares 31 340 - 371
Investor B Shares 545 1,182 - 1,727
Investor C Shares 12 31 - 43
Seafirst Shares - 360 (360)(b) -
------------------------------------------------ --------------
Total expenses 1,842 6,202 (586) 7,458
------------------------------------------------ --------------
Fees waived by investment advisor, administrator
and/or distributor (272) (621) 893 (c) -
Fees reduced by credits allowed by the custodian - (7) - (7)
------------------------------------------------ --------------
Net Expenses 1,570 5,574 307 7,451
------------------------------------------------ --------------
Net Investment Income 2,995 8,587 (307) 11,275
------------------------------------------------ --------------
Net Realized And Unrealized Gain/(Loss) on Investments:
Net realized gain/(loss) from:
Security transactions 2,504 24,409 26,913
Futures contracts - (20) (20)
------------------------------------------------ --------------
Net realized gain/(loss) on investments 2,504 24,389 26,893
------------------------------------------------ --------------
Change in unrealized appreciation/
(depreciation) of:
Securities (1,821) 8,617 6,796
Futures contracts - (185) (185)
------------------------------------------------ --------------
Net change in unrealized appreciation/
(depreciation) of investments (1,821) 8,432 6,611
------------------------------------------------ --------------
Net realized and unrealized gain/(loss)
on investments 683 32,821 33,504
------------------------------------------------ --------------
Net Increase/(Decrease) in Net Assets Resulting
From Operations $ 3,678 $ 41,408 ($307) $ 44,779
================================================ ==============
</TABLE>
Legend:
(a) Adjustment reflects expected savings when the two funds become one.
(b) Seafirst Shares converted into Investor A Shares on June 23, 2000.
(c) Adjustment for inapplicability of expense cap.
See Notes to Pro Forma Financial Statements
<PAGE>
Nations Balanced Assets Fund
Nations Asset Allocation Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Combination
Nations Fund Trust (the "Trust"), Nations Reserves ("Reserves") and Nations
Funds Trust ("Funds Trust") are each registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end investment company. As of
September 30, 2000, the Trust offered thirty-four separate portfolios, Reserves
offered sixteen separate portfolios and Funds Trust offered five separate
portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes
the exchange described in the next paragraph occurred as of September 30, 2000
and the unaudited Pro Forma Combining Statement of Operations for the year ended
September 30, 2000 assumes the exchange occurred as of October 1, 1999. These
statements have been derived from books and records utilized in calculating
daily net asset value of each fund at September 30, 2000 and for the twelve
month period then ended.
The pro forma statements give effect to the proposed agreement and plan of
reorganization between the Trust, on behalf of Nations Balanced Assets Fund,
Reserves, on behalf of Nations Asset Allocation Fund and Funds Trust, on behalf
of a newly created shell fund (the "Acquiring Fund"). The Agreement provides for
the transfer of the assets and stated liabilities of Nations Balanced Assets
Fund and Nations Asset Allocation Fund to the Acquiring Fund, in exchange for
shares of equal value of designated classes of the Acquiring Fund. Under
generally accepted accounting principles, the market value of investment
securities of Nations Balanced Assets Fund and Nations Asset Allocation Fund
will be carried forward as the cost basis to the Acquiring Fund and the results
of operations of Nations Balanced Assets Fund and Nations Asset Allocation Fund
for pre-combination periods will not be restated. The pro forma statements do
not reflect the expenses of either fund in carrying out its obligations under
the proposed Agreement and Plan of Reorganization, which are not considered to
be material.
These financial statements present the reorganization of Nations Balanced Assets
Fund and Nations Asset Allocation Fund into a newly created shell fund of Funds
Trust. It is possible that one or both of Nations Balanced Assets Fund and
Nations Asset Allocation Fund will not approve the reorganization. The pro forma
presentation is not shown for either of these scenarios because each such
scenario would result in a shell transaction only, and the pro forma
presentation would be identical to the existing historical financial information
of that fund.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
2. Pro Forma Operations
Pro forma operating expenses include the actual expenses of each fund and the
combined fund, with certain expenses adjusted to reflect the expected expenses
of the combined entity.
<PAGE>
Nations U. S. Government Bond Fund/Nations Government Securities Fund
Pro Forma Combining Schedule of Investments (unaudited)
September 30, 2000
<TABLE>
<CAPTION>
Nations Nations
U.S. Government Government Nations Nations
Bond Securities Combined Pro U.S. Government Government
Fund Fund Forma Bond Securities Combined Pro
Principal Principal Principal Fund Fund Forma
amount amount amount Value Value Value
(000) (000) (000) Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asset-backed securities - 0.4%
(Cost $1,308)
$ - $ 1,308 $ 1,308 Export Funding Trust, Series 1995-A, Class A,
8.210% 12/29/06 $ - $ 1,363 $ 1,363
------------------------------------------
Mortgage-backed securities - 86.0%
Commercial mortgage-backed securities - 10.6%
1,265 1,265 Chase Manhattan Bank - First Union
National, Series 1999-1, Class A2,
7.439% 07/15/09 1,287 1,287
1,225 1,225 Commercial Mortgage Acceptance
Corporation, Series 1999-C1, Class A2,
7.030% 05/15/09 1,213 1,213
1,200 3,900 5,100 Commercial Mortgage Asset Trust,
Series 1999-C1, Class A3,
6.640% 09/17/10 1,157 3,759 4,916
725 725 DLJ Commercial Mortgage Corporation,
Series 1998-CG1, Class A1B,
6.410% 05/10/08 695 695
3,820 3,820 DLJ Commercial Mortgage Corporation,
Series 1999-CG3, Class A1B,
7.340% 09/10/09 3,833 3,833
1,265 3,820 5,085 First Union National Bank Commercial
Mortgage, Series 1999-C4, Class A2,
7.390% 11/15/09 1,283 3,875 5,158
650 650 Mortgage Capital Funding, Inc.,
Series 1998-MC2, Class A2,
6.423% 05/18/08 621 621
1,225 3,800 5,025 PNC Mortgage Acceptance Corporation,
Series 1999-CM1, Class A1B,
7.330% 10/10/09 1,236 3,835 5,071
1,200 1,200 PNC Mortgage Acceptance Corporation,
Series 2000-C1, Class A2,
7.610% 02/15/10 1,231 1,231
3,900 3,900 Prudential Securities Secured Financing
Corporation, Series 1999-C2, Class A2,
7.193% 04/15/09 3,908 3,908
1,265 1,265 Prudential Securities Secured Financing
Corporation, Series 1999-NRF1, Class A2,
6.480% 01/15/09 1,212 1,212
1,265 1,265 Salomon Brothers Mortgage Securities,
Series 2000-C2, Class A2,
7.455% 04/18/10 1,283 1,283
45,095 45,095 Vendee Mortgage Trust, Series 1998-1,
Class 2, IO,
.453% 09/15/27 786 786
41,572 41,572 Vendee Mortgage Trust, Series
1998-3, Class 1, IO,
.314% 03/15/29 543 543
------------------------------------------
9,902 21,855 31,757
------------------------------------------
Federal Home Loan Mortgage Corporation (FHLMC) Certificates - 36.7%
607 607 10.000% 07/01/01 - 09/01/18 634 634
1,810 1,810 8.500% 09/01/01 - 09/01/20 1,848 1,848
435 435 9.000% 02/01/02 - 12/01/16 445 445
925 42,000 42,925 6.250% 10/15/02 - 07/15/04 920 41,663 42,583
5,975 5,975 5.750% 07/15/03 5,857 5,857
308 308 8.000% 08/01/07 - 05/01/17 312 312
29 29 7.500% 08/01/08 29 29
29,011 29,011 6.500% 01/01/09 - 09/15/25 27,909 27,909
1,000 1,000 6.625% 09/15/09 988 988
4,992 5,347 10,339 6.000% 09/01/13 4,817 5,159 9,976
1,381 1,381 9.500% 04/01/18 - 01/01/29 1,432 1,432
358 358 7.000% 05/01/29 - 08/01/29 351 351
17,450 17,450 6.500% 08/01/30 16,748 16,748
------------------------------------------
28,342 80,770 109,112
------------------------------------------
Federal National Mortgage Association (FNMA) Certificates - 29.0%
255 255 8.500% 11/01/01 - 07/01/21 261 261
236 236 7.000% 07/01/03 235 235
5,600 5,600 5.625% 05/14/04 5,430 5,430
10,091 10,091 8.000% 04/01/06 - 11/01/29 10,229 10,229
1,849 1,849 10.000% 10/01/06 - 04/01/20 1,906 1,906
2,444 2,444 6.135% 08/01/08 2,342 2,342
8,290 8,290 7.500% 08/01/08 - 02/01/15 8,354 8,354
61 61 8.250% 04/01/09 63 63
474 19,946 20,420 6.000% 05/01/13 - 06/01/29 457 18,720 19,177
1,750 1,750 7.500% 02/01/15 1,763 1,763
6,733 6,733 6.565% 07/01/16 6,495 6,495
814 814 9.000% 12/01/16 - 09/01/24 840 840
6,386 6,386 9.500% 04/01/20 - 08/01/21 6,626 6,626
</TABLE>
<PAGE>
Nations U. S. Government Bond Fund/Nations Government Securities Fund
Pro Forma Combining Schedule of Investments (unaudited) (continued)
September 30, 2000
<TABLE>
<CAPTION>
Nations Nations
U.S. Government Government Nations Nations
Bond Securities Combined Pro U.S. Government Government
Fund Fund Forma Bond Securities Combined Pro
Principal Principal Principal Fund Fund Forma
amount amount amount Value Value Value
(000) (000) (000) Description (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities - (continued)
Federal National Mortgage Association (FNMA)
Certificates - (continued)
$ - $ 1,748 $ 1,748 6.990% 06/01/23 $ - $ 1,720 $ 1,720
1,496 1,496 6.750% 03/18/28 1,424 1,424
9,616 9,616 5.500% 02/01/29 - 03/01/29 8,724 8,724
4,855 4,855 6.500% 03/01/29 4,663 4,663
5,800 5,800 8.000% 05/01/30 5,876 5,876
305 305 8.426% 08/01/36 313 313
-------------------------------------------
8,096 78,345 86,441
-------------------------------------------
Government National Mortgage Association (GNMA)
Certificates - 9.7%
260 260 10.500% 10/15/00 - 04/15/21 282 282
240 240 10.000% 12/15/00 - 03/15/21 254 254
1 1 11.750% 12/15/00 1 1
357 357 9.500% 02/20/01 - 04/20/06 364 364
546 546 9.000% 06/15/01 - 03/15/27 565 565
3,979 3,979 7.500% 09/15/07 - 04/15/29 3,991 3,991
259 259 7.000% 02/15/09 - 06/15/23 256 256
2,815 2,815 8.500% 10/15/09 - 02/20/29 2,897 2,897
9,812 9,812 6.000% 12/15/10 - 07/15/29 9,217 9,217
46 46 13.000% 1/15/11 - 04/15/11 50 50
3,348 3,348 8.000% 11/15/14 - 07/15/26 3,418 3,418
81 81 11.000% 11/15/15 - 10/20/20 87 87
5,191 5,191 7.500% 04/15/22 - 04/15/29 5,216 5,216
2,350 2,350 6.500% 04/15/29 2,263 2,263
127 127 8.000% 07/15/29 130 130
-------------------------------------------
6,384 22,607 28,991
-------------------------------------------
Total mortgage-backed securities
(Cost $52,635 and $203,887, respectively) 52,724 203,577 256,301
-------------------------------------------
U.S. government and agency obligations - 1.2%
(Cost $3,925)
Federal Home Loan Mortgage Corporation
(FHLMC) - 1.2%
4,005 4,005 5.750% 04/15/08 3,768 3,768
-------------------------------------------
U.S. Treasury obligations - 9.8%
U.S. Treasury notes - 1.6%
4,900 4,900 5.500% 08/31/01 4,865 4,865
-------------------------------------------
U.S. Treasury strips - 8.2%
5,000 5,000 Interest only 02/15/10 2,859 2,859
16,625 16,625 Interest only 02/15/20 5,115 5,115
2,570 5,300 7,870 Interest only 05/15/20 782 1,613 2,395
1,750 1,750 Principal only 11/15/04 1,373 1,373
2,100 2,100 Principal only 05/15/20 640 640
1,500 1,500 Principal only 02/15/21 438 438
9,525 8,500 18,025 Principal only 11/15/21 2,659 2,372 5,031
4,525 22,075 26,600 Principal only 02/15/27 949 4,632 5,581
1,700 2,300 4,000 Principal only 11/15/27 343 463 806
-------------------------------------------
4,733 19,505 24,238
-------------------------------------------
Total U.S. Treasury obligations
(Cost $4,585 and $23,147, respectively) 4,733 24,370 29,103
-------------------------------------------
Short term investments - 2.0%
(Cost $5,877)
Federal Home Loan Mortgage Corporation (FHLMC) Certificates - 2.0%
5,890 5,890 Discount note 10/13/00 5,877 5,877
-------------------------------------------
Investment companies - 2.4%
(Cost $5,794 and $1,289, respectively)
5,794,000 1,289,000 7,083,000 Nations Cash Reserves# 5,794 1,289 7,083
-------------------------------------------
Total investments - 101.8%
(Cost $72,816 and $229,631, respectively) $ 72,896 $ 230,599 $ 303,495
-------------------------------------------
</TABLE>
# Money market mutual fund registered under the Investment Company Act of 1940,
as amended, and sub-advised by Banc of America Capital Management, Inc.
<PAGE>
Nations U.S. Government Bond Fund / Nations Government Securities Fund
Pro Forma Combining Statement of Net Assets (unaudited)
September 30, 2000
<TABLE>
<CAPTION>
Nations
U.S. Govenrment Nations Government Adjustments to Pro Forma
Bond Fund Securities Fund Pro Forma Combined
(in 000's) (in 000's) (in 000's) (in 000's)
----------------------------------------------------- -----------------
<S> <C> <C> <C> <C>
Total Investments $ 72,896 $ 230,599 $ - $ 303,495
Other Assets and Liabilities:
Cash 1 - 1
Receivable for investment securities sold 865 2,386 3,251
Receivable for Fund shares sold 558 149 707
Interest receivable 473 2,106 2,579
Collateral for securities loaned - (644) (644)
Payable for Fund shares redeemed (913) (2,742) (3,655)
Investment advisory fee payable (23) (76) (99)
Administration fee payable (12) (42) (54)
Shareholder servicing and distribution
fees payable (8) (32) (40)
Distributions payable (318) (1,186) (1,504)
Payable for investment securities purchased (5,842) - (5,842)
Accrued Directors' fees and expenses (21) (26) (47)
Accrued expenses and other liabilities (51) (56) (107)
--------------------------------------------------- ------------
Total Other Assets and Liabilities (5,291) (163) - (5,454)
--------------------------------------------------- ------------
Net Assets $ 67,605 $ 230,436 $ - $ 298,041
=================================================== ============
Net Assets by Class:
Primary A $ 55,630,974 $ 151,990,440 $ - $207,621,414
Investor A 2,607,193 53,237,827 - 55,845,020
Investor B 8,645,303 24,939,807 - 33,585,110
Investor C 721,153 267,593 - 988,746
--------------------------------------------------- ------------
$ 67,604,623 $ 230,435,667 $ - $298,040,290
--------------------------------------------------- ------------
Shares Outstanding by Class:
Primary A 5,746,515 16,035,375 121,731 (a) 21,903,621
Investor A 268,667 5,623,627 6,644 (a) 5,898,938
Investor B 893,173 2,631,264 18,779 (a) 3,543,216
Investor C 74,478 28,342 1,915 (a) 104,735
--------------------------------------------------- ------------
6,982,833 24,318,608 149,069 31,450,510
--------------------------------------------------- ------------
Net Asset Value per Share by Class:
Primary A $ 9.68 $ 9.48 $ - $ 9.48
Investor A $ 9.70 $ 9.47 $ - $ 9.47
Investor B $ 9.68 $ 9.48 $ - $ 9.48
Investor C $ 9.68 $ 9.44 $ - $ 9.44
</TABLE>
(a) Reflects the issuance of Nations Government Securities Fund shares to
holders of shares of Nations U.S. Government Bond Fund.
See Notes to Pro Forma Financial Statements
<PAGE>
Nations U.S. Government Bond Fund / Nations Government Securities Fund
Pro Forma Combining Statement of Operations (unaudited)
Twelve Month Period Ending September 30, 2000
<TABLE>
<CAPTION>
Nations
U.S. Govenrment Nations Government Adjustments to Pro Forma
Bond Fund Securities Fund Pro Forma Combined
(in 000's) (in 000's) (in 000's) (in 000's)
--------------------------------------------------- ------------
<S> <C> <C> <C> <C>
Investment Income:
Interest $ 5,065 $ 15,030 $ - $ 20,095
Securities lending 66 42 - 108
--------------------------------------------------- ------------
Total Investment Income 5,131 15,072 - 20,203
--------------------------------------------------- ------------
Expenses:
Investment advisory fee 405 1,039 - 1,444
Administration fee 178 460 - 638
Transfer agent fee 32 84 - 116
Custodian fees 9 35 (9)(a) 35
Legal and audit fees 95 95 (95)(a) 95
Registration and filing fees 22 47 (6)(a) 63
Directors' fees and expenses 19 20 (19)(a) 20
Printing expense 17 23 - 40
Other 62 83 (62)(a) 83
--------------------------------------------------- ------------
Subtotal 839 1,886 (191) 2,534
--------------------------------------------------- ------------
Shareholder servicing and distribution fees:
Investor A Shares 6 147 - 153
Investor B Shares 82 277 - 359
Investor C Shares 11 2 - 13
--------------------------------------------------- ------------
Total expenses 938 2,312 (191) 3,059
--------------------------------------------------- ------------
Fees waived by investment advisor, administrator
and/or distributor (80) (222) (145)(b) (447)
Fees reduced by credits allowed by the custodian (1) (3) - (4)
--------------------------------------------------- ------------
Net Expenses 857 2,087 (336) 2,608
--------------------------------------------------- ------------
Net Investment Income 4,274 12,985 336 17,595
--------------------------------------------------- ------------
Net Realized And Unrealized Gain/(Loss) on Investments:
Net realized gain/(loss) on investments (3,713) (5,022) (8,735)
Net change in unrealized appreciation/
(depreciation) of investments 2,976 4,511 7,487
--------------------------------------------------- ------------
Net realized and unrealized gain/(loss)
on investments (737) (511) (1,248)
--------------------------------------------------- ------------
Net Increase/(Decrease) in Net Assets Resulting
From Operations $3,537 $ 12,474 $ 336 $ 16,347
=================================================== ============
</TABLE>
Legend:
-------
(a) Adjustment reflects expected savings when the two funds become one.
(b) Adjustment reflects 0.05% co-administration waiver approved by the Board of
Directors, effective December 1, 2000.
See Notes to Pro Forma Financial Statements
<PAGE>
Nations U.S. Government Bond Fund
Nations Government Securities Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
1. Basis of Combination
Nations Fund, Inc. (the "Company") and Nations Funds Trust ("Funds Trust") are
each registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end investment company. As of September 30, 2000, the Company
offered six separate portfolios and Funds Trust offered five separate
portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes
the exchange described in the next paragraph occurred as of September 30, 2000
and the unaudited Pro Forma Combining Statement of Operations for the year ended
September 30, 2000 assumes the exchange occurred as of October 1, 1999. These
statements have been derived from books and records utilized in calculating
daily net asset value of each fund at September 30, 2000 and for the twelve
month period then ended.
The pro forma statements give effect to the proposed agreement and plan of
reorganization between the Company, on behalf of Nations U.S. Government Bond
Fund and Nations Government Securities Fund and Funds Trust, on behalf of a
newly created shell fund (the "Acquiring Fund"). The Agreement provides for the
transfer of the assets and stated liabilities of Nations U.S. Government Bond
Fund and Nations Government Securities Fund to the Acquiring Fund, in exchange
for shares of equal value of designated classes of the Acquiring Fund. Under
generally accepted accounting principles, the market value of investment
securities of Nations U.S. Government Bond Fund and Nations Government
Securities Fund will be carried forward as the cost basis to the Acquiring Fund
and the results of operations of Nations U.S. Government Bond Fund and Nations
Government Securities Fund for pre-combination periods will not be restated. The
pro forma statements do not reflect the expenses of either fund in carrying out
its obligations under the proposed Agreement and Plan of Reorganization, which
are not considered to be material.
These financial statements present the reorganization of Nations U.S. Government
Bond Fund and Nations Government Securities Fund into a newly created shell fund
of Funds Trust. It is possible that one or both of Nations U.S. Government Bond
Fund and Nations Government Securities Fund will not approve the reorganization.
The pro forma presentation is not shown for either of these scenarios because
each such scenario would result in a shell transaction only, and the pro forma
presentation would be identical to the existing historical financial information
of that fund.
The unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
<PAGE>
Nations U.S. Government Bond Fund
Nations Government Securities Fund
Notes to Pro Forma Combining Financial Statements (unaudited) (continued)
2. Pro Forma Operations
Pro forma operating expenses include the actual expenses of each fund and the
combined fund, with certain expenses adjusted to reflect the expected expenses
of the combined entity. The proforma financial statements were prepared to
reflect a voluntary co-administration waiver of 0.05% of Nations Government
Securities Fund's average daily net assets which was effective on December 1,
2000. Prior to December 1, 2000, there was no co-administration waiver for
Nations Government Securities Fund.
3. Subsequent Event
Effective December 1, 2000, the net fund level expense ratio for U.S. Government
Bond Fund will be maintained, on a daily basis, at the same net fund level
expense ratio as that of Government Securities Fund.
<PAGE>
NATIONS FUNDS TRUST
One Bank of America Plaza
33rd Floor
Charlotte, NC 28255
1-800-626-2275
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification.
---------------
Article VII of the Declaration of Trust filed as Exhibit 1 to the
Registration Statement (defined below) is incorporated by reference.
Indemnification of the Registrant's administrators, distributor, custodian and
transfer agents is provided for, respectively, in the Registrant's:
1. Co-Administration Agreement with Stephens Inc. and Banc of
America Advisors, Inc. ("BAAI");
2. Sub-Administration Agreement with The Bank of New York
("BNY");
3. Distribution Agreement with Stephens Inc. ("Stephens");
4. Custody Agreement with BNY;
5. Transfer Agency and Services Agreement with PFPC Inc.
("PFFC"); and
6. Sub-Transfer Agency and Services Agreement with PFFC and Bank
of America, N.A.
The Registrant has entered into a Cross Indemnification Agreement
with Nations Fund Trust (the "Trust") Nations Fund, Inc. (the "Company"),
Nations Reserves ("Reserves") and Nations Master Investment Trust ("Master
Trust") dated February 14, 2000. The Trust, the Company, Reserves and/or Master
Trust will indemnify and hold harmless the Registrant against any losses,
claims, damages or liabilities, to which the Registrant may become subject,
under the Securities Act of 1933, as amended (the "1933 Act") and the Investment
Company Act of 1940, as amended (the "1940 Act") or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any prospectuses, any preliminary prospectuses, the
registration statements, any other prospectuses relating to the securities, or
any amendments or supplements to the foregoing (hereinafter referred to
collectively as the "Offering Documents"), or arise out of or are based upon the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Offering Documents in
reliance upon and in conformity with written information furnished to the
Registrant by the Trust, the Company, Reserves and/or Master Trust expressly for
use therein; and will reimburse the Registrant for any legal or other expenses
reasonably incurred by the Registrant in connection with investigating or
defending any such action or claim; provided, however, that the Trust, the
Company, Reserves and/or Master Trust shall not be liable in any such case to
the extent that any such loss, claim, damage, or liability arises out of or is
based upon an
1
<PAGE>
untrue statement or alleged untrue statement or omission or alleged omission
made in the Offering Documents in reliance upon and in conformity with written
information furnished to the Trust, the Company, Reserves and/or Master Trust by
the Registrant expressly for use in the Offering Documents.
Promptly after receipt by an indemnified party above of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under such
subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission to so notify the indemnifying party shall not relieve
it from any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation.
The Registrant has obtained from a major insurance carrier a
trustees' and officers' liability policy covering certain types of errors and
omissions. In no event will the Registrant indemnify any of its trustees,
officers, employees, or agents against any liability to which such person would
otherwise be subject by reason of his/her willful misfeasance, bad faith, gross
negligence in the performance of his/her duties, or by reason of his/her
reckless disregard of the duties involved in the conduct of his/her office or
arising under his agreement with the Registrant. The Registrant will comply with
Rule 484 under the 1933 Act and Release No. 11330 under the 1940 Act, in
connection with any indemnification.
Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to trustees, officers and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
Commission ("SEC") such indemnification is against public policy as expressed in
the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any act, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issues.
Item 16. Exhibits.
--------
All references to the "Registration Statement" in the following
list of Exhibits refer to the Registrant's Registration Statement on Form N-1A
(File Nos. 333-89661; 811-9645). All references to "Nations Fund, Inc.'s
Registration Statement" in the following list of exhibits refer to Nations Fund,
Inc.'s Registration Statement on Form N-1A (File Nos. 33-4038; 811-4614). All
references to "Nations Fund Trust's Registration Statement" in the following
list of exhibits refer to Nations Fund Trust's Registration Statement on Form
N-1A (File Nos. 002-97817; 811-04305). All references to "Nations Reserves's
Registration Statement" in the following list of exhibits refer to Nations
Reserves's Registration Statement on Form N-1A (File Nos. 33-33144; 811-6030).
2
<PAGE>
<TABLE>
<CAPTION>
Exhibit Number Description
<S> <C>
(1) Declaration of Trust dated February 7, 2000, is incorporated by reference to
Post-Effective Amendment No. 1 to the Registration Statement, filed on
February 10, 2000.
(2) Not Applicable
(3) Not Applicable.
(4) Form of Agreement and Plan of Reorganization, filed herewith.
(5) Not Applicable.
(6)(a) Investment Advisory Agreement with BAAI, (formerly, NationsBanc Advisors,
Inc.) to be filed by Post-Effective Amendment to the Registration Statement.
(6)(b) Investment Sub-Advisory Agreement with Banc of America Capital Management,
Inc., to be filed by Post-Effective Amendment to the Registration Statement.
(6)(c) Investment Sub-Advisory Agreement with Chicago Equity Partners LLC, to be
filed by Post-Effective Amendment to the Registration Statement.
(7) Distribution Agreement with Stephens to be filed by Post-Effective Amendment
to the Registration Statement.
(8) Not Applicable.
(9) Custody Agreement with BNY to be filed by Post Effective Amendment to the
Registration Statement.
(10)(a) Shareholder Servicing and Distribution Plan for Investor A Shares to be filed
by Post-Effective Amendment to the Registration Statement.
(10)(b) Distribution Plan for Investor B Shares to be filed by Post-Effective
Amendment to the Registration Statement.
(10)(c) Distribution Plan for Investor C Shares to be filed by Post-Effective
Amendment to the Registration Statement.
(10)(d) Plan entered into by Registrant pursuant to Rule 18f-3 under the
Investment Company Act of 1940, as amended, to be filed by Post-
Effective Amendment to the Registration Statement.
(11) Opinion and Consent of Counsel- Morrison & Foerster LLP, filed herewith.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(12) See Item 17(3) of this Part C.
(13)(a) Co-Administration Agreement among Nations Funds Trust, Stephens, and BAAI, to
be filed by Post-Effective Amendment to the Registration Statement.
(13)(b) Sub-Administration Agreement among Nations Funds
Trust, BNY and BAAI, to be filed by Post-Effective
Amendment to the Registration Statement.
(14) Consent of Independent Accountants- PricewaterhouseCoopers LLP, filed
herewith.
(15) Not Applicable.
(16) Powers of Attorney, filed herewith.
(17)(a) Form of Proxy Ballot, filed herewith.
(17)(b) Prospectus for the Primary A, Primary B, Investor A, Investor B, and
Investor C Shares of Nations U.S. Government Bond Fund, dated August 1,
2000, is incorporated by reference to Post-Effective Amendment No. 47
to Nations Fund, Inc.'s Registration Statement, as filed on July 28, 2000.
(17)(c) Statement of Additional Information for the Primary A, Primary B and
Investor Shares of Nations U.S. Government Bond Fund, dated August 1,
2000, as supplemented, filed as part of Post-Effective Amendment No. 47
to Nations Fund, Inc.'s Registration Statement on Form N-1A filed
on November 1, 2000.
(17)(d) Prospectus for the Primary A, Primary B, Investor A, Investor B, and
Investor C Shares of Nations Government Securities Fund, dated
August 1, 2000, is incorporated by reference to Post-Effective
Amendment No. 47 to Nations Fund, Inc.'s Registration Statement,
as filed on July 28, 2000.
(17)(e) Statement of Additional Information for the Primary A, Primary B and
Investor Shares of Nations Government Securities Fund, dated August
1, 2000, as supplemented, filed as part of Post-Effective Amendment
No. 47 to Nations Fund, Inc.'s Registration Statement on Form N-1A
filed on November 1, 2000.
(17)(f) Prospectus for the Primary A, Primary B, Investor A, Investor B, and
Investor C Shares of Nations Balanced Assets Fund, dated August 1, 2000,
is incorporated by reference to Post-Effective Amendment No. 66 to
Nations Fund Trust's Registration Statement, as filed on July 28, 2000.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(17)(g) Statement of Additional Information for the Primary A, Primary B and
Investor Shares of Nations Balanced Assets Fund, dated August 1,
2000, as supplemented, filed as part of Post-Effective Amendment
No. 66 to Nations Fund Trust's Registration Statement on Form N-1A filed
on November 1, 2000.
(17)(h) Prospectus for the Primary A, Primary B, Investor A, Investor B, and
Investor C Shares of Nations Asset Allocation Fund, dated August 1, 2000,
is incorporated by reference to Post-Effective Amendment No. 31 to Nations
Reserves's Registration Statement, as filed on July 28, 2000.
(17)(i) Statement of Additional Information for the Primary A, Primary B and
Investor Shares of Nations Asset Allocation Fund, dated August 1,
2000, as supplemented, filed as part of Post-Effective Amendment No. 31
to Nations Reserves's Registration Statement on Form N-1A filed on
November 1, 2000.
(17)(j) Prospectus for the Primary A, Primary B, Investor A, Investor B, and
Investor C Shares of Nations Asset Allocation Fund, to be filed by
Post-Effective Amendment to the Registration Statement.
(17)(k) Statement of Additional Information for the Primary A, Primary B and Investor Shares
of Nations Asset Allocation Fund, to be filed by Post-Effective Amendment to the
Registration Statement.
(17)(l) Prospectus for the Primary A, Primary B, Investor A, Investor B, and Investor C Shares
of Nations Government Securities Fund, to be filed by Post-Effective Amendment to the
Registration Statement.
(17)(m) Statement of Additional Information for the Primary A, Primary B and Investor Shares
of Nations Government Securities Fund, to be filed by Post-Effective Amendment to the
Registration Statement.
</TABLE>
Item 17. Undertakings.
------------
(1) Registrant agrees that, prior to any public reoffering
of the securities registered through the use of a
prospectus which is a part of this registration
statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, the reoffering prospectus will
contain the information called for by the applicable
registration form for the reofferings by persons who
may be deemed underwriters, in addition to the
information called for by the other items of the
applicable form.
(2) The undersigned registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed
as part of an amendment to the registration statement
and will not be used until the amendment is effective,
and that, in determining any liability under the
Securities Act of 1933, each post-effective amendment
shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the
securities at that time shall be deemed to be the
initial bona fide offering of them.
5
<PAGE>
(3) The undersigned Registrant agrees to file, by
post-effective amendment, an opinion of counsel or a
copy of an IRS ruling supporting the tax consequences
of the Reorganization within a reasonable time after
receipt of such opinion or ruling.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on N-14 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Little
Rock, State of Arkansas on the 15th day of December, 2000.
NATIONS FUNDS TRUST
By: *
---------------------------------
A. Max Walker
President and Chairman
of the Board of Trustees
By: /s/ Richard H. Blank, Jr.
---------------------------------
Richard H. Blank, Jr.
*Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
* President and Chairman December 15, 2000
---------------------------------------- of the Board of Trustees
(A. Max Walker) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Treasurer and Secretary December 15, 2000
---------------------------------------- (Principal Financial and
(Richard H. Blank, Jr.) Accounting Officer)
* Trustee December 15, 2000
----------------------------------------
(Edmund L. Benson, III)
Trustee December 15, 2000
----------------------------------------
(William P. Carmichael)
* Trustee December 15, 2000
----------------------------------------
(James Ermer)
* Trustee December 15, 2000
----------------------------------------
(William H. Grigg)
* Trustee December 15, 2000
----------------------------------------
(Thomas F. Keller)
* Trustee December 15, 2000
----------------------------------------
(Carl E. Mundy, Jr.)
* Trustee December 15, 2000
----------------------------------------
(Cornelius J. Pings)
* Trustee December 15, 2000
----------------------------------------
(Charles B. Walker)
* Trustee December 15, 2000
----------------------------------------
(Thomas S. Word)
* Trustee December 15, 2000
----------------------------------------
(James B. Sommers)
</TABLE>
<PAGE>
/s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
*Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Nations Funds Trust
File No. 333-89661
Exhibit Number Description
-------------- -----------
EX.-99.4(a) Form of Agreement and Plan of Reorganization for
Nations Fund, Inc.
EX.-99.4(b) Form of Agreement and Plan of Reorganization for
Nations Fund Trust
EX.-99.4(c) Form of Agreement and Plan of Reorganization for
Nations Reserves
EX.-99.11 Opinion and Consent of Counsel--Morrison & Foerster LLP
EX.-99.14 Consent of Independent Accountants
PricewaterhouseCoopers LLP
EX.-99.16 Powers of Attorney
EX.-99.17(a) Nations U.S. Government Bond Fund Form of Proxy
EX.-99.17(b) Nations Government Securities Fund Form of Proxy
EX.-99.17(c) Nations Balanced Assets Fund Form of Proxy
EX.-99.17(d) Nations Asset Allocation Fund Form of Proxy
