<PAGE>
NATIONS FUND TRUST
NATIONS GOVERNMENT MONEY MARKET FUND
SUPPLEMENT DATED JANUARY 30, 1996 TO PROSPECTUSES DATED SEPTEMBER 30, 1995
The Prospectuses for the Trust A, Trust B, Investor A, Investor B,
Investor C and Investor D Shares of NATIONS GOVERNMENT MONEY MARKET FUND are
hereby supplemented as follows:
1. By substituting the following for the second sentence in the
first paragraph in the section entitled "HOW TO BUY SHARES -- EFFECTIVE TIME OF
PURCHASES":
A purchase order must be received by Stephens or by the
Transfer Agent by 2:00 p.m., Eastern time (12:00 noon, Eastern time,
with respect to Nations Tax Exempt Fund and Nations Government Money
Market Fund).
2. By substituting the following for the first three
sentences in the second paragraph in the section entitled "HOW
TO REDEEM SHARES":
Redemption orders must be received on a Business Day before
2:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Tax Exempt Fund and Nations Government Money Market Fund), and
payment will normally be wired the same day to Selling Agents. Nations
Fund reserves the right to wire redemption proceeds within five Business
Days after receiving the redemption order if, in the judgment of
NationsBank, an earlier payment could adversely impact a Fund.
Redemption orders received by Stephens or by the Transfer Agent after
2:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Tax Exempt Fund and Nations Government Money Market Fund), will
be processed on the next Business Day.
3. By substituting the following for the second sentence in
the first paragraph in the section entitled "HOW THE FUNDS VALUE THEIR SHARES":
Shares are valued as of 2:00 p.m., Eastern time (1:00 p.m.,
Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund), on each Business Day.
4. By substituting the following for the first sentence in the
first paragraph in the section entitled "HOW DIVIDENDS AND DISTRIBUTIONS ARE
MADE; TAX INFORMATION -- DIVIDENDS AND DISTRIBUTIONS":
Dividends from net investment income of each Fund are
declared daily to shareholders at 2:00 p.m., Eastern time (1:00 p.m.
Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund) on the day of declaration.
1
<PAGE>
PROSPECTUS
TRUST A SHARES
SEPTEMBER 30, 1995
MONEY MARKET FUNDS
Nations Prime Fund
Nations Treasury Fund
Nations Government Money Market
Fund
Nations Tax Exempt Fund
EQUITY FUNDS
Nations Value Fund
Nations Equity Income Fund
Nations International Equity Fund
Nations Emerging Markets Fund
Nations Pacific Growth Fund
Nations Capital Growth Fund
Nations Emerging Growth Fund
Nations Disciplined Equity Fund
Nations Equity Index Fund
BALANCED FUND
Nations Balanced Assets Fund
BOND FUNDS
Nations Short-Intermediate Government
Fund
Nations Government Securities Fund
Nations Short-Term Income Fund
Nations Diversified Income Fund
Nations Strategic Fixed Income Fund
Nations Mortgage-Backed Securities
Fund
Nations Global Government
Income Fund
Nations Municipal Income Fund
Nations Short-Term Municipal Income
Fund
Nations Intermediate Municipal
Bond Fund
Nations Florida Intermediate Municipal
Bond Fund
Nations Florida Municipal Bond Fund
Nations Georgia Intermediate Municipal
Bond Fund
Nations Georgia Municipal Bond Fund
Nations Maryland Intermediate
Municipal Bond Fund
Nations Maryland Municipal Bond Fund
Nations North Carolina Intermediate
Municipal Bond Fund
Nations North Carolina Municipal Bond
Fund
Nations South Carolina Intermediate
Municipal Bond Fund
Nations South Carolina Municipal Bond
Fund
Nations Tennessee Intermediate
Municipal Bond Fund
Nations Tennessee Municipal Bond Fund
Nations Texas Intermediate Municipal
Bond Fund
Nations Texas Municipal Bond Fund
Nations Virginia Intermediate Municipal
Bond Fund
Nations Virginia Municipal Bond Fund
(Nations Fund Logo Appears Here)
Investment Adviser: NationsBank, N.A. (Carolinas)
Distributor: Stephens Inc.
<PAGE>
Prospectus
TRUST A SHARES
SEPTEMBER 30, 1995
This Prospectus describes the forty investment
portfolios listed in the column to the right (each a
"Fund"), of the Nations Fund Family ("Nations Fund"
or "Nations Fund Family"). This Prospectus describes
one class of shares of each Fund -- Trust A Shares.
The Nations Disciplined Equity Fund was formerly
called "Nations Special Equity Fund."
THE NATIONS PRIME FUND, NATIONS TREASURY FUND,
NATIONS GOVERNMENT MONEY MARKET FUND AND NATIONS TAX
EXEMPT FUND (THE "MONEY MARKET FUNDS") SEEK TO
MAINTAIN A NET ASSET VALUE OF $1.00 PER SHARE.
INVESTMENTS IN THESE FUNDS ARE NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE
NO ASSURANCE THAT THESE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
This Prospectus sets forth concisely the information
about each Fund that a prospective purchaser of
Trust A Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust, Nations Fund, Inc. and Nations
Fund Portfolios, Inc. ("Nations Portfolios") is
contained in separate Statements of Additional
Information (the "SAIs"), which have been filed with
the Securities and Exchange Commission (the "SEC")
and are available upon request without charge by
writing or calling Nations Fund at its address or
telephone number shown below. The SAIs for Nations
Fund Trust, Nations Fund, Inc. and Nations
Portfolios dated September 30, 1995, September 30,
1995 and July 1, 1995, respectively, are
incorporated by reference in their entirety into
this Prospectus.
SHARES OF NATIONS FUND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. (CAROLINAS) ("NATIONSBANK") OR
ANY OF ITS AFFILIATES. SUCH SHARES ARE NOT INSURED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
FUNDS INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
NATIONSBANK IS THE INVESTMENT ADVISER AND, TOGETHER
WITH ITS AFFILIATES, PROVIDES CERTAIN OTHER SERVICES
TO NATIONS FUND, FOR WHICH THEY ARE COMPENSATED.
STEPHENS INC., WHICH IS NOT AFFILIATED WITH
NATIONSBANK, IS THE SPONSOR AND ADMINISTRATOR AND
SERVES AS THE DISTRIBUTOR FOR NATIONS FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
MONEY MARKET FUNDS:
Nations Prime Fund
Nations Treasury Fund
Nations Government Money Market Fund
Nations Tax Exempt Fund
EQUITY FUNDS:
Nations Value Fund
Nations Equity Income Fund
Nations International Equity Fund
Nations Emerging Markets Fund
Nations Pacific Growth Fund
Nations Capital Growth Fund
Nations Emerging Growth Fund
Nations Disciplined Equity Fund
Nations Equity Index Fund
BALANCED FUND:
Nations Balanced Assets Fund
BOND FUNDS:
Nations Short-Intermediate Government Fund
Nations Government Securities Fund
Nations Short-Term Income Fund
Nations Diversified Income Fund
Nations Strategic Fixed Income Fund
Nations Mortgage-Backed Securities Fund
Nations Global Government Income Fund
Nations Municipal Income Fund
Nations Short-Term Municipal Income Fund
Nations Intermediate Municipal Bond Fund
Nations Florida Intermediate Municipal Bond Fund
Nations Florida Municipal Bond Fund
Nations Georgia Intermediate Municipal Bond Fund
Nations Georgia Municipal Bond Fund
Nations Maryland Intermediate Municipal Bond Fund
Nations Maryland Municipal Bond Fund
Nations North Carolina Intermediate Municipal Bond Fund
Nations North Carolina Municipal Bond Fund
Nations South Carolina Intermediate Municipal Bond Fund
Nations South Carolina Municipal Bond Fund
Nations Tennessee Intermediate
Municipal Bond Fund
Nations Tennessee Municipal Bond Fund
Nations Texas Intermediate Municipal Bond Fund
Nations Texas Municipal Bond Fund
Nations Virginia Intermediate Municipal Bond Fund
Nations Virginia Municipal Bond Fund
For purchase, redemption and
performance information
call:
1-800-626-2275
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
(Nations Fund Logo Appears
Here)
<PAGE>
Table Of Contents
About The Funds
Expenses Summary 3
Financial Highlights 8
Objectives 29
How Objectives Are Pursued 32
How Performance Is Shown 47
How the Funds Are Managed 49
Organization and History 54
About Your
Investment
How to Buy Shares 56
How to Redeem Shares 56
How the Funds Value Their Shares 57
How Dividends and Distributions Are Made;
Tax Information 57
Appendix A -- Portfolio Securities 60
Appendix B -- Description of Ratings 69
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAIS
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
NATIONS FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY NATIONS FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About the Funds
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds. The
following tables summarize shareholder transaction and operating expenses for
Trust A Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
NATIONS FUND MONEY MARKET FUNDS TRUST A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Nations Nations
Government Tax
Nations Prime Nations Money Market Exempt
Fund Treasury Fund Fund Fund
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Deferred Sales Load None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees1 .14% .17% .16% .17%
All Other Expenses .16% .13% .14% .13%
Total Operating Expenses1 .30% .30% .30% .30%
</TABLE>
1 After any waivers and reimbursements. See page 7 for a discussion of the
actual expenses.
NATIONS FUND EQUITY/BALANCED FUNDS TRUST A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Nations
Nations Equity Nations Nations Nations
Value Income International Emerging Pacific Growth
Fund Fund Equity Fund Markets Fund Fund
<S> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None None
Deferred Sales Load None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees1 .75% .70% .90% 1.10% .90%
All Other Expenses .17% .25% .20% .80% .80%
Total Operating Expenses1 .92% .95% 1.10% 1.90% 1.70%
</TABLE>
1 After any waivers and reimbursements. See page 7 for a discussion of the
actual expenses.
3
<PAGE>
NATIONS FUND EQUITY/BALANCED FUNDS TRUST A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Nations Nations Nations Nations Nations
Capital Emerging Disciplined Equity Balanced
Growth Growth Equity Index Assets
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None None
Deferred Sales Load None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees1 .75% .75% .75% .10% .75%
All Other Expenses .17% .20% .25% .30% .20%
Total Operating Expenses1 .92% .95% 1.00% .40% .95%
</TABLE>
1 After any waivers and reimbursements. See page 7 for a discussion of the
actual expenses.
NATIONS FUND BOND FUNDS TRUST A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Nations
Short- Nations Nations Nations Nations Nations
Intermediate Government Short-Term Nations Strategic Mortgage- Global
Government Securities Income Diversified Fixed Backed Government
Fund Fund Fund Income Fund Income Fund Securities Fund Income Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Sales Load Imposed on
Purchases None None None None None None None
Deferred Sales Load None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees1 .40% .50% .30% .50% .50% .50% .70%
All Other Expenses .18% .30% .22% .32% .17% .20% .60%
Total Operating Expenses1 .58% .80% .52% .82% .67% .70% 1.30%
</TABLE>
1 After any waivers and reimbursements. See page 7 for a discussion of the
actual expenses.
NATIONS FUND TAX-EXEMPT BOND FUNDS TRUST A SHARES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
Nations Nations
Nations Short-Term Nations Florida Nations
Municipal Municipal Intermediate Intermediate Florida
Income Income Municipal Municipal Municipal
Fund Fund Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None None
Deferred Sales Load None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees1 .40% .30% .30% .30% .40%
All Other Expenses .25% .25% .25% .25% .25%
Total Operating Expenses1 .65% .55% .55% .55% .65%
</TABLE>
1 After any waivers and reimbursements. See page 7 for a discussion of the
actual expenses.
4
<PAGE>
NATIONS FUND TAX-EXEMPT BOND FUNDS TRUST A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Nations Nations Nations
Georgia Nations Maryland Nations North Carolina
Intermediate Georgia Intermediate Maryland Intermediate
Municipal Municipal Municipal Municipal Municipal
Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None None
Deferred Sales Load None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees1 .30% .40% .30% .40% .30%
All Other Expenses .25% .25% .25% .25% .30%
Total Operating Expenses1 .55% .65% .55% .65% .60%
</TABLE>
1 After any waivers and reimbursements. See page 7 for a discussion of the
actual expenses.
NATIONS FUND TAX-EXEMPT BOND FUNDS TRUST A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Nations
Nations South Nations Nations
North Carolina South Tennessee Nations
Carolina Intermediate Carolina Intermediate Tennessee
Municipal Municipal Municipal Municipal Municipal
Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None None
Deferred Sales Load None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees1 .40% .30% .40% .30% .40%
All Other Expenses .25% .24% .25% .30% .25%
Total Operating Expenses1 .65% .54% .65% .60% .65%
</TABLE>
1 After any waivers and reimbursements. See page 7 for a discussion of the
actual expenses.
NATIONS FUND TAX-EXEMPT BOND FUNDS TRUST A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Nations Nations
Texas Nations Virginia Nations
Intermediate Texas Intermediate Virginia
Municipal Municipal Municipal Municipal
Bond Fund Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Deferred Sales Load None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees1 .30% .40% .40% .40%
All Other Expenses .30% .25% .25% .25%
Total Operating Expenses1 .60% .65% .65% .65%
</TABLE>
1 After any waivers and reimbursements. See page 7 for a discussion of the
actual expenses.
5
<PAGE>
EXAMPLES:
You would pay the following expenses on a $1,000 investment in Trust A Shares of
the indicated Fund, assuming (1) a 5% annual return and (2) redemption at the
end of each time period.
<TABLE>
<CAPTION>
Nations
Government Nations Nations Nations
Nations Nations Money Tax Nations Equity International
Prime Treasury Market Exempt Value Income Equity
Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 3 $ 3 $ 3 $ 3 $ 9 $ 10 $ 11
3 Years $10 $10 $10 $10 $ 29 $ 30 $ 35
5 Years $17 $17 $17 $17 $ 51 $ 53 $ 61
10 Years $38 $38 $38 $38 $113 $117 $134
</TABLE>
<TABLE>
<CAPTION>
Nations Nations
Emerging Pacific
Markets Growth
Fund Fund
<S> <C> <C>
1 Year $19 $17
3 Years $60 $54
5 Years N/A N/A
10 Years N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Nations
Nations Nations Nations Nations Short- Nations
Nations Emerging Disciplined Equity Balanced Intermediate Government
Capital Growth Growth Equity Index Assets Government Securities
Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 9 $ 10 $ 10 $ 4 $ 10 $ 6 $ 8
3 Years $ 29 $ 30 $ 32 $13 $ 30 $19 $26
5 Years $ 51 $ 53 $ 55 $22 $ 53 $32 $44
10 Years $113 $117 $122 $51 $117 $73 $99
</TABLE>
<TABLE>
<CAPTION>
Nations Nations
Short-Term Diversified
Income Income
Fund Fund
<S> <C> <C>
1 Year $ 5 $ 8
3 Years $17 $ 26
5 Years $29 $ 46
10 Years $65 $101
</TABLE>
<TABLE>
<CAPTION>
Nations
Nations Nations Nations Nations Nations Florida
Strategic Mortgage- Global Nations Short-Term Intermediate Intermediate
Fixed Backed Government Municipal Municipal Municipal Municipal
Income Securities Income Income Income Bond Bond
Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 7 $ 7 $13 $ 7 $ 6 $ 6 $ 6
3 Years $21 $22 $41 $21 $18 $18 $18
5 Years $37 $39 N/A $36 $31 $31 $31
10 Years $82 $87 N/A $81 $69 $69 $69
</TABLE>
<TABLE>
<CAPTION>
Nations Nations
Florida Georgia
Municipal Intermediate
Bond Municipal
Fund Bond Fund
<S> <C> <C>
1 Year $ 7 $ 6
3 Years $21 $18
5 Years $36 $31
10 Years $81 $69
</TABLE>
<TABLE>
<CAPTION>
Nations Nations
Nations North Nations South Nations
Nations Maryland Carolina North Carolina South
Georgia Intermediate Nations Intermediate Carolina Intermediate Carolina
Municipal Municipal Maryland Municipal Municipal Municipal Municipal
Bond Bond Municipal Bond Bond Bond Bond Bond
Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 7 $ 6 $ 7 $ 6 $ 7 $ 6 $ 7
3 Years $21 $18 $21 $19 $21 $17 $21
5 Years $36 $31 $36 $33 $36 $30 $36
10 Years $81 $69 $81 $75 $81 $68 $81
</TABLE>
<TABLE>
<CAPTION>
Nations
Tennessee Nations
Intermediate Tennessee
Municipal Municipal
Bond Bond
Fund Fund
<S> <C> <C>
1 Year $ 6 $ 7
3 Years $19 $21
5 Years $33 $36
10 Years $75 $81
</TABLE>
<TABLE>
<CAPTION>
Nations Nations
Texas Nations Virginia Nations
Intermediate Texas Intermediate Virginia
Municipal Municipal Municipal Municipal
Bond Bond Bond Bond
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
1 Year $ 6 $ 7 $ 7 $ 7
3 Years $19 $21 $21 $21
5 Years $33 $36 $36 $36
10 Years $75 $81 $81 $81
</TABLE>
6
<PAGE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Trust A Shares will bear either directly or indirectly. Except for the Nations
Emerging Markets Fund, Nations Global Government Income Fund and Nations Pacific
Growth Fund, which fees and expenses are based on estimates, certain figures
contained in the above tables are based on amounts incurred during each Fund's
most recent fiscal year and have been adjusted as necessary to reflect current
service provider fees. There is no assurance that any fee waivers and
reimbursements will continue beyond the current fiscal year. If fee waivers
and/or reimbursements are discontinued, the amounts contained in the "Examples"
above may increase. For more complete descriptions of the Funds' operating
expenses, see "How the Funds are Managed."
Absent fee waivers and reimbursements, "Management Fees" and "Total Operating
Expenses" for Trust A Shares of the indicated Fund would have been as follows:
Nations Prime Fund -- .20% and .36%, respectively; Nations Treasury Fund -- .20%
and .33%, respectively; Nations Government Money Market Fund -- .40% and .54%,
respectively; Nations Tax Exempt Fund -- .40% and .53%, respectively; Nations
Value Fund -- .75% and .92%, respectively; Nations Equity Income Fund -- .70%
and .95%, respectively; Nations International Equity Fund -- .90% and 1.10%,
respectively; Nations Emerging Markets Fund -- 1.10% and 1.90%, respectively;
Nations Pacific Growth Fund -- .90% and 1.70%, respectively; Nations Capital
Growth Fund -- .75% and .92%, respectively; Nations Emerging Growth Fund -- .75%
and .95%, respectively; Nations Disciplined Equity Fund -- .75% and 1.00%,
respectively; Nations Equity Index Fund -- .50% and .80%, respectively; Nations
Balanced Assets Fund -- .75% and .95%, respectively; Nations Short-Intermediate
Government Fund -- .60% and .78%, respectively; Nations Government Securities
Fund -- .64% and .94%, respectively; Nations Short-Term Income Fund -- .60% and
.82%, respectively; Nations Diversified Income Fund -- .60% and .92%,
respectively; Nations Strategic Fixed Income Fund -- .60% and .77%,
respectively; Nations Mortgage-Backed Securities Fund -- .60% and .80%,
respectively; Nations Global Government Income Fund -- .70% and 1.30%,
respectively; Nations Municipal Income Fund, Nations Florida Municipal Bond
Fund, Nations Georgia Municipal Bond Fund, Nations Maryland Municipal Bond Fund,
Nations North Carolina Municipal Bond Fund, Nations South Carolina Municipal
Bond Fund, Nations Tennessee Municipal Bond Fund, Nations Texas Municipal Bond
Fund and Nations Virginia Municipal Bond Fund -- .60% and .85%, respectively;
Nations Short-Term Municipal Income Fund, Nations Intermediate Municipal Bond
Fund, Nations Florida Intermediate Municipal Bond Fund, Nations Georgia
Intermediate Municipal Bond Fund, Nations Maryland Intermediate Municipal Bond
Fund and Nations Virginia Intermediate Municipal Bond Fund -- .50% and .75%,
respectively; Nations North Carolina Intermediate Municipal Bond Fund, Nations
Tennessee Intermediate Municipal Bond Fund and Nations Texas Intermediate
Municipal Bond Fund -- .50% and .80%, respectively; and Nations South Carolina
Intermediate Municipal Bond Fund -- .50% and .74%, respectively.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE GREATER OR LESS
THAN THOSE SHOWN.
7
<PAGE>
Financial Highlights
The audited financial information on the following pages has been derived from
the financial statements of Nations Fund Trust and Nations Fund, Inc. Price
Waterhouse LLP is the independent accountant to Nations Fund Trust, Nations
Fund, Inc. and Nations Portfolios. The reports of Price Waterhouse LLP for the
most recent fiscal years of Nations Fund Trust and Nations Fund, Inc. accompany
the financial statements for such periods and are incorporated by reference in
the SAIs, which are available upon request. Financial information is not
available for Nations Portfolios because it is a new Registrant. For more
information see "Organization and History." Shareholders of a Fund will receive
unaudited semi-annual reports describing the Fund's investment operations and
annual financial statements audited by the Funds' independent accountant.
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS PRIME FUND
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
TRUST A SHARES 05/31/95 5/31/94 5/31/93 5/31/92
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0519 0.0318 0.0328 0.0506
Dividends from net investment income (0.0519) (0.0318) (0.0328) (0.0506)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 5.32% 3.22% 3.33% 5.19%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 2,873,096 $ 2,883,762 $ 1,156,266 $ 500,476
Ratio of operating expenses to average net assets 0.30% 0.30% 0.30% 0.30%
Ratio of net investment income to average net assets 5.23% 3.20% 3.25% 5.03%
Ratio of operating expenses to average net assets without
waivers and reimbursements 0.38% 0.37% 0.36% 0.42%
Net investment income per share without waivers and
reimbursements $ 0.0511 $ 0.0311 $ 0.0322 $ 0.0494
</TABLE>
<TABLE>
<CAPTION>
YEAR
ENDED
TRUST A SHARES 5/31/91
<S> <C>
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0749
Dividends from net investment income (0.0749)
Net asset value, end of period $ 1.00
Total return++ 7.75%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 574,993
Ratio of operating expenses to average net assets 0.30%
Ratio of net investment income to average net assets 7.47%
Ratio of operating expenses to average net assets without
waivers and reimbursements 0.44%
Net investment income per share without waivers and
reimbursements $ 0.0735
</TABLE>
NATIONS PRIME FUND (CONT.)
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
TRUST A SHARES 5/31/90 5/31/89 5/31/88
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0855 0.0839 0.0675
Dividends from net investment income (0.0855) (0.0839) (0.0675)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
Total return++ 8.88%+++ 8.71%+++ 6.94%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 433,298 $ 115,295 $ 264,063
Ratio of operating expenses to average net assets 0.32% 0.35% 0.36%
Ratio of net investment income to average net assets 8.43% 8.11% 6.73%
Ratio of operating expenses to average net assets without waivers and
reimbursements 0.50%+++ 0.55%+++ 0.56%+++
Net investment income per share without waivers and reimbursements $ 0.0731+++ $ 0.0819+++ $ 0.0655+++
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 5/31/87*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0277
Dividends from net investment income (0.0277)
Net asset value, end of period $ 1.00
Total return++ 2.79%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 252,562
Ratio of operating expenses to average net assets 0.35%+
Ratio of net investment income to average net assets 5.99%+
Ratio of operating expenses to average net assets without waivers and
reimbursements 0.65%+++
Net investment income per share without waivers and reimbursements $ 0.0247+++
</TABLE>
* The Nations Prime Fund Trust A Shares commenced operations on December 15,
1986.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
8
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NATIONS TREASURY FUND
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
TRUST A SHARES 5/31/95 5/31/94 5/31/93 5/31/92
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0494 0.0297 0.0307 0.0483
Dividends from net investment income (0.0494) (0.0297) (0.0307) (0.0483)
Distributions from net realized capital gains (0.0000)** -- -- --
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 5.05% 2.99% 3.12% 4.95%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 2,896,868 $ 2,679,992 $ 2,956,796 $1,094,741
Ratio of operating expenses to average net assets 0.30% 0.30% 0.30% 0.29%
Ratio of net investment income to average net assets 4.99% 2.97% 3.02% 4.82%
Ratio of operating expenses to average net assets without
waivers and reimbursements 0.35% 0.36% 0.36% 0.42%
Net investment income per share without waivers and
reimbursements $ 0.0489 $ 0.0292 $ 0.0302 $ 0.0470
</TABLE>
<TABLE>
<CAPTION>
YEAR
ENDED
TRUST A SHARES 5/31/91
<S> <C>
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0721
Dividends from net investment income (0.0721)
Distributions from net realized capital gains --
Net asset value, end of period $ 1.00
Total return++ 7.46%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 955,186
Ratio of operating expenses to average net assets 0.25%
Ratio of net investment income to average net assets 7.04%
Ratio of operating expenses to average net assets without
waivers and reimbursements 0.43%
Net investment income per share without waivers and
reimbursements $ 0.0703
</TABLE>
NATIONS TREASURY FUND (CONT.)
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
TRUST A SHARES 5/31/90 5/31/89 5/31/88
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0829 0.0802 0.0630
Dividends from net investment income (0.0829) (0.0802) (0.0630)
Distributions from net realized capital gains -- -- --
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
Total return++ 8.61%+++ 8.33%+++ 6.49%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 392,843 $ 90,946 $ 111,414
Ratio of operating expenses to average net assets 0.25% 0.39% 0.38%
Ratio of net investment income to average net assets 8.18% 7.93% 6.31%
Ratio of operating expenses to average net assets without waivers and
reimbursements 0.59%+++ 0.58%+++ 0.65%+++
Net investment income per share without waivers and reimbursements $ 0.0693+++ $ 0.0783+++ $ 0.0603+++
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 5/31/87*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0262
Dividends from net investment income (0.0262)
Distributions from net realized capital gains --
Net asset value, end of period $ 1.00
Total return++ 2.64%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 66,221
Ratio of operating expenses to average net assets 0.35%+
Ratio of net investment income to average net assets 5.68%+
Ratio of operating expenses to average net assets without waivers and
reimbursements 0.75%+++
Net investment income per share without waivers and reimbursements $ 0.0222+++
</TABLE>
* The Nations Treasury Fund Trust A Shares commenced operations on December
15, 1986.
** Amount represents less than $0.0001.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
9
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR
05/31/95 ENDED ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0280 0.0375 0.0294 0.0358
Distributions:
Dividends from net investment income (0.0280) (0.0375) (0.0294) (0.0358)
Dividends from net realized gains -- (0.0000)# -- --
Total distributions (0.0280) (0.0375) (0.0294) (0.0358)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 2.83% 3.84% 2.96% 3.63%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 395,770 $ 432,729 $ 475,180 $ 414,412
Ratio of operating expenses to average net assets 0.30%+ 0.30% 0.30% 0.42%
Ratio of net investment income to average net assets 5.61%+ 3.79% 2.91% 3.55%
Ratio of operating expenses to average net assets
before fee waivers 0.56%+ 0.59% 0.56% 0.58%
Net investment income per share before fee waivers $ 0.0267 $ 0.0347 $ 0.0269 $ 0.0341
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/91*
<S> <C>
Net asset value, beginning of period $ 1.00
Net investment income 0.0571
Distributions:
Dividends from net investment income (0.0571)
Dividends from net realized gains --
Total distributions (0.0571)
Net asset value, end of period $ 1.00
Total return++ 5.87%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 333,979
Ratio of operating expenses to average net assets 0.43%+
Ratio of net investment income to average net assets 5.49%+
Ratio of operating expenses to average net assets
before fee waivers 0.62%+
Net investment income per share before fee waivers $ 0.0551
</TABLE>
* The Nations Government Money Market Fund Trust A Shares commenced operations
on December 3, 1990.
+ Annualized.
++ Total return represents aggregate return for the periods indicated.
+++ Unaudited.
# Value represents less than $(0.0001) per share.
NATIONS TAX EXEMPT FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
05/31/95 ENDED ENDED ENDED ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92 11/30/91 11/30/90
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0181 0.0257 0.0223 0.0267 0.0422 0.0550
Dividends from net
investment income (0.0181) (0.0257) (0.0223) (0.0267) (0.0422) (0.0550)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 1.82% 2.60% 2.27% 2.70%+++ 4.31%+++ 5.63%+++
Ratios to average net
assets/
supplemental data:
Net assets, end of period
(000's) $ 945,477 $ 820,677 $ 701,403 $ 329,265 $ 168,829 $ 173,834
Ratio of operating expenses
to average net assets 0.30%+ 0.27% 0.23% 0.40% 0.42% 0.40%
Ratio of net investment
income to average net
assets 3.64%+ 2.59% 2.23% 2.65% 4.23% 5.51%
Ratio of operating expenses
to average net assets
before fee waivers. 0.55%+ 0.59% 0.59% 0.57% 0.60% 0.75%
Net investment income per
share before fee waivers $ 0.0169 $ 0.0226 $ 0.0187 $ 0.0250 $ 0.0404 $ 0.0515
</TABLE>
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
TRUST A SHARES 11/30/89 11/30/88*
<S> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00
Net investment income 0.0600 0.0350
Dividends from net
investment income (0.0600) (0.0350)
Net asset value, end of
period $ 1.00 $ 1.00
Total return++ 6.17%+++ 3.55%+++
Ratios to average net
assets/
supplemental data:
Net assets, end of period
(000's) $ 145,109 $ 143,245
Ratio of operating expenses
to average net assets 0.40% 0.40%+
Ratio of net investment
income to average net
assets 6.00% 4.97%+
Ratio of operating expenses
to average net assets
before fee waivers. 0.74% 0.75%+
Net investment income per
share before fee waivers $ 0.0566 $ 0.0325
</TABLE>
* The Nations Tax Exempt Fund Trust A Shares commenced operations on March 14,
1988.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated.
+++ Unaudited.
10
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS VALUE FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR
05/31/95 ENDED ENDED ENDED ENDED
TRUST A SHARES (UNAUDTED) 11/30/94 11/30/93 11/30/92 11/30/91
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 12.98 $ 13.74 $ 12.45 $ 11.16 $ 9.71
Net investment income 0.14 0.24 0.24 0.28 0.34
Net realized and unrealized
gain/(loss) on investments 2.12 (0.23) 1.38 1.57 1.47
Net increase/(decrease) in net
assets resulting from
investment operations 2.26 0.01 1.62 1.85 1.81
Distributions:
Dividends from net investment
income (0.14) (0.23) (0.24) (0.27) (0.36)
Distributions from net
realized capital gains (0.67) (0.54) (0.09) (0.29) --
Total distributions (0.81) (0.77) (0.33) (0.56) (0.36)
Net asset value, end of period $ 14.43 $ 12.98 $ 13.74 $ 12.45 $ 11.16
Total return++ 18.64% (0.08)% 13.19% 17.00%+++ 18.79%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000's) $ 872,044 $ 799,743 $ 707,185 $ 282,138 $ 82,360
Ratio of operating expenses to
average net assets 0.91%+ 0.93% 0.96% 0.90% 0.53%
Ratio of net investment income
to average net assets 2.17%+ 1.85% 1.98% 2.31% 3.33%
Portfolio turnover rate 36% 75% 64% 60% 51%
Ratio of operating expenses to
average net assets before
fee waivers and/or expense
reimbursements 0.91%+ 0.93% 0.97% 0.97% 0.99%
Net investment income per
share before fee waivers
and/or expense
reimbursements $ 0.14 $ 0.24 $ 0.24 $ 0.27 $ 0.30
</TABLE>
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
TRUST A SHARES 11/30/90 11/30/89*#
<S> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 10.04 $ 10.00
Net investment income 0.35 0.08
Net realized and unrealized
gain/(loss) on investments (0.36) (0.04)
Net increase/(decrease) in net
assets resulting from
investment operations (0.01) 0.04
Distributions:
Dividends from net investment
income (0.32) --
Distributions from net
realized capital gains -- --
Total distributions (0.32) --
Net asset value, end of period $ 9.71 $ 10.04
Total return++ (0.16)%+++ 0.40%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000's) $ 19,769 $ 5,161
Ratio of operating expenses to
average net assets 0.21% 0.49%+
Ratio of net investment income
to average net assets 4.19% 4.41%+
Portfolio turnover rate 24% --
Ratio of operating expenses to
average net assets before
fee waivers and/or expense
reimbursements 1.11% 1.41%+
Net investment income per
share before fee waivers
and/or expense
reimbursements $ 0.26 $ 0.06
</TABLE>
* The Nations Value Fund Trust A Shares commenced operations on September 19,
1989.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed method did not accord with the results of operations.
11
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NATIONS EQUITY INCOME FUND
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
TRUST A SHARES 05/31/95 5/31/94 5/31/93 5/31/92
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.43 $ 12.06 $ 11.41 $ 10.19
Net investment income 0.42 0.38 0.37 0.34
Net realized and unrealized gain on investments 1.11 0.22 1.08 1.25
Net increase in net assets resulting from investment
operations 1.53 0.60 1.45 1.59
Distributions:
Dividends from net investment income (0.42) (0.42) (0.35) (0.30)
Distributions from net realized capital gains (0.73) (0.81) (0.45) (0.07)
Total distributions (1.15) (1.23) (0.80) (0.37)
Net asset value, end of period $ 11.81 $ 11.43 $ 12.06 $ 11.41
Total return++ 14.79% 5.00% 13.30% 15.91%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 283,082 $ 225,740 $ 175,949 $ 18,104
Ratio of operating expenses to average net assets 0.92% 0.94% 0.92% 1.10%
Ratio of net investment income to average net assets 3.75% 3.41% 3.37% 3.15%
Portfolio turnover rate 158% 116% 55% 84%
Ratio of operating expenses to average net assets without
waivers and reimbursements 0.93% 0.95% 1.04% 2.21%
Net investment income per share without waivers and
reimbursements $ 0.42 $ 0.38 $ 0.36 $ 0.22
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 5/31/91*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.05
Net realized and unrealized gain on investments 0.14
Net increase in net assets resulting from investment
operations 0.19
Distributions:
Dividends from net investment income --
Distributions from net realized capital gains --
Total distributions 0.00
Net asset value, end of period $ 10.19
Total return++ 1.90%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 10,194
Ratio of operating expenses to average net assets 1.12%+
Ratio of net investment income to average net assets 3.66%+
Portfolio turnover rate 9%
Ratio of operating expenses to average net assets without
waivers and reimbursements 1.80%+
Net investment income per share without waivers and
reimbursements $ (0.06)
</TABLE>
* The Nations Equity Income Fund Trust A Shares commenced operations on April
11, 1991.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
NATIONS INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
TRUST A SHARES 05/31/95# 5/31/94# 5/31/93#
Operating performance:
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.06 $ 10.60 $ 10.40
Net investment income/(loss) 0.14 0.09 0.09
Net realized and unrealized gain/(loss) on investments (0.20) 1.44 0.21
Net increase/(decrease) in net assets resulting from investment operations (0.06) 1.53 0.30
Distributions:
Dividends from net investment income (0.03) (0.05) (0.08)
Distributions from net realized capital gains (0.12) (0.02) (0.02)
Distributions in excess of net realized capital gains (0.10) -- --
Total distributions (0.25) (0.07) (0.10)
Net asset value, end of period $ 11.75 $ 12.06 $ 10.60
Total return++ (0.46)% 14.37% 3.14%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 572,940 $ 401,559 $ 118,873
Ratio of operating expenses to average net assets 1.03% 1.17% 1.30%
Ratio of net investment income/(loss) to average net assets 1.17% 0.75% 1.03%
Portfolio turnover rate 92% 39% 41%
Ratio of operating expenses to average net assets without waivers and
reimbursements 1.04% 1.18% 1.32%
Net investment income/(loss) per share without waivers and reimbursements $ 0.14 $ 0.08 $ 0.10
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 5/31/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss) 0.08
Net realized and unrealized gain/(loss) on investments 0.36
Net increase/(decrease) in net assets resulting from investment operations 0.44
Distributions:
Dividends from net investment income (0.04)
Distributions from net realized capital gains --
Distributions in excess of net realized capital gains --
Total distributions (0.04)
Net asset value, end of period $ 10.40
Total return++ 4.43%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 83,970
Ratio of operating expenses to average net assets 1.33%+
Ratio of net investment income/(loss) to average net assets 1.81%+
Portfolio turnover rate 11%
Ratio of operating expenses to average net assets without waivers and
reimbursements 1.43%+
Net investment income/(loss) per share without waivers and reimbursements $ 0.03
</TABLE>
* The Nations International Equity Fund Trust A Shares commenced operations on
December 2, 1991.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charge.
+++ Unaudited.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed method did not accord with the results of operations.
12
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93
Operating performance:
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.23 $ 11.08 $ 10.68
Net investment income/(loss) 0.06 0.09 0.09
Net realized and unrealized gain on investments 1.37 0.14 0.42
Net increase in net assets resulting from investment operations 1.43 0.23 0.51
Distributions:
Dividends from net investment income (0.05) (0.08) (0.10)
Distributions from net realized gains (0.26) (0.00)(a) (0.01)
Total distributions (0.31) (0.08) (0.11)
Net asset value, end of period $ 12.35 $ 11.23 $ 11.08
Total return++ 13.19% 2.14% 4.84%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 783,103 $ 717,914 $ 646,661
Ratio of operating expenses to average net assets 0.91%+ 0.90% 0.80%
Ratio of net investment income/(loss) to average net assets 1.03%+ 0.85% 0.84%
Portfolio turnover rate 43% 56% 81%
Ratio of operating expenses to average net assets before fee waivers 0.97%+ 0.91% 0.89%
Net investment income/(loss) per share before fee waivers $ 0.06 $ 0.09 $ 0.08
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss) 0.02
Net realized and unrealized gain on investments 0.66##
Net increase in net assets resulting from investment operations 0.68
Distributions:
Dividends from net investment income --
Distributions from net realized gains --
Total distributions --
Net asset value, end of period $ 10.68
Total return++ 6.80%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 728,629
Ratio of operating expenses to average net assets 0.30%+
Ratio of net investment income/(loss) to average net assets 1.33%+
Portfolio turnover rate 7%
Ratio of operating expenses to average net assets before fee waivers 1.05%+
Net investment income/(loss) per share before fee waivers $ 0.01
</TABLE>
* The Nations Capital Growth Fund Trust A Shares commenced operations on
September 30, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
## The amount shown at this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and losses in
the portfolio securities for the period because of the timing of purchases
and withdrawals of shares in relation to the fluctuating market values of the
portfolio.
(a) Value represents less than $0.01 per share.
NATIONS EMERGING GROWTH FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94# 11/30/93*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.41 $ 10.87 $ 10.00
Net investment income/(loss) 0.01 (0.03) (0.01)
Net realized and unrealized gain on investments 0.97 0.71 0.89
Net increase in net assets resulting from investment operations 0.98 0.68 0.88
Distributions:
Distributions from net realized gains (0.40) (0.14) (0.01)
Total distributions (0.40) (0.14) (0.01)
Net asset value, end of period $ 11.99 $ 11.41 $ 10.87
Total return++ 9.11% 6.26% 8.81%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 210,203 $ 182,459 $ 121,281 +
Ratio of operating expenses to average net assets 0.97%+ 1.01% 0.80%%+
Ratio of net investment income/(loss) to average net assets 0.10%+ (0.29)% (0.15)
Portfolio turnover rate 69% 129% 159%+
Ratio of operating expenses to average net assets before fee waivers 0.98%+ 1.01% 1.01%
Net investment income/(loss) per share before fee waivers $ 0.00(a) $ (0.03) $ (0.03)
</TABLE>
* The Nations Emerging Growth Fund Trust A Shares commenced operations on
December 4, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
# Per share numbers have been calculated using the average shares method.
(a) Value represents less than $0.01 per share.
13
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS DISCIPLINED EQUITY FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD PERIOD
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED)# 11/30/94* 04/29/94*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 13.08 $ 13.31 $ 13.65
Net investment income/(loss) 0.09 0.01 (0.05)
Net realized and unrealized gain/(loss) on investments 1.35 (0.23)## 2.66
Net increase/(decrease) in net assets resulting from
investment operations 1.44 (0.22) 2.61
Distributions:
Dividends from net investment income (0.02) (0.01) --
Distributions from net realized gains -- -- (2.95)
Return of capital -- (0.00)(a) --
Total distributions (0.02) (0.01) (2.95)
Net asset value, end of period $ 14.50 $ 13.08 $ 13.31
Total return++ 11.01% (1.62)% 18.79%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 47,077 $ 9,947 $ 8,079
Ratio of operating expenses to average net assets 0.94%+ 1.13%+ 1.20%+
Ratio of net investment income/(loss) to average net assets 1.37%+ 0.12%+ (0.60)%+
Portfolio turnover rate 98% 177% 475%
Ratio of operating expenses to average net assets before fee
waivers 1.65%+ 1.56%+ 1.53%+
Net investment income/(loss) per share before fee waivers $ 0.04 $ (0.03) $ (0.08)
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 04/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss) (0.03)
Net realized and unrealized gain/(loss) on investments 3.74
Net increase/(decrease) in net assets resulting from
investment operations 3.71
Distributions:
Dividends from net investment income --
Distributions from net realized gains (0.06)
Return of capital --
Total distributions (0.06)
Net asset value, end of period $ 13.65
Total return++ 37.13%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 4,638
Ratio of operating expenses to average net assets 1.20%+
Ratio of net investment income/(loss) to average net assets (0.58)%+
Portfolio turnover rate 203%
Ratio of operating expenses to average net assets before fee
waivers 1.31%+
Net investment income/(loss) per share before fee waivers $ (0.03)
</TABLE>
* The period for the Nations Disciplined Equity Fund Trust A Shares reflects
operations from April 30, 1994 through November 30, 1994. The financial
information for the fiscal periods through April 29, 1994 is based on the
financial information for The Capitol Mutual Funds Special Equity Portfolio
Class A Shares, which were reorganized into Trust A Shares of Nations
Disciplined Equity Fund (then named Nations Special Equity Fund) as of the
close of business on April 29, 1994. The Capitol Mutual Funds Special Equity
Portfolio Class A Shares commenced operations on October 1, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
# Per share numbers have been calculated using the monthly average shares
method.
## The amount shown at this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and losses in
the portfolio securities for the period because of the timing of purchases
and withdrawals of shares in relation to the fluctuating market value of the
portfolio.
(a) Value represents less than $0.01 per share.
14
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS EQUITY INDEX FUND
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
05/31/95 11/30/94*
TRUST A SHARES (UNAUDITED)
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.84 $ 10.00
Net investment income 0.08 0.24
Net realized and unrealized gain/(loss) on investments 1.64 (0.21)
Net increase in net assets resulting from investment operations 1.72 0.03
Distributions:
Dividends from net investment income (0.07) (0.19)
Distributions from net realized gains (0.08) --
Total distributions (0.15) (0.19)
Net asset value, end of period $ 11.41 $ 9.84
Total return++ 19.01% 0.29%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 129,706 $ 123,147
Ratio of operating expenses to average net assets 0.35%+ 0.35%+
Ratio of net investment income to average net assets 2.68%+ 2.64%+
Portfolio turnover rate 7% 14%
Ratio of operating expenses to average net assets before fee waivers 0.75%+ 0.79%+
Net investment income per share before fee waivers $ 0.07 $ 0.20
</TABLE>
* The Nations Equity Index Fund Trust A Shares commenced operations on December
16, 1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
NATIONS BALANCED ASSETS FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.44 $ 10.87 $ 10.24
Net investment income 0.17 0.25 0.29
Net realized and unrealized gain/(loss) on investments 1.13 (0.43) 0.64
Net increase/(decrease) in net assets resulting from investment
operations 1.30 (0.18) 0.93
Distributions:
Dividends from net investment income (0.14) (0.25) (0.30)
Distributions from net realized gains (0.02) -- --
Total distributions (0.16) (0.25) (0.30)
Net asset value, end of period $ 11.58 $ 10.44 $ 10.87
Total return++ 12.59% (1.73)% 9.22%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 157,581 $ 162,215 $ 178,270
Ratio of operating expenses to average net assets 0.99%+ 0.98% 0.90%
Ratio of net investment income to average net assets 3.11%+ 2.31% 2.82%
Portfolio turnover rate 101% 156% 50%
Ratio of operating expenses to average net assets before fee waivers 0.99%+ 0.99% 0.97%
Net investment income per share before fee waivers $ 0.17 $ 0.25 $ 0.29
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.06
Net realized and unrealized gain/(loss) on investments 0.18##
Net increase/(decrease) in net assets resulting from investment
operations 0.24
Distributions:
Dividends from net investment income --
Distributions from net realized gains --
Total distributions --
Net asset value, end of period $ 10.24
Total return++ 2.40%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 111,953
Ratio of operating expenses to average net assets 0.30%+
Ratio of net investment income to average net assets 3.85%+
Portfolio turnover rate 79%
Ratio of operating expenses to average net assets before fee waivers 1.05%+
Net investment income per share before fee waivers $ 0.05
</TABLE>
* The Nations Balanced Assets Fund Trust A Shares commenced operations on
September 30, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated
and does not reflect any applicable sales charges.
+++ Unaudited.
## The amount shown at this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and losses in
the portfolio securities for the period because of the timing of purchases
and withdrawals of shares in relation to the fluctuating market values of
the portfolio.
15
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR
05/31/95 ENDED ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of year $ 3.93 $ 4.28 $ 4.16 $ 4.17
Net investment income 0.12 0.23 0.23 0.28
Net realized and unrealized gain/(loss) on investments 0.16 (0.33) 0.14 (0.01)
Net increase/(decrease) in net assets resulting from
investment operations 0.28 (0.10) 0.37 0.27
Distributions:
Dividends from net investment income (0.12) (0.23) (0.23) (0.28)
Distributions in excess of net investment income -- (0.00)# -- --
Distributions from net realized capital gains -- (0.02) (0.02) --
Total distributions (0.12) (0.25) (0.25) (0.28)
Net asset value, end of year $ 4.09 $ 3.93 $ 4.28 $ 4.16
Total return++ 7.25% (2.23)% 9.03% 6.70%+++
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $ 411,934 $ 433,278 $ 443,426 $ 360,497
Ratio of operating expenses to average net assets 0.58%+ 0.59% 0.55% 0.37%
Ratio of net investment income to average net assets 6.07%+ 5.76% 5.40% 6.48%
Portfolio turnover rate 130% 133% 92% 25%
Ratio of operating expenses to average net assets before fee
waivers and/or expense reimbursements 0.79%+ 0.80% 0.79% 0.77%
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.11 $ 0.22 $ 0.22 $ 0.26
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/91*
<S> <C>
Operating performance:
Net asset value, beginning of year $ 4.00
Net investment income 0.10
Net realized and unrealized gain/(loss) on investments 0.17
Net increase/(decrease) in net assets resulting from
investment operations 0.27
Distributions:
Dividends from net investment income (0.10)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.10)
Net asset value, end of year $ 4.17
Total return++ 6.81%+++
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $ 158,435
Ratio of operating expenses to average net assets 0.08%+
Ratio of net investment income to average net assets 7.21%+
Portfolio turnover rate 11%
Ratio of operating expenses to average net assets before fee
waivers and/or expense reimbursements 0.82%+
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.00
</TABLE>
* The Nations Short-Intermediate Government Fund Trust A Shares commenced
operations on August 1, 1991.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
# Value represents less than $0.01 per share.
16
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
TRUST A SHARES 05/31/95# 05/31/94 05/31/93 05/31/92
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.80 $ 10.46 $ 10.36 $ 10.05
Net investment income 0.64 0.64 0.71 0.74
Net realized and unrealized gain/(loss) on investments 0.06 (0.61) 0.13 0.37
Net increase/(decrease) in net assets resulting from
investment operations 0.70 0.03 0.84 1.11
Distributions:
Dividends from net investment income (0.60) (0.58) (0.70) (0.77)
Dividends in excess of net investment income -- (0.02) -- --
Distributions in excess of net realized capital gains -- (0.05) (0.04) (0.03)
Distributions from capital (0.04) (0.04) -- --
Total distributions (0.64) (0.69) (0.74) (0.80)
Net asset value, end of period $ 9.86 $ 9.80 $ 10.46 $ 10.36
Total return++ 7.55% 0.06% 8.37% 11.43%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 39,909 $ 44,536 $ 40,472 $ 42,256
Ratio of operating expenses to average net assets 0.76% 0.73% 0.85% 1.06%
Ratio of net investment income to average net assets 6.69% 6.08% 6.67% 7.15%
Portfolio turnover rate 413% 56% 103% 130%
Ratio of operating expenses to average net assets without
waivers and reimbursements 0.94% 0.94% 1.00% 1.72%
Net investment income per share without waivers and
reimbursements $ 0.62 $ 0.61 $ 0.60 $ 0.07
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 05/31/91*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.10
Net realized and unrealized gain/(loss) on investments 0.02
Net increase/(decrease) in net assets resulting from
investment operations 0.12
Distributions:
Dividends from net investment income (0.07)
Dividends in excess of net investment income --
Distributions in excess of net realized capital gains --
Distributions from capital --
Total distributions (0.07)
Net asset value, end of period $ 10.05
Total return++ 1.19%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 10,047
Ratio of operating expenses to average net assets 1.10%+
Ratio of net investment income to average net assets 7.18%+
Portfolio turnover rate 5%
Ratio of operating expenses to average net assets without
waivers and reimbursements 1.69% +++
Net investment income per share without waivers and
reimbursements $ 0.09+++
</TABLE>
* The Nations Government Securities Fund Trust A Shares commenced operations
on April 11, 1991.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share amounts have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed income method did not accord with the results of
operations.
NATIONS SHORT-TERM INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED)# 11/30/94# 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.48 $ 10.01 $ 9.75
Net investment income 0.30 0.50 0.53
Net realized and unrealized gain/(loss) on investments 0.28 (0.51) 0.26
Net increase/(decrease) in net assets resulting from investment operations 0.58 (0.01) 0.79
Distributions:
Dividends from net investment income (0.30) (0.48) (0.53)
Distributions in excess of net investment income -- (0.02) --
Distributions from capital -- (0.02) --
Total distributions (0.30) (0.52) (0.53)
Net asset value, end of period $ 9.76 $ 9.48 $ 10.01
Total return++ 6.25% (0.11)% 8.26%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 169,616 $ 176,712 $ 201,738
Ratio of operating expenses to average net assets 0.51 %+ 0.50 % 0.37%
Ratio of net investment income to average net assets 6.35 %+ 5.23 % 5.27%
Portfolio turnover rate 145 % 293 % 121%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 0.86 %+ 0.82 % 0.79%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.29 $ 0.47 $ 0.48
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.09
Net realized and unrealized gain/(loss) on investments (0.25)
Net increase/(decrease) in net assets resulting from investment operations (0.16)
Distributions:
Dividends from net investment income (0.09)
Distributions in excess of net investment income --
Distributions from capital --
Total distributions (0.09)
Net asset value, end of period $ 9.75
Total return++ (1.58)%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 190,680
Ratio of operating expenses to average net assets 0.30%+
Ratio of net investment income to average net assets 5.54%+
Portfolio turnover rate 45%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 0.90%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.08
</TABLE>
* The Nations Short-Term Income Fund Trust A Shares commenced operations on
September 30, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed method did not accord with the results of operations.
17
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED YEAR
TRUST A SHARES (UNAUDITED) 11/30/94# ENDED 11/30/93#
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.67 $ 10.88 $ 9.97
Net investment income 0.38 0.74 0.78
Net realized and unrealized gain/(loss) on investments 0.86 (1.06) 0.91
Net increase/(decrease) in net assets resulting from investment operations 1.24 (0.32) 1.69
Distributions:
Dividends from net investment income (0.38) (0.74) (0.78)
Distributions in excess of net investment income -- (0.00)## --
Distributions from net realized capital gains -- (0.15) --
Total distributions (0.38) (0.89) (0.78)
Net asset value, end of period $ 10.53 $ 9.67 $ 10.88
Total return++ 13.05% (3.05)% 17.40%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 24,598 $ 22,298 $ 28,553
Ratio of operating expenses to average net assets 0.77%+ 0.74% 0.55%
Ratio of net investment income to average net assets 7.53%+ 7.31% 7.02%
Portfolio turnover rate 67% 144% 86%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 0.93%+ 0.95% 0.95%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.37 $ 0.72 $ 0.70
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.06
Net realized and unrealized gain/(loss) on investments (0.03)
Net increase/(decrease) in net assets resulting from investment operations 0.03
Distributions:
Dividends from net investment income (0.06)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.06)
Net asset value, end of period $ 9.97
Total return++ 0.32%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 23,962
Ratio of operating expenses to average net assets 0.25%+
Ratio of net investment income to average net assets 7.76%+
Portfolio turnover rate 46%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 0.85%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.05
</TABLE>
* The Nations Diversified Income Fund Trust A Shares commenced operations on
October 30, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed method did not accord with the results of operations.
## Value represents less than $0.01 per share.
NATIONS STRATEGIC FIXED INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.32 $ 10.55 $ 9.94
Net investment income 0.29 0.53 0.56
Net realized and unrealized gain/(loss) on investments 0.70 (0.89) 0.62
Net increase/(decrease) in net assets resulting from investment operations 0.99 (0.36) 1.18
Distributions:
Dividends from net investment income (0.29) (0.51) (0.56)
Distributions in excess of net investment income -- (0.02) --
Distributions from net realized capital gains -- (0.34) (0.01)
Total distributions (0.29) (0.87) (0.57)
Net asset value, end of period $ 10.02 $ 9.32 $ 10.55
Total return++ 10.85% (3.58)% 12.05%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 608,173 $ 550,697 $ 545,538
Ratio of operating expenses to average net assets 0.68%+ 0.68% 0.61%
Ratio of net investment income to average net assets 6.18%+ 5.43% 5.40%
Portfolio turnover rate 155% 307% 161%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 0.79%+ 0.76% 0.77%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.29 $ 0.52 $ 0.55
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.05
Net realized and unrealized gain/(loss) on investments (0.06)
Net increase/(decrease) in net assets resulting from investment operations (0.01)
Distributions:
Dividends from net investment income (0.05)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.05)
Net asset value, end of period $ 9.94
Total return++ (0.11)%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 581,329
Ratio of operating expenses to average net assets 0.26%+
Ratio of net investment income to average net assets 6.15%+
Portfolio turnover rate 12%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 0.86%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.04
</TABLE>
* The Nations Strategic Fixed Income Fund Trust A Shares commenced operations
on October 30, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
18
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS MORTGAGE-BACKED SECURITIES FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 8.97 $ 9.95 $ 9.97
Net investment income 0.31 0.65 0.68
Net realized and unrealized gain/(loss) on investments 0.59 (0.97) (0.02)
Net increase/(decrease) in net assets resulting from investment operations 0.90 (0.32) 0.66
Distributions:
Dividends from net investment income (0.32) (0.57) (0.68)
Distributions from capital -- (0.09) --
Total distributions (0.32) (0.66) (0.68)
Net asset value, end of period $ 9.55 $ 8.97 $ 9.95
Total return++ 10.14% (3.41)% 6.73%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 58,588 $ 61,946 $ 72,596
Ratio of operating expenses to average net assets 0.71%+ 0.75% 0.67%
Ratio of net investment income to average net assets 6.86%+ 6.81% 6.70%
Portfolio turnover rate 199% 207% 167%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 0.81%+ 0.86% 0.86%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.30 $ 0.64 $ 0.66
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.06
Net realized and unrealized gain/(loss) on investments (0.03)
Net increase/(decrease) in net assets resulting from investment operations 0.03
Distributions:
Dividends from net investment income (0.06)
Distributions from capital --
Total distributions (0.06)
Net asset value, end of period $ 9.97
Total return++ 0.35%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 63,583
Ratio of operating expenses to average net assets 0.25%+
Ratio of net investment income to average net assets 8.16%+
Portfolio turnover rate 4%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 0.85%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.06
</TABLE>
* The Nations Mortgage-Backed Securities Fund Trust A Shares commenced
operations on October 30, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
NATIONS MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR
05/31/95 ENDED ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.64 $ 11.33 $ 10.65 $ 10.25
Net investment income 0.30 0.57 0.59 0.59
Net realized and unrealized gain/(loss) on investments 1.14 (1.44) 0.72 0.41
Net increase/(decrease) in net assets resulting from
investment operations 1.44 (0.87) 1.31 1.00
Distributions:
Dividends from net investment income (0.30) (0.57) (0.59) (0.59)
Distributions in excess of net investment income -- (0.00)# -- --
Distributions from net realized capital gains -- (0.25) (0.04) (0.01)
Total distributions (0.30) (0.82) (0.63) (0.60)
Net asset value, end of period $ 10.78 $ 9.64 $ 11.33 $ 10.65
Total return++ 15.08% (8.17)% 12.54% 9.97%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 61,785 $ 59,279 $ 88,386 $ 62,387
Ratio of operating expenses to average net assets 0.61%+ 0.61% 0.52% 0.43%
Ratio of operating expenses to average net asset including
interest expense -- 0.62% -- --
Ratio of net investment income to average net assets 5.81%+ 5.42% 5.24% 5.51%
Portfolio turnover rate 24% 63% 48% 19%
Ratio of operating expenses to average net assets before fee
waivers and/or expense reimbursements 0.90%+ 0.90% 0.84% 0.90%
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.28 $ 0.54 $ 0.55 $ 0.54
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/91*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.52
Net realized and unrealized gain/(loss) on investments 0.25
Net increase/(decrease) in net assets resulting from
investment operations 0.77
Distributions:
Dividends from net investment income (0.52)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.52)
Net asset value, end of period $ 10.25
Total return++ 7.87%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 23,631
Ratio of operating expenses to average net assets 0.20%+
Ratio of operating expenses to average net asset including
interest expense --
Ratio of net investment income to average net assets 6.07%+
Portfolio turnover rate 54%
Ratio of operating expenses to average net assets before fee
waivers and/or expense reimbursements 0.88%+
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.45
</TABLE>
* The Nations Municipal Income Fund Trust A Shares commenced operations on
February 1, 1991.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
19
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SHORT-TERM MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.69 $ 9.96 $ 10.00
Net investment income 0.26 0.38 0.05
Net realized and unrealized gain/(loss) on investments 0.26 (0.27) (0.04)
Net increase in net assets resulting from investment operations 0.52 0.11 0.01
Distributions:
Dividends from net investment income (0.26) (0.38) (0.05)
Distributions from net realized capital gains -- (0.00)# --
Total distributions (0.26) (0.38) (0.05)
Net asset value, end of period $ 9.95 $ 9.69 $ 9.96
Total return++ 5.01% 1.09% 0.06%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 46,773 $ 33,488 $ 5,999
Ratio of operating expenses to average net assets 0.41%+ 0.34% 0.09%+
Ratio of net investment income to average net assets 4.50%+ 3.83% 3.16%+
Portfolio turnover rate 33% 57% 45%
Ratio of operating expenses to average net assets
before fee waivers and/or expense reimbursements 0.97%+ 0.80% 1.04%+
Net investment income per share before fee waivers
and/or expense reimbursements $ 0.23 $ 0.33 $ 0.04
</TABLE>
* The Nations Short-Term Municipal Income Fund Trust A Shares commenced
operations on October 7, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
NATIONS INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.24 $ 10.11 $ 10.00
Net investment income 0.24 0.45 0.14
Net realized and unrealized gain/(loss) on investments 0.74 (0.86) 0.11
Net increase/(decrease) in net assets resulting from investment operations 0.98 (0.41) 0.25
Distributions:
Dividends from net investment income (0.24) (0.45) (0.14)
Distributions in excess of net investment income -- (0.00)# --
Distributions from net realized capital gains -- (0.01) --
Total distributions (0.24) (0.46) (0.14)
Net asset value, end of period $ 9.98 $ 9.24 $ 10.11
Total return++ 10.74% (4.25)% 2.46%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 67,929 $ 38,055 $ 28,335
Ratio of operating expenses to average net assets 0.41%+ 0.35% 0.24%+
Ratio of net investment income to average net assets 5.03%+ 4.59% 4.07%+
Portfolio turnover rate 20% 51% 23%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursement 0.79%+ 0.88% 0.96%+
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.23 $ 0.40 $ 0.12
</TABLE>
* The Nations Intermediate Municipal Bond Fund Trust A Shares commenced
operations on July 30, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
20
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.61 $ 10.50 $ 10.00
Net investment income 0.24 0.45 0.44
Net realized and unrealized gain/(loss) on investments 0.82 (0.88) 0.50
Net increase/(decrease) in net assets resulting from investment operations 1.06 (0.43) 0.94
Distributions:
Dividends from net investment income (0.24) (0.45) (0.44)
Distributions in excess of net investment income -- (0.00)# --
Distributions from net realized gains -- (0.01) --
Total distributions (0.24) (0.46) (0.44)
Net asset value, end of period $ 10.43 $ 9.61 $ 10.50
Total return++ 11.15% (4.26)% 9.50%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 43,868 $ 42,717 $ 41,489
Ratio of operating expenses to average net assets 0.55%+ 0.55% 0.44%+
Ratio of operating expenses to average net assets including interest expense 0.56%+ -- --
Ratio of net investment income to average net assets 4.81%+ 4.44% 4.28%+
Portfolio turnover rate 17% 34% 15%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 0.77%+ 0.76% 0.80%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.23 $ 0.43 $ 0.40
</TABLE>
* The Nations Florida Intermediate Municipal Bond Fund Trust A Shares
commenced operations on December 11, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
NATIONS FLORIDA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
05/31/95 ENDED
TRUST A SHARES (UNAUDITED) 11/30/94*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 8.40 $ 9.93
Net investment income 0.26 0.49
Net realized and unrealized gain/(loss) on investments 1.11 (1.53)
Net increase/(decrease) in net assets resulting from investment operations 1.37 (1.04)
Dividends from net investment income (0.26) (0.49)
Net asset value, end of period $ 9.51 $ 8.40
Total return++ 16.45% (10.70)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 9,149 $ 4,258
Ratio of operating expenses to average net assets 0.33%+ 0.21%+
Ratio of net investment income to average net assets 5.67%+ 5.55%+
Portfolio turnover rate 9% 46%
Ratio of operating expenses to average net assets before fee waivers and/or expense reimbursements 0.95%+ 0.91%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.23 $ 0.43
</TABLE>
* The Nations Florida Municipal Bond Fund Trust A Shares commenced operations
on December 13, 1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
21
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.82 $ 10.82 $ 10.29
Net investment income 0.25 0.49 0.50
Net realized and unrealized gain/(loss) on investments 0.78 (0.98) 0.56
Net increase/(decrease) in net assets resulting from investment
operations 1.03 (0.49) 1.06
Distributions:
Dividends from net investment income (0.25) (0.49) (0.50)
Distributions in excess of net investment income -- (0.00)# --
Distributions from net realized capital gains -- (0.02) (0.03)
Total distributions (0.25) (0.51) (0.53)
Net asset value, end of period $ 10.60 $ 9.82 $ 10.82
Total return++ 10.57% (4.70)% 10.43%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 35,966 $ 33,111 $ 30,738
Ratio of operating expenses to average net assets 0.55%+ 0.54% 0.46%
Ratio of operating expenses to average net assets including interest
expense -- 0.55% --
Ratio of net investment income to average net assets 4.85%+ 4.74% 4.57%
Portfolio turnover rate 13% 22% 6%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 0.75%+ 0.75% 0.77%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.24 $ 0.47 $ 0.46
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.41
Net realized and unrealized gain/(loss) on investments 0.29
Net increase/(decrease) in net assets resulting from investment
operations 0.70
Distributions:
Dividends from net investment income (0.41)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.41)
Net asset value, end of period $ 10.29
Total return++ 7.07%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 20,584
Ratio of operating expenses to average net assets 0.20%+
Ratio of operating expenses to average net assets including interest
expense --
Ratio of net investment income to average net assets 5.25%+
Portfolio turnover rate 12%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 0.77%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.37
</TABLE>
* The Nations Georgia Intermediate Municipal Bond Fund Trust A Shares
commenced operations on March 1, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
NATIONS GEORGIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
05/31/95 ENDED
TRUST A SHARES (UNAUDITED) 11/30/94*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 8.38 $ 10.02
Net investment income 0.26 0.46
Net realized and unrealized gain/(loss) on investments 1.09 (1.64)
Net increase/(decrease) in net assets resulting from investment operations 1.35 (1.18)
Dividends from net investment income (0.26) (0.46)
Net asset value, end of period $ 9.47 $ 8.38
Total return++ 16.24% (12.07)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 598 $ 232
Ratio of operating expenses to average net assets 0.34%+ 0.21%+
Ratio of net investment income to average net assets 5.68%+ 5.60%+
Portfolio turnover rate 17% 35%
Ratio of operating expenses to average net assets before fee waivers and/or expense reimbursements 0.99%+ 1.04%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.23 $ 0.39
</TABLE>
* The Nations Georgia Municipal Bond Fund Trust A Shares commenced operations
on January 13, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
22
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR
05/31/95 ENDED ENDED ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92 11/30/91
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.00 $ 11.09 $ 10.72 $ 10.44 $ 10.21
Net investment income 0.25 0.50 0.52 0.55 0.60
Net realized and unrealized gain/(loss) on
investments 0.79 (0.99) 0.44 0.31 0.24
Net increase/(decrease) in net assets
resulting from investment operations 1.04 (0.49) 0.96 0.86 0.84
Distributions:
Dividends from net investment income (0.25) (0.50) (0.52) (0.55) (0.60)
Distributions from net realized capital
gains (0.03) (0.10) (0.07) (0.03) (0.01)
Distributions in excess of net realized
capital gains -- (0.00)# -- -- --
Total distributions (0.28) (0.60) (0.59) (0.58) (0.61)
Net asset value, end of period $ 10.76 $ 10.00 $ 11.09 $ 10.72 $ 10.44
Total return++ 10.57% (4.64)% 9.11% 8.41%+++ 8.46%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 60,431 $ 61,349 $ 61,552 $ 48,192 $ 31,088
Ratio of operating expenses to average net
assets 0.55%+ 0.53% 0.49% 0.39% 0.20%
Ratio of net investment income to average
net assets 4.89%+ 4.73% 4.73% 5.12% 5.76%
Portfolio turnover rate 7% 22% 26% 38% 26%
Ratio of operating expenses to average net
assets before fee waivers and/or expense
reimbursements 0.77%+ 0.73% 0.73% 0.78% 0.71%
Net investment income per share before fee
waivers and/or expense reimbursements $ 0.24 $ 0.48 $ 0.49 $ 0.51 $ 0.55
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/90*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.16
Net realized and unrealized gain/(loss) on
investments 0.21
Net increase/(decrease) in net assets
resulting from investment operations 0.37
Distributions:
Dividends from net investment income (0.16)
Distributions from net realized capital
gains --
Distributions in excess of net realized
capital gains --
Total distributions (0.16)
Net asset value, end of period $ 10.21
Total return++ 3.72%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 11,087
Ratio of operating expenses to average net
assets 0.21%+
Ratio of net investment income to average
net assets 6.12%+
Portfolio turnover rate 49%
Ratio of operating expenses to average net
assets before fee waivers and/or expense
reimbursements 0.84%+
Net investment income per share before fee
waivers and/or expense reimbursements $ 0.13
</TABLE>
* The Nations Maryland Intermediate Municipal Bond Fund Trust A Shares
commenced operations on September 1, 1990.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
NATIONS MARYLAND MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
05/31/95 ENDED
TRUST A SHARES (UNAUDITED) 11/30/94*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 8.37 $ 8.90
Net investment income 0.25 0.11
Net realized and unrealized gain/(loss) on investments 1.02 (0.53)
Net increase/(decrease) in net assets resulting from investment operations 1.27 (0.42)
Dividends from net investment income (0.25) (0.11)
Net asset value, end of period $ 9.39 $ 8.37
Total return++ 15.29% (4.89)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,891 $ 39
Ratio of operating expenses to average net assets 0.34%+ 0.21%+
Ratio of net investment income to average net assets 5.43%+ 5.48%+
Portfolio turnover rate 5% 39%
Ratio of operating expenses to average net assets before fee waivers and/or expense reimbursements 1.02%+ 1.30%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.22 $ 0.09
</TABLE>
* The Nations Maryland Municipal Bond Fund Trust A Shares commenced operations
on September 20, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period and does not
reflect the deduction of any applicable sales charges.
23
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.53 $ 10.46 $ 10.00
Net investment income 0.23 0.44 0.43
Net realized and unrealized gain/(loss) on investments 0.81 (0.88) 0.46
Net increase/(decrease) in net assets resulting from investment operations 1.04 (0.44) 0.89
Distributions:
Dividends from net investment income (0.23) (0.44) (0.43)
Distributions from net realized capital gains (0.01) (0.05) --
Total distributions (0.24) (0.49) (0.43)
Net asset value, end of period $ 10.33 $ 9.53 $ 10.46
Total return++ 10.98% (4.34)% 9.03%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 18,538 $ 14,148 $ 11,814
Ratio of operating expenses to average net assets 0.56%+ 0.55% 0.42%+
Ratio of net investment income to average net assets 4.57%+ 4.38% 4.23%+
Portfolio turnover rate 36% 37% 29%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 0.82%+ 0.82% 0.85%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.22 $ 0.42 $ 0.39
</TABLE>
* The Nations North Carolina Intermediate Municipal Bond Fund Trust A Shares
commenced operations on December 11, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
05/31/95 ENDED
TRUST A SHARES (UNAUDITED) 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.36 $ 10.06
Net investment income 0.26 0.45
Net realized and unrealized gain/(loss) on investments 1.11 (1.70)
Net increase/(decrease) in net assets resulting from investment operations 1.37 (1.25)
Dividends from net investment income (0.26) (0.45)
Net asset value, end of period $ 9.47 $ 8.36
Total return++ 16.50% (12.65)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 962 $ 531
Ratio of operating expenses to average net assets 0.31%+ 0.21%+
Ratio of net investment income to average net assets 5.65%+ 5.53%+
Portfolio turnover rate 20% 29%
Ratio of operating expenses to average net assets before fee waivers and/or expense reimbursements 0.93%+ 0.92%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.23 $ 0.40
</TABLE>
* The Nations North Carolina Municipal Bond Fund Trust A Shares commenced
operations on January 11, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
24
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.76 $ 10.61 $ 10.18
Net investment income 0.25 0.50 0.50
Net realized and unrealized gain/(loss) on investments 0.74 (0.84) 0.43
Net increase/(decrease) in net assets resulting from investment
operations 0.99 (0.34) 0.93
Distributions:
Dividends from net investment income (0.25) (0.50) (0.50)
Distributions in excess of net investment income -- (0.00)# --
Distributions from net realized capital gains -- (0.01) --
Total distributions (0.25) (0.51) (0.50)
Net asset value, end of period $ 10.50 $ 9.76 $ 10.61
Total return++ 10.30% (3.37)% 9.32%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 48,222 $ 49,030 $ 56,995
Ratio of operating expenses to average net assets 0.55%+ 0.54% 0.45%
Ratio of operating expenses to average net assets including
interest expense 0.56%+ -- --
Ratio of net investment income to average net assets 5.03%+ 4.82% 4.68%
Portfolio turnover rate 6% 30% 11%
Ratio of operating expenses to average net assets before fee
waivers and/or expense reimbursements 0.76%+ 0.75% 0.75%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.24 $ 0.48 $ 0.47
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.47
Net realized and unrealized gain/(loss) on investments 0.18
Net increase/(decrease) in net assets resulting from investment
operations 0.65
Distributions:
Dividends from net investment income (0.47)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.47)
Net asset value, end of period $ 10.18
Total return++ 6.62%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 39,535
Ratio of operating expenses to average net assets 0.20%+
Ratio of operating expenses to average net assets including
interest expense --
Ratio of net investment income to average net assets 4.11%+
Portfolio turnover rate 7%
Ratio of operating expenses to average net assets before fee
waivers and/or expense reimbursements 0.74%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.42
</TABLE>
* The Nations South Carolina Intermediate Municipal Bond Fund Trust A Shares
commenced operations on January 6, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
NATIONS SOUTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
05/31/95 11/30/94*
TRUST A SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.65 $ 10.02
Net investment income 0.27 0.48
Net realized and unrealized gain/(loss) on investments 1.08 (1.37)
Net increase/(decrease) in net assets resulting from investment operations 1.35 (0.89)
Dividends from net investment income (0.27) (0.48)
Net asset value, end of period $ 9.73 $ 8.65
Total return++ 15.71% (9.12)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,614 $ 400
Ratio of operating expenses to average net assets 0.34%+ 0.21%+
Ratio of net investment income to average net assets 5.68%+ 5.48%+
Portfolio turnover rate 5% 14%
Ratio of operating expenses to average net assets before fee waivers and/or expense reimbursements 0.99%+ 1.12%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.24 $ 0.41
</TABLE>
* The Nations South Carolina Municipal Bond Fund Trust A Shares commenced
operations on December 27, 1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
25
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
TRUST A SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.30 $ 10.18
Net investment income 0.23 0.45
Net realized and unrealized gain/(loss) on investments 0.72 (0.87)
Net increase/(decrease) in net assets resulting from investment operations 0.95 (0.42)
Distributions:
Dividends from net investment income (0.23) (0.45)
Distributions in excess of net investment income -- (0.00)#
Distributions from net realized capital gains -- (0.01)
Total distributions (0.23) (0.46)
Net asset value, end of period $ 10.02 $ 9.30
Total return++ 10.34% (4.24)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 5,815 $ 4,116
Ratio of operating expenses to average net assets 0.56%+ 0.52%
Ratio of operating expenses including interest expense -- 0.53%
Ratio of net investment income to average net assets 4.80%+ 4.56%
Portfolio turnover rate 17% 41%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 0.87%+ 0.89%
Net investment income per share before fee waivers and/or expense reimbursements $ 0.22 $ 0.41
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
TRUST A SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.06
Net investment income 0.29
Net realized and unrealized gain/(loss) on investments 0.12
Net increase/(decrease) in net assets resulting from investment operations 0.41
Distributions:
Dividends from net investment income (0.29)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.29)
Net asset value, end of period $ 10.18
Total return++ 4.09%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,123
Ratio of operating expenses to average net assets 0.27%+
Ratio of operating expenses including interest expense --
Ratio of net investment income to average net assets 4.31%+
Portfolio turnover rate 16%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 0.94%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.24
</TABLE>
* The Nations Tennessee Intermediate Municipal Bond Fund Trust A Shares
commenced operations on April 13, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
NATIONS TENNESSEE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
05/31/95 11/30/94*
TRUST A SHARES (UNAUDITED)
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 8.58 $ 9.59
Net investment income 0.26 0.39
Net realized and unrealized gain/(loss) on investments 1.05 (1.01)
Net increase/(decrease) in net assets resulting from investment operations 1.31 (0.62)
Dividends from net investment income (0.26) (0.39)
Net asset value, end of period $ 9.63 $ 8.58
Total return++ 15.47% (6.66)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 270 $ 311
Ratio of operating expenses to average net assets 0.34%+ 0.21%+
Ratio of net investment income to average net assets 5.72%+ 5.56%+
Portfolio turnover rate 30% 38%
Ratio of operating expenses to average net assets before fee waivers and/or expense reimbursements 1.10%+ 1.20%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.23 $ 0.32
</TABLE>
* The Nations Tennessee Municipal Bond Fund Trust A Shares commenced
operations on March 2, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
26
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.53 $ 10.35 $ 10.00
Net investment income 0.23 0.44 0.41
Net realized and unrealized gain/(loss) on investments 0.65 (0.79) 0.35
Net increase/(decrease) in net assets resulting from investment operations 0.88 (0.35) 0.76
Distributions:
Dividends from net investment income (0.23) (0.44) (0.41)
Distributions in excess of net investment income -- (0.00)# --
Distributions from net realized capital gains -- (0.03) --
Total distributions (0.23) (0.47) (0.41)
Net asset value, end of period $ 10.18 $ 9.53 $ 10.35
Total return++ 9.35% (3.48)% 7.72%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 22,956 $ 24,066 $ 31,875
Ratio of operating expenses to average net assets 0.56%+ 0.55% 0.44%+
Ratio of net investment income to average net assets 4.72%+ 4.40% 4.43%+
Portfolio turnover rate 38% 61% 63%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 0.80%+ 0.78% 0.82%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.22 $ 0.42 $ 0.38
</TABLE>
* The Nations Texas Intermediate Municipal Bond Fund Trust A Shares commenced
operations on January 12, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
NATIONS TEXAS MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
05/31/95 ENDED
TRUST A SHARES (UNAUDITED) 11/30/94*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 8.39 $ 10.01
Net investment income 0.26 0.42
Net realized and unrealized gain/(loss) on investments 1.05 (1.62)
Net increase/(decrease) in net assets resulting from investment operations 1.31 (1.20)
Dividends from net investment income (0.26) (0.42)
Net asset value, end of period $ 9.44 $ 8.39
Total return++ 15.76% (12.21)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3,271 $ 2,285
Ratio of operating expenses to average net assets 0.34%+ 0.22%+
Ratio of net investment income to average net assets 5.73%+ 5.52%+
Portfolio turnover rate 35% 107%
Ratio of operating expenses to average net assets before fee waivers and/or expense reimbursements 0.99%+ 1.06%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.23 $ 0.35
</TABLE>
* The Nations Texas Municipal Bond Fund Trust A Shares commenced operations on
February 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
27
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR
05/31/95 ENDED ENDED ENDED ENDED
TRUST A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92 11/30/91
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 9.94 $ 10.99 $ 10.59 $ 10.34 $ 10.14
Net investment income 0.25 0.50 0.48 0.54 0.58
Net realized and unrealized
gain/(loss) on investments 0.73 (0.96) 0.42 0.29 0.21
Net increase/(decrease) in net
assets resulting from
investment operations 0.98 (0.46) 0.90 0.83 0.79
Distributions:
Dividends from net investment
income (0.25) (0.50) (0.48) (0.54) (0.58)
Distributions from net
realized capital gains -- (0.09) (0.02) (0.04) (0.01)
Distributions in excess of net
realized capital gains -- (0.00)# -- -- --
Total distributions (0.25) (0.59) (0.50) (0.58) (0.59)
Net asset value, end of period $ 10.67 $ 9.94 $ 10.99 $ 10.59 $ 10.34
Total return++ 10.03% (4.35)% 9.08% 8.28%+++ 8.04%+++
Ratios to average net assets/
supplemental data:
Net assets, end of period (in
000's) $ 162,341 $ 167,405 $ 193,084 $ 157,773 $ 119,757
Ratio of operating expenses to
average net assets 0.62%+ 0.61% 0.57% 0.56% 0.45%
Ratio of net investment income
to average net assets 4.94%+ 4.76% 4.80% 5.17% 5.67%
Portfolio turnover rate 10% 14% 26% 13% 24%
Ratio of operating expenses to
average net assets before
fee waivers and/or expense
reimbursements 0.82%+ 0.73% 0.69% 0.68% 0.73%
Net investment income per
share before fee waivers
and/or expense
reimbursements $ 0.24 $ 0.49 $ 0.47 $ 0.53 $ 0.55
</TABLE>
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
TRUST A SHARES 11/30/90 11/30/89*
<S> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 10.08 $ 10.00
Net investment income 0.61 0.12
Net realized and unrealized
gain/(loss) on investments 0.11 0.03
Net increase/(decrease) in net
assets resulting from
investment operations 0.72 0.15
Distributions:
Dividends from net investment
income (0.66) (0.07)
Distributions from net
realized capital gains -- --
Distributions in excess of net
realized capital gains -- --
Total distributions (0.66) (0.07)
Net asset value, end of period $ 10.14 $ 10.08
Total return++ 7.41%+++ 1.46%+++
Ratios to average net assets/
supplemental data:
Net assets, end of period (in
000's) $ 75,962 $ 46,560
Ratio of operating expenses to
average net assets 0.26% 0.16%+
Ratio of net investment income
to average net assets 6.09% 6.09%+
Portfolio turnover rate 19% 12%
Ratio of operating expenses to
average net assets before
fee waivers and/or expense
reimbursements 0.80% 0.81%+
Net investment income per
share before fee waivers
and/or expense
reimbursements $ 0.55 $ 0.08
</TABLE>
* The Nations Virginia Intermediate Municipal Bond Fund Trust A Shares
commenced operations on September 20, 1989.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
28
<PAGE>
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS VIRGINIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
05/31/95 ENDED
TRUST A SHARES (UNAUDITED) 11/30/94*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 8.29 $ 10.00
Net investment income 0.26 0.45
Net realized and unrealized gain/(loss) on investments 1.07 (1.71)
Net increase/(decrease) in net assets resulting from investment operations 1.33 (1.26)
Dividends from net investment income (0.26) (0.45)
Net asset value, end of period $ 9.36 $ 8.29
Total return++ 16.17% (12.86)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,364 $ 432
Ratio of operating expenses to average net assets 0.34%+ 0.21%+
Ratio of net investment income to average net assets 5.71%+ 5.52%+
Portfolio turnover rate 0% 61%
Ratio of operating expenses to average net assets before fee waivers and/or expense reimbursements 0.98%+ 0.99%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.24 $ 0.38
</TABLE>
* The Nations Virginia Municipal Bond Fund Trust A Shares commenced operations
on January 11, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
Objectives
MONEY MARKET FUNDS:
Each Money Market Fund, described below, endeavors to achieve its investment
objective by investing in a diversified portfolio of high quality money market
instruments with maturities of 397 days or less from the date of purchase.
Securities subject to repurchase agreements may bear longer maturities.
NATIONS PRIME FUND: The Nations Prime Fund's investment objective is to seek the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS TREASURY FUND: The Nations Treasury Fund's investment objective is the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS GOVERNMENT MONEY MARKET FUND: The Nations Government Money Market Fund's
investment objective is to seek as high a level of current income as is
consistent with liquidity and stability of principal.
NATIONS TAX EXEMPT FUND: The Nations Tax Exempt Fund's investment objective is
to seek as high a level of current interest income exempt from Federal income
taxes as is consistent with liquidity and stability of principal.
EQUITY FUNDS:
NATIONS VALUE FUND: The Nations Value Fund's investment objective is to seek
long-term capital growth with income a secondary consideration. The Fund invests
under normal market conditions at least 65% of its total assets in common
stocks.
NATIONS EQUITY INCOME FUND: The Nations Equity Income Fund seeks to provide high
current income primarily through investments in equity securities (including
convertible securities) having a relatively high current yield. Secondarily,
equity securities will be selected which NationsBank believes have favorable
prospects for increasing dividend income and/or capital appreciation.
NATIONS INTERNATIONAL EQUITY FUND: The Nations International Equity Fund's
investment objective is to seek long-term growth of capital primarily by
investing in marketable equity securities of established, non-United States
issuers.
NATIONS EMERGING MARKETS FUND: The Nations Emerging Markets Fund's investment
objective is to seek long-term capital growth. It seeks to achieve this
objective by investing primarily in securities of companies that conduct their
principal business activities in emerging markets. The Fund invests primarily in
companies located in countries considered to have potential for rapid economic
growth and that have a relatively low gross national product per capita compared
to the world's major economies.
29
<PAGE>
NATIONS PACIFIC GROWTH FUND: The Nations Pacific Growth Fund's investment
objective is to seek long-term capital growth, with income a secondary
consideration. It seeks to achieve this objective by investing primarily in
securities of issuers that conduct their principal business activities in the
Pacific Basin and the Far East (excluding Japan).
NATIONS CAPITAL GROWTH FUND: The Nations Capital Growth Fund's investment
objective is to seek long-term capital appreciation by investing primarily in
common stocks issued by companies that, in the judgment of NationsBank, have
above average potential for capital appreciation. Over time, total return is
likely to consist primarily of capital appreciation and secondarily of dividend
and interest income.
NATIONS EMERGING GROWTH FUND: The Nations Emerging Growth Fund's investment
objective is to seek capital appreciation by investing in equity securities of
high quality emerging growth companies that are expected to have earnings growth
rates superior to most publicly traded companies.
NATIONS DISCIPLINED EQUITY FUND: The Nations Disciplined Equity Fund's
investment objective is to seek long-term capital appreciation. The Fund seeks
to achieve its investment objective by investing primarily in the common stocks
of companies that are considered by NationsBank to have the potential for
significant increases in earnings per share.
NATIONS EQUITY INDEX FUND: The investment objective of the Nations Equity Index
Fund is to seek investment results that correspond, before fees and expenses, to
the total return (i.e., the combination of capital changes and income) of common
stocks publicly traded in the United States, as represented by the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500 Index" or the "Index").(1)
The Fund is not managed according to traditional methods of "active" investment
management, which involve the buying and selling of securities based upon
economic, financial, and market analyses and investment judgment. Instead, the
Fund, utilizing a "passive" or "indexing" investment approach, attempts to
duplicate the performance of the S&P 500 Index.
BALANCED FUND:
NATIONS BALANCED ASSETS FUND: The Nations Balanced Assets Fund's investment
objective is total investment return through a combination of growth of capital
and current income consistent with the preservation of capital. In seeking its
objective, the Fund will use a disciplined approach of allocating assets
primarily among
(1) "Standard & Poor's 500" is a registered service mark of Standard & Poor's
Corporation, which does not sponsor and is in no way affiliated with the
Nations Equity Index Fund.
three major asset groups: common stocks, fixed income securities, and cash
equivalents.
BOND FUNDS:
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND: The Nations Short-Intermediate
Government Fund's investment objective is to seek as high a level of current
income as is consistent with prudent investment risk. The Fund invests
essentially all of its assets in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and in repurchase agreements
relating to such obligations. Under normal market conditions, the Fund is
expected to have an average dollar weighted maturity between two and seven
years.
NATIONS GOVERNMENT SECURITIES FUND: The Nations Government Securities Fund's
investment objective is to provide current income and preservation of capital.
The Fund seeks to achieve its objective by investing primarily in obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
NATIONS SHORT-TERM INCOME FUND: The Nations Short-Term Income Fund's investment
objective is to seek as high a level of current income as is consistent with
prudent investment risk. The Fund invests primarily in investment grade
corporate bonds and mortgage-backed bonds. Under normal market conditions, it is
expected that the Fund will have an average dollar weighted maturity of three
years or less. The Fund's investment program attempts to maintain a higher level
of income than normally provided by money market instruments, and more price
stability than investments in intermediate and long-term bonds. However, the
value of the Fund's portfolio generally will vary inversely with changes in
prevailing interest rates.
NATIONS DIVERSIFIED INCOME FUND: The Nations Diversified Income Fund's
investment objective is to seek as high a level of current income as is
consistent with prudent investment risk. The Fund invests primarily in a
diversified portfolio of government and corporate fixed income securities.
NATIONS STRATEGIC FIXED INCOME FUND: The Nations Strategic Fixed Income Fund's
investment objective is to maximize total investment return through the active
management of fixed income securities. The Fund invests primarily in investment
grade fixed income securities. The Fund may under normal market conditions
invest in long-term, intermediate-term and short-term securities and has not
placed any limitations on the duration of the portfolio.
NATIONS MORTGAGE-BACKED SECURITIES FUND: The Nations Mortgage-Backed Securities
Fund's investment objective is to seek as high a level of total investment
return as is consistent with prudent investment risk, by investing primarily in
mortgage-backed securities.
30
<PAGE>
NATIONS GLOBAL GOVERNMENT INCOME FUND: The Nations Global Government Income
Fund's investment objective is to seek current income. Although the Fund
emphasizes income when selecting investments, the potential for growth of
capital also is considered. It seeks to achieve this objective by investing
primarily in debt securities issued by governments, banks and supranational
entities located throughout the world.
NATIONS MUNICIPAL INCOME FUND, NATIONS SHORT-TERM MUNICIPAL INCOME FUND AND
NATIONS INTERMEDIATE MUNICIPAL BOND FUND: The investment objective of Nations
Municipal Income Fund and Nations Short-Term Municipal Income Fund is to seek a
high level of current interest income that is exempt from Federal income taxes.
Such Funds invest primarily in investment grade obligations issued by or on
behalf of states, territories and possessions of the United States, the District
of Columbia, and their political subdivisions, agencies, instrumentalities and
authorities, the interest on which, in the opinion of counsel to the issuer or
bond counsel, is exempt from Federal income tax ("Municipal Securities").
The Nations Intermediate Municipal Bond Fund's investment objective is to seek
higher than money market yields by investing primarily in intermediate-term,
investment grade Municipal Securities which make interest payments that are
exempt from Federal income taxes.
During normal market conditions, at least 80% of the total assets of Nations
Municipal Income Fund and Nations Intermediate Municipal Bond Fund will be
invested in Municipal Securities with remaining maturities of 40 years or less.
The average dollar weighted effective maturity of the Nations Municipal Income
Fund will be at least five years, except during temporary defensive periods.
During normal market conditions, the average dollar weighted effective maturity
of Nations Short-Term Municipal Income Fund will be three years or less. The
average dollar weighted effective maturity of Nations Intermediate Municipal
Bond Fund will be between three to ten years, except during temporary defensive
periods.
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND, NATIONS GEORGIA INTERMEDIATE
MUNICIPAL BOND FUND, NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND, NATIONS
NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND, NATIONS SOUTH CAROLINA
INTERMEDIATE MUNICIPAL BOND FUND, NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND
FUND, NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND AND NATIONS VIRGINIA
INTERMEDIATE MUNICIPAL BOND FUND, SOMETIMES COLLECTIVELY REFERRED TO AS THE
"STATE INTERMEDIATE MUNICIPAL BOND FUNDS," AND NATIONS FLORIDA MUNICIPAL BOND
FUND, NATIONS GEORGIA MUNICIPAL BOND FUND, NATIONS MARYLAND MUNICIPAL BOND FUND,
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND, NATIONS SOUTH CAROLINA MUNICIPAL
BOND FUND, NATIONS TENNESSEE MUNICIPAL BOND FUND, NATIONS TEXAS MUNICIPAL BOND
FUND AND NATIONS VIRGINIA MUNICIPAL BOND FUND, SOMETIMES COLLECTIVELY REFERRED
TO AS THE "STATE MUNICIPAL BOND FUNDS": As described below, each of these Funds
seeks to provide investors with as high a level of income exempt from Federal
income taxes as is consistent with prudent investing, while seeking preservation
of shareholders' capital. Each Fund also seeks to provide a maximum level of
income which is exempt from the personal income taxes, if any, for resident
shareholders of the Fund's respective state.
The Nations Florida Intermediate Municipal Bond Fund's and Nations Florida
Municipal Bond Fund's investment objective is to seek a high level of current
interest income exempt from Federal income and the Florida state intangibles
tax, consistent with relative stability of principal. The Nations Georgia
Intermediate Municipal Bond Fund's and Nations Georgia Municipal Bond Fund's
investment objective is to seek a high level of current interest income exempt
from Federal and Georgia state income taxes and state intangibles taxes,
consistent with relative stability of principal. The Nations Maryland
Intermediate Municipal Bond Fund's and Nations Maryland Municipal Bond Fund's
investment objective is to seek a high level of current interest income exempt
from both Federal and Maryland state income taxes, consistent with relative
stability of principal. The Nations North Carolina Intermediate Municipal Bond
Fund's and Nations North Carolina Municipal Bond Fund's investment objective is
to seek a high level of current interest income exempt from Federal and North
Carolina state income taxes and state intangibles taxes, consistent with the
relative stability of principal. The Nations South Carolina Intermediate
Municipal Bond Fund's and Nations South Carolina Municipal Bond Fund's
investment objective is to seek a high level of current interest income exempt
from both Federal and South Carolina state income taxes, consistent with
relative stability of principal. The Nations Tennessee Intermediate Municipal
Bond Fund's and Nations Tennessee Municipal Bond Fund's investment objective is
to seek a high level of current interest income exempt from both Federal and
Tennessee state income taxes, consistent with relative stability of principal.
The Nations Texas Intermediate Municipal Bond Fund's and Nations Texas Municipal
Bond Fund's investment objective is to seek a high level of current interest
income exempt from Federal income tax, consistent with the relative stability of
principal. The Nations Virginia Intermediate Municipal Bond Fund's and Nations
Virginia Municipal Bond Fund's investment objective is to seek a high level of
current interest income exempt from both Federal and Virginia state income
taxes, consistent with relative stability of principal.
31
<PAGE>
Each of the above State Intermediate Municipal Bond Funds and State Municipal
Bond Funds operates as a non-diversified fund (except to the extent
diversification is required for Federal income tax purposes). For these tax
purposes, with respect to 50% of the value of its assets, each Fund invests no
more than 5% of such assets in securities of a single issuer (except the U.S.
Government or its agencies or instrumentalities). Each Fund may not invest more
than 25% of its assets in the securities of a single issuer. The average dollar
weighted effective maturity of each of the State Intermediate Municipal Bond
Funds will be between three and ten years, except during temporary defensive
periods. The average dollar weighted effective maturity of the State Municipal
Bond Funds will be at least five years, except during temporary defensive
periods. The value of the Funds' portfolios can be expected to vary inversely
with changes in prevailing interest rates.
How Objectives Are Pursued
MONEY MARKET FUNDS:
NATIONS PRIME FUND: The Fund may invest in U.S. Treasury bills, notes and bonds
and other instruments issued directly by the U.S. Government ("U.S. Treasury
Obligations"), other obligations issued or guaranteed as to payment of principal
and interest by the U.S. Government, its agencies or instrumentalities ("U.S.
Government Obligations"), bank and commercial instruments that may be available
in the money markets, high quality short-term taxable obligations issued by
state and local governments, their agencies and instrumentalities and repurchase
agreements relating to U.S. Government Obligations. The Fund also may purchase
securities issued by other investment companies, consistent with the Fund's
investment objective and policies, and may engage in reverse repurchase
agreements. The Fund also may invest in guaranteed investment contracts and in
instruments issued by trusts, including pass-through certificates representing
participations in, or debt instruments backed by, the securities and other
assets owned by the trust. In addition, the Fund may lend its portfolio
securities to qualified institutional investors. For more information concerning
these instruments, see "Appendix A."
NATIONS TREASURY FUND: The Fund invests in U.S. Treasury Obligations and
repurchase agreements secured by such obligations. The Fund also may purchase
securities issued by other investment companies, consistent with the Fund's
investment objective and policies, and may engage in reverse repurchase
agreements. The Fund also may lend its portfolio securities to qualified
institutional investors. For more information concerning these instruments, see
"Appendix A."
NATIONS GOVERNMENT MONEY MARKET FUND: The Fund invests in U.S. Government
Obligations and repurchase agreements relating to such obligations. The Fund
also may purchase securities issued by other investment companies, consistent
with the Fund's investment objective and policies, and may engage in reverse
repurchase agreements. The Fund also may lend its portfolio securities to
qualified institutional investors. For more information concerning these
instruments, see "Appendix A."
NATIONS TAX EXEMPT FUND: The Fund invests in a diversified portfolio of
obligations issued by or on behalf of states, territories, and possessions of
the United States, the District of Columbia, and their political subdivisions,
agencies, instrumentalities and authorities, the interest on which, in the
opinion of counsel to the issuer or bond counsel, is exempt from regular Federal
income tax ("Municipal Securities"). The Fund will not knowingly purchase
securities, the interest on which is subject to such tax. A portion of the
Fund's assets, however, may be invested in private activity bonds, the interest
on which may be treated as a specific tax preference item under the Federal
alternative minimum tax. See "How Dividends and Distributions are Made; Tax
Information."
The Fund invests in Municipal Securities which are determined to present minimal
credit risks and which at the time of purchase are considered to be of "high
quality" -- E.G., rated "AA" or higher by Duff & Phelps Credit Rating Co.
("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard & Poor's Corporation
("S&P"), IBCA Limited or its affiliate IBCA Inc. (collectively "IBCA"), or
Thomson BankWatch, Inc. ("BankWatch"), or "Aa" or higher by Moody's Investors
Service, Inc. ("Moody's"), in the case of bonds; rated "Duff 1" or higher by
D&P, "F-1" or higher by Fitch, "SP-1" by S&P, or "MIG-1" by Moody's in the case
of notes; rated "Duff 1" or higher by D&P, "F-1" or higher by Fitch, or "VMIG-1"
by Moody's in the case of variable rate demand notes; or rated "Duff 1" or
higher by D&P, "F-1" or higher by Fitch, "A-1" or higher by S&P or "Prime-1" by
Moody's in the case of tax-exempt commercial paper. D&P, Fitch, S&P, Moody's,
IBCA and BankWatch are the six nationally recognized statistical rating
organizations (collectively, "NRSROs"). Securities that are unrated at the time
of purchase will be determined to be of comparable quality by NationsBank
pursuant to guidelines approved by Nations Fund Trust's Board of Trustees. The
applicable Municipal Securities ratings are described in "Appendix B."
The payment of principal and interest on most securities purchased by the Fund
will depend upon the ability of the issuers to meet their obligations. The
District of Columbia, each state, each of their political subdivisions,
32
<PAGE>
agencies, instrumentalities and authorities and each multi-state agency of which
a state is a member is a separate "issuer" as that term is used in this
Prospectus and the related SAI. The non-governmental user of facilities financed
by private activity bonds also is considered to be an "issuer." For more
information concerning Municipal Securities, see "Appendix A -- Municipal
Securities."
The Fund may hold uninvested cash reserves pending investment, during temporary
defensive periods, or if, in the opinion of NationsBank, desirable tax-exempt
obligations are unavailable. Uninvested cash reserves will not earn income. As a
matter of fundamental policy, under normal market conditions, at least 80% of
the Fund's net assets will be invested in Municipal Securities. Investments in
private activity bonds, the interest on which may be treated as a specific tax
preference item under the Federal alternative minimum tax, will not be treated
as Municipal Securities in determining whether the Fund is in compliance with
this 80% requirement. The Fund also may invest in securities issued by other
investment companies, consistent with the Fund's investment objective and
policies. For more information concerning the Fund's investments, see "Appendix
A."
EQUITY FUNDS:
NATIONS VALUE FUND: The Fund invests in stocks drawn from a universe of
approximately 800 stocks monitored by NationsBank. NationsBank closely monitors
these companies, rating them for quality and projecting their future earnings
and dividends as well as other factors. To qualify for purchase, an issuer would
normally have a market capitalization of $300 million or more and have average
monthly trading volume of at least $10 million. These requirements are generally
considered by NationsBank to be adequate to support normal purchase and sale
activity without materially affecting prevailing market prices of the issuer's
shares. NationsBank also analyzes key financial ratios that measure the growth,
profitability, and leverage of such issuers that it believes will help maintain
a portfolio of above-average quality.
Stocks are selected from this universe based on NationsBank's judgment of their
total return potential. NationsBank buys stocks that it believes are undervalued
relative to the overall stock market. The principal factor considered by
NationsBank in making these determinations is the ratio of a stock's price to
earnings relative to corresponding ratios of other stocks in the same industry
or economic sector. NationsBank believes that companies with lower
price/earnings ratios are more likely to provide better opportunities for
capital appreciation. This "value" approach generally produces a dividend yield
greater than the market average. NationsBank will attempt to temper risk by
broad diversification among economic sectors and industries. Through this
strategy, the Fund pursues above-average returns while seeking to avoid
above-average risks. No industry will represent 25% or more of the Fund's
portfolio at the time of purchase.
In addition to common stocks, the Fund also may invest in preferred stocks,
securities convertible into common stock and other types of securities having
common stock characteristics (such as rights and warrants to purchase equity
securities). Although the Fund invests primarily in publicly-traded common
stocks of companies incorporated in the United States, the Fund may invest in
securities of foreign issuers. See "Appendix A -- Foreign Securities." The Fund
also may hold up to 20% of its total assets in U.S. Government Obligations, and
investment grade bonds and other debt securities of domestic companies.
Obligations with the lowest investment grade rating (e.g. rated "BBB" by S&P or
"Baa" by Moody's) have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade debt
obligations. Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum rating required
for purchase by the Fund. NationsBank will consider such an event in determining
whether the Fund should continue to hold the obligation. Unrated obligations may
be acquired by the Fund if they are determined by NationsBank to be of
comparable quality at the time of purchase to rated obligations that may be
acquired.
The Fund may invest in various money market instruments. The Fund may invest
without limitation in such instruments pending investment, to meet anticipated
redemption requests, or as a temporary defensive measure if market conditions
warrant. For additional information concerning these instruments and the Fund's
investment practices, see "Appendix A."
NATIONS EQUITY INCOME FUND: The investment program of the Fund is based on
several premises. First, NationsBank believes that, over time, dividend income
can account for a significant component of the total return from equity
investments. Over time, reinvested dividend income has accounted for
approximately one-half of the total return of the S&P 500 Index, a broad-based
and widely used index of common stock prices. Second, dividends are normally a
more stable and predictable source of return than capital appreciation. While
the price of a company's stock generally increases or decreases in response to
short-term earnings and market fluctuations, its dividends are generally less
volatile. Finally, NationsBank believes that stocks which distribute a high
level of current income tend to have less price volatility than those which pay
below average dividends.
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The Fund's equity investments will generally be made in companies which share
some of the following characteristics:
(Bullet) above-average current dividend yields relative to the S&P 500 Index;
(Bullet) five years of stable or increasing dividends;
(Bullet) established operating histories; and
(Bullet) strong balance sheets and other favorable financial characteristics.
To achieve its objectives, the Fund, under normal circumstances, will invest at
least 65% of its assets in income-producing common stocks, including securities
convertible into or ultimately exchangeable for common stock (i.e., convertible
bonds or convertible preferred stock), whose prospects for dividend growth and
capital appreciation are considered favorable by NationsBank. The securities
held by the Fund generally will be listed on a national exchange or, if not so
listed, will usually have an established over-the-counter market.
In order to further enhance its income, the Fund also may invest its assets in
fixed income securities (corporate, government and municipal bonds of various
maturities), preferred stocks and warrants. The Fund may invest in debt
securities that are considered investment grade (e.g. securities rated in one of
the top four investment categories by S&P or Moody's, or if not rated, are of
equivalent investment quality as determined by NationsBank). Obligations rated
in the lowest of the top four investment grade rating categories (e.g., rated
"BBB" by S&P) have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade debt
obligations. The Fund also may invest up to 5% of its assets in debt securities
that are rated below investment grade (e.g. rated "BB" by S&P) or if not rated,
are of equivalent investment quality as determined by NationsBank.
Non-investment-grade debt securities are sometimes referred to as "high yield
bonds" or "junk bonds," tend to have speculative characteristics, generally
involve more risk of principal and income than higher rated securities, and have
yields and market values that tend to fluctuate more than higher quality
securities. The Fund will invest in such high-yield debt securities only when
NationsBank believes that the issue presents minimal credit risk. For a
description of corporate debt ratings, see "Appendix B." Although the Fund
invests primarily in securities of U.S. issuers, the Fund may invest 10% or more
of its total assets in debt obligations of foreign issuers and stocks of foreign
corporations. The Fund will treat foreign securities as illiquid unless there is
an active and substantial secondary market for such securities.
The Fund also may invest in various money market instruments. The Fund may
invest without limitation in such instruments pending investment, to meet
anticipated redemption requests, or as a temporary defensive measure if market
conditions warrant. For additional information concerning these instruments and
the Fund's investment practices, see "Appendix A."
NATIONS INTERNATIONAL EQUITY FUND: The Fund intends to diversify investments
broadly among countries and normally to invest in securities representing at
least three different countries. The Fund may invest in countries located in the
Far East and Western Europe as well as Australia, Canada, and other areas
(including developing countries). Under unusual circumstances, however, the Fund
may invest substantially all of its assets in one or two countries.
In seeking to achieve its objective, the Fund will invest at least 65% of its
assets in common stocks of established non-United States companies that
NationsBank and the Fund's sub-investment adviser believe have potential for
growth of capital. The Fund may invest up to 35% of its assets in any other type
of security including: convertible securities; preferred stocks; bonds, notes
and other debt securities (including Eurodollar securities); and obligations of
domestic or foreign governments and their political subdivisions.
The Fund also may invest in American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs"), American Depository Shares ("ADSs"), bonds, notes,
other debt securities of foreign issuers and securities of foreign investment
funds or trusts. For additional information concerning the Fund's investment
practices, see "Appendix A."
NATIONS EMERGING MARKETS FUND: In seeking to achieve its objective, the Fund
will invest under normal market conditions at least 65% of its total assets in
securities of companies that conduct their principal business activities in
emerging markets. A company will be considered to conduct its principal business
activities in a country, market or region if it derives a significant portion
(at least 50 percent) of its revenues or profits from goods produced or sold,
investments made, or services performed in such country, market or region or has
at least 50 percent of its assets situated in such country, market or region.
Equity securities of emerging market issuers may include common stocks,
preferred stocks (including convertible preferred stocks) and warrants; bonds,
notes and debentures convertible into common or preferred stock; equity
interests in foreign investment funds or trusts and real estate investment trust
securities. The Fund may invest in ADRs, Global Depositary Receipts ("GDRs"),
EDRs, and ADSs of such issuers.
The Fund also may invest in other types of instruments, including debt
obligations. Debt obligations acquired by the Fund will be rated investment
grade at the time of purchase by Moody's or S&P or, if unrated, determined
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by NationsBank and/or the Fund's sub-investment adviser to be comparable in
quality to instruments so rated. Obligations with the lowest investment grade
rating (e.g., rated "Baa" by Moody's or "BBB" by S&P) have speculative
characteristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt obligations. See "Appendix B"
for a description of these ratings designations.
The Fund is a diversified fund that intends, under normal market conditions, to
invest in at least three different countries, although it may, from time to
time, invest all of its assets in a single country. If the Fund invests all or a
significant portion of its assets at any time in a single country, events
occurring in such country are more likely to affect the Fund's investments. For
additional information concerning risk, see "Special Risk Considerations
Relevant to an Investment in the Nations International Equity Fund, Nations
Emerging Markets Fund, Nations Pacific Growth Fund and Nations Global Government
Income Fund," below. When allocating investments among individual countries,
NationsBank and/or the Fund's sub-investment adviser will consider various
criteria, such as the relative economic growth potential of the various
economies and securities markets, expected levels of inflation, government
policies influencing business conditions and the outlook for currency
relationships.
The Fund considers countries with emerging markets to include the following: (i)
countries with an emerging stock market as defined by the International Finance
Corporation; (ii) countries with low- to middle-income economies according to
the International Bank For Reconstruction and Development (more commonly
referred to as the World Bank); and (iii) countries listed in World Bank
publications as developing. NationsBank and the Fund's sub-investment adviser
seek to identify and invest in those emerging markets that have a relatively low
gross national product per capita, compared to the world's major economies, and
which exhibit potential for rapid economic growth. NationsBank and the Fund's
sub-investment adviser believe that investment in equity securities of emerging
market issuers offers significant potential for long-term capital appreciation.
For defensive purposes, the Fund may temporarily invest substantially all of its
assets in U.S. financial markets or in U.S. dollar-denominated instruments. See
"Appendix A" below for additional information concerning the investment
practices of the Fund.
NATIONS PACIFIC GROWTH FUND: The Fund seeks to achieve its objective by
investing primarily in securities of issuers that conduct their principal
business activities in the regions known as the Pacific Basin and the Far East.
The Pacific Basin and Far East include Australia, Hong Kong, India, Indonesia,
South Korea, Malaysia, New Zealand, Pakistan, the People's Republic of China,
the Philippines, Singapore, Sri Lanka, Taiwan and Thailand and may include other
markets that develop in the region. The Fund will not invest in securities of
issuers that conduct their principal business activities in Japan.
The Fund will focus on equity securities, but may also invest in debt
obligations. Such equity securities may include common stocks, preferred stocks
(including convertible preferred stocks) and warrants; bonds, notes and
debentures convertible into common or preferred stock; equity interests in
foreign investment funds or trusts and real estate investment trust securities.
Debt obligations acquired by the Fund will be rated investment grade at the time
of purchase by Moody's or S&P or, if unrated, determined by NationsBank and/or
the Fund's sub-investment adviser to be comparable in quality to instruments so
rated. Obligations with the lowest investment grade rating (e.g., rated "Baa" by
Moody's or "BBB" by S&P) have speculative characteristics, and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade debt obligations. See "Appendix B" for a description of these ratings
designations.
In seeking to achieve its objective, the Fund will invest under normal market
conditions at least 65% of its total assets in securities of issuers that
conduct their principal business activities in countries of the Pacific Basin
and Far East, except for Japan. Although the Fund may not invest in securities
issued by companies that conduct their principal business activities in Japan,
the Fund may invest in securities that are listed on a Japanese exchange.
The Fund is a diversified fund that intends, under normal market conditions, to
invest in at least three different countries, although it may, from time to
time, invest all of its assets in a single country. If the Fund invests all or a
significant portion of its assets at any time in a single country, events
occurring in such country are more likely to affect the Fund's investments. For
additional information concerning risk, see "Special Risk Considerations
Relevant to an Investment in the Nations International Equity Fund, Nations
Emerging Markets Fund, Nations Pacific Growth Fund and Nations Global Government
Income Fund," below. When allocating investments among individual countries,
NationsBank and/or the Fund's sub-investment adviser will consider various
criteria, such as the relative economic growth potential of the various
economies and securities markets, expected levels of inflation, government
policies influencing business conditions and the outlook for currency
relationships. The Fund may invest in ADRs, GDRs, EDRs and ADSs.
For defensive purposes, the Fund may temporarily invest substantially all of its
assets in U.S. financial markets or in U.S. dollar-denominated instruments. See
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"Appendix A" below for additional information concerning the investment
practices of the Fund.
NATIONS CAPITAL GROWTH FUND: The investment philosophy of the Fund is based on
the belief that companies with superior growth characteristics selling at
reasonable prices will, over time, outperform the market. Therefore, the Fund
will generally seek to invest in larger capitalization, high-quality companies
which possess above average earnings growth potential.
The Fund's equity investments will generally be made in companies which share
some of the following characteristics:
(Bullet) above average earnings growth relative to the S&P 500 Index;
(Bullet) established operating histories, strong balance sheets and favorable
financial characteristics; and
(Bullet) above average return on equity relative to the S&P 500 Index.
In addition, the Fund's investment program enables it to invest in the following
companies that comprise the equity markets:
(Bullet) companies that generate or apply new technologies, new and improved
distribution techniques, or new services, such as those in the business
equipment, electronics, specialty merchandising and health service
industries;
(Bullet) companies that own or develop natural resources, such as energy
exploration companies;
(Bullet) companies that may benefit from changing consumer demands and
lifestyles, such as financial service organizations and
telecommunication companies;
(Bullet) foreign companies, including those in countries with more rapid
economic growth than the U.S.;
(Bullet) companies whose earnings growth is projected at a pace in excess of the
average company (I.E., growth companies); and
(Bullet) companies whose earnings are temporarily depressed and are currently
out of favor with most investors.
In seeking capital growth, the Fund looks for companies whose securities appear
to present a favorable relationship between market price and opportunity. These
may include securities of companies whose fundamentals or products may be of
only average promise. Market misconceptions, temporary bad news and other
factors may cause a security to be out of favor in the stock market and to trade
at a price below its potential value. These undervalued securities can provide
the opportunity for above average market performance. Through intensive
research, visits to many companies each year and efficient response to changing
market conditions, NationsBank seeks to make the most of the Fund's flexible
charter.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks. In addition to common stocks, the Fund also may invest
in preferred stocks, securities convertible into common stocks and other types
of securities having common stock characteristics (such as rights and warrants
to purchase equity securities). Although the Fund invests primarily in publicly
traded common stocks of companies incorporated in the United States, the Fund
may invest 10% or more of its total assets in securities of foreign issuers. See
"Appendix A -- Foreign Securities."
The Fund also may invest in various money market instruments. The Fund may
invest without limitation in such instruments pending investment, to meet
anticipated redemption requests, or as a temporary defensive measure if market
conditions warrant. For additional information concerning these instruments and
the Fund's investment practices, see "Appendix A."
NATIONS EMERGING GROWTH FUND: The Fund will invest in common stocks and
securities convertible into common stocks selected from a universe of emerging
growth companies monitored by NationsBank. Most of the companies will have
revenues between $50 million and $1.5 billion and a debt ratio of less than 50%
of capitalization. The universe focuses on companies with above average earnings
growth rates and profit margins, yet the portfolio may include positions of
special situation companies whose growth is expected to accelerate. These
companies are believed to offer significant opportunities for capital
appreciation and NationsBank will attempt to identify these opportunities before
their potential is recognized by investors in general.
In selecting industries and companies for investment, NationsBank will consider
overall growth prospects, financial condition, competitive position, technology,
research and development, innovative products, marketing expertise,
productivity, labor costs, raw material costs and sources, profit margins,
return on investment, structural changes in local economies, capital resources,
the degree of governmental regulation or deregulation, management and other
factors.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks. The Fund also may invest in various money market
instruments. The Fund may invest without limitation in such instruments pending
investment, to meet anticipated redemption requests, or as a temporary defensive
measure if market conditions warrant. For more information concerning these
instruments and the Fund's investment practices, see "Appendix A."
The volatility of emerging growth stocks is higher than that of larger
companies. Many of these stocks trade over the counter and may not have
widespread interest among institutional investors. These securities may have
larger potential for gains but also carry more risk if
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unexpected company developments adversely affect the stock prices. To help
reduce risk, the Fund is diversified and typically invests in 75 to 100
companies which represent a broad range of industries and sectors, both in the
United States and abroad.
NATIONS DISCIPLINED EQUITY FUND: The investment philosophy of the Fund is based
on the premise that companies with positive earnings trends also should
experience positive trends in their share price. Based on this philosophy, the
Fund invests primarily in the common stocks of companies that NationsBank, as
investment adviser, believes are likely to experience significant increases in
earnings. By pursuing this investment philosophy, the Fund seeks to provide
investors with long-term capital appreciation which exceeds that of the S&P 500
Index.
In selecting stocks for purchase by the Fund, NationsBank utilizes quantitative
analysis supported by fundamental research. This approach seeks to identify
companies that have experienced positive historical earnings trends, as
evidenced by earnings forecasts issued by investment banks, broker/dealers and
other investment professionals. NationsBank believes that companies experiencing
such earnings trends have the potential to generate significant increases in per
share earnings. NationsBank also believes that companies with increasing
earnings should experience positive trends in their stock price. Although the
Fund seeks to invest in companies with increasing earnings, the Fund's
investment objective focuses on long-term capital appreciation; income is not an
objective of the Fund.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks of domestic issuers. With respect to the remainder of
the Fund's assets, the Fund may invest in a broad range of equity and debt
instruments, including preferred stocks, securities (debt and preferred stock)
convertible into common stock, warrants and rights to purchase common stocks,
options, U.S. government and corporate debt securities and various money market
instruments. The Fund will invest primarily in medium- and large-sized companies
(I.E. companies with market capitalizations of $500 million or greater) that are
determined to have favorable price/earnings ratios. The Fund also may invest in
securities issued by companies with market capitalizations of less than $500
million. The volatility of small-capitalization stocks is typically greater than
that of larger companies. To help reduce risk, the Fund will invest in the
securities of companies representing a broad range of industries and economic
sectors.
The Fund's investments in debt securities, including convertible securities,
will be limited to securities rated investment grade (E.G. securities rated in
one of the top four investment categories by a nationally recognized statistical
rating organization or, if not rated, are of equivalent quality as determined by
NationsBank). Obligations rated in the lowest of the top four investment grade
rating categories have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade debt
obligations.
The Fund may invest in foreign securities. Investments in foreign securities
involve risks that are different in some respects from investments in securities
of U.S. issuers, such as the risk of fluctuations in the value of the currencies
in which they are denominated. See "Appendix A -- Foreign Securities." For
temporary defensive purposes if market conditions warrant, the Fund may invest
without limitation in preferred stocks, investment grade debt instruments and
money market instruments.
NATIONS EQUITY INDEX FUND: Under normal conditions, the Fund will invest at
least 80% of its assets in equity securities of companies which compose the S&P
500 Index. The S&P 500 Index consists of 500 selected common stocks, most of
which are listed on the New York Stock Exchange. Different stocks have different
weightings in the Index, depending on the amount of stock outstanding and its
current price. In seeking to duplicate the performance of the S&P 500 Index,
NationsBank will attempt to allocate the Fund's portfolio among common stocks in
approximately the same weightings as the S&P 500 Index, beginning with the
heaviest weighted stocks that make up a larger portion of the Index's value.
NationsBank generally will seek to match the composition of the S&P 500 Index as
much as possible, but may not always invest the Fund's portfolio to mirror the
Index exactly. Because of the difficulty and expense of executing relatively
small stock transactions, the Fund may not always be invested in the less
heavily weighted S&P 500 Index stocks and may at times have its portfolio
weighted differently from the S&P 500 Index. The Fund may omit or remove an S&P
500 Index stock from its portfolio if, following objective criteria, NationsBank
judges the stock to be insufficiently liquid or believes the merit of the
investment has been substantially impaired by extraordinary events or financial
conditions. NationsBank may purchase stocks that are not included in the S&P 500
Index to compensate for these differences if it believes that their prices will
move together with the prices of S&P 500 Index stocks omitted from the
portfolio.
Under normal conditions, NationsBank will attempt to invest as much of the
Fund's assets as is practical in common stocks. However, the Fund will maintain
a reasonable position in high-quality short-term debt securities and money
market instruments to meet redemption requests. If NationsBank believes that
market conditions warrant a temporary defensive posture, the Fund may invest
without limitation in high-quality short-term
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debt securities and money market instruments. These securities and money market
instruments may include domestic and foreign commercial paper, certificates of
deposit, bankers' acceptances and time deposits, U.S. government securities and
repurchase agreements.
The Fund may also invest a portion of its portfolio in instruments whose return
depends on stock market prices. These may include debt securities whose prices
or interest rates are indexed to the return of the S&P 500 Index, or swap
agreements linked to the S&P 500 Index, and options and futures contracts. The
Fund would invest in these types of instruments in order to seek to match the
total return of the Index in accordance with its investment objective. However,
instruments linked to stock market returns may not track the return of the Index
in all cases, and may involve additional credit risks. The Fund may also invest
in warrants. For additional information concerning the Fund's investment
practices, see "Appendix A."
ABOUT THE INDEX. The S&P 500 Index is composed of 500 common stocks, which are
chosen by S&P on a statistical basis to be included in the Index. The inclusion
of a stock in the S&P 500 Index in no way implies that S&P believes the stock to
be an attractive investment. The Index is determined, composed and calculated by
S&P without regard to the Fund. S&P is neither a sponsor of, nor in any way
affiliated with the Fund, and S&P makes no representation or warranty, expressed
or implied on the advisability of investing in the Fund or as to the ability of
the Index to track general stock market performance, and S&P disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the Index or any data included therein. "Standard and Poor's 500" is
a service mark of S&P.
The 500 securities, most of which trade on the New York Stock Exchange,
represented, as of February 28, 1995, approximately 70% of the market value of
all U.S. common stocks. Each stock in the S&P 500 Index is weighted by its
market value. Because of the market-value weighting, the 50 largest companies in
the S&P 500 Index currently account for approximately 47% of the Index.
Typically, companies included in the S&P 500 Index are the largest and most
dominant firms in their respective industries. As of February 28, 1995, the five
largest companies in the Index were: General Electric (2.6%), Exxon Corporation
(2.2%), American Telephone & Telegraph (2.2%), Coca-Cola (2.0%) and Royal
Dutch/Shell (1.7%). The largest industry categories were telephone companies
(8.2%), pharmaceuticals (5.8%), financial institutions (5.4%), retail (5.1%) and
producer goods (5.0%).
GENERAL: Each Equity Fund also may invest in certain specified derivative
securities including: exchange-traded options; over-the-counter options executed
with primary dealers, including long calls and puts and covered calls to enhance
return; and U.S. and foreign exchange-traded financial futures approved by the
Commodity Futures Trading Commission ("CFTC") and options thereon for market
exposure risk management. Each Equity Fund may lend its portfolio securities to
qualified institutional investors. Each Equity Fund also may invest in
restricted, private placement and other illiquid securities. Each Equity Fund
(except Nations Equity Index Fund) also may invest in real estate investment
trust securities. In addition, each Equity Fund may invest in securities issued
by other investment companies, consistent with the Fund's investment objective
and policies.
BALANCED FUND:
NATIONS BALANCED ASSETS FUND: In pursuing the Fund's objective, NationsBank will
allocate the Fund's assets based upon its judgment of the relative valuation and
the expected returns of the three major asset groups in which the Fund invests:
common stocks, fixed income securities, and cash equivalents. In assessing
relative value and expected returns, NationsBank will evaluate current economic
and financial market conditions (both domestically and internationally), current
interest rate trends, earnings and dividend prospects for common stocks, and
overall financial market stability. In general, NationsBank believes that common
stocks typically offer the best opportunity for long-term capital appreciation,
and that high quality companies with above average earnings growth and return on
equity offer the best growth prospects among common stocks.
The Fund invests in common and preferred stocks of U.S. corporations and of
foreign issuers, as well as securities convertible into common stocks, and other
types of securities having common stock characteristics (such as rights and
warrants to purchase equity securities) that meet NationsBank's stringent
criteria. The stocks are primarily those of seasoned, financially strong U.S.
companies with records of above-average earnings growth and above-average
capital growth potential. No industry will represent 25% or more of the Fund's
portfolio at the time of purchase.
The Fund also will invest in government, corporate and mortgage-backed
securities (see "Appendix A -- Asset-Backed Securities"). Most obligations
acquired by the Fund will be issued by companies or governmental entities
located within the United States. Debt obligations acquired by the Fund will be
rated investment grade at the time of purchase by D&P, Fitch, S&P, Moody's, IBCA
or BankWatch, or, if unrated, determined by NationsBank to be comparable in
quality to instruments so rated. Obligations with the lowest investment grade
rating (e.g. rated "BBB" by S&P or "Baa" by Moody's) have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt obliga-
38
<PAGE>
tions. See "Appendix B" for a description of these ratings designations.
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. NationsBank will consider such an event in determining
whether the Fund should continue to hold the obligation. Unrated obligations may
be acquired by the Fund if they are determined by NationsBank to be of
comparable quality at the time of purchase to rated obligations that may be
acquired. Under normal circumstances, at least 25% of the total value of the
Fund's assets will be invested in fixed income securities.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest 10% or more of its total assets in debt obligations of foreign issuers
and stocks of foreign corporations. See "Appendix A -- Foreign Securities."
The Fund also may invest in various money market instruments. The Fund may
invest without limitation in such instruments pending investment, to meet
anticipated redemption requests, or as a temporary defense measure if market
conditions warrant. For additional information concerning these instruments, see
"Appendix A."
The Fund also may invest in certain specified derivative securities, including:
interest rate swaps, caps and floors for hedging purposes; exchange-traded
options; over-the-counter options executed with primary dealers, including long
calls and puts and covered calls to enhance return; and CFTC-approved U.S. and
foreign exchange-traded financial futures and options thereon for market
exposure risk management. The Fund may lend its portfolio securities to
qualified institutional investors and engage in dollar roll transactions. The
Fund also may invest in restricted, private placement and other illiquid
securities, and also may purchase securities issued by other investment
companies, consistent with the Fund's investment objective and policies. See
"Appendix A" below for additional information concerning the investment
practices of this Fund.
BOND FUNDS:
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND: The Nations Short-Intermediate
Government Fund invests substantially all of its assets in U.S. Government
Obligations and repurchase agreements relating to such obligations. U.S.
Government Obligations have historically involved little risk of loss of
principal if held to maturity. However, due to fluctuations in interest rates,
the market value of such securities may vary during the period a shareholder
owns shares of the Fund. The value of the Fund's portfolio generally will vary
inversely with changes in prevailing interest rates.
Certain government securities that have variable or floating interest rates or
demand or put features may be deemed to have remaining maturities shorter than
their nominal maturities for purposes of determining the average weighted
maturity of the Fund. See "Investment Objectives and Policies" in the Fund's
SAI. See "Appendix A" below for additional information concerning the investment
practices of this Fund.
NATIONS GOVERNMENT SECURITIES FUND: Under normal circumstances, substantially
all, and in any event, at least 65% of the Fund's assets, will be invested in
U.S. Government Obligations. U.S. Government Obligations include U.S. Treasury
Obligations, which differ only in their interest rates, maturities and times of
issuance. U.S. Government Obligations also include obligations issued or
guaranteed by U.S. Government agencies, authorities or instrumentalities, some
of which are backed by the full faith and credit of the U.S. Treasury, such as
direct pass-through certificates of the Government National Mortgage Association
("GNMA"); some of which are supported by the right of the issuer to borrow from
the U.S. Government, such as obligations of Federal Home Loan Banks; and some of
which are backed only by the credit of the issuer itself, such as obligations of
the Federal National Mortgage Association ("FNMA"). For a more detailed
description of the investment practices of this Fund, see "Appendix A -- U.S.
Government Obligations" and "Asset Backed Securities."
Although changes in the value of securities subsequent to their acquisition are
reflected in the net asset value of the Fund's shares, such changes will not
affect the income received by the Fund from such securities. However, since
available yields vary over time, no specific level of income can ever be
assured. The dividends paid by the Fund will increase or decrease in relation to
the income received by the Fund from its investments, which will in any case be
reduced by the Fund's expenses before being distributed to the Fund's
shareholders. The value of the Fund's portfolio generally will vary inversely
with changes in prevailing interest rates.
The Fund also may hold or invest in short-term U.S. Government obligations,
"high quality" money market instruments (I.E., those within the two highest
rating categories or unrated instruments deemed by NationsBank to be of
comparable quality), repurchase agreements and cash. Such obligations may
include those issued by foreign banks and foreign branches of U.S. banks. These
investments may be in such proportion as, in NationsBank's opinion, existing
circumstances warrant.
NATIONS SHORT-TERM INCOME FUND: In pursuing its investment objective, Nations
Short-Term Income Fund may invest in a broad range of debt obligations such as
U.S. Government Obligations; corporate debt obligations, including bonds, notes
and debentures rated
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investment grade by one of the six NRSROs, or, if not so rated, determined by
NationsBank to be of comparable quality to instruments so rated;
dollar-denominated debt obligations of foreign issuers, including foreign
corporations and foreign governments (see "Appendix A -- Foreign Securities");
and mortgage-related securities of governmental issuers, including GNMA, FNMA
and the Federal Home Loan Mortgage Corporation ("FHLMC"), or of private issuers,
including mortgage pass-through certificates, collateralized mortgage
obligations or "CMOs," real estate investment trust securities or
mortgage-backed bonds; other Asset-Backed Securities rated by one of the six
NRSROs, or, if not so rated, determined by NationsBank to be of comparable
quality to instruments so rated. (For more information concerning Asset Backed
Securities, including Mortgage-Backed Securities, see "Appendix A -- Asset
Backed Securities.")
The Fund will invest, under normal market conditions, at least 65% of the total
value of its assets in investment grade corporate bonds and mortgage-backed
bonds. Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. Debt obligations
acquired by the Fund generally will be rated investment grade at the time of
purchase by D&P, Fitch, S&P, Moody's, IBCA or BankWatch, or, if unrated,
determined by NationsBank to be comparable in quality to instruments so rated.
Obligations rated in the lowest of the top four investment grade rating
categories (e.g. rated "BBB" by S&P or "Baa" by Moody's) have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt obligations. Subsequent to its
purchase by the Fund, an issue of securities may cease to be rated or its rating
may be reduced below the minimum rating required for purchase by the Fund.
NationsBank will consider such an event in determining whether the Fund should
continue to hold the obligation. See "Appendix B" below for a description of
these rating designations.
The Fund also may hold or invest in short-term U.S. Government obligations,
"high quality" money market instruments (i.e., those within the two highest
rating categories or unrated instruments determined by NationsBank to be of
comparable quality), repurchase agreements and cash. Such obligations may
include those issued by foreign banks and foreign branches of U.S. banks. These
investments may be in such proportions as, in NationsBank's opinion, prevailing
market or economic circumstances warrant.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest 10% or more of its total assets in securities of foreign issuers. See
"Appendix A -- Foreign Securities." See "Appendix A" below for additional
information concerning the investment practices of this Fund.
NATIONS DIVERSIFIED INCOME FUND: In pursuing its investment objective, the
Nations Diversified Income Fund may invest in a broad range of corporate
convertible and non-convertible debt obligations such as fixed and variable rate
bonds; obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; dollar-denominated and non-dollar-denominated debt
obligations of foreign issuers, including foreign corporations and foreign
governments (see "Appendix A -- Foreign Securities"); mortgage-backed securities
of governmental issuers, including GNMA, FNMA and FHLMC, or of private issuers,
including mortgage pass-through certificates, CMOs, real estate investment trust
securities or mortgage-backed bonds; other asset-backed securities rated by one
of the six NRSROs, or if not so rated, determined by NationsBank to be of
comparable quality. (For more information concerning Asset Backed Securities,
including Mortgage-Backed Securities, see "Appendix A -- Asset Backed
Securities.") In pursuing its investment objective, the Fund also may invest in
dividend-paying convertible and non-convertible preferred and common stocks.
Under normal market conditions, the Fund will invest at least 65% of the total
value of its assets in fixed income securities, such as government, government
agency and corporate bonds. Most obligations acquired by the Fund will be issued
by companies or governmental entities located within the United States. Not less
than 65% of the debt obligations acquired by the Fund will be rated investment
grade at the time of purchase by D&P, Fitch, S&P, Moody's, IBCA or BankWatch,
or, if unrated, determined by NationsBank to be comparable in quality to
instruments so rated. Obligations rated in the lowest of the top four investment
grade rating categories (e.g. rated "BBB" by S&P or "Baa" by Moody's) have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations.
Up to 35% of the total value of the Fund's assets may be invested in
lower-quality fixed income securities rated "B" or better by Moody's or S&P, or
if not so rated, determined by NationsBank to be of comparable quality.
Securities which are rated "B" generally lack characteristics of the desirable
investment, and assurance of interest and principal payment over any long period
of time may be limited. Non-investment-grade debt securities are sometimes
referred to as "high yield bonds" or "junk bonds," tend to have speculative
characteristics, generally involve more risk of principal and income than higher
rated securities, and have yields and market values that tend to fluctuate more
than higher quality securities. See "Appendix A -- Lower-Rated Debt Securities."
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Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. NationsBank will consider such an event in determining
whether the Fund should continue to hold the obligation. See "Appendix B" below
for a description of these rating designations.
The Fund may hold or invest in short-term U.S. Government obligations, "high
quality" money market instruments (i.e., those within the two highest rating
categories or unrated instruments deemed by NationsBank to be of comparable
quality), repurchase agreements and cash. Such obligations may include those
issued by foreign banks and foreign branches of U.S. banks. These investments
may be in such proportions as, in NationsBank's opinion, existing circumstances
warrant.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest 10% or more of its total assets in securities of foreign issuers. The
value of the Fund's portfolio generally will vary inversely with changes in
prevailing interest rates. See "Appendix A" below for additional information
concerning the investment practices of this Fund.
NATIONS STRATEGIC FIXED INCOME FUND: In pursuing its investment objective, the
Nations Strategic Fixed Income Fund may invest in corporate convertible and
non-convertible debt obligations, including bonds, notes and debentures rated
investment grade at the time of purchase by one of the six NRSROs, or if not so
rated, determined by NationsBank to be of comparable quality to instruments so
rated; U.S. Government obligations; dollar-denominated debt obligations of
foreign issuers, including foreign corporations and foreign governments (see
"Appendix A -- Foreign Securities"); mortgage-backed securities of governmental
issuers, including GNMA, FNMA and FHLMC, or of private issuers, including
mortgage pass-through certificates, CMOs, real estate investment trust
securities or mortgage-backed bonds; other asset-backed securities rated by one
of the six NRSROs, or if not so rated, determined by NationsBank to be of
comparable quality. (For more information concerning Asset Backed Securities,
including Mortgage-Backed Securities, see "Appendix A -- Asset Backed
Securities.") Pursuant to its investment objective, the Fund also may invest in
dividend paying preferred and common stock.
Under normal market conditions, the Fund will invest at least 65% of the total
value of its assets in government, corporate and mortgage-backed securities.
Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. Debt obligations
acquired by the Fund will be rated investment grade at the time of purchase by
D&P, Fitch, S&P, Moody's, IBCA or BankWatch, or, if unrated, determined by
NationsBank to be comparable in quality. Obligations rated in the lowest of the
top four investment grade rating categories (e.g. rated "BBB" by S&P or "Baa" by
Moody's) have speculative characteristics and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade debt
obligations. Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum rating required
for purchase by the Fund. NationsBank will consider such an event in determining
whether the Fund should continue to hold the obligation. See "Appendix B" below
for a description of these rating designations.
The Fund also may hold or invest in short-term U.S. Government obligations,
"high quality" money market instruments (I.E., those within the two highest
rating categories or unrated instruments deemed by NationsBank to be of
comparable quality), repurchase agreements and cash. Such obligations may
include those issued by foreign banks and foreign branches of U.S. banks. These
investments may be in such proportions as, in NationsBank's opinion, existing
circumstances warrant.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest 10% or more of its assets in securities of foreign issuers. The value of
the Fund's portfolio generally will vary inversely with changes in prevailing
interest rates. See "Appendix A" below for additional information concerning the
investment practices of this Fund.
NATIONS MORTGAGE-BACKED SECURITIES FUND: In pursuing its investment objective,
the Nations Mortgage-Backed Securities Fund may invest in a broad range of debt
obligations such as: obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities; GNMA, FHLMC and FNMA mortgage pass-through
securities and collateralized mortgage obligations, other mortgage-backed
securities, and other asset backed securities; and corporate debt. (For more
information concerning Asset Backed Securities, including Mortgage-Backed
Securities, see "Appendix A -- Asset Backed Securities.") Share price
fluctuation is expected to be greater than in funds holding shorter-term
securities.
The Fund will invest, under normal market conditions, at least 65% of the total
value of its assets in Mortgage-Backed Securities. Most obligations acquired by
the Fund will be issued by companies or governmental entities located within the
United States. Debt obligations acquired by the Fund will, at the time of
purchase, be within the three highest quality ratings of at least one of the six
NRSROs or, if unrated, determined by NationsBank to be comparable in quality.
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund.
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NationsBank will consider such an event in determining whether the Fund should
continue to hold the obligation. See "Appendix B" below for a description of
these rating designations.
The Fund also may invest in repurchase agreements, commercial paper, bankers'
acceptances, certificates of deposit, time deposits, when-issued and delayed
delivery securities and firm commitment agreements. Except as otherwise
indicated in this Prospectus, these investments may be in such proportions as,
in NationsBank's opinion, existing circumstances warrant. The value of the
Fund's portfolio generally will vary inversely with changes in prevailing
interest rates. See "Appendix A" below for additional information concerning the
investment practices of this Fund.
NATIONS GLOBAL GOVERNMENT INCOME FUND: In seeking to achieve its investment
objective, the Fund will invest under normal market conditions at least 65% of
its total assets in debt securities issued or guaranteed by U.S. or foreign
governments (including states, provinces and municipalities) or their agencies,
instrumentalities or subdivisions ("Government Securities"). Except for
temporary defensive purposes, the Fund will concentrate its investments in
foreign Government Securities. Concentration in this context means the
investment of more than 25% of the Fund's total assets in such securities. The
Fund may invest in the debt securities of any type of issuer, including
corporations, banks and supranational entities.
The Fund, under normal market conditions, will invest in at least three
different countries. These countries may include the U.S., the countries of
Western Europe, Japan, Australia, New Zealand and Canada. If the Fund invests a
significant portion of its assets at any time in a single country, events
occurring in such country are more likely to affect the Fund's investments. For
additional information concerning risk, see "Special Risk Considerations
Relevant to an Investment in the Nations International Equity Fund, Nations
Emerging Markets Fund, Nations Pacific Growth Fund and Nations Global Government
Income Fund," below. Because the Fund intends to invest a large portion of its
assets in foreign Government Securities, the Fund is a "non-diversified"
investment company for purposes of the Investment Company Act of 1940 (the "1940
Act"). The Fund may invest in securities of issuers located in any region or
country and that are denominated in any currency.
The Fund is managed in accordance with an overall global investment strategy
which means that Fund investments are allocated among securities denominated in
U.S. dollars and the currencies of a number of foreign countries. The Fund's
exposure to various count-
ries and currencies will vary in accordance with NationsBank's and/or the Fund's
sub-investment adviser's assessment of the relative yield and appreciation of
such securities. Fundamental economic strength, credit quality and interest rate
trends are the principal factors considered by NationsBank and/or the Fund's
sub-investment adviser in determining whether to increase or decrease the
emphasis placed upon a particular country or particular type of security within
the Fund's investment portfolio.
Under normal market conditions, the Fund intends to invest primarily in
securities rated A or better at the time of purchase by Moody's or S&P and
unrated securities that, at the time of purchase will be determined to be of
comparable quality by NationsBank and/or the Fund's sub-investment adviser. The
Fund also may invest in securities rated "Baa" by Moody's or "BBB" by S & P, but
does not, as a general matter, intend to invest more than 10% of its total
assets in such securities. Subsequent to its purchase by the Fund, an issue of
securities may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by the Fund. NationsBank and/or the Fund's
sub-investment adviser will consider such event in determining whether the Fund
should continue to hold the obligation. In no event will the Fund hold more than
5% of its total net assets in securities rated below investment grade. See
"Appendix B" below for a description of these rating designations. NationsBank
and the Fund's sub-investment adviser expect that the Fund's dollar-weighted
average maturity will not be greater than fifteen years under normal market
conditions.
Supranational entities are international organizations jointly operated by
multiple sovereign governments including, for example, the World Bank, the
European Coal and Steel Community, the Asian Development Bank, the European
Investment Bank and the Inter-American Development Bank. Supranational entities
generally have no taxing authority and are dependent upon their members for the
funds necessary to pay principal and interest on their debt obligations.
For defensive purposes, the Fund may temporarily invest substantially all of its
assets in U.S. financial markets or in U.S. dollar-denominated instruments. See
"Appendix A" below for additional information concerning the investment
practices of the Fund.
NATIONS MUNICIPAL INCOME FUND, NATIONS SHORT-TERM MUNICIPAL INCOME FUND AND
NATIONS INTERMEDIATE MUNICIPAL BOND FUND: Under normal market conditions, the
Nations Municipal Income Fund, Nations Short-Term Municipal Income Fund and
Nations Intermediate Municipal Bond Fund will invest at least 65% of the total
value of their assets in Municipal Securities which will be rated investment
grade at the time of purchase by at least one of the following: D&P, Fitch, S&P,
Moody's, IBCA or BankWatch or, if unrated, determined by NationsBank to be of
comparable quality at the time of purchase to rated obligations that may be
acquired by a Fund. Obligations rated in the
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lowest of the top four investment grade rating categories (e.g. rated "BBB" by
S&P or "Baa" by Moody's) have speculative characteristics and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade debt obligations. Subsequent to its purchase by a Fund, an issue of
Municipal Securities may cease to be rated, or its rating may be reduced below
the minimum rating required for purchase by a Fund. NationsBank will consider
such an event in determining whether a Fund should continue to hold the
obligation. See "Appendix B" for a description of these rating designations.
Up to 35% of the assets of Nations Municipal Income Fund, Nations Short-Term
Municipal Income Fund and Nations Intermediate Municipal Bond Fund may be
invested in lower-quality Municipal Securities rated "B" or better by Moody's or
S&P, or if not so rated, determined by NationsBank to be of comparable quality.
Securities which are rated "B" generally lack characteristics of the desirable
investment and assurance of interest and principal payment over any long period
of time may be small. Non-investment-grade debt securities are sometimes
referred to as "high yield bonds" or "junk bonds," tend to have speculative
characteristics, generally involve more risk of principal and income than higher
rated securities, and have yields and market values that tend to fluctuate more
than higher quality securities. See "Appendix A -- Lower-Rated Debt Securities."
During temporary defensive periods, the Funds may invest in short-term taxable
obligations in such proportions as, in the opinion of NationsBank, prevailing
market or economic conditions warrant. Taxable obligations that may be acquired
by a Fund include short-term U.S. Government obligations; repurchase agreements;
and short-term debt securities. Under normal market conditions, each Fund's
investments in taxable obligations and private activity bonds (see "Appendix
A -- Municipal Securities"), the interest on which may be treated as a specific
tax preference item under the Federal alternative minimum tax, will not exceed
20% of its total assets at the time of purchase. The Funds may hold uninvested
cash reserves pending investment or during defensive periods. The value of a
Fund's portfolio generally will vary inversely with changes in prevailing
interest rates. For additional information concerning the Funds' investment
practices, see "Appendix A."
STATE INTERMEDIATE MUNICIPAL BOND FUNDS AND STATE MUNICIPAL BOND FUNDS: Under
normal market conditions, at least 65% of the total value of the assets of the
State Intermediate Municipal Bond Funds and the State Municipal Bond Funds will
be invested in municipal bonds, and substantially all of each Fund's assets will
be invested in debt instruments issued by or on behalf of the pertinent state
and its political subdivisions, agencies, instrumentalities and authorities
("Municipal Securities"). Dividends paid by each of these Funds which are
derived from interest attributable to tax-exempt obligations of the pertinent
state and that state's political subdivisions, agencies, instrumentalities and
authorities, as well as certain other governmental issuers such as Puerto Rico,
will be exempt from regular Federal income tax and (with the exception of Texas
and Florida) the income tax of the pertinent state. Texas and Florida do not
impose a state income tax; however, Florida, Georgia and North Carolina do
impose a state intangibles tax. Dividends derived from interest on obligations
of other governmental issuers will be exempt from regular Federal income tax,
but generally will be subject to state income tax (with the exception of Texas
and Florida). (See "How Dividends and Distributions are Made; Tax Information.")
During normal market conditions and as a matter of fundamental investment
policy, each of these Funds will invest at least 80% of its total net assets in
obligations the interest on which will be exempt from regular Federal income tax
and (with the exception of Texas and Florida) the income tax of the pertinent
state.
Municipal Securities acquired by the Funds will be rated investment grade at the
time of purchase by D&P, Fitch, S&P, Moody's, IBCA or BankWatch or, if unrated,
determined by NationsBank to be of comparable quality at the time of purchase to
rated obligations that may be acquired by the Funds. Obligations rated in the
lowest of the top four investment grade rating categories (e.g. rated "BBB" by
S&P or "Baa" by Moody's) have speculative characteristics and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade debt obligations. Subsequent to its purchase by a Fund, an issue of
Municipal Securities may cease to be rated or its rating may be reduced below
the minimum rating required for purchase by a Fund. NationsBank will consider
such an event in determining whether a Fund should continue to hold the
obligation. See "Appendix B" below for a description of these rating
designations.
The Funds also may invest in Municipal Securities with stated maturities of less
than one year, which are determined to present minimal credit risks and which at
the time of purchase are considered to be of high quality, issued by or on
behalf of states, territories and possessions of the United States, the District
of Columbia, and their political subdivisions, agencies, instrumentalities and
authorities, and the interest on which, in the opinion of counsel to the issuer
or bond counsel, is exempt from regular Federal income tax.
During temporary defensive periods, the Funds may invest in short-term taxable
obligations in such proportions as, in the opinion of NationsBank, prevailing
market or economic conditions warrant. Taxable obligations
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<PAGE>
that may be acquired by the Funds include short-term U.S. Government
obligations; repurchase agreements; options; and futures contracts. Under normal
market conditions, each Fund's investments in taxable obligations and private
activity bonds (see "Appendix A -- Municipal Securities"), the interest on which
may be treated as a specific tax preference item under the Federal alternative
minimum tax, will not exceed 20% of its total assets at the time of purchase.
The Funds also may hold uninvested cash reserves pending investment or during
defensive periods. For additional information concerning the Funds' investment
practices, see "Appendix A."
GENERAL: The Nations Short-Intermediate Government Fund, Nations Government
Securities Fund, Nations Short-Term Income Fund, Nations Diversified Income
Fund, Nations Strategic Fixed Income Fund, Nations Mortgage-Backed Securities
Fund, Nations Municipal Income Fund, Nations Short-Term Municipal Income Fund,
Nations Intermediate Municipal Bond Fund, Nations State Intermediate Municipal
Bond Funds and Nations State Municipal Bond Funds may invest in certain
specified derivative securities, including: interest rate swaps, caps and floors
for hedging purposes; exchange-traded options; over-the-counter options executed
with primary dealers, including long calls and puts and covered calls to enhance
return; and CFTC-approved U.S. and foreign exchange-traded financial futures and
options thereon for market exposure risk-management. Each of those Funds also
may lend its portfolio securities to qualified institutional investors and may
invest in restricted, private placement and other illiquid securities. The
Nations Short-Intermediate Government Fund, Nations Government Securities Fund,
Nations Short-Term Income Fund, Nations Diversified Income Fund, Nations
Strategic Fixed Income Fund and Nations Mortgage-Backed Securities Fund may
engage in reverse repurchase agreements and dollar roll transactions. The
Nations Global Government Income Fund may invest in money market instruments,
forward foreign currency exchange contracts, futures and options and other
instruments. Additionally, each Bond Fund may purchase securities issued by
other investment companies, consistent with the Fund's investment objective and
policies.
SPECIAL RISK CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE NATIONS
INTERNATIONAL EQUITY FUND, NATIONS EMERGING MARKETS FUND, NATIONS PACIFIC GROWTH
FUND AND NATIONS GLOBAL GOVERNMENT INCOME FUND: Investors should understand and
consider carefully the special risks involved in foreign investing. In addition,
each Fund presents unique risks that investors should be aware of.
Investors in the Nations International Equity Fund should be aware that the Fund
may, from time to time, invest up to 5% of its total assets in securities of
companies located in Eastern Europe. Economic and political reforms in this
region are still in their infancy. As a result, investment in such countries
would be highly speculative and could result in losses to the Fund and, thus, to
its shareholders.
Investors in the Nations Pacific Growth Fund should understand and consider
carefully the special risks involved in investing in the Pacific Basin and Far
East. Countries in the Pacific Basin and Far East are in various stages of
economic development, ranging from emerging markets to mature economies, but
each has unique risks. Most countries in this region are heavily dependent on
international trade, and some are especially vulnerable to recessions in other
countries. Many of these countries are also sensitive to world commodity prices.
Some countries that have experienced rapid growth may still have obsolete
financial systems, economic problems or archaic legal systems. In addition, many
of these nations are experiencing political and social uncertainties. For
example, the return of Hong Kong to Chinese dominion may have a profound effect
on both Hong Kong and China, and could affect the entire Pacific Basin and Far
East.
The same is true, but even more so, for the emerging market countries in which
the Nations Emerging Markets Fund will invest. Although the Fund believes that
its investments present the possibility for significant growth over the long
term, they also entail significant risks. Many investments in emerging markets
can be considered speculative, and their prices can be much more volatile than
in the more developed nations of the world. This difference reflects the greater
uncertainties of investing in less established markets and economies. The
financial markets of emerging markets countries are generally less well
capitalized and thus securities of issuers based in such countries may be less
liquid.
The Nations Global Government Income Fund's yield and share price will change
based on changes in domestic or foreign interest rates and in an issuer's
creditworthiness. In general, bond prices rise when interest rates fall, and
vice versa.
Moreover, for each of the Funds, investing in securities denominated in foreign
currencies and utilization of forward foreign currency exchange contracts and
other currency hedging techniques involve certain considerations comprising both
opportunities and risks not typically associated with investing in U.S.
dollar-denominated securities. Additionally, changes in the value of foreign
currencies can significantly affect a Fund's share price. General economic and
political factors in the various world markets also can impact a Fund's share
price.
The expenses to individual investors of investing directly in foreign securities
are very high relative to similar costs for investing in U.S. securities. While
the Funds offer a more efficient way for individual investors to
par-
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ticipate in foreign markets, their expenses, including custodial fees, are also
higher than the typical domestic equity mutual fund.
Risks unique to international investing include: (1) restrictions on foreign
investment and repatriation of capital; (2) fluctuations in currency exchange
rates; (3) costs of converting foreign currency into U.S. dollars and U.S.
dollars into foreign currencies; (4) greater price volatility and less
liquidity; (5) settlement practices, including delays, which may differ from
those customary in United States markets; (6) exposure to political and economic
risks, including the risk of nationalization, expropriation of assets and war;
(7) possible imposition of foreign taxes and exchange control and currency
restrictions; (8) lack of uniform accounting, auditing and financial reporting
standards; (9) less governmental supervision of securities markets, brokers and
issuers of securities; (10) less financial information available to investors;
and (11) difficulty in enforcing legal rights outside the United States. These
risks often are heightened for investments in emerging or developing countries.
See "Appendix A" for additional discussion of the risks associated with an
investment in the Nations International Equity Fund, Nations Emerging Markets
Fund, Nations Pacific Growth Fund and Nations Global Government Income Fund.
PORTFOLIO TURNOVER (NON-MONEY MARKET FUNDS): Generally, the Equity Funds, the
Balanced Fund and the Bond Funds (the "Non-Money Market Funds") will purchase
portfolio securities for capital appreciation or investment income, or both, and
not for short-term trading profits. While it is not possible to predict exactly
annual portfolio turnover rates, it is expected that under normal market
conditions, annual portfolio turnover rates will not exceed 75% for Nations
Emerging Markets Fund and Nations Pacific Growth Fund and 175% for Nations
Global Government Income Fund. If a Fund's annual portfolio turnover rate
exceeds 100%, it may result in higher brokerage costs and possible tax
consequences for the Fund and its shareholders. For the other Funds' portfolio
turnover rates, see "Financial Highlights."
RISK CONSIDERATIONS: Although NationsBank and Nations Gartmore Investment
Management ("Nations Gartmore"), the sub-investment adviser for the Nations
International Equity Fund, Nations Emerging Markets Fund, Nations Pacific Growth
Fund and Nations Global Government Income Fund, will seek to achieve the
investment objective of each Fund, there is no assurance that they will be able
to do so. No single Fund should be considered, by itself, to provide a complete
investment program for any investor. Investments in a Fund are not insured
against loss of principal.
Investments by a Fund in common stocks and other equity securities are subject
to stock market risks. The value of the stocks that the Fund holds, like the
broader stock market, may decline over short or even extended periods. The value
of a Fund's investments in debt securities will tend to decrease when interest
rates rise and increase when interest rates fall. In general, longer-term debt
instruments tend to fluctuate in value more than shorter-term debt instruments
in response to interest rate movements. In addition, debt securities that are
not backed by the United States Government are subject to credit risk, which is
the risk that the issuer may not be able to pay principal and/or interest when
due.
Since each of the State Intermediate Municipal Bond Funds and State Municipal
Bond Funds invests primarily in securities issued by entities located in a
single state, such Funds are more susceptible to changes in value due to
political or economic changes affecting that state or its subdivisions.
Certain of the Funds' investments constitute derivative securities, which are
securities whose value is derived, at least in part, from an underlying index or
reference rate. There are certain types of derivative securities that can, under
certain circumstances, significantly increase a purchaser's exposure to market
or other risks. The Funds' investment adviser, however, only purchases
derivative securities in circumstances where it believes such purchases are
consistent with the Fund's investment objective and do not unduly increase the
Fund's exposure to market or other risks. For additional risk information
regarding the Funds' investments in particular instruments, see "Appendix
A -- Portfolio Securities."
INVESTMENT LIMITATIONS: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAIs.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry, provided that this limitation does not apply (a) with respect to
the Nations Global Government Income Fund, to investments in foreign Government
Securities; and (b) to investments in obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities. In addition, this
limitation does not apply to investments by "money market funds" as that term is
used under the 1940 Act, in obligations of domestic banks.)
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are
45
<PAGE>
part of a public offering or privately placed), may enter into repurchase
agreements and may lend portfolio securities in accordance with its investment
policies.
Nations Prime Fund, Nations Treasury Fund, Nations Government Money Market Fund,
Nations Tax Exempt Fund, Nations Value Fund, Nations Equity Income Fund, Nations
International Equity Fund, Nations Emerging Markets Fund, Nations Pacific Growth
Fund, Nations Capital Growth Fund, Nations Emerging Growth Fund, Nations
Disciplined Equity Fund, Nations Equity Index Fund, Nations Balanced Assets
Fund, Nations Short-Intermediate Government Fund, Nations Government Securities
Fund, Nations Short-Term Income Fund, Nations Diversified Income Fund, Nations
Strategic Fixed Income Fund, Nations Mortgage-Backed Securities Fund, Nations
Intermediate Municipal Bond Fund, Nations Municipal Income Fund and Nations
Short-Term Municipal Income Fund may not:
Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's
total assets would be invested in the securities of such issuer, except
that up to 25% of the value of the Fund's total assets may be invested
without regard to these limitations and with respect to 75% of such Fund's
assets, such Fund will not hold more than 10% of the voting securities of
any issuer.
The Nations Global Government Income Fund, the State Intermediate Municipal Bond
Funds and the State Municipal Bond Funds may not:
Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 25% of the value of a Fund's
total assets would be invested in the securities of one issuer, and with
respect to 50% of such Fund's total assets, more than 5% of its assets
would be invested in the securities of one issuer.
In addition, as a matter of non-fundamental policy, the Nations Tax Exempt Fund
may not purchase any securities other than obligations the interest on which is
exempt from Federal income tax and stand-by commitments with respect to such
obligations.
Also, as a matter of fundamental policy, except during defensive periods, the
State Intermediate Municipal Bond Funds and the State Municipal Bond Funds will
invest at least 80% of their respective total net assets in Municipal Securities
the interest on which is exempt from Federal income taxes and the pertinent
state's income taxes (with the exception of Texas and Florida). Similarly, as a
matter of fundamental policy, except during defensive periods, the Nations
Municipal Income Fund, Nations Short-Term Municipal Income Fund and Nations
Intermediate Municipal Bond Fund will invest at least 80% of their respective
total net assets in Municipal Securities the interest on which is exempt from
Federal income taxes. For purposes of these fundamental policies, private
activity bonds are included in the term "Municipal Securities" only if the
interest paid thereon is exempt from Federal income tax and not treated as a
specific tax preference item under the Federal alternative minimum tax.
The investment objective and policies of each Fund, unless otherwise specified,
may be changed without a vote of the Fund's shareholders. If the investment
objective or policies of a Fund change, shareholders should consider whether the
Fund remains an appropriate investment in light of their current position and
needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus and the SAIs. Should a Fund determine that any such
commitment is no longer in the best interests of the Fund, it may consider
terminating sales of its shares in the states involved.
In order for the Money Market Funds to value their investments on the basis of
amortized cost, investments must be in accordance with the requirements of Rule
2a-7 under the 1940 Act, some of which are described below. These include
maturity, quality and diversification requirements. Maturity is limited to a
dollar-weighted average portfolio maturity of 90 days or less. Quality
requirements generally limit investments to U.S. dollar-denominated instruments
determined to present minimal credit risks and that at the time of acquisition
are rated in the top two rating categories by the required number of NRSROs (at
least two or, if only one NRSRO has rated the security, that one NRSRO) or, if
unrated by any NRSRO, are (i) comparable in priority and security to a class of
short-term securities of the same issuer that has the required rating, or (ii)
determined to be comparable in quality to securities having the required rating.
The diversification requirements provide generally that a Money Market Fund
(except the Nations Tax Exempt Fund) may not at the time of acquisition invest
more than 5% of its assets in securities of any one issuer or invest more than
5% of its assets in securities (and no more than 1% in any one issuer) that have
not been rated in the highest category by the required number of NRSROs or, if
unrated, are described in (i) or (ii) above. Securities issued by the U.S.
Government, its agencies, authorities or instrumentalities, and
fully-collateralized repurchase agreements secured by such obligations, are
exempt from the quality requirements, other than minimal credit risk. In the
event that a Money Market Fund's investment restrictions or permissible
investments are more restrictive than the requirements of Rule 2a-7, the Money
Market Fund's own restrictions will govern.
46
<PAGE>
How Performance Is Shown
MONEY MARKET FUNDS: From time to time the Money Market Funds may advertise the
yield and effective yield on a class of shares and the Nations Tax Exempt Fund
also may advertise the tax-equivalent yield of a class of shares. YIELD,
EFFECTIVE YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED ON HISTORICAL
EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" of a
class of shares in a Fund refers to the income generated by an investment in
such class over a seven-day period identified in the advertisement. This income
is then "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly, but, when annualized, the income earned by an investment in a class
of shares in the Fund is assumed to be reinvested. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. The "tax-equivalent yield" of each class of shares in the
Nations Tax Exempt Fund shows the level of taxable yield needed to produce an
after-tax equivalent to such class's tax-free yield. This is done by increasing
the class's yield (calculated as above) by the amount necessary to reflect the
payment of Federal income tax at a stated tax rate.
NON-MONEY MARKET FUNDS: From time to time the Non-Money Market Funds may
advertise the total return and yield on a class of shares. Nations Municipal
Income Fund, Nations Short-Term Municipal Income Fund, Nations Intermediate
Municipal Bond Fund, the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds also may advertise the tax-equivalent yield of a class of
shares. TOTAL RETURN, YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The
"total return" of a class of shares of Non-Money Market Fund may be calculated
on an average annual total return basis or an aggregate total return basis.
Average annual total return refers to the average annual compounded rates of
return over one-, five-, and ten-year periods or the life of the Fund (as stated
in the advertisement) that would equate an initial amount invested at the
beginning of a stated period to the ending redeemable value of the investment,
assuming the reinvestment of all dividend and capital gains distributions.
Aggregate total return reflects the total percentage change in the value of the
investment over the measuring period again assuming the reinvestment of all
dividends and capital gains distributions. Total return may also be presented
for other periods.
Set forth below is certain performance data for the Pacific Ex-Japan Composite,
the Emerging Markets Composite and the Global Government Bond Ex-U.K. Composite,
reflecting the performance of private accounts, including U.K. authorized unit
trusts, managed by the Gartmore Group, as defined below. The performance data
for these accounts is deemed relevant because the Pacific Ex-Japan Composite,
the Emerging Markets Composite and the Global Government Bond Ex-U.K. Composite
have investment objectives, policies and restrictions that are substantially
similar to those of the Nations Pacific Growth Fund, Nations Emerging Markets
Fund and Nations Global Government Income Fund, respectively. There is
substantial continuity between the portfolio managers of the Gartmore Group who
were responsible for managing those accounts and the portfolio managers of
Nations Gartmore who are responsible for managing the Nations Pacific Growth
Fund, Nations Emerging Markets Fund and Nations Global Government Income Fund,
respectively. THIS PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NOT
NECESSARILY INDICATIVE OF THE FUTURE PERFORMANCE OF NATIONSBANK, NATIONS
GARTMORE INVESTMENT MANAGEMENT OR THE FUNDS.
<TABLE>
<CAPTION>
Average Annual Total Return
for the Periods Indicated
through
PACIFIC EX-JAPAN COMPOSITE March 31, 1995*
<S> <C>
One Year 4.90%
Three Year 24.50%
Five Year 15.70%
Since Inception on January 1,
1988 22.20%
</TABLE>
[CAPTION]
<TABLE>
<CAPTION>
Annual Total Returns*
1988 1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
10.70% 56.10% (1.50%) 20.30% 21.10% 106.90% (15.10%)
</TABLE>
* The average annual total returns and annual total returns are net of fees. The
fees for these accounts were 1% per annum until September 30, 1988, and 1.5%
per annum thereafter.
<TABLE>
<CAPTION>
Average Annual Total Return
for the Periods Indicated
through
EMERGING MARKETS COMPOSITE March 31, 1995*
<S> <C>
One Year (24.40%)
Since Inception on January 1,
1993 9.60%
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Annual
Total
Returns*
1993 1994
<S> <C>
73.90% (20.20%)
</TABLE>
* The average annual total returns and annual total returns are net of fees. The
fees for these accounts were 1.5% per annum.
<TABLE>
<CAPTION>
Average Annual Total Return
for the Periods Indicated
GLOBAL GOVERNMENT BOND EX-U.K. through
COMPOSITE* March 31, 1995**
<S> <C>
One Year 7.90%
Three Year 9.40%
Since Inception on September 1,
1990 11.40%
</TABLE>
<TABLE>
<CAPTION>
Annual Total Returns**
1991 1992 1993 1994
<S> <C> <C> <C>
19.30% 3.30% 13.50% (2.40%)
</TABLE>
* The accounts of the Global Government Bond Ex-U.K. Composite do not invest in
securities of U.K. issuers, which are permissible investments for the Nations
Global Government Income Fund. However, inclusion of such securities, to the
extent of their representation in the J. P. Morgan Global Government Bond
Index, would not have materially affected their total returns.
** The average annual total returns and annual total returns are net of fees.
The fees on these accounts varied by contractual agreement and have been
assumed to be 1.5% per annum.
Set forth below is the average annual total return and the annual total return
for the Nations International Equity Fund for the periods ending March 31, 1995:
<TABLE>
<CAPTION>
Average Annual Total Return
for the Periods Indicated
NATIONS INTERNATIONAL EQUITY through
FUND March 31, 1995
<S> <C>
One Year 1.22%
Three Year 6.98%
Since Inception on December 2,
1991 5.30%
</TABLE>
[CAPTION]
<TABLE>
<CAPTION>
Annual Total Returns
1992 1993 1994
<S> <C> <C>
(8.57%) 27.21% 2.60%
</TABLE>
"Yield" is calculated by dividing the annualized net investment income per share
during a recent 30-day (or one month) period of a class of shares of a Fund by
the maximum public offering price per share on the last day of that period.
The "tax-equivalent yield" of the Nations Municipal Income Fund, Nations
Short-Term Municipal Income Fund, Nations Intermediate Municipal Bond Fund, the
State Intermediate Municipal Bond Funds and the State Municipal Bond Funds also
may be quoted from time to time, which shows the level of taxable yield needed
to produce an after-tax equivalent to the Fund's tax-free yield. This is done by
increasing the Fund's yield (calculated as above) by the amount necessary to
reflect the payment of Federal income tax at a stated tax rate.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a Fund's portfolio and such Fund's
operating expenses. Investment performance also often reflects the risks
associated with a Fund's investment objective and policies. These factors should
be considered when comparing a Fund's investment results to those of other
mutual funds and other investment vehicles. Since yields fluctuate, yield data
cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
In addition to Trust A Shares, the Money Market Funds offer Trust B, Investor A,
Investor B, Investor C and Investor D Shares. In addition to Trust A Shares, the
Non-Money Market Funds offer Trust B, Investor A, Investor C and Investor N
Shares. Each class of shares may bear different sales charges, shareholder
servicing fees, loads and other expenses, which may cause the performance of a
class to differ from the performance of the other classes. Performance
quotations will be computed separately for each class of a Fund's shares. Any
fees charged by an institution directly to its customers' accounts in connection
with investments in the Funds will not be included in calculations of total
return or yield. Each Fund's annual report contains additional performance
information and is available upon request without charge from the Funds'
distributor or your Institution, as defined below.
48
<PAGE>
How The Funds Are Managed
The business and affairs of Nations Fund Trust, Nations Fund, Inc. and Nations
Portfolios are managed under the direction of their Board of Trustees and Boards
of Directors, respectively. Nations Fund Trust's SAI contains the names of and
general background information concerning each Trustee of Nations Fund Trust.
Nations Fund, Inc.'s and Nations Portfolios' SAI contains the names of and
general background information concerning each Director of Nations Fund, Inc.
and Nations Portfolios.
Nations Fund and NationsBank have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially comply in all
material respects with the recommendations set forth in the May 9, 1994 Report
of the Advisory Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISER: NationsBank, through its investment management division,
serves as investment adviser to the Funds. NationsBank is an indirect wholly
owned subsidiary of NationsBank Corporation, a bank holding company organized as
a North Carolina corporation. NationsBank has its principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255.
NationsBank provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking. Although Nations Portfolios, as
a new registrant, does not have an operating history, NationsBank has
significant experience managing mutual funds.
Nations Gartmore, with principal offices at One NationsBank Plaza, Charlotte,
North Carolina 28255, serves as sub-investment adviser to Nations International
Equity Fund, Nations Emerging Markets Fund, Nations Pacific Growth Fund and
Nations Global Government Income Fund pursuant to a sub-advisory agreement.
Nations Gartmore is a joint venture structured as a general partnership between
NB Partner Corp., a wholly owned subsidiary of NationsBank, and Gartmore U.S.
Limited, a wholly owned subsidiary of Gartmore plc, a UK company listed on the
London Stock Exchange which is the holding company for a leading UK based
international fund management group of companies (the "Gartmore Group"). Banque
Indosuez S.A., a leading French bank, owns 75% of the equity of Gartmore plc.
The initial asset management company in the Gartmore Group was founded in 1969
and the Gartmore Group currently provides investment management and advisory
services to pension funds, unit trusts, offshore funds and investment funds. As
of December 31, 1994 the Gartmore Group had over $30 billion in assets under
management. Although Nations Gartmore is newly formed with no experience
managing mutual funds, many of its professionals have, in their capacity as
employees of the Gartmore Group, managed mutual funds.
Subject to the general supervision of Nations Fund Trust's Board of Trustees and
Nations Fund, Inc.'s and Nations Portfolios' Boards of Directors, and in
accordance with each Fund's investment policies, NationsBank (and/or Nations
Gartmore) formulates guidelines and lists of approved investments for each Fund,
makes decisions with respect to and places orders for each Fund's purchases and
sales of portfolio securities and maintains records relating to such purchases
and sales. With respect to the Non-Money Market Funds and the Nations Tax Exempt
Fund, NationsBank (and/or Nations Gartmore) is authorized to allocate purchase
and sale orders for portfolio securities to certain financial institutions,
including, in the case of agency transactions, financial institutions which are
affiliated with NationsBank (and/or Nations Gartmore) or which have sold shares
in such Funds, if NationsBank (and/or Nations Gartmore) believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms. From time to time, to the extent
consistent with its investment objective, policies and restrictions, each Fund
may invest in securities of companies with which NationsBank or Banque Indosuez
S.A. has a lending relationship. For the services provided and expenses assumed
pursuant to various Advisory Agreements, NationsBank is entitled to receive
advisory fees, computed daily and paid monthly, at the annual rates of: 0.25% of
the first $250 million of the combined average daily net assets of both Nations
Prime Fund and Nations Treasury Fund, plus 0.20% of the combined average daily
net assets of such Funds in excess of $250 million; 0.40% of the average daily
net assets of each of Nations Government Money Market Fund and Nations Tax
Exempt Fund; 0.50% of the average daily net assets of each of the Nations Equity
Index Fund, Nations Short-Term Municipal Income Fund, Nations Intermediate
Municipal Bond Fund and the State Intermediate Municipal Bond Funds; 0.60% of
the average daily net assets of each of the Nations Short-Intermediate
Government Fund, Nations Short-Term Income Fund, Nations Diversified Income
Fund, Nations Strategic Fixed Income Fund, Nations Mortgage-Backed Securities
Fund, Nations Municipal Income Fund and the State Municipal Bond Funds; 0.75% of
the average daily net assets of each of Nations Value Fund, Nations Capital
Growth Fund, Nations Emerging Growth Fund, Nations Disciplined Equity Fund and
Nations Balanced
49
<PAGE>
Assets Fund; 0.65% of the first $100 million of the Nations Government
Securities Fund's average daily net assets, plus 0.55% of the Fund's average
daily net assets in excess of $100 million and up to $250 million, plus 0.50% of
the Fund's average daily net assets in excess of $250 million; 0.75% of the
first $100 million of the Nations Equity Income Fund's average daily net assets,
plus 0.70% of the Fund's average daily net assets in excess of $100 million and
up to $250 million, plus 0.60% of the Fund's average daily net assets in excess
of $250 million; 0.90% of the average daily net assets of Nations International
Equity Fund; 1.10% of the average daily net assets of Nations Emerging Markets
Fund; 0.90% of the average daily net assets of Nations Pacific Growth Fund; and
0.70% of the average daily net assets of Nations Global Government Income Fund.
For services provided and expenses assumed pursuant to a sub-advisory agreement,
Nations Gartmore is entitled to receive from NationsBank sub-advisory fees,
computed daily and paid monthly, at the annual rate of 0.70% of Nations
International Equity Fund's average daily net assets; 0.85% of Nations Emerging
Markets Fund's daily net assets; 0.70% of Pacific Growth Fund's daily net assets
and 0.54% of Nations Global Government Income Fund's daily net assets. Although
the advisory fees for Nations Value Fund, Nations Equity Income Fund, Nations
International Equity Fund, Nations Emerging Markets Fund, Nations Pacific Growth
Fund, Nations Global Government Income Fund, Nations Capital Growth Fund,
Nations Emerging Growth Fund, Nations Disciplined Equity Fund and Nations
Balanced Assets Fund are higher than the advisory fees paid by most other mutual
funds, Nations Fund believes that the fees are comparable to the advisory fees
paid by many other funds with similar investment objectives and policies.
From time to time, NationsBank and/or Nations Gartmore may waive (either
voluntarily or pursuant to applicable state limitations) advisory fees payable
by a Fund. For the fiscal year ended November 30, 1994, after waivers, Nations
Fund Trust paid NationsBank advisory fees at the indicated rate of the following
Funds' average daily net assets: Nations Government Money Market Fund -- 0.16%;
Nations Tax Exempt Fund -- 0.09%; Nations Value Fund -- 0.74%; Nations Capital
Growth Fund -- 0.75%; Nations Emerging Growth Fund -- 0.75%; Nations Disciplined
Equity Fund -- 0.05%; Nations Equity Index Fund -- 0.10%; Nations Balanced
Assets Fund -- 0.75%; Nations Short-Intermediate Government Fund -- 0.40%;
Nations Short-Term Income Fund -- 0.29%; Nations Diversified Income Fund --
0.40%; Nations Strategic Fixed Income Fund -- 0.52%; Nations Mortgage-Backed
Securities Fund -- 0.50%; Nations Municipal Income Fund -- 0.32%; Nations
Short-Term Municipal Income Fund -- 0.10%; Nations Intermediate Municipal Bond
Fund -- 0%; Nations Florida Intermediate Municipal Bond Fund -- 0.30%; Nations
Florida Municipal Bond Fund -- 0%; Nations Georgia Intermediate Municipal Bond
Fund -- 0.30%; Nations Georgia Municipal Bond Fund -- 0%; Nations Maryland
Intermediate Municipal Bond Fund -- 0.30%; Nations Maryland Municipal Bond
Fund -- 0%; Nations North Carolina Intermediate Municipal Bond Fund -- 0.24%;
Nations North Carolina Municipal Bond Fund -- 0%; Nations South Carolina
Intermediate Municipal Bond Fund -- 0.30%; Nations South Carolina Municipal Bond
Fund -- 0%; Nations Tennessee Intermediate Municipal Bond Fund -- 0.15%; Nations
Tennessee Municipal Bond Fund -- 0%; Nations Texas Intermediate Municipal Bond
Fund -- 0.28%; Nations Texas Municipal Bond Fund -- 0%; Nations Virginia
Intermediate Municipal Bond Fund -- 0.38%; and Nations Virginia Municipal Bond
Fund -- 0%. For the fiscal year ended November 30, 1994, after waivers, Nations
Disciplined Equity Fund paid its prior sub-adviser fees at the rate of 0.21% of
the Fund's average daily net assets.
For the fiscal year ended May 31, 1995, after waivers, Nations Fund, Inc. paid
NationsBank advisory fees at the indicated rate of the following Funds' average
daily net assets: Nations Prime Fund -- 0.13%; Nations Treasury Fund -- 0.16%;
Nations Government Securities Fund -- 0.46%; Nations Equity Income
Fund -- 0.68%; and Nations International Equity Fund -- 0.40%. For the fiscal
year ended May 31, 1995, after waivers, Nations Fund, Inc. paid the prior
sub-adviser for Nations International Equity Fund 0.38% of the Fund's average
daily net assets.
Sharon M. Herrmann has been the principal portfolio manager for Nations Value
Fund since its inception in 1989. Ms. Herrmann is Senior Vice President and
Director of the Value Equity Style Group and personally manages the core value
equity funds of NationsBank's trust investment division. Ms. Herrmann has over
20 years investment experience with NationsBank. Ms. Herrmann earned the
Chartered Financial Analyst designation in 1985 and is a member of the
Association for Investment Management and Research.
Eric S. Williams, a Senior Vice President of NationsBank, has been the principal
portfolio manager for Nations Equity Income Fund since 1991. Mr. Williams is
Senior Portfolio Manager for NationsBank's investment management division's
Equity Income Style Group. He has a B.S. in Business Administration, SUMMA CUM
LAUDE, from East Carolina University and has an M.B.A. in Finance from Indiana
University. Mr. Williams has been with NationsBank's investment management
division since 1986. He is a member of the Association for Investment Management
and Research and is on the Advisory Board of Indiana University's Reese
Investment Fund.
Stephen Watson has been the principal portfolio manager of the Nations
International Equity Fund since February, 1995. He joined the Gartmore Group as
a Global
50
<PAGE>
Fund Manager in August 1993 and was recently appointed Head of the International
and Global Team. Prior to that, Mr. Watson was employed by James Capel Fund
Managers where he acted as a Director, Global Fund Manager and Client Services
Manager for various international clients. From 1980 to 1987 he was associated
with Capel-Cure Myers in their portfolio Management Division and prior to that
he was with the investment division at Samuel Montagu. Mr. Watson is currently a
member of the Securities Institute.
Andrew Fleming is the principal portfolio manager of the Nations Emerging
Markets Fund. Mr. Fleming is Chief Investment Officer for Nations Gartmore and
head of the emerging markets team. Mr. Fleming joined Gartmore in 1984 as an
analyst and fund manager on the European desk. In 1986, he joined the Far East
team and, in 1993, became head of the Far East desk. Mr. Fleming was then
promoted to head of overseas equities. He graduated from the University of York,
England.
Seok Teoh is the principal portfolio manager of the Nations Pacific Growth Fund.
She has been associated with the Gartmore Group since 1990 as the London based
manager on its Far East desk. Prior to that, Ms. Teoh worked for Overseas Union
Bank Securities in Singapore where she was responsible for Singaporean and
Malaysian equity sales and then subsequently for Rothschild as a Fund Manager in
Singapore and later in Tokyo. Ms. Teoh, who is a native of Singapore, is fluent
in Mandarin and Cantonese and received an Economics degree from the University
of Durham in 1985.
Philip J. Sanders, a member of the Value Equity Group, has been the principal
portfolio manager for the Nations Capital Growth Fund since May of 1995. Mr.
Sanders is also the Vice President and Fund Manager of the Nations Balanced
Target Maturity Fund. Mr. Sanders joined NationsBank in 1988 and prior to
joining NationsBank he was employed at Duke Power Company for six years where he
supervised and performed various types of detailed financial analysis. He holds
a B.A. in Economics from the University of Michigan and a M.B.A. from the
University of North Carolina in Charlotte. He is a Chartered Financial Analyst
and a member of the Association for Investment Management and Research.
Edward E. Smiley is a Senior Vice President of NationsBank and has been the
principal portfolio manager for Nations Emerging Growth Fund since 1992. Mr.
Smiley received his B.B.A. in Management from Southern Methodist University in
1966 and is a Chartered Financial Analyst. After serving in investment positions
with Merrill Lynch and Dean Witter, Mr. Smiley joined Interfirst Investment
Management as a senior portfolio manager in 1980. Mr. Smiley manages
Emerging-Midcap Funds Style for NationsBank. Mr. Smiley also serves as one of
the officer members on the Growth Equity Style Group. Mr. Smiley is a member of
the Association for Investment Management and Research and the Dallas
Association of Investment Analysts. Mr. Smiley has over 25 years of investment
experience.
Steve Smith, a Senior Vice President at NationsBank, has been portfolio manager
for the Disciplined Equity Fund since April 1995. Mr. Smith has approximately
twenty years of investment management experience, the last twelve years with
NationsBank and its affiliates. Mr. Smith is a Chartered Financial Analyst and a
member of the Association of Investment Management and Research. Mr. Smith
earned a B.S. in engineering and an M.B.A. from the University of Alabama.
Julie L. Hale is the Vice President and Manager of the Balanced Assets Group and
Co-Manager of the Equity Income Group and has been the principal portfolio
manager for the Nations Balanced Assets Fund since May of 1995. Ms. Hale joined
NationsBank in 1991 and was previously employed with National City Bank in Ohio
and the Mercantile Safe Deposit & Trust Company in Baltimore, Maryland. She
received a B.S. from Mount St. Mary's College and an M.B.A. from Kent State
University. She is a Chartered Financial Analyst and a member of the Association
for Investment Management and Research.
Kathy E. Bowman joined NationsBank in March 1995 as a Vice President and Fixed
Income Portfolio Manager. She has been the principal portfolio manager for
Nations Mortgage-Backed Securities Fund and Nations Government Securities Fund
since April, 1995. Ms. Bowman is a member of the Fixed Income Team and has over
fourteen years of investment experience. Prior to joining NationsBank, she was a
Director of Fixed Income Securities at Providian Capital Management and managed
public bond portfolios for insurance products. Ms. Bowman received a BBA from
Memphis State University, and holds the Chartered Financial Analyst designation.
Mark Rimmer is the principal portfolio manager of the Nations Global Government
Income Fund and has been an International Fixed Income Manager with the Gartmore
Group since 1990. He joined Gulf International Bank in 1986 on the trading desk,
and subsequently joined their Investment Management Group in 1988, managing
multi-currency funds for institutional clients in the Gulf region. Prior to that
he was associated with Sumitomo Finance International as a senior trader. Mr.
Rimmer graduated from Cambridge University in 1984 with an honors degree in
Economics. Mr. Rimmer also is a member of the Institute of Investment Management
and Research.
Gregory H. Cobb is a Vice President and Fixed Income Portfolio Manager at
NationsBank and has been principal portfolio manager for Nations Short-Term
Income Fund since 1993. Mr. Cobb, who joined NationsBank in 1993, is a member of
the Fixed Income Group and has
51
<PAGE>
over 7 years of portfolio management experience. Mr. Cobb received a B.A. from
the University of North Carolina-Chapel Hill.
Mark S. Ahnrud is a Vice President and Fixed Income Portfolio Manager at
NationsBank. He has been the principal portfolio manager for Nations Diversified
Income Fund since 1992, and has been the principal portfolio manager for Nations
Strategic Fixed Income Fund since 1993. Mr. Ahnrud is a member of the Fixed
Income Team and has eight years of investment experience. Mr. Ahnrud received a
B.S. from Babson College and an M.B.A. from Duke University. Mr. Ahnrud holds
the Chartered Financial Analyst designation.
John Swaim joined NationsBank in 1986 and has been the principal portfolio
manager for Nations Short-Intermediate Government Fund since 1995. Mr. Swaim is
a member of the Fixed Income Team and has over eight years of investment
experience. Mr. Swaim previously served as derivative products manager for the
NationsBank Texas Corporate Investment Division portfolio. Mr. Swaim received
his B.S. from the University of North Texas and holds an M.B.A. from the
University of Texas, Arlington.
Michele M. Poirier is responsible for the management of Nations Municipal Income
Fund, Nations Florida Intermediate Municipal Bond Fund, Nations Florida
Municipal Bond Fund, Nations Georgia Intermediate Municipal Bond Fund, Nations
Georgia Municipal Bond Fund, Nations South Carolina Intermediate Municipal Bond
Fund and Nations South Carolina Municipal Bond Fund. Ms. Poirier, a Vice
President and Fixed Income Portfolio Manager, is responsible for over $1 billion
in tax-free assets. She joined NationsBank in 1990 and is the principal
portfolio manager for 9 municipal bond mutual funds and 6 municipal bond common
trust funds. Ms. Poirer has over 20 years of investment experience from
positions previously held in management, sales and trading at Financial Service
Corporation, Bankers Trust Company and The Robinson-Humphrey Company,
respectively. She earned a B.B.A. in marketing from Georgia State University.
Mathew M. Kiselak, a Vice President and Fixed Income Portfolio Manager
responsible for over $600 million in assets, is responsible for the management
of Nations Tennessee Intermediate Municipal Bond Fund, Nations Tennessee
Municipal Bond Fund, Nations Texas Intermediate Municipal Bond Fund, Nations
Texas Municipal Bond Fund, Nations North Carolina Intermediate Municipal Bond
Fund, Nations North Carolina Municipal Bond Fund and Nations Short-Term
Municipal Income Fund. Mr. Kiselak joined NationsBank in 1992 and has over seven
years of investment experience. Prior to joining NationsBank, Mr. Kiselak was a
tax-exempt portfolio manager and bank credit analyst for Reich & Tang Inc. He
received his B.A. in economics from Pace University.
John C. Kohl, a Senior Vice President and Fixed Income Portfolio Manager, has
been the principal portfolio manager of Nations Maryland Intermediate Municipal
Bond Fund, Nations Maryland Municipal Bond Fund, Nations Virginia Intermediate
Municipal Bond Fund, Nations Virginia Municipal Bond Fund and Nations
Intermediate Municipal Bond Fund since August 1994. Mr. Kohl, who has over 15
years of investment experience, joined NationsBank in 1994 and currently is
responsible for managing over $1 billion in tax-free assets. Prior to joining
NationsBank, Mr. Kohl was chief investment officer for a life insurance company,
fixed-income group manager for the personal trust group of a large midwestern
bank, and an asset-liability management consultant. Mr. Kohl received a joint
B.A. in Economics and North American Studies from McGill University in Montreal
and has continued his studies at The American
University and the J. L. Kellogg Graduate School of Management.
Morrison & Foerster, counsel to Nations Fund and special counsel to NationsBank
has advised Nations Fund and NationsBank that NationsBank may perform the
services contemplated by the various Investment Advisory Agreements without
violation of the Glass-Steagall Act or other applicable banking laws or
regulations. Such counsel has pointed out, however, that there are no
controlling judicial or administrative interpretations or decisions and that
future judicial or administrative interpretations of, or decisions relating to,
present federal or state statutes, including the Glass-Steagall Act, and
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as future changes in such federal or state
statutes, regulations and judicial or administrative decisions or
interpretations, could prevent NationsBank from continuing to perform, in whole
or in part, such services. If NationsBank were prohibited from performing any of
such services, it is expected that the Board of Trustees of Nations Fund Trust
and the Boards of Directors of Nations Fund, Inc. and Nations Portfolios would
recommend to each Fund's shareholders that they approve a new advisory agreement
with another entity or entities qualified to perform such services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
Nations Fund pursuant to Administration Agreements. Pursuant to the terms of the
Administration Agreements, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of
First Data Corporation, with
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principal offices at One Exchange Place, Boston, Massachusetts 02109, serves as
the co-administrator of Nations Fund pursuant to Co-Administration Agreements.
Under the Co-Administration Agreements, TSSG provides various administrative and
accounting services to the Funds including performing the calculations necessary
to determine net asset value per share and dividends, preparing tax returns and
financial statements and maintaining the portfolio records and certain of the
general accounting records for the Funds. For the services rendered pursuant to
the Administration and Co-Administration Agreements, Stephens and TSSG are
entitled to receive a combined fee at the annual rate of up to 0.10% of each
Fund's average daily net assets.
For the fiscal year ended November 30, 1994, after waivers, Nations Fund Trust
paid its administrators fees at the indicated rate of the following Funds'
average daily net assets: Nations Government Money Market Fund, Nations Tax
Exempt Fund, Nations Value Fund, Nations Capital Growth Fund, Nations Emerging
Growth Fund, Nations Disciplined Equity Fund, Nations Equity Index Fund, Nations
Balanced Assets Fund, Nations Short-Intermediate Government Fund, Nations
Short-Term Income Fund, Nations Diversified Income Fund, Nations Strategic Fixed
Income Fund, Nations Mortgage-Backed Securities Fund, Nations Municipal Income
Fund, Nations Intermediate Municipal Bond Fund, Nations Florida Intermediate
Municipal Bond Fund, Nations Georgia Intermediate Municipal Bond Fund, Nations
Maryland Intermediate Municipal Bond Fund, Nations North Carolina Intermediate
Municipal Bond Fund, Nations South Carolina Intermediate Municipal Bond Fund,
Nations Tennessee Intermediate Municipal Bond Fund, Nations Texas Intermediate
Municipal Bond Fund and Nations Virginia Intermediate Municipal Bond
Fund -- 0.09%; Nations Short-Term Municipal Income Fund, Nations North Carolina
Municipal Bond Fund, Nations Tennessee Municipal Bond Fund and Nations Texas
Municipal Bond Fund -- 0.06%; Nations Florida Municipal Bond Fund -- 0.07%; and
Nations Georgia Municipal Bond Fund, Nations Maryland Municipal Bond Fund,
Nations South Carolina Municipal Bond Fund and Nations Virginia Municipal Bond
Fund -- 0.05%.
For the fiscal year ended May 31, 1995, after waivers, Nations Fund, Inc. paid
its administrators fees at the rate of 0.09% of the average daily net assets of
the following Funds: Nations Prime Fund, Nations Treasury Fund, Nations Equity
Income Fund, Nations International Equity Fund and Nations Government Securities
Fund.
It is anticipated that beginning in November of 1995, NationsBank will serve as
sub-administrator for Nations Fund pursuant to a Sub-Administration Agreement.
Pursuant to the terms of the Sub-Administration Agreement, NationsBank will
assist Stephens in supervising, coordinating and monitoring various aspects of
the Funds' administrative operations. For providing such services, NationsBank
shall be entitled to receive a monthly fee from Stephens based on an annual rate
of .01% of the Funds' average daily net assets.
Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker-dealer with principal
offices at 111 Center Street, Little Rock, Arkansas 72201. Nations Fund has
entered into distribution agreements with Stephens which provide that Stephens
has the exclusive right to distribute shares of the Funds. Stephens may pay
service fees or commissions to Institutions which assist customers in purchasing
Trust Shares of the Funds.
Morgan Guaranty Trust Company ("Morgan Guaranty"), Avenue des Arts, 35 1040
Brussels, Belgium, serves as custodian for the assets of the Nations
International Equity Fund, Nations Emerging Markets Fund, Nations Pacific Growth
Fund and Nations Global Government Income Fund.
TSSG serves as the Transfer Agent for each of the Fund's Trust Shares.
NationsBank of Texas, N.A. ("NationsBank of Texas" and, collectively with Morgan
Guaranty, called "Custodians") serves as custodian for the assets of each Fund
except Nations International Equity Fund, Nations Emerging Markets Fund, Nations
Pacific Growth Fund and Nations Global Government Income Fund. NationsBank of
Texas, which also serves as the sub-transfer agent for each Fund's Trust Shares,
is located at 1401 Elm Street, Dallas, Texas 75202, and is a wholly owned
subsidiary of NationsBank Corporation. In return for providing custodial
services, NationsBank of Texas is entitled to receive, in addition to out-of-
pocket expenses, fees payable monthly (i) at the rate of 1.25% of 1% of the
average daily net assets of each Fund for which it acts as custodian, (ii)
$10.00 per repurchase collateral transaction by such Funds, and (iii) $15.00 per
purchase, sale and maturity transaction involving such Funds. In return for
providing sub-transfer agency services for the Trust Shares of Nations Fund,
NationsBank of Texas is entitled to receive an annual fee from TSSG of $251,000.
Price Waterhouse LLP serves as independent accountant to Nations Funds. Their
address is 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES: The accrued expenses of each Fund are deducted from the Fund's total
accrued income before dividends are declared. These expenses include, but are
not limited to: fees paid to NationsBank, Stephens and TSSG; taxes; interest;
fees (including fees paid to Nations Fund's trustees, directors and officers);
federal and state securities registration and qualification fees; brokerage fees
and commissions; costs of preparing and printing prospectuses for regulatory
purposes and for
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distribution to existing shareholders; charges of the Custodians and Transfer
Agent; certain insurance premiums; outside auditing and legal expenses; costs of
shareholder reports and shareholder meetings; other expenses which are not
expressly assumed by NationsBank, Stephens or TSSG under their respective
agreements with Nations Fund; and any extraordinary expenses. Any general
expenses of Nations Fund Trust, Nations Fund, Inc. and/or Nations Portfolios
that are not readily identifiable as belonging to a particular investment
portfolio are allocated among all portfolios in the proportion that the assets
of a portfolio bears to the assets of Nations Fund Trust, Nations Fund, Inc.
and/or Nations Portfolios or in such other manner as the Board of Trustees or
the relevant Board of Directors determines is fair and equitable.
Organization And History
The Funds are members of the Nations Fund Family, which consists of Nations Fund
Trust, Nations Fund, Inc., Nations Portfolios and Nations Institutional Reserves
(formerly known as The Capitol Mutual Funds). The Nations Fund Family currently
has 44 distinct investment portfolios and total assets in excess of $16 billion.
NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. The Money Market Funds currently offer six classes of
shares -- Trust A Shares, Trust B Shares, Investor A Shares, Investor B Shares,
Investor C Shares and Investor D Shares. The Non-Money Market Funds currently
offer five classes of shares -- Trust A Shares, Trust B Shares, Investor A
Shares, Investor C Shares and Investor N Shares. Certain Funds, however, do not
offer shares of each class. This Prospectus relates only to the Trust A Shares
of the following funds of Nations Fund Trust: Nations Government Money Market
Fund, Nations Tax Exempt Fund, Nations Value Fund, Nations Capital Growth Fund,
Nations Emerging Growth Fund, Nations Disciplined Equity Fund, Nations Equity
Index Fund, Nations Balanced Assets Fund, Nations Short-Intermediate Government
Fund, Nations Short-Term Income Fund, Nations Diversified Income Fund, Nations
Strategic Fixed Income Fund, Nations Mortgage-Backed Securities Fund, Nations
Municipal Income Fund, Nations Short-Term Municipal Income Fund, Nations
Intermediate Municipal Bond Fund, Nations Florida Intermediate Municipal Bond
Fund, Nations Georgia Intermediate Municipal Bond Fund, Nations Maryland
Intermediate Municipal Bond Fund, Nations North Carolina Intermediate Municipal
Bond Fund, Nations South Carolina Intermediate Municipal Bond Fund, Nations
Tennessee Intermediate Municipal Bond Fund, Nations Texas Intermediate Municipal
Bond Fund, Nations Virginia Intermediate Municipal Bond Fund, Nations Florida
Municipal Bond Fund, Nations Georgia Municipal Bond Fund, Nations Maryland
Municipal Bond Fund, Nations North Carolina Municipal Bond Fund, Nations South
Carolina Municipal Bond Fund, Nations Tennessee Municipal Bond Fund, Nations
Texas Municipal Bond Fund and Nations Virginia Municipal Bond Fund. To obtain
additional information regarding the Funds' other classes of shares which may be
available to you, contact your Institution (as defined below) or Nations Fund at
1-800-626-2275.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund, and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See Nations Fund Trust's SAI for examples of when the
1940 Act requires voting by fund.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose or vote with respect to more than 25% of the outstanding shares of
Nations Fund Trust and therefore could be considered to be a controlling person
of Nations Fund Trust for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series of shares over
which NationsBank and its affiliates possessed or shared power to dispose or
vote as of a certain date, see Nations Fund Trust's SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
NATIONS FUND, INC.: Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no operations prior to December 15, 1986. As of the date of
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this Prospectus, the authorized capital stock of Nations Fund, Inc. consists of
270,000,000,000 shares of common stock, par value of $.001 per share, which are
divided into series or funds each of which consists of separate classes of
shares. This Prospectus relates only to the Trust A Shares of the following
funds of Nations Fund, Inc.: Nations Prime Fund, Nations Treasury Fund, Nations
Equity Income Fund, Nations International Equity Fund and Nations Government
Securities Fund. To obtain additional information regarding the Funds' other
classes of shares which may be available to you, contact your Institution (as
defined below) or Nations Fund at 1-800-626-2275.
Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such fund
or class. In the event of dissolution or liquidation, holders of each class will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of that portion of the assets allocated to that class held in the
respective fund of Nations Fund, Inc., less (b) the liabilities of Nations Fund,
Inc. attributable to the respective fund or class or allocated among the funds
or classes based on the respective liquidation value of each fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Fund, Inc.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s shares.
Nations Fund, Inc.'s shares, when issued, will be fully paid and non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Fund, Inc. and therefore could be considered to be a controlling person
of Nations Fund, Inc. for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see Nations Fund, Inc.'s SAI. It is anticipated that Nations
Fund, Inc. will not hold annual shareholder meetings on a regular basis unless
required by the 1940 Act or Maryland law.
NATIONS PORTFOLIOS: Nations Portfolios was incorporated in Maryland on January
23, 1995. As of the date of this Prospectus, the authorized capital stock of
Nations Portfolios consists of 150,000,000,000 shares of common stock, par value
of $.001 per share, which are divided into series or funds each of which
consists of separate classes of shares. This Prospectus relates only to the
Trust A Shares of Nations Emerging Markets Fund, Nations Pacific Growth Fund and
Nations Global Government Income Fund of Nations Portfolios. To obtain
additional information regarding the Funds' other classes of shares which may be
available to you, contact your Institution (as defined below) or Nations Fund at
1-800-626-2275.
Shares of a fund and class have equal rights with respect to voting, except that
the holders of shares of a fund or class will have the exclusive right to vote
on matters affecting only the rights of the holders of such fund or class. In
the event of dissolution or liquidation, holders of each class will receive pro
rata, subject to the rights of creditors, (a) the proceeds of the sale of that
portion of the assets allocated to that class held in the respective fund of
Nations Portfolios, less (b) the liabilities of Nations Portfolios attributable
to the respective fund or class or allocated among the funds or classes based on
the respective liquidation value of each fund or class.
Shareholders of Nations Portfolios do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Portfolios. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Portfolios.
There are no preemptive rights applicable to any of Nations Portfolios' shares.
Nations Portfolios' shares, when issued, will be fully paid and non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Portfolios and, therefore, could be considered to be a controlling
person of Nations Portfolios for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see Nations
Portfolios' SAI. It is anticipated that Nations Portfolios will not hold annual
shareholder meetings on a regular basis unless required by the 1940 Act or
Maryland law.
Because this Prospectus combines disclosures on three separate investment
companies, there is a possibility that one investment company could become
liable for a misstatement, inaccuracy or incomplete disclosure in this
Prospectus concerning the other investment company. Nations Fund Trust, Nations
Fund, Inc. and Nations Portfolios have entered into an indemnification agreement
that creates a right of indemnification from the investment company responsible
for any such misstatement, inaccuracy or incomplete disclosure that may appear
in this Prospectus.
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About Your Investment
How To Buy Shares
Trust A Shares are sold primarily to bank trust departments and other financial
institutions (including NationsBank and its affiliated and correspondent banks)
("Institutions") acting on behalf of their customers ("Customers") having a
qualified trust account at or relationship with the Institution.
Trust Shares are purchased at net asset value per share without the imposition
of a sales charge according to procedures established by the Institution.
Institutions, however, may charge their Customers' accounts for services
provided in connection with the purchase of shares.
Purchases of the Money Market Funds may be effected on days on which the Federal
Reserve Bank of New York is open for business (a "Bank Business Day"). Purchases
of the Non-Money Market Funds may be effected on days on which the New York
Stock Exchange (the "Exchange") is open for business (a "NYSE Business Day").
Unless otherwise specified, the term Business Day in this Prospectus refers to a
Bank Business Day with respect to a Money Market Fund, and a NYSE Business Day
with respect to a Non-Money Market Fund.
There is a minimum initial investment of $1,000 for each record holder; there is
no minimum subsequent investment.
Nations Fund reserves the right to reject any purchase order. The issuance of
Trust A Shares is recorded on the books of the Funds, and share certificates are
not issued. It is the responsibility of Institutions to record beneficial
ownership of Trust A Shares and to reflect such ownership in the account
statements provided to their Customers.
EFFECTIVE TIME OF PURCHASES -- MONEY MARKET FUNDS: Purchases will be effected
only when federal funds are available for investment on the Business Day the
purchase order is received by Stephens or by the Transfer Agent. A purchase
order must be received by Stephens or by the Transfer Agent by 2:00 p.m.,
Eastern time (12 noon, Eastern time, with respect to Nations Tax Exempt Fund). A
purchase order received by Stephens or the Transfer Agent after such time will
not be accepted; notice thereof will be given to the Institution placing the
order, and any funds received will be returned promptly to the sending
Institution. If federal funds are not available by 4:00 p.m., Eastern time, the
order will be canceled. Trust Shares are purchased at the net asset value per
share next determined after receipt of the order by Stephens or by the Transfer
Agent.
Institutions are responsible for transmitting orders for purchases by their
Customers, and delivering required funds, on a timely basis. It is Stephens'
responsibility to transmit orders it receives to Nations Fund.
EFFECTIVE TIME OF PURCHASES -- NON-MONEY MARKET FUNDS: Purchase orders for Trust
A Shares in the Non-Money Market Funds which are received by Stephens or by the
Transfer Agent before the close of regular trading hours on the Exchange
(currently 4:00 p.m., Eastern time) on any Business Day are priced according to
the net asset value determined on that day but are not executed until 4:00 p.m.,
Eastern time, on the Business Day on which immediately available funds in
payment of the purchase price are received by the Fund's Custodian. Such payment
must be received not later than 4:00 p.m., Eastern time, by the third Business
Day following receipt of the order. If funds are not received by such date, the
order will not be accepted and notice thereof will be given to the Institution
placing the order. Payment for orders which are not received or accepted will be
returned after prompt inquiry to the sending Institution. Trust Shares are
purchased at the net asset value per share next determined after receipt of the
order by Stephens or by the Transfer Agent.
Institutions are responsible for transmitting orders for purchases of Trust A
Shares by their Customers, and for delivering required funds, on a timely basis.
It is Stephens' responsibility to transmit orders it receives to Nations Fund.
How To Redeem Shares
Customers may redeem all or part of their Trust A Shares in accordance with
instructions and limitations pertaining to their account at an Institution. It
is the responsibility of the Institutions to transmit redemption orders to
Stephens or to the Transfer Agent and to credit their Customers' accounts with
the redemption proceeds on a timely basis. It is the responsibility of Stephens
to transmit orders it receives to Nations Fund. No charge for wiring redemption
payments is imposed by Nations Fund, although the Institutions may charge their
Cus-
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tomer accounts for these or other services provided in connection with the
redemption of Trust Shares. Information concerning these services and any
charges are available from the Institutions. Redemption orders are effected at
the net asset value per share next determined after acceptance of the order by
Stephens or by the Transfer Agent.
With respect to the Money Market Funds, redemption orders must be received on a
Business Day before 2:00 p.m., Eastern time (12 noon, Eastern time, with respect
to Nations Tax Exempt Fund), and payment will normally be wired the same day to
the Institutions. Nations Fund reserves the right to wire redemption proceeds
within three Business Days after receiving the redemption orders if, in the
judgment of NationsBank, an earlier payment could adversely impact a Fund.
However, redemption proceeds for shares purchased by check may not be remitted
until at least 15 days after the date of purchase to ensure that the check has
cleared; a certified check, however, is deemed to be cleared immediately.
Redemption orders will not be accepted by Stephens or by the Transfer Agent
after 2:00 p.m., Eastern time (12
noon, Eastern time, with respect to Nations Tax Exempt Fund) for execution on
that Business Day.
With respect to the Non-Money Market Funds, redemption proceeds are normally
remitted in federal funds wired to the redeeming Institution within three
Business Days following receipt of the order.
Nations Fund may redeem a shareholder's Trust Shares if the balance in such
shareholder's account with the Fund drops below $500 as a result of redemptions,
and the shareholder does not increase the balance to at least $500 on 60 days'
written notice. If a shareholder has agreed with a particular Institution to
maintain a minimum balance in his or her account at the Institution, and the
balance in such Institution account falls below that minimum, the shareholder
may be obliged to redeem all or a part of his or her Trust Shares in the Funds
to the extent necessary to maintain the required minimum balance in such
Institution account. Nations Fund also may redeem shares involuntarily or make
payment for redemption in readily marketable securities or other property under
certain circumstances in accordance with the 1940 Act.
How The Funds Value Their Shares
The net asset value of a share of each class is calculated by dividing the total
value of its assets, less liabilities, by the number of shares in the class
outstanding. Shares of the Money Market Funds are valued as of 2:00 p.m.,
Eastern time (1:00 p.m., Eastern time, with respect to Nations Tax Exempt Fund),
each Bank Business Day. Shares of the Non-Money Market Funds are valued as of
the close of regular trading on the Exchange (currently 4:00 p.m., Eastern time)
on each NYSE Business Day. Currently, the days on which the Federal Reserve Bank
of New York is closed (other than weekends) are: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Memorial Day (observed), Independence Day, Labor
Day, Columbus Day, Thanksgiving Day and Christmas Day. Currently, the days on
which the Exchange is closed (other than weekends) are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day (observed), Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
The assets in the Money Market Funds are valued based upon the amortized cost
method. Although Nations Fund seeks to maintain the net asset value per share of
these Funds at $1.00, there can be no assurance that their net asset value per
share will not vary.
With respect to the Non-Money Market Funds, portfolio securities for which
market quotations are readily available are valued at market value. Short-term
investments that will mature in 60 days or less are valued at amortized cost,
which approximates market value. All other securities are valued at their fair
value following procedures approved by the Trustees or Directors.
How Dividends And Distributions Are Made;
Tax Information
DIVIDENDS AND DISTRIBUTIONS
MONEY MARKET FUNDS: Dividends from net investment income of each of the Money
Market Funds are declared daily to shareholders at 2:00 p.m., Eastern time (1:00
p.m., Eastern time, with respect to Nations Tax Exempt Fund), on the day of
declaration. Trust A Shares begin earning dividends on the day the purchase
order is executed and continue earning dividends through and including the day
before the redemption order is executed (E.G., the settlement date). Dividends
are paid within five Business Days after the end of each month. Dividends are
paid in the form of additional Trust A Shares of the same Fund unless the
Customer has elected prior to the date of distribution to receive payment in
cash. Such election, or any revocation thereof,
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must be made in writing to the Fund's Transfer Agent and will become effective
with respect to dividends paid after its receipt. Dividends are paid in cash
within five Business Days after a shareholder's complete redemption of his Trust
A Shares in a Fund. To the extent that there are any net short-term capital
gains, they will be paid at least annually.
NON-MONEY MARKET FUNDS: Dividends from net investment income are declared daily
and paid monthly by the Bond Funds. Dividends from net investment income are
declared and paid each fiscal quarter by the Equity Funds and the Balanced Fund.
Each Fund's net realized capital gains (including net short-term capital gains)
are distributed at least annually.
Trust A Shares of the Bond Funds are eligible to begin earning dividends that
are declared on the day the purchase order is executed and continue to be
eligible for dividends through and including the day before the redemption order
is executed. Trust A Shares of the Equity Funds and the Balanced Fund are
eligible to receive dividends when declared, provided, however, that the
purchase order for such shares is received at least one day prior to the
dividend declaration and such shares continue to be eligible for dividends
through and including the day before the redemption order is executed.
The net asset value of Trust A Shares in the Non-Money Market Funds will be
reduced by the amount of any dividend or distribution. Dividends and
distributions are paid in cash within five Business Days of the end of the month
or quarter to which the dividend relates. Certain purchasing Institutions may
provide for the reinvestment of dividends in additional Trust A Shares of the
same Fund. Dividends and distributions payable to a shareholder are paid in cash
within five Business Days after a shareholder's complete redemption of his or
her Trust A Shares in a Fund.
TAX INFORMATION
Each of the Funds intends to qualify as a separate "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Fund of liability for Federal income taxes to the
extent its earnings are distributed in accordance with the Code.
Each Fund intends to distribute substantially all of its investment company
taxable income and net tax-exempt income each taxable year. Such distributions
by a Fund of its net investment income (including net foreign currency gains)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss will be taxable as ordinary income to shareholders who
are not currently exempt from Federal income taxes, whether such income is
received in cash or reinvested in additional shares. (Federal income taxes for
distributions to an Individual Retirement Account are generally deferred under
the Code.)
Corporate shareholders may be entitled to the dividends received deduction for
distributions from those Funds investing in the stock of domestic corporations
to the extent of the total qualifying dividends received by the distributing
Fund. Corporate shareholders of the Nations International Equity, Nations
Emerging Markets and Nations Pacific Growth Funds may be eligible for the
dividends-received deduction on the dividends (excluding the net capital gains
dividends) paid by these Funds to the extent that a Fund's income is derived
from dividends (which, if received directly, would qualify for such deduction)
received from domestic corporations. In order to qualify for the
dividends-received deduction, a corporate shareholder must hold the fund shares
paying the dividends upon which the deduction is based for at least 46 days.
Substantially all of the net realized long-term capital gains of the Non-Money
Market Funds, if any, will be distributed at least annually to such Funds'
shareholders. These Funds will generally have no tax liability with respect to
such gains, and the distributions will be taxable to such shareholders who are
not currently exempt from Federal income taxes as long-term capital gains,
regardless of how long the shareholders have held such Funds' shares and whether
such gains are received in cash or reinvested in additional shares. The Money
Market Funds do not expect to realize long-term capital gains and, therefore, do
not expect to distribute any capital gain dividends.
Each year, shareholders will be notified as to the amount and Federal tax status
of all dividends and capital gains paid during the prior year. Such dividends
and capital gains may also be subject to state and local taxes.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by a Fund on December 31 of such year in
the event such dividends are actually paid during January of the following year.
Federal law requires Nations Fund to withhold 31% from any dividends (other than
exempt-interest dividends) paid by Nations Fund and/or redemptions (including
exchange redemptions) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply. If
the Internal Revenue Service has notified Nations Fund that the Taxpayer
Identification Number listed on a shareholder account is incorrect according to
its records, or that the shareholder is subject to backup withholding, the Fund
is required by the Internal Revenue Service to withhold 31% of any dividend
(other than exempt-interest dividends) and/or redemption (including
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exchange redemptions). Amounts withheld are applied to the shareholder's Federal
tax liability, and a refund may be obtained from the Internal Revenue Service if
withholding results in overpayment of taxes. Federal law also requires the Funds
to withhold 30% or the applicable tax treaty rate from dividends paid to certain
nonresident alien, non-U.S. partnership and non-U.S. corporation shareholder
accounts.
Portions of each Fund's investment income may be subject to foreign income taxes
withheld at their source. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. Generally, more than 50% of
the value of the total assets of each Fund will consist of securities of foreign
issuers, and therefore each Fund may elect to "pass through" to its shareholders
these foreign taxes, if any. In such event each shareholder will be required to
include his or her pro rata portion thereof in his or her gross income, but will
be able to deduct or (subject to various limitations) claim a foreign tax credit
against U.S. income taxes for such amount.
NATIONS TAX EXEMPT FUND, NATIONS MUNICIPAL INCOME FUND, NATIONS SHORT-TERM
MUNICIPAL INCOME FUND, NATIONS INTERMEDIATE MUNICIPAL BOND FUND, THE STATE
INTERMEDIATE MUNICIPAL BOND FUNDS AND THE STATE MUNICIPAL BOND FUNDS
As regulated investment companies, each of these Funds is entitled to pass
through to their shareholders tax-exempt interest income ("exempt-interest
dividends") subject to certain conditions which these Funds intend to satisfy.
To the extent that any of these Funds earn taxable income or realize long-term
capital gains, distributions to shareholders from such sources will be subject
to Federal income taxes. The policy of the Nations Municipal Income Fund,
Nations Short-Term Municipal Income Fund, Nations Intermediate Municipal Bond
Fund, the State Intermediate Municipal Bond Funds and the State Municipal Bond
Funds is to pay to their shareholders an amount equal to at least 90% of their
exempt-interest income net of certain deductions and 90% of their investment
company taxable income. The Nations Tax Exempt Fund does not intend to earn
investment company taxable income or long-term capital gains. Exempt-interest
dividends may be treated by shareholders as items of interest excludable from
their Federal gross income under Section 103(a) of the Code unless, under the
circumstances applicable to the particular shareholder, the exclusion would be
disallowed. (See Nations Fund Trust's SAI under "Additional Information
Concerning Taxes.") Distributions of net investment income by Nations Tax Exempt
Fund, Nations Municipal Income Fund, Nations Intermediate Municipal Bond Fund
and Nations Short-Term Municipal Income Fund may be taxable to investors under
state or local law even though a substantial portion of such distributions may
be derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such income taxes.
If any of these Funds should hold certain private activity bonds issued after
August 7, 1986, shareholders must include, as an item of tax preference, the
portion of dividends paid by the Fund that is attributable to interest on such
bonds in their Federal alternative minimum taxable income for purposes of
determining liability (if any) for the 28% alternative minimum tax applicable to
individuals and the 20% alternative minimum tax and the environmental tax
applicable to corporations. Corporate shareholders must also take all
exempt-interest dividends into account in determining certain adjustments for
Federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed at the rate of 0.12% on the excess of
the corporation's modified Federal alternative minimum taxable income over
$2,000,000. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.
With respect to the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds, it is anticipated that exempt-interest dividends derived
from tax-exempt interest paid on municipal obligations of the pertinent state
and that state's political subdivisions, agencies, instrumentalities and
authorities, and certain other issuers, including Puerto Rico and Guam, will be
exempt from state income tax with respect to those states which impose a state
income tax. Florida and Texas do not impose income taxes, but Florida, Georgia
and North Carolina impose a tax upon intangible personal property which may
apply to shares of the Funds held by residents of those states. Florida has
issued a Technical Assistance Advisement indicating that shares in the Nations
Florida Intermediate Municipal Bond Fund and the Nations Florida Municipal Bond
Fund will not be subject to Florida's intangibles tax, subject to certain
requirements which these two Funds intend to satisfy. See Nations Fund Trust's
SAI for further details about state tax treatment relevant to shareholders of
these Funds.
In addition to annual disclosures as to Federal tax consequences of dividends
and distributions, shareholders of the State Intermediate Municipal Bond Funds
and the State Municipal Bond Funds will also be advised as to the state tax
consequences of dividends and distributions made each year.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning.
Accordingly, potential investors should consult their tax advisers with specific
reference to their
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own tax situations. Further tax information is contained in the SAIs.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAIs contain more
information concerning such investments.
ASSET BACKED SECURITIES: Asset Backed Securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset Backed
Securities consist of both mortgage and non-mortgage backed securities.
Interests in pools of these assets differ from other forms of debt securities,
which normally provide for periodic payment of interest in fixed amounts with
principal paid at maturity or specified call dates. Instead, Asset Backed
Securities provide periodic payments which generally consist of both interest
and principal payments.
The life of an Asset Backed Security varies depending upon rate of the
prepayment of the underlying debt instruments. The rate of such prepayments will
be primarily a function of current market interest rates, although other
economic and demographic factors may be involved. For example, falling interest
rates generally result in an increase in the rate of prepayments of mortgage
loans while rising interest rates generally decrease the rate of prepayments. An
acceleration in prepayments in response to sharply falling interest rates will
shorten the security's average maturity and limit the potential appreciation in
the security's value relative to a conventional debt security. Consequently,
Asset Backed Securities are not as effective in locking in high, long-term
yields. Conversely, in periods of sharply rising rates, prepayments are
generally slow, increasing the security's average life and its potential for
price depreciation.
MORTGAGE BACKED SECURITIES represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself.
Mortgage pass-through securities may represent participation interests in pools
of residential mortgage loans originated by U.S. governmental or private lenders
and guaranteed, to the extent provided in such securities, by the U.S.
Government or one of its agencies, authorities or instrumentalities. Such
securities, which are ownership interests in the underlying mortgage loans,
differ from conventional debt securities, which provide for periodic payment of
interest in fixed amounts (usually semi-annually) and principal payments at
maturity or on specified call dates. Mortgage pass-through securities provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans.
The guaranteed mortgage pass-through securities in which a Fund may invest may
include those issued or guaranteed by GNMA, by FNMA and FHLMC. Such Certificates
are mortgage-backed securities which represent a partial ownership interest in a
pool of mortgage loans issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations. Such mortgage loans may have fixed or
adjustable rates of interest. Each mortgage loan included in the pool is either
insured by the Federal Housing Administration ("FHA") or guaranteed by the
Veterans Administration ("VA").
The average life of a GNMA Certificate is likely to be substantially less than
the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return on the greater part of principal invested far in advance of
the maturity of the mortgages in the pool. Foreclosures impose no risk to
principal investment because of the GNMA guarantee.
As the prepayment rates of individual mortgage pools will vary widely, it is not
possible to accurately predict the average life of a particular issue of GNMA
Certificates. However, statistics published by the FHA indicate that the average
life of a single-family dwelling mortgage with a 25- to 30-year maturity, the
type of mortgage which backs most GNMA Certificates, is approximately 12 years.
It is therefore customary practice to treat GNMA Certificates as 30-year
mortgage-backed securities which prepay fully in the twelfth year.
As a consequence of the fees paid to GNMA and the issuer of GNMA Certificates,
the coupon rate of interest of GNMA Certificates is lower than the interest paid
on the VA-guaranteed or FHA-insured mortgages underlying the Certificates.
The yield which will be earned on GNMA Certificates may vary from their coupon
rates for the following reasons: (i) Certificates may be issued at a premium or
discount, rather than at par; (ii) Certificates may trade in the secondary
market at a premium or discount after issuance; (iii) interest is earned and
compounded monthly which has the effect of raising the effective yield
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earned on the Certificates; and (iv) the actual yield of each Certificate is
affected by the prepayment of mortgages included in the mortgage pool underlying
the Certificates and the rate at which principal so prepaid is reinvested. In
addition, prepayment of mortgages included in the mortgage pool underlying a
GNMA Certificate purchased at a premium may result in a loss to the Fund.
Due to the large numbers of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors, GNMA
Certificates are highly liquid instruments.
Mortgage backed securities issued by private issuers, whether or not such
obligations are subject to guarantees by the private issuer, may entail greater
risk than obligations directly or indirectly guaranteed by the U.S. Government.
Collateralized mortgage obligations or "CMOs," are debt obligations
collateralized by mortgage loans or mortgage pass-through securities (collateral
collectively hereinafter referred to as "Mortgage Assets"). Multi-class pass-
through securities are interests in a trust composed of Mortgage Assets and all
references herein to CMOs will include multi-class pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the funds to pay debt service on the CMOs
or make scheduled distribution on the multi-class pass-through securities.
Moreover, principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of the premium if any has been paid.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semiannual basis.
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. Planned Amortization Class CMOs ("PAC
Bonds") generally require payments of a specified amount of principal on each
payment date. PAC Bonds are always parallel pay CMOs with the required principal
payment on such securities having the highest priority after interest has been
paid to all classes.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage
securities. A Fund will only invest in SMBS that are obligations backed by the
full faith and credit of the U.S. Government. SMBS are usually structured with
two classes that receive different proportions of the interest and principal
distributions from a pool of mortgage assets. A Fund will only invest in SMBS
whose mortgage assets are U.S. Government obligations.
A common type of SMBS will be structured so that one class receives some of the
interest and most of the principal from the mortgage assets, while the other
class receives most of the interest and the remainder of the principal. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, a Fund may fail to fully recoup its initial investment in these
securities. The market value of any class which consists primarily or entirely
of principal payments generally is unusually volatile in response to changes in
interest rates. Because SMBS were only recently introduced, established trading
markets for these securities have not yet been developed.
The average life of mortgage backed securities varies with the maturities of the
underlying mortgage instruments, which have maximum maturities of 40 years. The
average life is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities as the result of mortgage
prepayments, mortgage refinancings, or foreclosures. The rate of mortgage
prepayments, and hence the average life of the certificates, will be a function
of the level of interest rates, general economic conditions, the location and
age of the mortgage and other social and demographic conditions. Such
prepayments are passed through to the registered holder with the regular monthly
payments of principal and interest and have the effect of reducing future
payments. Estimated average life will be determined by NationsBank and used for
the purpose of determining the average weighted maturity of the Funds. For
additional information concerning mortgage backed securities, see the related
SAI.
NON-MORTGAGE ASSET BACKED SECURITIES include interests in pools of receivables,
such as motor vehicle installment purchase obligations and credit card
receivables. Such securities are generally issued as pass- through certificates,
which represent undivided fractional ownership interests in the underlying pools
of assets. Such securities also may be debt instruments, which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt.
Non-mortgage backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities. In addition, such securities generally will have
remaining estimated lives at the time of purchase of five years or less.
The purchase of non-mortgage backed securities raises considerations peculiar to
the financing of the instruments underlying such securities. For example, most
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organizations that issue Asset Backed Securities relating to motor vehicle
installment purchase obligations perfect their interests in their respective
obligations only by filing a financing statement and by having the servicer of
the obligations, which is usually the originator, take custody thereof. In such
circumstances, if the servicer were to sell the same obligations to another
party, in violation of its duty not to do so, there is a risk that such party
could acquire an interest in the obligations superior to that of the holders of
the Asset Backed Securities. Also, although most such obligations grant a
security interest in the motor vehicle being financed, in most states the
security interest in a motor vehicle must be noted on the certificate of title
to perfect such security interest against competing claims of other parties. Due
to the larger number of vehicles involved, however, the certificate of title to
each vehicle financed, pursuant to the obligations underlying the Asset Backed
Securities, usually is not amended to reflect the assignment of the seller's
security interest for the benefit of the holders of the Asset Backed Securities.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on those securities. In
addition, various state and Federal laws give the motor vehicle owner the right
to assert against the holder of the owner's obligation certain defenses such
owner would have against the seller of the motor vehicle. The assertion of such
defenses could reduce payments on the related Asset Backed Securities. Insofar
as credit card receivables are concerned, credit card holders are entitled to
the protection of a number of state and Federal consumer credit laws, many of
which give such holders the right to set off certain amounts against balances
owed on the credit card, thereby reducing the amounts paid on such receivables.
In addition, unlike most other Asset Backed Securities, credit card receivables
are unsecured obligations of the card holder.
The development of non-mortgage backed securities is at an early stage compared
to mortgage backed securities. While the market for Asset Backed Securities is
becoming increasingly liquid, the market for mortgage backed securities issued
by certain private organizations and non-mortgage backed securities is not as
well developed. As stated above, each Fund intends to limit its purchases of
mortgage backed securities issued by certain private organizations and
non-mortgage backed securities to securities that are readily marketable at the
time of purchase.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. The Nations Prime Fund generally limits
investments in bank instruments to (a) U.S. dollar-denominated obligations of
U.S. banks which have total assets exceeding $1 billion and which are members of
the Federal Deposit Insurance Corporation (including obligations of foreign
branches of such banks) or of the 75 largest foreign commercial banks in terms
of total assets; or (b) U.S. dollar-denominated bank instruments issued by other
banks believed by NationsBank to present minimal credit risks. For purposes of
the foregoing, total assets may be determined on the basis of the bank's most
recent annual financial statements.
The Nations Prime Fund may invest up to 100% of its assets in obligations issued
by banks. All Funds (except Nations Prime Fund) will limit their investments in
bank obligations so they do not exceed 25% of each Fund's total assets at the
time of purchase. The Nations Prime Fund may invest in U.S. dollar-denominated
obligations issued by foreign branches of domestic banks ("Eurodollar"
obligations) and domestic branches of foreign banks ("Yankee dollar"
obligations).
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Funds' total assets must be repaid prior to the purchase of
portfolio securities. The Funds are parties to a Line of Credit Agreement with
Mellon Bank, N.A. Advances under the agreement are taken primarily for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities.
Reverse repurchase agreements and dollar roll transactions may be considered to
be borrowings. When a Fund invests in a reverse repurchase agreement, it sells a
portfolio security to another party, such as a bank or broker-dealer, in return
for cash, and agrees to buy the security back at a future date and price.
Reverse repurchase agreements may be used to provide cash to satisfy unusually
heavy redemption requests without having to sell portfolio securities, or for
other temporary or
emer-
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gency purposes. In addition, the Nations Treasury Fund may use reverse
repurchase agreements for the purpose of investing the proceeds in tri-party
repurchase agreements as discussed below. Generally, the effect of such a
transaction is that the Funds can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while they will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Funds of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Funds are obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Funds' use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Funds'
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The Fund
only enters into reverse repurchase agreements (and repurchase agreements) with
counterparties that are deemed by NationsBank to be credit worthy. Reverse
repurchase agreements are speculative techniques involving leverage, and are
subject to asset coverage requirements if the Funds do not establish and
maintain a segregated account (as described above). Under the requirements of
the 1940 Act, the Funds are required to maintain an asset coverage (including
the proceeds of the borrowings) of at least 300% of all borrowings. Depending on
market conditions, the Funds' asset coverage and other factors at the time of a
reverse repurchase, the Funds may not establish a segregated account when
NationsBank believes it is not in the best interests of the Funds to do so. In
this case, such reverse repurchase agreements will be considered borrowings
subject to the asset coverage described above.
Dollar roll transactions consist of the sale by a Fund of mortgage-backed or
other asset-backed securities, together with a commitment to purchase similar,
but not identical, securities at a future date, at the same price. In addition,
a Fund is paid a fee as consideration for entering into the commitment to
purchase. If the broker/dealer to whom a Fund sells the security becomes
insolvent, the Fund's right to purchase or repurchase the security may be
restricted; the value of the security may change adversely over the term of the
dollar roll; the security that the Fund is required to repurchase may be worth
less than the security that the Fund originally held, and the return earned by
the Fund with the proceeds of a dollar roll may not exceed transaction costs.
The Nations Treasury Fund has entered into an arrangement whereby it reinvests
the proceeds of a reverse repurchase agreement in a tri-party repurchase
agreement and receives the net interest rate differential.
COMMERCIAL INSTRUMENTS: Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or foreign
corporations and foreign commercial banks. The Nations Prime Fund will limit
purchases of commercial instruments to instruments which: (a) if rated by at
least two NRSROs, are rated in the highest rating category for short-term debt
obligations given by such organizations, or if only rated by one such
organization, are rated in the highest rating category for short-term debt
obligations given by such organization; or (b) if not rated, are (i) comparable
in priority and security to a class of short-term instruments of the same issuer
that has such rating(s), or (ii) of comparable quality to such instruments as
determined by Nations Fund, Inc.'s Board of Directors on the advice of
NationsBank.
Investments by a Fund in commercial paper will consist of issues rated in a
manner consistent with such Fund's investment policies and objectives. In
addition, a Fund may acquire unrated commercial paper and corporate bonds that
are determined by NationsBank and/or Nations Gartmore at the time of purchase to
be of comparable quality to rated instruments that may be acquired by a Fund.
Commercial instruments include variable rate master demand notes, which are
unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate, and variable and floating
rate instruments.
The Nations Prime Fund also may purchase short-term participation interests in
loans extended by banks to companies, provided that both such banks and
companies meet the quality standards set forth above.
CONVERTIBLE SECURITIES, PREFERRED STOCK, AND WARRANTS: Certain of the Funds may
invest in debt securities convertible into or exchangeable for equity
securities, preferred stocks or warrants. Preferred stocks are securities that
represent an ownership interest in a corporation providing the owner with claims
on a company's earnings and assets before common stock owners, but after bond or
other debt security owners. Warrants are options to buy a stated number of
shares of common stock at a specified price any time during the life of the
warrants.
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FIXED INCOME INVESTING: The performance of the fixed-income debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. A Fund's share price
and yield depend, in part, on the maturity and quality of its debt instruments.
FOREIGN CURRENCY TRANSACTIONS: Certain of the Funds may enter into foreign
currency exchange transactions to convert foreign currencies to and from the
United States Dollar. A Fund either enters into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or uses forward contracts to purchase or sell foreign currencies. A
forward foreign currency exchange contract is an obligation by a Fund to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract.
Foreign currency hedging transactions are an attempt to protect a Fund against
changes in foreign currency exchange rates between the trade and settlement
dates of specific securities transactions or changes in foreign currency
exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. Neither spot transactions nor forward
foreign currency exchange contracts eliminate fluctuations in the prices of a
Fund's portfolio securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.
A Fund will generally enter into forward currency exchange contracts only under
two circumstances: (i) when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, to "lock" in the U.S.
dollar price of the security; and (ii) when NationsBank and the Fund's
sub-adviser believe that the currency of a particular foreign country may
experience a substantial movement against another currency. Under certain
circumstances, the Fund may commit a substantial portion of its portfolio to the
execution of these contracts. NationsBank and the Fund's sub-adviser will
consider the effects such a commitment would have on the investment program of
the Fund and the flexibility of the Fund to purchase additional securities.
Although forward contracts will be used primarily to protect the Fund from
adverse currency movements, they also involve the risk that anticipated currency
movements will not be accurately predicted. The Nations International Equity
Fund will generally not enter into a forward contract with a term of greater
than one year.
FOREIGN SECURITIES: Foreign securities include obligations of foreign
corporations and banks as well as obligations of foreign governments and their
political subdivisions (which will be limited to direct government obligations
and government-guaranteed securities). Such investments may subject a Fund to
special investment risks, including future political and economic developments,
the possible imposition of withholding taxes on interest income, possible
seizure or nationalization of foreign deposits, the possible establishment of
exchange controls, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. In addition, foreign issuers in general may be subject to different
accounting, auditing, reporting, and record keeping standards than those
applicable to domestic companies, and securities of foreign issuers may be less
liquid and their prices more volatile than those of comparable domestic issuers.
Investments in foreign securities may present additional risks, whether made
directly or indirectly, including the political or economic instability of the
issuer or the country of issue and the difficulty of predicting international
trade patterns. In addition, there may be less publicly available information
about a foreign company than about a U.S. company. Further, foreign stock
markets are generally not as developed or efficient as those in the U.S., and in
most foreign markets volume and liquidity are less than in the U.S. Fixed
commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign stock exchanges, brokers, and companies
than in the U.S. With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS: Certain of the Funds may
attempt to reduce the overall level of investment risk of particular securities
and attempt to protect a Fund against adverse market movements by investing in
futures, options and other derivative instruments. These include the purchase
and writing of options on securities (including index options) and options on
foreign currencies, and investing in futures contracts for the purchase or sale
of instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign government, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and swaps
and swap-related products such as interest rate swaps, currency swaps, caps,
collars and floors.
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The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If NationsBank or Nations
Gartmore incorrectly analyzes market conditions or does not employ the
appropriate strategy with respect to these instruments, a Fund could be left in
a less favorable position. Additional risks inherent in the use of futures,
options, forward contracts and swaps include: imperfect correlation between the
price of futures, options and forward contracts and movements in the prices of
the securities or currencies being hedged; the possible absence of a liquid
secondary market for any particular instrument at any time; and the possible
need to defer closing out certain hedged positions to avoid adverse tax
consequences. A Fund may not purchase put and call options which are traded on a
national stock exchange in an amount exceeding 5% of its net assets. Further
information on the use of futures, options and other derivative instruments, and
the associated risks, is contained in the SAI.
GUARANTEED INVESTMENT CONTRACTS: Guaranteed investment contracts ("GICs") are
investment instruments issued by highly rated insurance companies. Pursuant to
such contracts, a Fund may make cash contributions to a deposit fund of the
insurance company's general or separate accounts. The insurance company then
credits to a Fund guaranteed interest. The insurance company may assess periodic
charges against a GIC for expense and service costs allocable to it, and the
charges will be deducted from the value of the deposit fund. The purchase price
paid for a GIC becomes part of the general assets of the issuer, and the
contract is paid from the general assets of the issuer.
A Fund will only purchase GICs from issuers which, at the time of purchase, meet
quality and credit standards established by NationsBank. Generally, GICs are not
assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not currently exist.
Also, a Fund may not receive the principal amount of a GIC from the insurance
company on seven days' notice or less. Therefore, GICs are generally considered
to be illiquid investments.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Money Market Funds will
not knowingly invest more than 10% of the value of their respective net assets
in securities that are illiquid or such lower percentage as may be required by
the states in which the appropriate Fund sells its shares. The Non-Money Market
Funds will not knowingly invest more than 15% of the value of their respective
net assets in securities that are illiquid or such lower percentage as may be
required by the states in which the appropriate Fund sells its shares.
Repurchase agreements and time deposits that do not provide for payment to a
Fund within seven days after notice, guaranteed investment contracts and some
commercial paper issued in reliance upon the exemption in Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act") (other than variable amount
master demand notes with maturities of nine months or less), are subject to the
limitation on illiquid securities. In addition, interests in privately arranged
loans acquired by the Nations Prime Fund, the State Intermediate Municipal Bond
Funds and the State Municipal Bond Funds may be subject to this limitation.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by a Fund's Board of Trustees or Board of Directors or
NationsBank or Nations Gartmore, acting under guidelines approved and monitored
by such Fund's Board, after considering trading activity, availability of
reliable price information and other relevant information, that an adequate
trading market exists for that security. To the extent that, for a period of
time, qualified institutional buyers cease purchasing such restricted securities
pursuant to Rule 144A, the level of illiquidity of a Fund holding such
securities may increase during such period.
INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of its
portfolio from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, E.G., an exchange of floating rate payments for fixed rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. NationsBank and/or Nations Gartmore expects to
enter into these transactions on behalf of a Fund primarily to preserve a return
or spread on a particular investment or portion of its portfolio or to protect
against any increase in the price of securities the Fund anticipated purchasing
at a later date rather than for speculative purposes. A Fund will not sell
interest rate caps or floors that it does not own.
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LOWER-RATED DEBT SECURITIES: Lower rated, high-yielding securities are those
rated Ba or B by Moody's or BB or B by S&P which are commonly referred to as
"junk bonds." These bonds provide poor protection for payment of principal and
interest. Lower-quality bonds involve greater risk of default or price changes
due to changes in the issuer's creditworthiness than securities assigned a
higher quality rating. These securities are considered to have speculative
characteristics and indicate an aggressive approach to income investing. The
Funds intend to limit their investments in lower-quality debt securities to 35%
of assets.
The market for lower-rated securities may be thinner and less active than that
for higher quality securities, which can adversely affect the price at which
these securities can be sold. If market quotations are not available, these
lower-rated securities will be valued in accordance with procedures established
by the Fund's Board, including the use of outside pricing services. Adverse
publicity and changing investor perceptions may affect the ability of outside
pricing services used by a Fund to value its portfolio securities, and a Fund's
ability to dispose of these lower-rated bonds.
The market prices of lower-rated securities may fluctuate more than higher-rated
securities and may decline significantly in periods of general economic
difficulty which may follow periods of rising interest rates. During an economic
downturn or a prolonged period of rising interest rates, the ability of issuers
of lower quality debt to service their payment obligations, meet projected
goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower-rated securities, NationsBank will
try to minimize the risks inherent in investing in lower-rated debt securities
by engaging in credit analysis, diversification, and attention to current
developments and trends affecting interest rates and economic conditions.
NationsBank will attempt to identify those issuers of high-yielding securities
whose financial condition are adequate to meet future obligations, have
improved, or are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated securities,
but they may not be attractive to as many buyers. Each Fund's policies regarding
lower-rated debt securities is not fundamental and may be changed at any time
without shareholder approval.
MONEY MARKET INSTRUMENTS: With respect to Non-Money Market Funds, the term
"money market instruments" refers to instruments with remaining maturities of
one year or less. With respect to Money Market Funds, the term "money market
instruments" refers to instruments with remaining maturities of 397 days or
less. Money market instruments may include, among other instruments, certain
U.S. Treasury obligations, U.S. Government obligations, bank instruments,
commercial instruments, repurchase agreements and municipal securities. Such
instruments are described in this Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable or floating rate instruments issued by
industrial development authorities and other governmental entities. While there
may not be an active secondary market with respect to a particular instrument
purchased by a Fund, a Fund may demand payment of the principal and accrued
interest on the instrument or may resell it to a third party as specified in the
instruments. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of the instrument if the issuer defaulted on its
payment obligation or during periods the Fund is not entitled to exercise its
demand rights, and the Fund could, for these or other reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by a
Fund will be determined by NationsBank to be of comparable quality at the time
of purchase to instruments rated "high quality" by any major rating service.
Where necessary to ensure that an instrument is of comparable "high quality," a
Fund will require that an issuer's obligation to pay the principal of the note
may be backed by an unconditional bank letter or line of credit, guarantee, or
commitment to lend.
Municipal securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases."
Generally such loans are unrated, in which case they will be determined by
NationsBank to be of comparable quality at the time of purchase to rated
instruments that may be acquired by a Fund. Frequently, privately arranged loans
have variable interest rates and may be backed by
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a bank letter of credit. In other cases, they may be unsecured or may be secured
by assets not easily liquidated. Moreover, such loans in most cases are not
backed by the taxing authority of the issuers and may have limited marketability
or may be marketable only by virtue of a provision requiring repayment following
demand by the lender. Such loans made by a Fund may have a demand provision
permitting the Fund to require payment within seven days. Participations in such
loans, however, may not have such a demand provision and may not be otherwise
marketable. To the extent these securities are illiquid, they will be subject to
each Fund's limitation on investments in illiquid securities. Recovery of an
investment in any such loan that is illiquid and payable on demand may depend on
the ability of the municipal borrower to meet an obligation for full repayment
of principal and payment of accrued interest within the demand period, normally
seven days or less (unless a Fund determines that a particular loan issue,
unlike most such loans, has a readily available market). As it deems
appropriate, NationsBank will establish procedures to monitor the credit
standing of each such municipal borrower, including its ability to meet
contractual payment obligations.
Municipal securities may include units of participation in trusts holding pools
of tax-exempt leases. Municipal participation interests may be purchased from
financial institutions, and give the purchaser an undivided interest in one or
more underlying municipal security. To the extent that municipal participation
interests are considered to be "illiquid securities," such instruments are
subject to each Fund's limitation on the purchase of illiquid securities.
Municipal leases and participating interests therein which may take the form of
a lease or an installment sales contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities. Interest payments on qualifying leases are exempt from Federal
income taxes.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to municipal securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified Municipal Securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.
Although the Funds do not presently intend to do so on a regular basis, each may
invest more than 25% of its total assets in municipal securities the interest on
which is paid solely from revenues of similar projects if such investment is
deemed necessary or appropriate by NationsBank. To the extent that more than 25%
of a Fund's total assets are invested in Municipal Securities that are payable
from the revenues of similar projects, a Fund will be subject to the peculiar
risks presented by such projects to a greater extent than it would be if its
assets were not so concentrated.
Since each of the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds will invest primarily in securities issued by issuers
located in one state, each of these Funds is susceptible to changes in value due
to political and economic factors affecting that state's issuers. A comparable
municipal bond fund which is not concentrated in obligations issued by issuers
located in one state would be less susceptible to these risks. If any issuer of
securities held by one of these Funds is unable to meets its financial
obligations, that Fund's income, capital, and liquidity may be adversely
affected.
For the past forty years, the economy of the State of Florida has consisted
primarily of tourism, retirement and agriculture. More recently, military and
defense spending have fueled economic diversification as well as the aerospace
industry, laser optics research, computer manufacturing and international trade
and commerce. Currently, Moody's rates Florida's general obligation bonds "Aa",
and S&P rates such bonds "AA".
The State of Georgia has a diversified economy, which has performed relatively
well in recent years. Important industries in the State include pulp and paper
products, agriculture and textiles. Currently, Moody's rates Georgia general
obligation bonds "Aaa" and S&P rates such bonds "AA+."
The State of Maryland's leading areas of employment are services (including
mining), wholesale and retail trade, government, and manufacturing (primarily
printing and publishing, food and kindred products, instruments and related
products, electronic equipment, industrial machinery, and transportation
equipment). Maryland has a higher than average number of people employed by the
Government. The Port of Baltimore is one of the larger international ports in
the United States and in the world. Currently, Moody's rates Maryland general
obligation bonds "Aaa" and S&P rates such bonds "AAA."
The State of North Carolina has an economic base consisting of a combination of
manufacturing, services, agriculture and tourism. During the period from 1980 to
1993, the per capita income in the State grew from $7,999 to $18,702, an
increase of 133.8%. During the same period, the State's labor force increased
24.5%. Currently, Moody's rates the state of North Carolina's general obligation
bonds "Aaa" and S&P rates such bonds "AAA."
The State of South Carolina's economy has been dominated since the early 1920's
by the textile industry, with over one-third of the manufacturing workers
directly or indirectly related to the textile industry. The economic base of the
State is gradually becoming more diversified
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as the trade and service sectors and durable goods manufacturing industries have
developed. Currently, Moody's rates South Carolina general obligation bonds
"Aaa" and S&P rates such bonds "AA+."
The State of Tennessee has an economic base consisting primarily of
manufacturing, services, agriculture and tourism. Currently, Moody's rates the
State of Tennessee's general obligation bonds "Aaa" and S&P rates such bonds
"AA+."
The State of Texas has long been identified with the oil and gas industry, but
the Texas economy recently has become more diversified. Oil and gas related
industries accounted for 27% of the state's total output of goods and services
in 1981, but currently account for only 12% of the state's economy. Servicing
sectors (which include transportation and public utilities; finance and
insurance; trade; services; and government) are the major sources of job growth
in Texas. Texas' location and transportation and accessibility have made it a
distribution center for the southwestern United States as well as an
international center for finance and distribution. The high-technology sector,
growth of exports and manufacturing job growth are expected to contribute to
Texas' future growth. Currently Moody's rates Texas general obligations bonds
"Aa" and S&P rates such bonds "AA".
The Commonwealth of Virginia has a diversified economy with government,
manufacturing, high technology (both manufacturing and non-manufacturing)
industries, agriculture, mining, construction, services, and tourism all
represented. Virginia also has benefited from its port facilities, a large
number of federal government and military installations, and its proximity to
Washington, D.C. Currently Moody's rates Virginia general obligation bonds "Aaa"
and S&P rates such bonds "AAA."
There can be no assurance that the economic conditions on which the above
ratings for a specific state are based will continue or that particular bond
issues may not be adversely affected by changes in economic or political
conditions. More detailed information about matters relating to each of the
State Intermediate Municipal Bond Funds and State Municipal Bond Funds is
contained in Nations Fund Trust's SAI.
OTHER INVESTMENT COMPANIES: A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
REAL ESTATE INVESTMENT TRUSTS: A real estate investment trust ("REIT") is a
managed portfolio of real estate investments which may include office buildings,
apartment complexes, hotels and shopping malls. An Equity REIT holds equity
positions in real estate, and it seeks to provide its shareholders with income
from the leasing of its properties, and with capital gains from any sales of
properties. A Mortgage REIT specializes in lending money to developers of
properties, and passes any interest income it may earn to its shareholders.
REITs may be affected by changes in the value of the underlying property owned
or financed by the REIT, while Mortgage REITs also may be affected by the
quality of credit extended. Both Equity and Mortgage REITs are dependent upon
management skill and may not be diversified. REITs also may be subject to heavy
cash flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to qualify for tax-free pass-through of income under the
Code.
REPURCHASE AGREEMENTS: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker-dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
uninvested cash. A risk associated with repurchase agreements is the failure of
the seller to repurchase the securities as agreed, which may cause a Fund to
suffer a loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the limit
stated above. A Fund may enter into joint repurchase agreements jointly with
other investment portfolios of Nations Fund and Nations Institutional Reserves.
SECURITIES LENDING: To increase return on portfolio securities, certain of the
Funds may lend their portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. There is a risk of delay in receiving
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by NationsBank or Nations Gartmore to be
credit worthy and when, in their judgment, the income to be earned from the loan
justifies the attendant risks. The aggregate of all outstanding loans of a Fund
may not exceed 30% of the value of its total assets.
SHORT SALES: A short sale is the sale of a security that a Fund does not own. A
short sale is "against the box" if at all times when the short position is open
a Fund owns an equal amount of securities convertible into, or exchangeable
without further consideration for, securities of the same issuer as the
securities sold short.
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SHORT-TERM TRUST OBLIGATIONS: Nations Prime Fund may invest in short-term
obligations issued by special purpose trusts established to acquire specific
issues of government or corporate securities. Such obligations entitle the Fund
to a proportional fractional interest in payments received by the trust, either
from the underlying securities owned by the trust or pursuant to other
arrangements entered into by the trust. A trust may enter into a swap
arrangement with a highly rated investment firm, pursuant to which the trust
grants to the counterparty certain of its rights with respect to the securities
owned by the trust in exchange for the obligation of the counterparty to make
payments to the trust according to an established formula. The trust obligations
purchased by the Fund must satisfy the quality and maturity requirements
generally applicable to the Fund pursuant to Rule 2a-7 under the 1940 Act.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indexes, non-U.S. interest rates and foreign currencies, that
have been approved by the CFTC for investment by U.S. investors, for the purpose
of hedging against changes in values of a Fund's securities or changes in the
prevailing levels of interest rates or currency exchange rates. The contracts
entail certain risks, including but not limited to the following: no assurance
that futures contracts transactions can be offset at favorable prices; possible
reduction of a Fund's total return due to the use of hedging; possible lack of
liquidity due to daily limits on price fluctuation; imperfect correlation
between the contracts and the securities or currencies being hedged; and
potential losses in excess of the amount invested in the futures contracts
themselves.
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
for which no common clearing facility exists and a trader may look only to the
broker for performance of the contract. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the
currencies in which trading is done on foreign exchanges, any profits that such
Fund might realize could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes.
U.S. GOVERNMENT OBLIGATIONS: U.S. Government obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. Obligations of U.S.
Government agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
E.G., GNMA certificates; in other cases interest and principal are not
guaranteed, E.G., obligations of the Federal Home Loan Bank System and the
Federal Farm Credit Bank. No assurance can be given that the U.S. Government
would provide financial support to government-sponsored instrumentalities if it
is not obligated to do so by law.
VARIABLE AND FLOATING RATE INSTRUMENTS: Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks and corporations
may carry variable or floating rates of interest. Such instruments bear interest
rates which are not fixed, but which vary with changes in specified market rates
or indices, such as a Federal Reserve composite index. A variable rate demand
instrument is an obligation with a variable or floating interest rate and an
unconditional right of demand on the part of the holder to receive payment of
unpaid principal and accrued interest. An instrument with a demand period
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities takes
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
Appendix B -- Description of Ratings
The following summarizes the highest six ratings used by S&P for corporate and
municipal bonds. The first four ratings denote investment grade securities.
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
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AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher-rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher-rated categories.
BB, B -- Bonds rated BB and B are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB represents the lowest
degree of speculation and B a higher degree of speculation. While such
bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the highest six ratings used by Moody's for corporate
and municipal bonds. The first four ratings denote investment grade securities.
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa through B. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category. With regard to municipal bonds, those bonds
in the Aa, A and Baa groups which Moody's believes possess the strongest
investment attributes are designated by the symbols Aa1, A1 or Baa1,
respectively.
The following summarizes the highest four ratings used by D&P for bonds, each of
which denotes that the securities are investment grade:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
A -- Bonds that are rated A have protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
BBB -- Bonds that are rated BBB have below average protection factors but
still are considered suffi-
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cient for prudent investment. Considerable variability in risk exists
during economic cycles.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major categories.
The following summarizes the highest four ratings used by Fitch for bonds, each
of which denotes that the securities are investment grade:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A -- Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are Duff 1, Duff 2 and Duff 3.
D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the highest
rating category. Duff 1+ indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be minor.
Duff 1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. Duff 2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. Duff 3 indicates satisfactory liquidity and other protection factors
which qualify the issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
The following summarizes the three highest rating categories used by Fitch for
short-term obligations, each of which denotes securities that are investment
grade:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
F-2 securities possess good credit quality. Issues carrying this rating
have a satisfactory degree of assurance for timely payment, but the margin
of safety is not as great as for issues assigned the F-1+ and F-1 ratings.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
71
<PAGE>
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following is the four investment grade ratings used by BankWatch
for long-term debt:
AAA -- The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA -- The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
A -- The third highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with
higher ratings.
BBB -- The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however,
more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 -- The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
TBW-3 -- The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
The following summarizes the three highest long-term ratings used by IBCA:
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk albeit not very significantly.
A -- Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
The following summarizes the three highest short-term debt ratings used by IBCA:
A1+ -- Obligations supported by the highest capacity for timely repayment
and possessing a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
A2 -- Obligations supported by a good capacity for timely repayment.
72
<PAGE>
NATIONS FUND TRUST
NATIONS GOVERNMENT MONEY MARKET FUND
SUPPLEMENT DATED JANUARY 30, 1996 TO PROSPECTUSES DATED SEPTEMBER 30, 1995
The Prospectuses for the Trust A, Trust B, Investor A, Investor B,
Investor C and Investor D Shares of NATIONS GOVERNMENT MONEY MARKET FUND are
hereby supplemented as follows:
1. By substituting the following for the second sentence in the
first paragraph in the section entitled "HOW TO BUY SHARES -- EFFECTIVE TIME OF
PURCHASES":
A purchase order must be received by Stephens or by the
Transfer Agent by 2:00 p.m., Eastern time (12:00 noon, Eastern time,
with respect to Nations Tax Exempt Fund and Nations Government Money
Market Fund).
2. By substituting the following for the first three
sentences in the second paragraph in the section entitled "HOW
TO REDEEM SHARES":
Redemption orders must be received on a Business Day before
2:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Tax Exempt Fund and Nations Government Money Market Fund), and
payment will normally be wired the same day to Selling Agents. Nations
Fund reserves the right to wire redemption proceeds within five Business
Days after receiving the redemption order if, in the judgment of
NationsBank, an earlier payment could adversely impact a Fund.
Redemption orders received by Stephens or by the Transfer Agent after
2:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Tax Exempt Fund and Nations Government Money Market Fund), will
be processed on the next Business Day.
3. By substituting the following for the second sentence in
the first paragraph in the section entitled "HOW THE FUNDS VALUE THEIR SHARES":
Shares are valued as of 2:00 p.m., Eastern time (1:00 p.m.,
Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund), on each Business Day.
4. By substituting the following for the first sentence in the
first paragraph in the section entitled "HOW DIVIDENDS AND DISTRIBUTIONS ARE
MADE; TAX INFORMATION -- DIVIDENDS AND DISTRIBUTIONS":
Dividends from net investment income of each Fund are
declared daily to shareholders at 2:00 p.m., Eastern time (1:00 p.m.
Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund) on the day of declaration.
1
<PAGE>
Prospectus
TRUST B SHARES
SEPTEMBER 30, 1995
Money Market
Funds
(NATIONS FUND LOGO
Appears Here)
INVESTMENT ADVISER: NationsBank, N.A. (Carolinas)
DISTRIBUTOR: Stephens Inc.
<PAGE>
Prospectus
TRUST B SHARES
SEPTEMBER 30, 1995
This Prospectus describes the four investment
portfolios listed in the column to the right (each a
"Fund" and collectively the "Money Market Funds"),
of the Nations Fund Family ("Nations Fund" or
"Nations Fund Family"). This Prospectus describes
one class of shares of each Fund -- Trust B Shares.
EACH MONEY MARKET FUND SEEKS TO MAINTAIN A NET ASSET
VALUE OF $1.00 PER SHARE. INVESTMENTS IN THE MONEY
MARKET FUNDS ARE NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE
THAT THE MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely the information
about the Funds that a prospective purchaser of
Trust B Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust and Nations Fund, Inc. is
contained in separate Statements of Additional
Information (the "SAIs"), which have been filed with
the Securities and Exchange Commission (the "SEC")
and are available upon request without charge by
writing or calling Nations Fund at its address or
telephone number shown below. The SAIs bear the same
date as this Prospectus and are incorporated by
reference in their entirety into this Prospectus.
SHARES OF NATIONS FUND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. (CAROLINAS) ("NATIONSBANK") OR
ANY OF ITS AFFILIATES. SUCH SHARES ARE NOT INSURED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
FUNDS INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
NATIONSBANK IS THE INVESTMENT ADVISER AND, TOGETHER
WITH ITS AFFILIATES, PROVIDES CERTAIN OTHER SERVICES
TO NATIONS FUND, FOR WHICH THEY ARE COMPENSATED.
STEPHENS INC., WHICH IS NOT AFFILIATED WITH
NATIONSBANK, IS THE SPONSOR AND ADMINISTRATOR AND
SERVES AS THE DISTRIBUTOR FOR NATIONS FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Nations Prime Fund
Nations Treasury Fund
Nations Government
Money Market Fund
Nations Tax Exempt
Fund
For purchase, redemption and
performance information
call:
1-800-626-2275
or write:
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
(Nations Fund Logo appears
here)
<PAGE>
Table Of Contents
About The Funds
Expenses Summary 3
Financial Highlights 4
Objectives 6
How Objectives Are Pursued 6
How Performance Is Shown 8
How the Funds Are Managed 9
Organization and History 11
About Your Investment
How to Buy Shares 12
Shareholder Servicing Plan 12
How to Redeem Shares 13
How the Funds Value Their Shares 14
How Dividends and Distributions Are Made; Tax
Information 14
Appendix A -- Portfolio Securities 15
Appendix B -- Description of Ratings 20
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAIS
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
NATIONS FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY NATIONS FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds. The
following table summarizes shareholder transaction and operating expenses for
Trust B Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
TRUST B SHARES
<TABLE>
<CAPTION>
Nations
Nations Prime Nations Treasury Government Money Nations Tax
Fund Fund Market Fund Exempt Fund
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None None None None
Deferred Sales Load None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees1 .14% .17% .16% .17%
Shareholder Servicing Fees .25% .25% .25% .25%
Other Expenses .16% .13% .14% .13%
Total Operating Expenses1 .55% .55% .55% .55%
</TABLE>
1 After any waivers and reimbursements.
EXAMPLES:
You would pay the following expenses on a $1,000 investment in Trust B Shares of
the indicated Fund, assuming (1) a 5% annual return and (2) redemption at the
end of each time period.
<TABLE>
<CAPTION>
Nations Treasury Nations Government Nations Tax Exempt
Nations Prime Fund Fund Money Market Fund Fund
<S> <C> <C> <C> <C>
1 Year $ 6 $ 6 $ 6 $ 6
3 Years $ 18 $ 18 $ 18 $ 18
</TABLE>
3
<PAGE>
The purpose of the foregoing table is to assist an investor in understanding the
various shareholder transaction and operating expenses that an investor in Trust
B Shares will bear either directly or indirectly. The "Other Expenses" figures
contained in the above table are based on estimated amounts for each Fund's
current fiscal year and reflect anticipated fee waivers and reimbursements.
There is no assurance that these fee waivers and reimbursements will continue
beyond the current fiscal year. If fee waivers and/or reimbursements are
discontinued, the amounts contained in the "Examples" above may increase. For
more complete descriptions of the Funds' operating expenses, see "How the Funds
are Managed."
Absent fee waivers and reimbursements, "Management Fees" and "Total Operating
Expenses" for Trust B Shares of the indicated Fund would have been as follows:
Nations Prime Fund -- .20% and .61%, respectively; Nations Treasury Fund -- .20%
and .58%, respectively; Nations Government Money Market Fund -- .40% and .79%,
respectively; and Nations Tax Exempt Fund -- .40% and .78%, respectively.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE GREATER OR LESS
THAN THOSE SHOWN.
Financial Highlights
The audited financial information on the following pages has been derived from
the financial statements of Nations Fund Trust and Nations Fund, Inc. Price
Waterhouse LLP is the independent accountant to Nations Fund Trust and Nations
Fund, Inc. The reports of Price Waterhouse LLP for the most recent fiscal years
of Nations Fund Trust and Nations Fund, Inc. accompany the financial statements
for such periods and are incorporated by reference in the SAIs, which are
available upon request. Shareholders of a Fund will receive unaudited
semi-annual reports describing the Fund's investment operations and annual
financial statements audited by the Funds' independent accountant.
FOR A TRUST B SHARE OUTSTANDING THROUGHOUT THE PERIOD
NATIONS PRIME FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
5/31/95*
<S> <C>
TRUST B SHARES
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0474
Dividends from net investment income (0.0474)
Net asset value, end of period $ 1.00
Total return++ 4.84%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $126,120
Ratio of operating expenses to average net assets 0.55%+
Ratio of net investment income to average net assets 4.98%+
Ratio of operating expenses to average net assets without waivers and reimbursements 0.63%+
Net investment income per share without waivers and reimbursements $ 0.0466
</TABLE>
* The Nations Prime Fund Trust B Shares commenced operations on June 16, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
4
<PAGE>
FOR A TRUST B SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TREASURY FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
05/31/95*
<S> <C>
TRUST B SHARES
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0449
Dividends from net investment income (0.0449)
Distributions from net realized capital gains (0.0000)**
Net asset value, end of period $ 1.00
Total return++ 4.56%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 56,815
Ratio of operating expenses to average net assets 0.55%+
Ratio of net investment income to average net assets 4.74%+
Ratio of operating expenses to average net assets without waivers and reimbursements 0.60%+
Net investment income per share without waivers and reimbursements $ 0.0444
</TABLE>
* The Nations Treasury Fund Trust B Shares commenced operations on June 16,
1994.
** Amount represents less than $0.0001.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
NATIONS GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
05/31/95 ENDED
(UNAUDITED) 11/30/94*
<S> <C> <C>
TRUST B SHARES
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0267 0.0200
Distributions:
Dividends from net investment income (0.0267) (0.0200)
Dividends from net realized gains -- (0.0000)#
Total distributions (0.0267) (0.0200)
Net asset value, end of period $ 1.00 $ 1.00
Total return++ 2.69% 2.02%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 75,218 $ 72,747
Ratio of operating expenses to average net assets 0.55%+ 0.55%+
Ratio of net investment income to average net assets 5.36%+ 3.54%+
Ratio of operating expenses to average net assets before fee waivers 0.81%+ 0.84%+
Net investment income per share before fee waivers $ 0.0254 $ 0.0186
</TABLE>
* The Nations Government Money Market Fund Trust B Shares commenced operations
on June 16, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
# Value represents less than $(0.0001) per share.
5
<PAGE>
FOR A TRUST B SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TAX EXEMPT FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
05/31/95 ENDED
(UNAUDITED) 11/30/94*
<S> <C> <C>
TRUST B SHARES
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0167 0.0116
Dividends from net investment income (0.0167) (0.0116)
Net asset value, end of period $ 1.00 $ 1.00
Total return++ 1.68% 1.17%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 21,407 $ 18,207
Ratio of operating expenses to average net assets 0.55%+ 0.52%+
Ratio of net investment income to average net assets 3.39%+ 2.34%+
Ratio of operating expenses to average net assets before fee waivers 0.80%+ 0.84%+
Net investment income per share before fee waivers $ 0.0155 $ 0.0102
</TABLE>
* The Nations Tax Exempt Fund Shares commenced operations on June 16, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
Objectives
Each Money Market Fund, described below, endeavors to achieve its investment
objective by investing in a diversified portfolio of high quality money market
instruments with maturities of 397 days or less from the date of purchase.
Securities subject to repurchase agreements may bear longer maturities.
NATIONS PRIME FUND: The Nations Prime Fund's investment objective is to seek the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS TREASURY FUND: The Nations Treasury Fund's investment objective is the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS GOVERNMENT MONEY MARKET FUND: The Nations Government Money Market Fund's
investment objective is to seek as high a level of current income as is
consistent with liquidity and stability of principal.
NATIONS TAX EXEMPT FUND: The Nations Tax Exempt Fund's investment objective is
to seek as high a level of current interest income exempt from Federal income
taxes as is consistent with liquidity and stability of principal.
How Objectives Are Pursued
NATIONS PRIME FUND: In pursuing its investment objective, the Fund may invest in
U.S. Treasury bills, notes and bonds and other instruments issued directly by
the U.S. Government ("U.S. Treasury Obligations"), other obligations issued or
guaranteed as to payment of principal and interest by the U.S. Government, its
agencies or instrumentalities ("U.S. Government Obligations"), bank and
commercial instruments that may be available in the money markets, high quality
short-term taxable obligations issued by state and local governments, their
agencies and instrumentalities and repurchase agreements relating to U.S.
Government Obligations. The Fund also may purchase securities issued by other
investment companies, consistent with the Fund's investment objective and
policies, and may engage in reverse repurchase agreements. The Fund also may
invest in guaranteed investment contracts and in instruments issued by trusts,
including pass-through certificates representing participation in, or debt
instruments backed by, the securities and other assets owned by the trust. In
addition, The Fund may lend its portfolio securities to qualified institutional
investors. For more information concerning these instruments, see "Appendix A."
NATIONS TREASURY FUND: In pursuing its investment objective, the Fund invests in
U.S. Treasury Obligations and repurchase agreements secured by such obligations.
The Fund also may purchase securities issued by other investment companies,
consistent with the Fund's investment objective and policies, and may engage in
reverse repurchase agreements. In addition, the Fund may lend its portfolio
securities to qualified institutional
6
<PAGE>
investors. For more information concerning these instruments, see "Appendix A."
NATIONS GOVERNMENT MONEY MARKET FUND: In pursuing its investment objective, the
Fund invests in U.S. Government Obligations and repurchase agreements relating
to such obligations. The Fund also may purchase securities issued by other
investment companies, consistent with the Fund's investment objective and
policies, and may engage in reverse repurchase agreements. In addition, the Fund
may lend its portfolio securities to qualified institutional investors. For more
information concerning these instruments, see "Appendix A."
NATIONS TAX EXEMPT FUND: In pursuing its investment objective, the Fund invests
in a diversified portfolio of obligations issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia, and
their political subdivisions, agencies, instrumentalities and authorities, the
interest on which, in the opinion of counsel to the issuer or bond counsel, is
exempt from regular Federal income tax ("Municipal Securities"). The Fund will
not knowingly purchase securities the interest on which is subject to such tax.
A portion of the Fund's assets, however, may be invested in private activity
bonds, the interest on which may be treated as a specific tax preference item
under the Federal alternative minimum tax. See "How Dividends and Distributions
Are Made; Tax Information."
The Fund invests in Municipal Securities which are determined to present minimal
credit risks and which at the time of purchase are considered to be of "high
quality" -- E.G., rated "AA" or higher by Duff & Phelps Credit Rating Co.
("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard & Poor's Corporation
("S&P"), IBCA Limited or its affiliate IBCA Inc. (collectively "IBCA"), or
Thomson BankWatch, Inc. ("BankWatch") or "Aa" or higher by Moody's Investors
Service, Inc. ("Moody's"), in the case of bonds; rated "Duff 1" or higher by
D&P, "F-1" or higher by Fitch, "SP-1" by S&P, or "MIG-1" by Moody's in the case
of notes; rated "Duff 1" or higher by D&P, "F-1" or higher by Fitch, or "VMIG-1"
by Moody's in the case of variable rate demand notes; or rated "Duff 1" or
higher by D&P, "F-1" or higher by Fitch, "A-1" or higher by S&P or "Prime-1" by
Moody's in the case of tax-exempt commercial paper. D&P, Fitch, S&P, Moody's,
IBCA and BankWatch are the six nationally recognized statistical rating
organizations (collectively, "NRSROs"). Securities that are unrated at the time
of purchase will be determined to be of comparable quality by NationsBank
pursuant to guidelines approved by Nations Fund Trust's Board of Trustees. The
applicable Municipal Securities ratings are described in "Appendix B."
The payment of principal and interest on most securities purchased by the Fund
will depend upon the ability of the issuers to meet their obligations. The
District of Columbia, each state, each of their political subdivisions,
agencies, instrumentalities and authorities and each multi-state agency of which
a state is a member is a separate "issuer" as that term is used in this
Prospectus and the related SAI. The non-governmental user of facilities financed
by private activity bonds also is considered to be an "issuer." For more
information concerning Municipal Securities, see "Appendix A -- Municipal
Securities."
The Fund may hold uninvested cash reserves pending investment, during temporary
defensive periods, or if, in the opinion of NationsBank, desirable tax-exempt
obligations are unavailable. Uninvested cash reserves will not earn income. As a
matter of fundamental policy, under normal market conditions, at least 80% of
the Fund's net assets will be invested in Municipal Securities. Investments in
private activity bonds, the interest on which may be treated as a specific tax
preference item under the Federal alternative minimum tax, will not be treated
as Municipal Securities in determining whether the Fund is in compliance with
this 80% requirement. The Fund also may invest in securities issued by other
investment companies that invest in securities consistent with the Fund's
investment objective and policies. For more information concerning the Fund's
investments, see "Appendix A."
RISK CONSIDERATIONS: Although NationsBank will seek to achieve the investment
objective of each Fund, there is no assurance that it will be able to do so. No
single Fund should be considered, by itself, to provide a complete investment
program for any investor. Investments in a Fund are not insured against loss of
principal. For additional risk information regarding the Funds' investment in
particular instruments, see "Appendix A -- Portfolio Securities."
INVESTMENT LIMITATIONS: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed with respect to a particular Fund without the
affirmative vote of the holders of a majority of that Fund's outstanding shares.
Other investment limitations that cannot be changed without such a vote of
shareholders are described in the SAIs.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
tax-exempt securities issued by state or municipal governments and their
political subdivisions are not considered members of any industry. In addition,
this limitation does not apply to investments in obligations of domestic banks.)
7
<PAGE>
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
3. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, such Fund will not
hold more than 10% of the voting securities of any issuer.
In addition, as a matter of non-fundamental policy, the Nations Tax Exempt Fund
may not purchase any securities other than obligations the interest on which is
exempt from Federal income tax and stand-by commitments with respect to such
obligations.
The investment objective and policies of the Funds, unless otherwise specified,
may be changed without a vote of shareholders. If the investment objective or
policies of a Fund change, shareholders should consider whether the Fund remains
an appropriate investment in light of their current position and needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus and the SAIs. Should a Fund determine that any such
commitment is no longer in the best interests of the Fund, it may consider
terminating sales of its shares in the states involved.
In order for the Funds to value their investments on the basis of amortized
cost, investments must be in accordance with the requirements of Rule 2a-7 under
the Investment Company Act of 1940, as amended ("1940 Act"), some of which are
described below. These include maturity, quality and diversification
requirements. Maturity is limited to a dollar-weighted average portfolio
maturity of 90 days or less. Quality requirements generally limit investments to
U.S. dollar-denominated instruments determined to present minimal credit risks
and that at the time of acquisition are rated in the top two rating categories
by the required number of NRSROs (at least two or, if only one NRSRO has rated
the security, that one NRSRO) or, if unrated by any NRSRO, are (i) comparable in
priority and security to a class of short-term securities of the same issuer
that has the required rating, or (ii) determined to be comparable in quality to
securities having the required rating. The diversification requirements provide
generally that a Money Market Fund (except the Nations Tax Exempt Fund) may not
at the time of acquisition invest more than 5% of its assets in securities of
any one issuer or invest more than 5% of its assets in securities (and no more
than 1% in any one issuer) that have not been rated in the highest category by
the required number of NRSROs or, if unrated, are described in (i) or (ii)
above. Securities issued by the U.S. Government, its agencies, authorities or
instrumentalities, and fully-collateralized repurchase agreements secured by
such obligations, are exempt from the quality requirements, other than minimal
credit risk. In the event that a Fund's investment restrictions or permissible
investments are more restrictive than the requirements of Rule 2a-7, the Fund's
own restrictions will govern.
How Performance Is Shown
From time to time the Money Market Funds may advertise the yield and effective
yield on a class of shares and the Nations Tax Exempt Fund also may advertise
the tax-equivalent yield of a class of shares. YIELD, EFFECTIVE YIELD AND
TAX-EQUIVALENT YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" of a class of shares in a
Fund refers to the income generated by an investment in such class over a
seven-day period identified in the advertisement. This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly, but, when annualized, the income earned by an investment in a class
of shares in the Fund is assumed to be reinvested. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. The "tax-equivalent yield" of each class of shares in the
Nations Tax Exempt Fund shows the level of taxable yield needed to produce an
after-tax equivalent to such class's tax-free yield. This is done by increasing
the class's yield (calculated as above) by the amount necessary to reflect the
payment of Federal income tax at a stated tax rate.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a Fund's portfolio and such Fund's
operating expenses. Investment performance also often reflects the risks
associated with a Fund's investment objective and policies. These factors should
be considered when comparing a Fund's investment results to those of other
mutual funds and other investment vehicles. Since yields fluctuate, yield data
cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts, and similar investment alternatives
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which often provide an agreed-upon or guaranteed fixed yield for a stated period
of time.
In addition to Trust B Shares, the Funds offer Trust A, Investor A, Investor B,
Investor C and Investor D Shares. Each class of shares may bear different sales
charges, shareholder servicing fees and other expenses, which may cause the
performance of a class to differ from the performance of the other classes.
Performance quotations will be computed separately for each class of a Fund's
shares. Any fees charged by an institution and/or servicing agent directly to
its customers' accounts in connection with investments in the Funds will not be
included in calculations of yield. Each Fund's annual report contains additional
performance information and is available upon request without charge from the
Funds' distributor or your Institution, as defined below.
How The Funds Are Managed
The business and affairs of Nations Fund Trust and Nations Fund, Inc. are
managed under the direction of its Trustees and Directors, respectively. Nations
Fund Trust's SAI contains the names of and general background information
concerning each Trustee of Nations Fund Trust. Nations Fund, Inc.'s SAI contains
the names of and general background information concerning each Director of
Nations Fund, Inc.
Nations Fund and NationsBank have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially comply in all
material respects with the recommendations set forth in the May 9, 1994 Report
of the Advisory Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISER: NationsBank, through its investment management division,
serves as investment adviser to the Funds. NationsBank is an indirect wholly
owned subsidiary of NationsBank Corporation, a bank holding company organized as
a North Carolina corporation. NationsBank has its principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255.
NationsBank provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking.
Subject to the general supervision of Nations Fund Trust's Board of Trustees and
Nations Fund, Inc.'s Board of Directors, and in accordance with each Fund's
investment policies, NationsBank formulates guidelines and lists of approved
investments for each Fund, makes decisions with respect to and places orders for
each Fund's purchases and sales of portfolio securities and maintains records
relating to such purchases and sales. With respect to the Nations Tax Exempt
Fund, NationsBank is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with
NationsBank or which have sold shares in such Fund, if NationsBank believes that
the quality of the transaction and the commission are comparable to what they
would be with other qualified brokerage firms. From time to time, to the extent
consistent with its investment objective, policies and restrictions, each Fund
may invest in securities of companies with which NationsBank has a lending
relationship. For the services provided and expenses assumed pursuant to various
Advisory Agreements, NationsBank is entitled to receive advisory fees, computed
daily and paid monthly, at the annual rates of: 0.25% of the first $250 million
of the combined average daily net assets of both Nations Prime Fund and Nations
Treasury Fund, plus 0.20% of the combined average daily net assets of such Funds
in excess of $250 million; and 0.40% of the average daily net assets of each of
Nations Government Money Market Fund and Nations Tax Exempt Fund.
From time to time, NationsBank may waive (either voluntarily or pursuant to
applicable state limitations) advisory fees payable by a Fund. For the fiscal
year ended November 30, 1994, after waivers, Nations Fund Trust paid NationsBank
advisory fees at the rate of 0.16% and 0.09% of the average daily net assets of
Nations Government Money Market Fund and Nations Tax Exempt Fund, respectively.
For the fiscal year ended May 31, 1995, after waivers, Nations Fund, Inc. paid
investment advisory fees at the rate of 0.13% and 0.16% of the average daily net
assets of Nations Prime Fund and Nations Treasury Fund, respectively.
Morrison & Foerster, counsel to Nations Fund and special counsel to NationsBank
has advised Nations Fund and NationsBank that NationsBank may perform the
services contemplated by the Investment Advisory Agreements without violation of
the Glass-Steagall Act or other applicable banking laws or regulations. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations,
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could prevent NationsBank from continuing to perform, in whole or in part, such
services. If NationsBank were prohibited from performing any of such services,
it is expected that the Board of Trustees of Nations Fund Trust and the Board of
Directors of Nations Fund, Inc. would recommend to each Fund's shareholders that
they approve a new advisory agreement with another entity or entities qualified
to perform such services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
Nations Fund pursuant to Administration Agreements. Pursuant to the terms of the
Administration Agreements, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of
First Data Corporation, with principal offices at One Exchange Place, Boston,
Massachusetts 02109, serves as the co-administrator of Nations Fund pursuant to
Co-Administration Agreements. Under the Co-Administration Agreements, TSSG
provides various administrative and accounting services to the Funds including
performing the calculations necessary to determine net asset value per share and
dividends, preparing tax returns and financial statements and maintaining the
portfolio records and certain of the general accounting records for the Funds.
For the services rendered pursuant to the Administration and Co-Administration
Agreements, Stephens and TSSG are entitled to receive a combined fee at the
annual rate of up to 0.10% of each Fund's average daily net assets. For the
fiscal year ended November 30, 1994, after waivers, Nations Fund Trust paid its
administrators fees at the rate of 0.09% of the average daily net assets of
Nations Government Money Market Fund and Nations Tax Exempt Fund. For the fiscal
year ended May 31, 1995, after waivers, Nations Fund, Inc. paid its
administrators fees at the rate of 0.09% of the average daily net assets of
Nations Prime Fund and Nations Treasury Fund.
It is anticipated that beginning in November of 1995, NationsBank will serve as
sub-administrator for Nations Fund pursuant to a Sub-Administration Agreement.
Pursuant to the terms of the Sub-Administration Agreement, NationsBank will
assist Stephens in supervising, coordinating and monitoring various aspects of
the Funds' administrative operations. For providing such services, NationsBank
shall be entitled to receive a monthly fee from Stephens based on an annual rate
of .01% of the Funds' average daily net assets.
Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker-dealer with principal
offices at 111 Center Street, Little Rock, Arkansas 72201. Nations Fund has
entered into distribution agreements with Stephens which provide that Stephens
has the exclusive right to distribute shares of the Funds. Stephens may pay
service fees or commissions to Institutions which assist customers in purchasing
Trust Shares of the Funds.
TSSG serves as the Transfer Agent for each Fund's Trust Shares. NationsBank of
Texas, N.A. (the "Custodian") serves as custodian for the assets of each Fund.
The Custodian, which also serves as the sub-transfer agent for each Fund's Trust
Shares, is located at 1401 Elm Street, Dallas, Texas 75202, and is a wholly
owned subsidiary of NationsBank Corporation. In return for providing custodial
services, the Custodian is entitled to receive, in addition to out-of-pocket
expenses, fees payable monthly (i) at the rate of 1.25% of 1% of the average
daily net assets of each Fund, (ii) $10.00 per repurchase collateral transaction
by the Funds, and (iii) $15.00 per purchase, sale and maturity transaction
involving the Funds. In return for providing sub-transfer agency services for
the Trust Shares of Nations Fund, the Transfer Agent is entitled to receive an
annual fee from TSSG of $251,000.
Price Waterhouse LLP serves as independent accountant to Nations Funds. Their
address is 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES: The accrued expenses of each Fund are deducted from the Fund's total
accrued income before dividends are declared. These expenses include, but are
not limited to: fees paid to NationsBank, Stephens and TSSG; taxes; interest;
fees (including fees paid to Nations Fund's trustees, directors and officers);
federal and state securities registration and qualification fees; brokerage fees
and commissions; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; charges of the Custodian
and Transfer Agent; certain insurance premiums; outside auditing and legal
expenses; costs of shareholder reports and shareholder meetings; other expenses
which are not expressly assumed by NationsBank, Stephens or TSSG under their
respective agreements with Nations Fund; and any extraordinary expenses. Trust B
Shares also bear certain shareholder servicing costs. Any general expenses of
Nations Fund Trust and/or Nations Fund, Inc. that are not readily identifiable
as belonging to a particular investment portfolio are allocated among all
portfolios in the proportion that the assets of a portfolio bears to the assets
of Nations Fund Trust and/or Nations Fund, Inc. or in such other manner as the
Board of Trustees or Board of Directors determines is fair and equitable.
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Organization And History
The Funds are members of the Nations Fund Family, which consists of Nations Fund
Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc. and Nations
Institutional Reserves (formerly known as The Capitol Mutual Funds). The Nations
Fund Family currently has 44 distinct investment portfolios and total assets in
excess of $16 billion.
NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. The Funds currently offer six classes of shares -- Trust A
Shares, Trust B Shares, Investor A Shares, Investor B Shares, Investor C Shares
and Investor D Shares. This Prospectus relates only to the Trust B Shares of
Nations Government Money Market Fund and Nations Tax Exempt Fund of Nations Fund
Trust. To obtain additional information regarding the Funds' other classes of
shares which may be available to you, contact your Institution (as defined
below) or Nations Fund at 1-800-626-2275.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund, and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See Nations Fund Trust SAI for examples of when the
1940 Act requires voting by fund.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose or vote with respect to more than 25% of the outstanding shares of
Nations Fund Trust and therefore could be considered to be a controlling person
of Nations Fund Trust for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series of shares over
which NationsBank and its affiliates possessed or shared power to dispose or
vote as of a certain date, see Nations Fund Trust's SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
NATIONS FUND, INC.: Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no operations prior to December 15, 1986. As of the date of
this Prospectus, the authorized capital stock of Nations Fund, Inc. consists of
270,000,000,000 shares of common stock, par value of $.001 per share, which are
divided into series or funds each of which consists of separate classes of
shares. This Prospectus relates only to the Trust B Shares of Nations Prime Fund
and Nations Treasury Fund of Nations Fund, Inc. To obtain additional information
regarding the Funds' other classes of shares which may be available to you,
contact your Institution (as defined below) or Nations Fund at 1-800-626-2275.
Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such fund
or class. In the event of dissolution or liquidation, holders of each class will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of that portion of the assets allocated to that class held in the
respective fund of Nations Fund, Inc., less (b) the liabilities of Nations Fund,
Inc. attributable to the respective fund or class or allocated among the funds
or classes based on the respective liquidation value of each fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Fund, Inc.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s shares.
Nations Fund, Inc.'s shares, when issued, will be fully paid and non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Fund, Inc. and therefore may be considered to be a controlling person of
Nations Fund, Inc. for purposes of the 1940 Act. For more detailed information
concerning the percentage of each class or series over which NationsBank and its
affiliates possessed or shared power to dispose or vote as of a certain date,
see Nations
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Fund, Inc.'s SAI. It is anticipated that Nations Fund, Inc. will not hold annual
shareholder meetings on a regular basis unless required by the 1940 Act or
Maryland law.
Because this Prospectus combines disclosure on two separate investment
companies, there is a possibility that one investment company could become
liable for a misstatement, inaccuracy or incomplete disclosure in this
Prospectus concerning the other investment company. Nations Fund Trust and
Nations Fund, Inc. have entered into an indemnification agreement that creates a
right of indemnification from the investment company responsible for any such
misstatement, inaccuracy or incomplete disclosure that may appear in this
Prospectus.
About Your Investment
How To Buy Shares
Trust B Shares are sold primarily to bank trust departments and other financial
institutions (including NationsBank and its affiliated and correspondent banks)
("Institutions") that have entered into shareholder servicing agreements
("Servicing Agreements") with Nations Fund and that are acting on behalf of
their customers ("Customers") having a qualified trust account at or
relationship with the Institution.
Trust B Shares are purchased at net asset value per share without the imposition
of a sales charge according to procedures established by the Institution.
Institutions, however, may charge their Customers' accounts for services
provided in connection with the purchase of shares. Purchases may be effected on
days on which the Federal Reserve Bank of New York is open for business (a
"Business Day").
There is a minimum initial investment of $1,000 for each record holder; there is
no minimum subsequent investment.
The Institutions have entered into Servicing Agreements whereby they will
provide various shareholder services for their Customers that own Trust B
Shares. From time to time, Nations Fund may voluntarily reduce the maximum fees
payable for shareholder services.
Nations Fund reserves the right to reject any purchase order. The issuance of
Trust B Shares is recorded on the books of the Funds, and share certificates are
not issued. It is the responsibility of Institutions to record beneficial
ownership of Trust B Shares and to reflect such ownership in the account
statements provided to their Customers.
EFFECTIVE TIME OF PURCHASES: Purchases will be effected only when federal funds
are available for investment on the Business Day the purchase order is received
by Stephens or by the Transfer Agent. A purchase order must be received by
Stephens or by the Transfer Agent by 2:00 p.m., Eastern time (12:00 noon,
Eastern time, with respect to Nations Tax Exempt Fund). A purchase order
received by Stephens or the Transfer Agent after such time will not be accepted;
notice thereof will be given to the Institution placing the order, and any funds
received will be returned promptly to the sending Institution. If federal funds
are not available by 4:00 p.m., Eastern time, the order will be canceled. Trust
B Shares are purchased at the net asset value per share next determined after
receipt of the order by Stephens or by the Transfer Agent.
Institutions are responsible for transmitting orders for purchases by their
Customers, and delivering required funds, on a timely basis. It is Stephens'
responsibility to transmit orders it receives to Nations Fund.
Shareholder Servicing Plan
The Funds have adopted a Shareholder Servicing Plan (the "Servicing Plan")
pursuant to which Trust B Shares are sold through Institutions which enter into
Servicing Agreements with Nations Fund. The Servicing Agreements require
Institutions to provide shareholder services to their Customers who from time to
time beneficially own Trust B Shares in return for payment by the Fund at a rate
not exceeding 0.25% (on an annualized basis) of the average daily net asset
value of the Trust B Shares beneficially owned by Customers with whom the
Institutions have a servicing relationship. Holders of Trust B Shares will bear
all fees paid to Institutions under the Servicing Plan. The Servicing Plan does
not cover, and the fees thereunder are not payable, to Institutions with respect
to Trust A Shares.
Such shareholder services supplement the services provided by Stephens, TSSG and
the Transfer Agent to
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shareholders of record. The shareholder services provided by Institutions may
include general shareholder liaison services; processing purchase, exchange, and
redemption requests from Customers and placing orders with Stephens or the
Transfer Agent; processing dividend and distribution payments from the Funds on
behalf of Customers; providing information periodically to Customers showing
their positions in Trust B Shares; providing sub-accounting with respect to
Trust B Shares beneficially owned by Customers or the information necessary for
sub-accounting; responding to inquiries from Customers concerning their
investment in Trust B Shares; arranging for bank wires; and providing such other
similar services as may be reasonably requested.
Nations Fund may suspend or reduce payments under the Servicing Plan at any
time, and payments are subject to the continuation of the Servicing Plan
described above and the terms of the Servicing Agreement between Institutions
and Nations Fund. See the SAIs for more details on the Servicing Plan.
Nations Fund understands that Institutions may charge fees to their Customers
who are the owners of Trust B Shares in connection with their Customers'
accounts. These fees would be in addition to any amounts which may be received
by an Institution under its Servicing Agreement with Nations Fund. The Servicing
Agreements require an Institution to disclose to its Customers any compensation
payable to the Institution by Nations Fund and any other compensation payable by
Customers in connection with the investment of their assets in Trust B Shares.
Customers of Institutions should read this Prospectus in light of the terms
governing their accounts with their Institutions.
Conflict of interest restrictions may apply to the receipt by Institutions of
compensation from Nations Fund in connection with the investment of fiduciary
assets in Trust B Shares. Institutions, including banks regulated by the
Comptroller of the Currency, the Federal Reserve Board, or the Federal Deposit
Insurance Corporation, and investment advisers and other money managers subject
to the jurisdiction of the SEC, the Department of Labor, or state securities
commissions, are urged to consult their legal advisers before investing such
assets in Trust B Shares.
How To Redeem Shares
Customers may redeem all or part of their Trust B Shares in accordance with
instructions and limitations pertaining to their account at an Institution. It
is the responsibility of the Institutions to transmit redemption orders to
Stephens or to the Transfer Agent and to credit their Customers' accounts with
the redemption proceeds on a timely basis. It is Stephens' responsibility to
transmit orders it receives to Nations Fund. No charge for wiring redemption
payments is imposed by Nations Fund, although the Institutions may charge their
Customer accounts for these or other services provided in connection with the
redemption of Trust Shares. Information concerning these services and any
charges are available from the Institutions. Redemption orders are effected at
the net asset value per share next determined after acceptance of the order by
Stephens or by the Transfer Agent.
Redemption orders must be received on a Business Day before 2:00 p.m., Eastern
time (12:00 noon, Eastern time, with respect to Nations Tax Exempt Fund), and
payment will normally be wired the same day to the Institutions. Nations Fund
reserves the right to wire redemption proceeds within three Business Days after
receiving a redemption order if, in the judgment of NationsBank, an earlier
payment could adversely impact a Fund. However, redemption proceeds for shares
purchased by check may not be remitted until at least 15 days after the date of
purchase to ensure that the check has cleared; a certified check, however, is
deemed to be cleared immediately. Redemption orders will not be accepted by
Stephens or by the Transfer Agent after 2:00 p.m., Eastern time (12:00 noon,
Eastern time, with respect to Nations Tax Exempt Fund), for execution on that
Business Day.
Nations Fund may redeem a shareholder's Trust Shares if the balance in such
shareholder's account with the Fund drops below $500 as a result of redemptions,
and the shareholder does not increase the balance to at least $500 on 60 days'
written notice. If a shareholder has agreed with a particular Institution to
maintain a minimum balance in his or her account at the Institution, and the
balance in such Institution account falls below that minimum, the shareholder
may be obliged to redeem all or a part of his or her Trust Shares in a Fund to
the extent necessary to maintain the required minimum balance in such
Institution account. Nations Fund also may redeem shares involuntarily or make
payment for redemption in readily marketable securities or other property under
certain circumstances in accordance with the 1940 Act.
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How The Funds Value Their Shares
The net asset value of a share of each class is calculated by dividing the total
value of its assets, less liabilities, by the number of shares in the class
outstanding. Shares are valued as of 2:00 p.m., Eastern time (1:00 p.m., Eastern
time, with respect to Nations Tax Exempt Fund), on each Business Day. Currently,
the days on which the Federal Reserve Bank of New York is closed (other than
weekends) are: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Memorial Day (observed), Independence Day, Labor Day, Columbus Day, Thanksgiving
Day and Christmas Day.
The assets in the Money Market Funds are valued based upon the amortized cost
method. Although Nations Fund seeks to maintain the net asset value per share of
these Funds at $1.00, there can be no assurance that their net asset value per
share will not vary.
How Dividends and Distributions Are Made;
Tax Information
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income of each of the
Money Market Funds are declared daily to shareholders at 2:00 p.m., Eastern time
(1:00 p.m., Eastern time, with respect to Nations Tax Exempt Fund), on the day
of declaration. Trust B Shares begin earning dividends on the day the purchase
order is executed and continue earning dividends through and including the day
before the redemption order is executed (E.G., the settlement date). Dividends
are paid within five Business Days after the end of each month. Dividends are
paid in the form of additional Trust B Shares of the same Fund unless the
Customer has elected prior to the date of distribution to receive payment in
cash. Such election, or any revocation thereof, must be made in writing to the
Transfer Agent and will become effective with respect to dividends paid after
its receipt. Dividends are paid in cash within five Business Days after a
shareholder's complete redemption of his or her Trust B Shares in a Fund. To the
extent that there are any net short-term capital gains, they will be paid at
least annually.
TAX INFORMATION: Each Fund intends to qualify as a separate "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Such qualification relieves a Fund of liability for Federal income
taxes to the extent its earnings are distributed in accordance with the Code.
Each Fund intends to distribute substantially all of its investment company
taxable income and net tax-exempt income each taxable year. Distributions by the
Nations Prime Fund, Nations Treasury Fund and Nations Government Money Market
Fund will be taxable as ordinary income to shareholders who are not currently
exempt from Federal income taxes, whether such income is received in cash or
reinvested in additional shares. (Federal income taxes for distributions to an
Individual Retirement Account are generally deferred under the Code.) These
distributions will not qualify for the dividends received deduction for
corporate shareholders.
Dividends received from Nations Treasury Fund and Nations Government Money
Market Fund may qualify as tax-exempt dividends for state income tax purposes in
some states. The Funds do not expect to realize any long-term capital gains, and
therefore, do not expect to distribute any capital gains dividends.
Each year, shareholders will be notified as to the amount and Federal tax status
of all dividends and capital gains paid during the prior year. Such dividends
and capital gains may also be subject to state and local taxes.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by a Fund on December 31 of such year in
the event such dividends are actually paid during January of the following year.
Federal law requires Nations Fund to withhold 31% from any dividends (other than
exempt-interest dividends) paid by Nations Fund and/or redemptions (including
exchange redemptions) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply. If
the Internal Revenue Service has notified Nations Fund that the Taxpayer
Identification Number listed on a shareholder account is incorrect according to
its records, or that the shareholder is subject to backup withholding, the Fund
is required by the Internal Revenue Service to withhold 31% of any dividend
(other than exempt-interest dividends) and/or redemption (including exchange
redemptions). Amounts withheld are applied to the shareholder's Federal tax
liability, and a refund may be obtained from the Internal Revenue Service if
withholding results in overpayment of taxes. Federal law also requires the Funds
to withhold 30% or the applicable tax treaty rate from dividends paid to certain
nonresident alien, non-U.S. partnership and non-U.S. corporation shareholder
accounts.
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NATIONS TAX EXEMPT FUND: As a regulated investment company, the Nations Tax
Exempt Fund is permitted to pass through to its shareholders tax-exempt income
("exempt-interest dividends") subject to certain requirements which the Fund
intends to satisfy. The Fund does not intend to earn investment company taxable
income or long-term capital gains; to the extent that it does earn taxable
income or realize long-term capital gains, distributions to shareholders from
such sources will be subject to Federal income tax. Exempt-interest dividends
may be treated by shareholders as items of interest excludable from their
Federal gross income under Section 103(a) of the Code unless, under the
circumstances applicable to the particular shareholder, the exclusion would be
disallowed. (See Nations Fund Trust's SAI under "Additional Information
Concerning Taxes.") Distributions of net investment income by Nations Tax Exempt
Fund may be taxable to investors under state or local law even though a
substantial portion of such distributions may be derived from interest on
tax-exempt obligations which, if realized directly, would be exempt from such
income taxes.
If the Nations Tax Exempt Fund should hold certain private activity bonds issued
after August 7, 1986, shareholders must include, as an item of tax preference,
the portion of dividends paid by the Fund that is attributable to interest on
such bonds in their Federal alternative minimum taxable income for purposes of
determining liability (if any) for the 28% alternative minimum tax applicable to
individuals and the 20% alternative minimum tax and the environmental tax
applicable to corporations. Corporate shareholders must also take all
exempt-interest dividends into account in determining certain adjustments for
Federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed at the rate of 0.12% on the excess of
the corporation's modified Federal alternative minimum taxable income over
$2,000,000. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important Federal tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisers with respect to their specific tax
situations as well as with respect to state and local taxes. Further tax
information is contained in the SAIs.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAIs contain more
information concerning such investments.
ASSET BACKED SECURITIES: Asset Backed Securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset Backed
Securities consist of both mortgage and non-mortgage backed securities.
Interests in pools of these assets differ from other forms of debt securities,
which normally provide for periodic payment of interest in fixed amounts with
principal paid at maturity or specified call dates. Instead, Asset Backed
Securities provide periodic payments which generally consist of both interest
and principal payments.
Mortgage backed securities represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself. Mortgage backed securities include
mortgage pass through securities, collateralized mortgage obligations ("CMOs"),
parallel pay CMOs, planned amortization class CMOs ("PAC Bonds") and stripped
mortgage-backed securities ("SMBS"), including interest-only and principal only
SMBS. SMBS may be more volatile than other debt securities. For additional
information concerning mortgage backed securities, see the SAIs.
Non-mortgage asset backed securities include interests in pools of receivables,
such as motor vehicle installment purchase obligations and credit card
receivables. Such securities are generally issued as pass-through certificates,
which represent undivided fractional ownership interests in the underlying pools
of assets. Such securities also may be debt instruments, which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. The Nations Prime Fund generally limits
investments in bank instruments to (a) U.S. dollar-denominated obligations of
U.S. banks which have total assets exceeding $1 billion and which are members of
the Federal Deposit Insurance Corporation (including obligations of foreign
branches of such banks) or of the 75 largest foreign commercial banks in terms
of total assets; or (b) U.S. dollar-denominated bank instruments issued by other
banks believed by NationsBank to present minimal credit risks. For purposes of
the foregoing, total assets may be determined on the basis of the bank's most
recent annual financial statements.
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The Nations Prime Fund may invest up to 100% of its assets in obligations issued
by banks. All Funds (except Nations Prime Fund) will limit their investments in
bank obligations so they do not exceed 25% of each Fund's total assets at the
time of purchase. The Nations Prime Fund may invest in U.S. dollar-denominated
obligations issued by foreign branches of domestic banks ("Eurodollar"
obligations) and domestic branches of foreign banks ("Yankee dollar"
obligations).
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Funds' total assets must be repaid prior to the purchase of
portfolio securities. The Funds are parties to a Line of Credit Agreement with
Mellon Bank, N.A. Advances under the agreement are taken primarily for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities.
Reverse repurchase agreements may be considered to be borrowings. When a Fund
invests in a reverse repurchase agreement, it sells a portfolio security to
another party, such as a bank or broker-dealer, in return for cash, and agrees
to buy the security back at a future date and price. Reverse repurchase
agreements may be used to provide cash to satisfy unusually heavy redemption
requests without having to sell portfolio securities, or for other temporary or
emergency purposes. In addition, the Nations Treasury Fund may use reverse
repurchase agreements for the purpose of investing the proceeds in tri-party
repurchase agreements as discussed below. Generally, the effect of such a
transaction is that the Funds can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while they will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Funds of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Fund is obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Fund's use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The Fund
only enters into reverse repurchase agreements (and repurchase agreements) with
counterparties that are deemed by NationsBank to be credit worthy. Reverse
repurchase agreements are speculative techniques involving leverage, and are
subject to asset coverage requirements if the Fund does not establish and
maintain a segregated account (as described above). Under the requirements of
the 1940 Act, the Fund is required to maintain an asset coverage (including the
proceeds of the borrowings) of at least 300% of all borrowings. Depending on
market conditions, a Fund's asset coverage and other factors at the time of a
reverse repurchase, a Fund may not establish a segregated account when
NationsBank believes it is not in the best interests of the Fund to do so. In
this case, such reverse repurchase agreements will be considered borrowings
subject to the asset coverage described above.
The Nations Treasury Fund has entered into an arrangement whereby it reinvests
the proceeds of a reverse repurchase agreement in a tri-party repurchase
agreement and receives the net interest rate differential.
COMMERCIAL INSTRUMENTS: Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or foreign
corporations and foreign commercial banks. The Nations Prime Fund will limit
purchases of commercial instruments to instruments which: (a) if rated by at
least two NRSROs, are rated in the highest rating category for short-term
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debt obligations given by such organizations, or if only rated by one such
organization, are rated in the highest rating category for short-term debt
obligations given by such organization; or (b) if not rated, are (i) comparable
in priority and security to a class of short-term instruments of the same issuer
that has such rating(s), or (ii) of comparable quality to such instruments as
determined by Nations Fund, Inc.'s Board of Directors on the advice of
NationsBank.
Investments by a Fund in commercial paper will consist of issues rated in a
manner consistent with such Fund's investment policies and objectives. In
addition, a Fund may acquire unrated commercial paper and corporate bonds that
are determined by NationsBank at the time of purchase to be of comparable
quality to rated instruments that may be acquired by a Fund. Commercial
instruments include variable rate master demand notes, which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate, and variable and floating rate
instruments.
The Nations Prime Fund also may purchase short-term participation interests in
loans extended by banks to companies, provided that both such banks and
companies meet the quality standards set forth above.
FOREIGN SECURITIES: Foreign securities include obligations of foreign
corporations and banks as well as obligations of foreign governments and their
political subdivisions (which will be limited to direct government obligations
and government-guaranteed securities). Such investments may subject a Fund to
special investment risks, including future political and economic developments,
the possible imposition of withholding taxes on interest income, possible
seizure or nationalization of foreign deposits, the possible establishment of
exchange controls, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. In addition, foreign issuers in general may be subject to different
accounting, auditing, reporting, and record keeping standards than those
applicable to domestic companies, and securities of foreign issuers may be less
liquid and their prices more volatile than those of comparable domestic issuers.
Investments in foreign securities may present additional risks, whether made
directly or indirectly, including the political or economic instability of the
issuer or the country of issue and the difficulty of predicting international
trade patterns. In addition, there may be less publicly available information
about a foreign company than about a U.S. company. Further, foreign stock
markets are generally not as developed or efficient as those in the U.S., and in
most foreign markets volume and liquidity are less than in the U.S. Fixed
commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign stock exchanges, brokers, and companies
than in the U.S. With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.
GUARANTEED INVESTMENT CONTRACTS: Guaranteed investment contracts ("GICs") are
investment instruments issued by highly rated insurance companies. Pursuant to
such contracts, a Fund may make cash contributions to a deposit fund of the
insurance company's general or separate accounts. The insurance company then
credits to a Fund guaranteed interest. The insurance company may assess periodic
charges against a GIC for expense and service costs allocable to it, and the
charges will be deducted from the value of the deposit fund. The purchase price
paid for a GIC becomes part of the general assets of the issuer, and the
contract is paid from the general assets of the issuer.
A Fund will only purchase GICs from issuers which, at the time of purchase, meet
quality and credit standards established by NationsBank. Generally, GICs are not
assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not currently exist.
Also, a Fund may not receive the principal amount of a GIC from the insurance
company on seven days' notice or less. Therefore, GICs are generally considered
to be illiquid investments.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Money Market Funds will
not knowingly invest more than 10% of the value of their respective net assets
in securities that are illiquid or such lesser percentages as may be required by
the states in which the appropriate Fund sells its shares. Repurchase agreements
and time deposits that do not provide for payment to a Fund within seven days
after notice, guaranteed investment contracts and some commercial paper issued
in reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act") (other than variable amount master demand notes with
maturities of nine months or less), are subject to the limitation on illiquid
securities. In addition, interests in privately arranged loans acquired by the
Nations Prime Fund may be subject to this limitation.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined
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by a Fund's Board of Trustees or Board of Directors or NationsBank, acting under
guidelines approved and monitored by the Fund's Board, that an adequate trading
market exists for that security.
INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of its
portfolio from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, E.G., an exchange of floating rate payments for fixed rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. NationsBank expects to enter into these
transactions on behalf of a Fund primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipated purchasing at a later
date rather than for speculative purposes. A Fund will not sell interest rate
caps or floors that it does not own.
MONEY MARKET INSTRUMENTS: With respect to the Money Market Funds, the term
"money market instruments" refers to instruments with remaining maturities of
397 days or less. Money market instruments include, among other instruments,
U.S. Treasury obligations, U.S. Government obligations, bank instruments,
commercial instruments, repurchase agreements and municipal securities. Such
instruments are described in this Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable or floating rate instruments issued by
industrial development authorities and other governmental entities. While there
may not be an active secondary market with respect to a particular instrument
purchased by a Fund, a Fund may demand payment of the principal and accrued
interest on the instrument or may resell it to a third party as specified in the
instruments. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of the instrument if the issuer defaulted on its
payment obligation or during periods the Fund is not entitled to exercise its
demand rights, and the Fund could, for these or other reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by a
Fund will be determined by NationsBank to be of comparable quality at the time
of purchase to instruments rated "high quality" by any major rating service.
Where necessary to ensure that an instrument is of comparable "high quality," a
Fund will require that an issuer's obligation to pay the principal of the note
may be backed by an unconditional bank letter or line of credit, guarantee, or
commitment to lend.
Municipal securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases," and
units of participation in trusts holding pools of tax-exempt leases. Such loans
in most cases are not backed by the taxing authority of the issuers and may have
limited marketability or may be marketable only by virtue of a provision
requiring repayment following demand by the lender. Such loans made by a Fund
may have a demand provision permitting the Fund to require payment within seven
days. Participations in such loans, however, may not have such a demand
provision and may not be otherwise marketable. To the extent these securities
are illiquid, they will be subject to each Fund's limitation on investments in
illiquid securities. As it deems appropriate, NationsBank will establish
procedures to monitor the credit standing of each such municipal borrower,
including its ability to meet contractual payment obligations.
Municipal participation interests may be purchased from financial institutions,
and give the purchaser an undivided interest in one or more underlying municipal
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security. To the extent that municipal participation interests are considered to
be "illiquid securities," such instruments are subject to each Fund's limitation
on the purchase of illiquid securities.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to municipal securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified Municipal Securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.
Although each Fund does not presently intend to do so on a regular basis, each
may invest more than 25% of its total assets in municipal securities the
interest on which is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by NationsBank. To the extent that
more than 25% of a Fund's total assets are invested in Municipal Securities that
are payable from the revenues of similar projects, a Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if its assets were not so concentrated.
OTHER INVESTMENT COMPANIES: A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
REPURCHASE AGREEMENTS: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker-dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
uninvested cash. A risk associated with repurchase agreements is the failure of
the seller to repurchase the securities as agreed, which may cause a Fund to
suffer a loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the limit
stated above. A Fund may enter into joint repurchase agreements jointly with
other investment portfolios of Nations Fund and Nations Institutional Reserves.
SECURITIES LENDING: To increase return on portfolio securities, certain of the
Funds may lend their portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. There is a risk of delay in receiving
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by NationsBank to be credit worthy and
when, in its judgment, the income to be earned from the loan justifies the
attendant risks. The aggregate of all outstanding loans of a Fund may not exceed
30% of the value of its total assets.
SHORT-TERM TRUST OBLIGATIONS: Nations Prime Fund may invest in short-term
obligations issued by special purpose trusts established to acquire specific
issues of government or corporate securities. Such obligations entitle the Fund
to a proportional fractional interest in payments received by the trust, either
from the underlying securities owned by the trust or pursuant to other
arrangements entered into by the trust. A trust may enter into a swap
arrangement with a highly rated investment firm, pursuant to which the trust
grants to the counterparty certain of its rights with respect to the securities
owned by the trust in exchange for the obligation of the counterparty to make
payments to the trust according to an established formula. The trust obligations
purchased by the Fund must satisfy the quality and maturity requirements
generally applicable to the Fund pursuant to Rule 2a-7 under the 1940 Act.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indexes, non-U.S. interest rates and foreign currencies, that
have been approved by the Commodity Futures Trading Commission ("CFTC") for
investment by U.S. investors, for the purpose of hedging against changes in
values of a Fund's securities or changes in the prevailing levels of interest
rates or currency exchange rates. The contracts entail certain risks, including
but not limited to the following: no assurance that futures contracts
transactions can be offset at favorable prices; possible reduction of a Fund's
total return due to the use of hedging; possible lack of liquidity due to daily
limits on price fluctuation; imperfect correlation between the contracts and the
securities or currencies being hedged; and potential losses in excess of the
amount invested in the futures contracts themselves.
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
for which no common clearing facility exists and a trader may look only to the
broker for performance of the contract. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the
cur-
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rencies in which trading is done on foreign exchanges, any profits that such
Fund might realize could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes.
U.S. GOVERNMENT OBLIGATIONS: U.S. Government obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. Obligations of U.S.
Government agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
E.G., GNMA certificates; in other cases interest and principal are not
guaranteed, E.G., obligations of the Federal Home Loan Bank System and the
Federal Farm Credit Bank. No assurance can be given that the U.S. Government
would provide financial support to government-sponsored instrumentalities if it
is not obligated to do so by law.
VARIABLE AND FLOATING RATE INSTRUMENTS: Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks and corporations
may carry variable or floating rates of interest. Such instruments bear interest
rates which are not fixed, but which vary with changes in specified market rates
or indices, such as a Federal Reserve composite index. A variable rate demand
instrument is an obligation with a variable or floating interest rate and an
unconditional right of demand on the part of the holder to receive payment of
unpaid principal and accrued interest. An instrument with a demand period
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities takes
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
Appendix B -- Description Of Ratings
The following summarizes the highest two ratings used by S&P for corporate and
municipal bonds:
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major rating category.
The following summarizes the highest two ratings used by Moody's for corporate
and municipal bonds:
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa. The modifier 1 indicates that the bond being rated ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category. With regard to municipal bonds, those bonds in the
Aa groups which Moody's believes possess the strongest investment attributes are
designated by the symbols Aa1.
The following summarizes the highest two ratings used by D&P for bonds:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be
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negligible, being only slightly more than for risk free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major category.
The following summarizes the highest two ratings used by Fitch for bonds:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major rating category.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The two highest rating categories of D&P for short-term debt are Duff 1 and Duff
2. D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the
highest rating category. Duff 1+ indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be minor.
Duff 1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. Duff 2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
The following summarizes the two highest rating categories used by Fitch for
short-term obligations:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute
21
<PAGE>
a recommendation to buy or sell securities of any of these companies. Further,
BankWatch does not suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following are the two highest investment grade ratings used by
BankWatch for long-term debt:
AAA -- The highest category; indicates ability to repay principal and interest
on a timely basis is very high.
AA -- The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk versus
issues rated in the highest category.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 -- The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
The following summarizes the two highest long-term ratings used by IBCA:
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk albeit not very significantly.
The following summarizes the two highest short-term debt ratings used by IBCA:
A1+ -- Obligations supported by the highest capacity for timely repayment
and possessing a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
22
<PAGE>
NATIONS FUND TRUST
NATIONS GOVERNMENT MONEY MARKET FUND
SUPPLEMENT DATED JANUARY 30, 1996 TO PROSPECTUSES DATED SEPTEMBER 30, 1995
The Prospectuses for the Trust A, Trust B, Investor A, Investor B,
Investor C and Investor D Shares of NATIONS GOVERNMENT MONEY MARKET FUND are
hereby supplemented as follows:
1. By substituting the following for the second sentence in the
first paragraph in the section entitled "HOW TO BUY SHARES -- EFFECTIVE TIME OF
PURCHASES":
A purchase order must be received by Stephens or by the
Transfer Agent by 2:00 p.m., Eastern time (12:00 noon, Eastern time,
with respect to Nations Tax Exempt Fund and Nations Government Money
Market Fund).
2. By substituting the following for the first three
sentences in the second paragraph in the section entitled "HOW
TO REDEEM SHARES":
Redemption orders must be received on a Business Day before
2:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Tax Exempt Fund and Nations Government Money Market Fund), and
payment will normally be wired the same day to Selling Agents. Nations
Fund reserves the right to wire redemption proceeds within five Business
Days after receiving the redemption order if, in the judgment of
NationsBank, an earlier payment could adversely impact a Fund.
Redemption orders received by Stephens or by the Transfer Agent after
2:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Tax Exempt Fund and Nations Government Money Market Fund), will
be processed on the next Business Day.
3. By substituting the following for the second sentence in
the first paragraph in the section entitled "HOW THE FUNDS VALUE THEIR SHARES":
Shares are valued as of 2:00 p.m., Eastern time (1:00 p.m.,
Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund), on each Business Day.
4. By substituting the following for the first sentence in the
first paragraph in the section entitled "HOW DIVIDENDS AND DISTRIBUTIONS ARE
MADE; TAX INFORMATION -- DIVIDENDS AND DISTRIBUTIONS":
Dividends from net investment income of each Fund are
declared daily to shareholders at 2:00 p.m., Eastern time (1:00 p.m.
Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund) on the day of declaration.
1
<PAGE>
Prospectus
MONEY MARKET FUNDS
Nations Prime Fund
Nations Treasury Fund
Nations Government Money Market
Fund
Nations Tax Exempt Fund
INVESTOR A SHARES
SEPTEMBER 30, 1995
INVESTMENT ADVISER: NationsBank, N.A. (Carolinas)
DISTRIBUTOR: Stephens Inc. (NATIONS FUND LOGO
GOES HERE)
MMPA
<PAGE>
Prospectus
INVESTOR A SHARES
SEPTEMBER 30, 1995
This Prospectus describes the four investment
portfolios listed in the column to the right (each
a "Fund" and collectively the "Money Market Funds")
of the Nations Fund Family ("Nations Fund" or
"Nations Fund Family"). This Prospectus describes
one class of shares of each Money Market
Fund -- Investor A Shares.
EACH MONEY MARKET FUND SEEKS TO MAINTAIN A NET
ASSET VALUE OF $1.00 PER SHARE. INVESTMENTS IN THE
MONEY MARKET FUNDS ARE NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE
NO ASSURANCE THAT THE MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
This Prospectus sets forth concisely the
information about the Funds that a prospective
purchaser of Investor A Shares should consider
before investing. Investors should read this
Prospectus and retain it for future reference.
Additional information about Nations Fund Trust and
Nations Fund, Inc. is contained in separate
Statements of Additional Information (the "SAIs"),
which have been filed with the Securities and
Exchange Commission (the "SEC") and are available
upon request without charge by writing or calling
Nations Fund at its address or telephone number
shown below. The SAIs bear the same date as this
Prospectus and are incorporated by reference in
their entirety into this Prospectus.
SHARES OF NATIONS FUND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. (CAROLINAS) ("NATIONSBANK")
OR ANY OF ITS AFFILIATES. SUCH SHARES ARE NOT
INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
FUNDS INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
NATIONSBANK IS THE INVESTMENT ADVISER AND,
TOGETHER WITH ITS AFFILIATES, PROVIDES CERTAIN
OTHER SERVICES TO NATIONS FUND, FOR WHICH THEY ARE
COMPENSATED. STEPHENS INC., WHICH IS NOT AFFILIATED
WITH NATIONSBANK, IS THE SPONSOR AND ADMINISTRATOR
AND SERVES AS THE DISTRIBUTOR FOR NATIONS FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Nations Prime Fund
Nations Treasury Fund
Nations Government
Money Market Fund
Nations Tax Exempt Fund
For purchase, redemption
and
performance information
call:
1-800-321-7854
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
(NATIONS FUND LOGO
GOES HERE)
<PAGE>
Table Of Contents
About The Funds
Expenses Summary 3
Financial Highlights 4
Objectives 6
How Objectives are Pursued 7
How Performance is Shown 10
How the Funds are Managed 10
Organization and History 13
About Your Investment
How to Buy Shares 15
Shareholder Servicing and Distribution Plans 16
How to Redeem Shares 18
How to Exchange Shares 19
How the Funds Value Their Shares 21
How Dividends and Distributions are Made; Tax
Information 21
Appendix A -- Portfolio Securities 23
Appendix B -- Description of Ratings 30
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAIS
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION
WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY NATIONS FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY NATIONS FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
2
<PAGE>
About The Funds
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds. The
following table summarizes shareholder transaction and operating expenses for
Investor A Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
<TABLE>
<CAPTION>
Nations Nations Tax
Nations Prime Nations Treasury Government Money Exempt Fund
Fund Fund Market Fund
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None None None None
Deferred Sales Charge None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees1 .14% .17% .16% .17%
Rule 12b-1 Fees .10% .10% .10% .10%
Shareholder Servicing Fees1 .25% .25% .25% .15%
Other Expenses .16% .13% .14% .13%
Total Operating Expenses1 .65% .65% .65% .55%
</TABLE>
1 After any waivers and reimbursements.
EXAMPLES:
You would pay the following expenses on a $1,000 investment in Investor A Shares
of the indicated Fund, assuming (1) a 5% annual return and (2) redemption at the
end of each time period.
<TABLE>
<CAPTION>
Nations Prime Nations Treasury Nations Government Nations Tax Exempt
Fund Fund Money Market Fund Fund
<S> <C> <C> <C> <C>
1 Year $ 7 $ 7 $ 7 $ 6
3 Year $ 21 $ 21 $ 21 $18
5 Year $ 36 $ 36 $ 36 $31
10 Years $ 81 $ 81 $ 81 $69
</TABLE>
The purpose of the foregoing table is to assist an investor in understanding the
various shareholder transaction and operating expenses that an investor in each
Fund will bear either directly or indirectly. Certain figures in the above table
are based on amounts incurred during each Fund's most recent fiscal year and
have been restated as necessary to reflect current service provider fees. There
is no assurance that any fee waivers and reimbursements will continue beyond the
current fiscal year. If fee waivers and/or reimbursements are discontinued, the
amounts contained in the "Examples" above may increase. For more complete
descriptions of the Funds' operating expenses, see "How the Funds are Managed."
3
<PAGE>
Absent fee waivers and reimbursements, "Management Fees," "Shareholder Servicing
Fees" and "Total Operating Expenses" for Investor A Shares of the indicated Fund
would be as follows: Nations Prime Fund -- .20%, .25% and .81%, respectively;
Nations Treasury Fund -- .20%, .25% and .70%, respectively; Nations Government
Money Market Fund -- .40%, .25% and .89%, respectively; and Nations Tax Exempt
Fund -- .40%, .25% and .90%, respectively.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Financial Highlights
The audited financial information on the following pages has been derived from
the financial statements of Nations Fund Trust and Nations Fund, Inc. Price
Waterhouse LLP is the independent accountant to Nations Fund Trust and Nations
Fund, Inc. The reports of Price Waterhouse LLP for the most recent fiscal years
of Nations Fund Trust and Nations Fund, Inc. accompany the financial statements
for such periods and are incorporated by reference in the SAIs, which are
available upon request. Shareholders of the Funds will receive unaudited
semi-annual reports describing the Funds' investment operations and annual
financial statements audited by the Funds' independent accountant.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS PRIME FUND
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
INVESTOR A SHARES 05/31/95 5/31/94 5/31/93 5/31/92 5/31/91*
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0475 0.0283 0.0293 0.0470 0.0617
Dividends from net investment income (0.0475) (0.0283) (0.0293) (0.0470) (0.0617)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 4.85% 2.86% 2.97% 4.81%+++ 7.31%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (000's) $ 698,358 $ 511,833 $ 306,376 $ 281,101 $ 144,202
Ratio of operating expenses to average
net assets 0.75% 0.65% 0.65% 0.65% 0.65%+
Ratio of net investment income to
average net assets 4.78% 2.85% 2.90% 4.67% 6.69%+
Ratio of operating expenses to average
net assets without waivers and
reimbursements 0.83% 0.72% 0.71% 0.77% 0.79%+
Net investment income per share without
waivers and reimbursements $ 0.0467 $ 0.0276 $ 0.0287 $ 0.0458 $ 0.0603
</TABLE>
* The Nations Prime Fund Investor A Shares commenced operations on July 16,
1990.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
4
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TREASURY FUND
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
INVESTOR A SHARES 05/31/95 5/31/94 5/31/93 5/31/92 5/31/91*
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0457 0.0262 0.0272 0.0448 0.0592
Dividends from net investment income (0.0457) (0.0262) (0.0272) (0.0448) (0.0592)
Distributions from net realized capital
gains (0.0000)** -- -- -- --
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 4.65 % 2.67 % 2.77 % 4.57+++ 6.98%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (000's) $ 107,475 $ 74,195 $ 105,828 $ 90,917 $ 37,265
Ratio of operating expenses to average
net assets 0.67 % 0.65 % 0.65 % 0.64 % 0.61%+
Ratio of net investment income to
average net assets 4.62 % 2.62 % 2.67 % 4.47 % 6.53%+
Ratio of operating expenses to average
net assets without waivers and
reimbursements 0.72 % 0.71 % 0.71 % 0.76 % 0.83 %+
Net investment income per share without
waivers and reimbursements $ 0.0452 $ 0.0257 $ 0.0266 $ 0.0435 $ 0.0570
</TABLE>
* The Nations Treasury Fund Investor A Shares commenced operations on July 16,
1990.
** Amount represents less than $0.0001.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
NATIONS GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92 11/30/91*
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0261 0.0340 0.0256 0.0358 0.0571
Distributions:
Dividends from net investment income (0.0261) (0.0340) (0.0256) (0.0358) (0.0571)
Dividends from net realized gains -- (0.0000)# -- -- --
Total distributions (0.0261) (0.0340) (0.0256) (0.0358) (0.0571)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 2.64% 3.45% 2.60% 3.63%+++ 5.86%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (000's) $ 13,063 $ 20,173 $ 10,499 $ 13,851 $ 8,949
Ratio of operating expenses to
average net assets 0.65%+ 0.65% 0.61% 0.42% 0.43%+
Ratio of net investment income to
average net assets 5.26%+ 3.44% 2.60% 3.55% 5.49%+
Ratio of operating expenses to
average net assets before fee
waivers 0.91%+ 0.94% 0.87% 0.58% 0.62%+
Net investment income per share
before fee waivers $ 0.0248 $ 0.0311 $ 0.0231 $ 0.0341 $ 0.0551
</TABLE>
* The Nations Government Money Market Fund Investor A Shares commenced
operations on February 11, 1991.
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
+++ Unaudited.
# Value represents less than $(0.0001) per share.
5
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TAX EXEMPT FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92 11/30/91*
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0167 0.0231 0.0198 0.0266 0.0422
Dividends from net investment income (0.0167) (0.0231) (0.0198) (0.0266) (0.0422)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 1.68% 2.36% 2.00% 2.68%+++ 4.30%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (000's) $ 106,838 $ 151,714 $ 119,552 $ 80,158 $ 1,690
Ratio of operating expenses to
average net assets 0.55%+ 0.52% 0.48% 0.55% 0.42%+
Ratio of net investment income to
average net assets 3.39%+ 2.34% 1.98% 2.50% 4.23%+
Ratio of operating expenses to
average net assets before fee
waivers 0.80%+ 0.84% 0.84% 0.72% 0.60%+
Net investment income per share
before fee waivers $ 0.0155 $ 0.0199 $ 0.0162 $ 0.0248 $ 0.0404
</TABLE>
* The Nations Tax Exempt Fund Investor A Shares commenced operations on April
5, 1991.
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
+++ Unaudited.
Objectives
Each Money Market Fund, described below, endeavors to achieve its investment
objective by investing in a diversified portfolio of high quality money market
instruments with maturities of 397 days or less from the date of purchase.
Securities subject to repurchase agreements may bear longer maturities.
NATIONS PRIME FUND: The Nations Prime Fund's investment objective is to seek the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS TREASURY FUND: The Nations Treasury Fund's investment objective is the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS GOVERNMENT MONEY MARKET FUND: The Nations Government Money Market Fund's
investment objective is to seek as high a level of current income as is
consistent with liquidity and stability of principal.
NATIONS TAX EXEMPT FUND: The Nations Tax Exempt Fund's investment objective is
to seek as high a level of current interest income exempt from Federal income
taxes as is consistent with liquidity and stability of principal.
6
<PAGE>
How Objectives Are Pursued
NATIONS PRIME FUND: In pursuing its investment objective, the Fund may invest in
U.S. Treasury bills, notes and bonds and other instruments issued directly by
the U.S. Government ("U.S. Treasury Obligations"), other obligations issued or
guaranteed as to payment of principal and interest by the U.S. Government, its
agencies or instrumentalities ("U.S. Government Obligations"), bank and
commercial instruments that may be available in the money markets, high quality
short-term taxable obligations issued by state and local governments, their
agencies and instrumentalities and repurchase agreements relating to U.S.
Government Obligations. The Fund also may purchase securities issued by other
investment companies, consistent with the Fund's investment objective and
policies, and may engage in reverse repurchase agreements. The Fund also may
invest in guaranteed investment contracts and in instruments issued by trusts,
including pass-through certificates representing participations in, or debt
instruments backed by, the securities and other assets owned by the trust. In
addition, the Fund may lend its portfolio securities to qualified institutional
investors. For more information concerning these instruments, see "Appen-
dix A."
NATIONS TREASURY FUND: In pursuing its investment objective, the Fund invests in
U.S. Treasury Obligations and repurchase agreements secured by such obligations.
The Fund also may purchase securities issued by other investment companies,
consistent with the Fund's investment objective and policies, and may engage in
reverse repurchase agreements. The Fund also may lend its portfolio securities
to qualified institutional investors. For more information concerning these
instruments, see "Appendix A."
NATIONS GOVERNMENT MONEY MARKET FUND: In pursuing its investment objective, the
Fund invests in U.S. Government Obligations and repurchase agreements relating
to such obligations. The Fund also may purchase securities issued by other
investment companies, consistent with the Fund's investment objective and
policies, and may engage in reverse repurchase agreements. The Fund also may
lend its portfolio securities to qualified institutional investors. For more
information concerning these instruments, see "Appendix A."
NATIONS TAX EXEMPT FUND: In pursuing its investment objective, the Fund invests
in a diversified portfolio of obligations issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia, and
their political subdivisions, agencies, instrumentalities and authorities, the
interest on which, in the opinion of counsel to the issuer or bond counsel, is
exempt from regular Federal income tax ("Municipal Securities"). The Fund will
not knowingly purchase securities the interest on which is subject to such tax.
A portion of the Fund's assets, however, may be invested in private activity
bonds, the interest on which may be treated as a specific tax preference item
under the Federal alternative minimum tax. See "How Dividends and Distributions
Are Made; Tax Information."
The Fund invests in Municipal Securities which are determined to present minimal
credit risks and which at the time of purchase are considered to be of "high
quality" -- E.G., rated "AA" or higher by Duff & Phelps Credit Rating Co.
("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard & Poor's Corporation
("S&P"), IBCA Limited or its affiliate IBCA Inc. (collectively "IBCA"), or
Thomson BankWatch, Inc. ("BankWatch") or "Aa" or higher by Moody's Investors
Service, Inc. ("Moody's"), in the case
7
<PAGE>
of bonds; rated "Duff 1" or higher by D&P, "F-1" or higher by Fitch, "SP-1" by
S&P, or "MIG-1" by Moody's in the case of notes; rated "Duff 1" or higher by
D&P, "F-1" or higher by Fitch, or "VMIG-1" by Moody's in the case of variable
rate demand notes; or rated "Duff 1" or higher by D&P, "F-1" or higher by Fitch,
"A-1" or higher by S&P, or "Prime-1" by Moody's in the case of tax-exempt
commercial paper. D&P, Fitch, S&P, Moody's, IBCA and BankWatch are the six
nationally recognized statistical rating organizations (collectively, "NRSROs").
Securities that are unrated at the time of purchase will be determined to be of
comparable quality by NationsBank pursuant to guidelines approved by Nations
Fund Trust's Board of Trustees. The applicable Municipal Securities ratings are
described in "Appendix B."
The payment of principal and interest on most securities purchased by the Fund
will depend upon the ability of the issuers to meet their obligations. The
District of Columbia, each state, each of their political subdivisions,
agencies, instrumentalities and authorities and each multi-state agency of which
a state is a member is a separate "issuer" as that term is used in this
Prospectus and the related SAI. The non-governmental user of facilities financed
by private activity bonds also is considered to be an "issuer." For more
information concerning Municipal Securities, see "Appendix A -- Municipal
Securities."
The Fund may hold uninvested cash reserves pending investment, during temporary
defensive periods, or if, in the opinion of NationsBank, desirable tax-exempt
obligations are unavailable. Uninvested cash reserves will not earn income. As a
matter of fundamental policy, under normal market conditions, at least 80% of
the Fund's net assets will be invested in Municipal Securities. Investments in
private activity bonds, the interest on which may be treated as a specific tax
preference item under the Federal alternative minimum tax, will not be treated
as Municipal Securities in determining whether the Fund is in compliance with
this 80% requirement. The Fund also may invest in securities issued by other
investment companies that invest in securities consistent with the Fund's
investment objective and policies. For more information concerning the Fund's
investments, see "Appendix A."
RISK CONSIDERATIONS: Although NationsBank will seek to achieve the investment
objective of each Fund, there is no assurance that it will be able to do so. No
single Fund should be considered, by itself, to provide a complete investment
program for any investor. Investments in a Fund are not insured against loss of
principal. For additional risk information regarding the Funds' investment in
particular instruments, see "Appendix A -- Portfolio Securities."
INVESTMENT LIMITATIONS: The Funds are subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed with respect to a particular Fund without the
affirmative vote of the holders of a majority of that Fund's outstanding shares.
Other investment limitations that cannot be changed without such a vote of
shareholders are described in the Funds' SAIs.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
tax-exempt securities issued by state or municipal governments and their
political subdivisions are not considered members of any industry. In addition,
this limitation does not apply to investments in obligations of domestic banks.)
8
<PAGE>
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or are privately
placed), may enter into repurchase agreements and may lend portfolio securities
in accordance with its investment policies.
3. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of such Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, such Fund will not
hold more than 10% of the voting securities of any issuer.
In addition, as a matter of non-fundamental policy, the Nations Tax Exempt Fund
may not purchase any securities other than obligations the interest on which is
exempt from Federal income tax and stand-by commitments with respect to such
obligations. The investment objectives and policies of the Funds, unless
otherwise specified, may be changed without shareholder approval. If the
investment objective or policies of a Fund change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus and the SAIs. Should a Fund determine that any such
commitment is no longer in its best interests, it may consider terminating sales
of its shares in the states involved.
In order for the Funds to value their investments on the basis of amortized cost
(see "How the Funds Value Their Shares"), investments must be in accordance with
the requirements of Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "1940 Act"), some of which are described below. These include
maturity, quality and diversification requirements. Maturity is limited to a
dollar-weighted average portfolio maturity of 90 days or less. Quality
requirements generally limit investments to U.S. dollar denominated instruments
determined to present minimal credit risks and that, at the time of acquisition,
are rated in the top two rating categories by the required number of NRSROs (at
least two or, if only one NRSRO has rated the security, that one NRSRO) or, if
unrated by any NRSRO, are (i) comparable in priority and security to a class of
short-term securities of the same issuer that has the required rating, or (ii)
determined to be comparable in quality to securities having the required rating.
The diversification requirements provide generally that a Money Market Fund
(except the Nations Tax Exempt Fund) may not at the time of acquisition invest
more than 5% of its assets in securities of any one issuer or invest more than
5% of its assets in securities (and no more than 1% in any one issuer) that have
not been rated in the highest category by the required number of NRSROs or, if
unrated, are described in (i) or (ii) above. Securities issued by the U.S.
Government, its agencies, authorities or instrumentalities, and
fully-collateralized repurchase agreements secured by such obligations, are
exempt from the quality requirements, other than minimal credit risk. In the
event that a Fund's investment restrictions or permissible investments are more
restrictive than the requirements of Rule 2a-7, the Fund's own restrictions will
govern.
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How Performance Is Shown
From time to time, a Fund may advertise the "yield" and "effective yield" of a
class of shares, and Nations Tax Exempt Fund may advertise the "tax equivalent
yield" of a class of shares. YIELD, EFFECTIVE YIELD AND TAX-EQUIVALENT YIELD
FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE
PERFORMANCE.
The "yield" of a class of shares in a Fund refers to the income generated by an
investment in such class over a seven-day period identified in the
advertisement. This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly, but, when annualized, the income
earned by an investment in a class of shares in a Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. The
"tax-equivalent yield" of each class of shares in the Nations Tax Exempt Fund
shows the level of taxable yield needed to produce an after-tax equivalent to
such class's tax-free yield. This is done by increasing the class's yield
(calculated as above) by the amount necessary to reflect the payment of Federal
income tax at a stated tax rate. The tax-equivalent yield will always be higher
than the "yield" of a class of shares in the Nations Tax Exempt Fund.
Since yields fluctuate, yield data cannot necessarily be used to compare an
investment in the Funds with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed-upon or guaranteed fixed
yield for a stated period of time. Any fees charged by selling agents and/or
servicing agents to their customers' accounts for automatic investment or other
cash management services will not be included in calculations of yield.
In addition to Investor A Shares, the Funds offer Trust A, Trust B, Investor B,
Investor C and Investor D Shares. Each class of shares may bear different sales
charges, shareholder servicing fees and other expenses, which may cause the
performance of a class to differ from the performance of the other classes.
Performance quotations will be computed separately for each class of the Funds'
shares. The Funds' annual report contains additional performance information and
is available upon request without charge from the Funds' distributor or your
selling agent.
How The Funds Are Managed
The business and affairs of Nations Fund Trust and Nations Fund, Inc. are
managed under the direction of its Board of Trustees and Board of Directors,
respectively. Nations Fund Trust's SAI contains the names of and general
background information concerning each Trustee of Nations Fund Trust. Nations
Fund, Inc.'s SAI contains the names of and general background information
concerning each Director of Nations Fund, Inc.
Nations Fund and NationsBank have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially comply in all
material respects with the recommendations set forth in the May 9, 1994 Report
of the Advisory Group on Personal Investing of the Investment Company Institute.
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INVESTMENT ADVISER: NationsBank, through its investment management division,
serves as investment adviser to the Funds. NationsBank is an indirect wholly
owned subsidiary of NationsBank Corporation, a bank holding company organized as
a North Carolina corporation. NationsBank has its principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255.
NationsBank provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking.
Subject to the general supervision of Nations Fund Trust's Board of Trustees and
Nations Fund, Inc.'s Board of Directors, and in accordance with each Fund's
investment policies, NationsBank formulates guidelines and lists of approved
investments for each Fund, makes decisions with respect to and places orders for
each Fund's purchases and sales of portfolio securities and maintains records
relating to such purchases and sales. With respect to the Nations Tax Exempt
Fund, NationsBank is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with
NationsBank or which have sold shares in such Fund, if NationsBank believes that
the quality of the transaction and the commission are comparable to what they
would be with other qualified brokerage firms. From time to time, to the extent
consistent with its investment objective, policies and restrictions, each Fund
may invest in securities of companies with which NationsBank has a lending
relationship. For the services provided and expenses assumed pursuant to various
Investment Advisory Agreements, NationsBank is entitled to receive advisory
fees, computed daily and paid monthly, at the annual rates of: 0.25% of the
first $250 million of the combined average daily net assets of both Nations
Prime Fund and Nations Treasury Fund, plus 0.20% of the combined average daily
net assets of such Funds in excess of $250 million; and 0.40% of the average
daily net assets of each of Nations Government Money Market Fund and Nations Tax
Exempt Fund.
From time to time, NationsBank may waive (either voluntarily or pursuant to
applicable state limitations) advisory fees payable by a Fund. For the fiscal
year ended November 30, 1994, after waivers, Nations Fund Trust paid NationsBank
advisory fees at the rate of 0.19% and 0.09% of the average daily net assets of
the Nations Government Money Market Fund and Nations Tax Exempt Fund,
respectively. For the fiscal year ended May 31, 1995, after waivers, Nations
Fund, Inc. paid NationsBank fees at the rate of 0.13% and 0.16% of the average
daily net assets of the Nations Prime Fund and Nations Treasury Fund,
respectively.
Morrison & Foerster, counsel to Nations Fund and special counsel to NationsBank,
has advised Nations Fund and NationsBank that NationsBank may perform the
services contemplated by the Investment Advisory Agreements without violation of
the Glass-Steagall Act or other applicable banking laws or regulations. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent NationsBank from
continuing to perform, in whole or in part, such services. If NationsBank were
prohibited from performing any such services, it is expected that the the Board
of Trustees of Nations Fund
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Trust and the Board of Directors of Nations Fund, Inc. would recommend to each
Fund's shareholders that they approve a new advisory agreement with another
entity or entities qualified to perform such services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
Nations Fund pursuant to Administration Agreements. Pursuant to the terms of the
Administration Agreements, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of
First Data Corporation, with principal offices at One Exchange Place, Boston,
Massachusetts 02109, serves as the co-administrator of the Funds pursuant to
Co-Administration Agreements. Under the Co-Administration Agreements, TSSG
provides various administrative and accounting services to the Funds, including
performing calculations necessary to determine net asset values and dividends,
preparing tax returns and financial statements and maintaining the portfolio
records and certain general accounting records for the Funds. For the services
rendered pursuant to the Administration and Co-Administration Agreements,
Stephens and TSSG are entitled to receive a combined fee at the annual rate of
up to 0.10% of each Fund's average daily net assets. For the fiscal year ended
November 30, 1994, after waivers, Nations Fund Trust paid its administrators
fees at the rate of 0.09% of the average daily net assets of Nations Government
Money Market Fund and Nations Tax Exempt Fund. For the fiscal year ended May 31,
1995, after waivers, Nations Fund, Inc. paid its administrators fees at the rate
of 0.09% of the average daily net assets of Nations Prime Fund and Nations
Treasury Fund.
It is anticipated that beginning in November of 1995, NationsBank will serve as
sub-administrator for Nations Fund pursuant to a Sub-Administration Agreement.
Pursuant to the terms of the Sub-Administration Agreement, NationsBank will
assist Stephens in supervising, coordinating and monitoring various aspects of
the Funds' administrative operations. For providing such services, NationsBank
shall be entitled to receive a monthly fee from Stephens based on an annual rate
of .01% of the Funds' average daily net assets.
Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker-dealer with principal
offices at 111 Center Street, Little Rock, Arkansas 72201. Nations Fund has
entered into a distribution agreement with Stephens which provides that Stephens
has the exclusive right to distribute shares of the Funds. Stephens may pay
service fees or commissions to selling agents that assist customers in
purchasing Investor A Shares of the Funds. See "Shareholder Servicing and
Distribution Plans."
NationsBank of Texas, N.A., serves as each Fund's custodian (the "Custodian").
The Custodian is located at 1401 Elm Street, Dallas, Texas 75202 and is a wholly
owned subsidiary of NationsBank Corporation. In return for providing custodial
services, the Custodian is entitled to receive, in addition to out-of-pocket
expenses, fees payable monthly (i) at the rate of 1.25% of 1% of the average
daily net assets of each Fund, (ii) $10.00 per repurchase collateral transaction
by the Funds, and (iii) $15.00 per purchase, sale and maturity transaction
involving the Funds.
TSSG serves as transfer agent (the "Transfer Agent") for each Fund's Investor A
Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
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Price Waterhouse LLP serves as independent accountant to Nations Funds. Their
address is 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES: The accrued expenses of each Fund, as well as certain expenses
attributable to Investor A Shares, are deducted from accrued income before
dividends are declared. The Funds' expenses include, but are not limited to:
fees paid to NationsBank, Stephens and TSSG; interest; directors' or trustees'
fees; federal and state securities registration and qualification fees;
brokerage fees and commissions; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings; other
expenses which are not expressly assumed by NationsBank, Stephens or TSSG under
their respective agreements with Nations Fund; and any extraordinary expenses.
Investor A Shares may bear certain class specific retail transfer agency
expenses and also bear certain additional shareholder service and distribution
costs. Any general expenses of Nations Fund Trust and/or of Nations Fund, Inc.
that are not readily identifiable as belonging to a particular investment
portfolio are allocated among all portfolios in the proportion that the assets
of a portfolio bears to the assets of Nations Fund Trust and/or of Nations Fund,
Inc. or in such other manner as the Board of Trustees or Board of Directors
deems appropriate.
Organization And History
The Funds are members of the Nations Fund Family, which consists of Nations Fund
Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc. and Nations
Institutional Reserves (formerly known as The Capitol Mutual Funds). The Nations
Fund Family currently has 44 distinct investment portfolios and total assets in
excess of $16 billion.
NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. The Funds currently offer six classes of shares -- Trust A
Shares, Trust B Shares, Investor A Shares, Investor B Shares, Investor C Shares
and Investor D Shares. This Prospectus relates only to the Investor A Shares of
Nations Government Money Market Fund and Nations Tax Exempt Fund of Nations Fund
Trust. To obtain additional information regarding the Funds' other classes of
shares which may be available to you, contact your Selling Agent (as defined
below) or Nations Fund at 1-800-321-7854.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund, and
shareholders of a fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See Nations Fund Trust's SAI for
exam-
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ples of instances where the 1940 Act requires voting by fund.
As of August, 1995, NationsBank and its affiliates possessed or shared power to
dispose or vote with respect to more than 25% of the outstanding shares of
Nations Fund Trust and therefore could be considered to be a controlling person
of Nations Fund Trust for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series of shares over
which NationsBank and its affiliates possessed or shared power to dispose or
vote as of a certain date, see Nations Fund Trust's SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
NATIONS FUND, INC. Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no operations prior to December 15, 1986. As of the date of
this Prospectus, the authorized capital stock of Nations Fund, Inc. consists of
270,000,000,000 shares of common stock, par value of $.001 per share, which are
divided into series or portfolios, each of which consists of separate classes of
shares. This Prospectus relates only to the Investor A Shares of Nations Prime
Fund and Nations Treasury Fund of Nations Fund, Inc. To obtain additional
information regarding the Funds' other classes of shares which may be available
to you, contact your Selling Agent (as defined below) or Nations Fund at
1-800-321-7854.
Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such fund
or class. In the event of dissolution or liquidation, holders of each class will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of that portion of the assets allocated to that class held in the
respective fund of Nations Fund, Inc., less (b) the liabilities of Nations Fund,
Inc. attributable to the respective fund or class or allocated among the funds
or classes based on the respective liquidation value of each fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of Directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of Nations Fund, Inc.'s outstanding shares.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s shares.
Nations Fund, Inc.'s shares, when issued, will be fully paid and non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Fund, Inc. and therefore could be considered to be a controlling person
of Nations Fund, Inc. for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see Nations Fund, Inc.'s SAI. It is anticipated that Nations
Fund, Inc. will not hold annual shareholder meetings, except when required by
the 1940 Act or Maryland law.
Because this Prospectus combines disclosure on two separate investment
companies, there is a possibility that one investment company could become
liable for a misstatement, inaccuracy or incomplete disclosure in this
Prospectus concerning the other investment company. Nations Fund Trust and
Nations Fund, Inc. have entered into an indemnification agreement that creates a
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right of indemnification from the investment company responsible for any such
misstatement, inaccuracy or incomplete disclosure that may appear in this
Prospectus.
About Your Investment
How To Buy Shares
Stephens has established various procedures for purchasing Investor A Shares in
order to accommodate different investors. Purchase orders may be placed through
banks, broker/dealers or other financial institutions (including certain
affiliates of NationsBank) that have entered into sales support agreements
("Sales Support Agreements") with Stephens ("Selling Agents").
Customers may invest in Investor A Shares through a Nations Fund Personal
Investment Planner account, which is a managed agency/asset allocation account
established with NationsBanc Advisors, Inc. (an "Account"). Investments through
an Account are governed by the terms and conditions of the Account, which are
set forth in the Client Agreement and Disclosure Statement provided by
NationsBanc Advisors, Inc. to each investor who establishes an Account. Because
of the nature of the Account, certain of the features described in this
prospectus are not available to investors purchasing Investor A Shares through
an Account. Potential investors through an Account should refer to the Client
Agreement and Disclosure Statement for more information regarding the Account,
including information regarding the fees and expenses charged in connection with
an Account.
There is a minimum initial investment of $1,000, except that the minimum initial
investment is:
(Bullet) $500 for Individual Retirement Account ("IRA") investors;
(Bullet) $250 for non-working spousal IRAs; and
(Bullet) $100 for investors participating on a monthly basis in the Systematic
Investment Plan described below.
There is no minimum investment amount for investments by 401(k) plans,
simplified employee pension plans ("SEPs"), salary reduction-simplified employee
pension plans ("SAR-SEPs") or salary reduction-Individual Retirement Account
("SAR-IRAs"). However, the assets of such plans must reach an asset value of
$1,000 ($500 for SEPs, SAR-SEPs and SAR-IRAs) within one year of the account
open date. If the assets of such plans do not reach the minimum asset size
within one year, Nations Fund reserves the right to redeem the shares held by
such plans on 60 days' written notice. The minimum subsequent investment is
$100, except for investments pursuant to the Systematic Investment Plan
described below.
Investor A Shares of the Money Market Funds are purchased at net asset value per
share without the imposition of a sales charge. Purchases may be effected only
on days on which the Federal Reserve Bank of New York is open for business (a
"Business Day").
The Selling Agents have entered into Sales Support Agreements with Stephens
under which they will provide various sales support services to their customers
("Customers") who own Investor A Shares. In addition, banks, broker/dealers or
other financial institutions (including certain affiliates of NationsBank) that
have entered into shareholder servicing
agree-
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ments ("Servicing Agreements") with Nations Fund ("Servicing Agents") will
provide various shareholder services for their Customers who own Investor A
Shares. Selling Agents and Servicing Agents are sometimes referred to hereafter
as "Agents." From time to time the Agents, Stephens and Nations Fund may agree
to voluntarily reduce the fees payable for shareholder services and sales
support services.
Nations Fund reserves the right to reject any purchase order. The issuance of
Investor A Shares is recorded on the books of the Funds, and share certificates
are not issued unless expressly requested in writing. Certificates are not
issued for fractional shares.
EFFECTIVE TIME OF PURCHASES: Purchases will be effected only when federal funds
are available for investment on the Business Day the purchase order is received
by Stephens or by the Transfer Agent. A purchase order must be received by
Stephens or by the Transfer Agent by 2:00 p.m., Eastern time (12 noon, Eastern
time, with respect to Nations Tax Exempt Fund). Absent prior arrangement with
Stephens or the Transfer Agent, purchase orders received after such time on any
given day will not be accepted; notice thereof will be given to the Selling
Agent transmitting the order, and any funds received will be returned promptly
to the sending Selling Agent. Any late purchase orders that are not rejected
pursuant to such a prior arrangement will be executed on the following Business
Day. If federal funds are not available by 4:00 p.m., Eastern time, the order
will be canceled. Investor A Shares are purchased at the net asset value per
share next determined after receipt of the order by Stephens or by the Transfer
Agent.
The Selling Agents are responsible for transmitting orders for purchases by
their Customers and delivering required funds on a timely basis. Stephens is
responsible for transmitting orders it receives to Nations Fund.
SYSTEMATIC INVESTMENT PLAN: Under the Funds' Systematic Investment Plan ("SIP")
a shareholder may automatically purchase Investor A Shares. On a bi-monthly,
monthly or quarterly basis, a shareholder may direct cash to be transferred
automatically from his/her checking or savings account at any bank to his/her
Fund account. Transfers will occur on or about the 15th and/or 30th day of the
applicable month. The systematic investment amount may be in any amount from $25
to $100,000. For more information concerning the SIP, contact your Selling
Agent.
TELEPHONIC TRANSACTIONS: An investor may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How to Redeem Shares" and "How to
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. You should be aware that by electing the telephone transaction feature
you may be giving up a measure of security that you may have if you were to
authorize written requests only. You may bear the risk of any resulting losses
from a telephone transaction. Nations Fund will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and if Nations
Fund and its service providers fail to employ such measures, they may be liable
for any losses due to unauthorized or fraudulent instructions. Nations Fund
requires a form of personal identification prior to acting upon instructions
received by telephone and provides written confirmation to shareholders of each
telephone share transaction. In addition, Nations Fund reserves the right to
record all telephone conversations.
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Shareholder Servicing And Distribution
Plans
Pursuant to Rule 12b-1 under the 1940 Act, the Trustees and Directors have
approved a Shareholder Servicing and Distribution Plan (the "Investor A Plan")
with respect to Investor A Shares of the Funds. Pursuant to the Investor A Plan,
the Funds may pay Stephens (or any other person) for distribution-related
expenses and Selling Agents for sales support expenses incurred in connection
with Investor A Shares. Payments under the Investor A Plan will be calculated
daily and paid monthly at a rate or rates set from time to time by the Trustees
or Directors provided that the annual rate may not exceed 0.10% of the average
daily net asset value of Investor A Shares of the Funds. Payments to Stephens
under the Investor A Plan may be used to reimburse Stephens for
distribution-related expenses actually incurred by Stephens, including expenses
of organizing and conducting sales seminars, printing prospectuses, statements
of additional information (and supplements thereto) and reports for other than
existing shareholders, preparation and distribution of advertising material and
sales literature and the costs of administering the Investor A Plan. The fees
payable to Selling Agents are used primarily to compensate Selling Agents for
providing sales support assistance in connection with the sale of Investor A
Shares to Customers, which may include forwarding sales literature and
advertising provided by Nations Fund to Customers. The Funds may not pay for
shareholder servicing activities under the Investor A Plan.
Nations Fund and Stephens may suspend or reduce payments under the Investor A
Plan at any time, and payments are subject to the continuation of the Investor A
Plan described above and the terms of the Sales Support Agreement between
Selling Agents and Stephens. See the SAIs for more information on the Investor A
Plan.
In addition, the Trustees and Directors have approved a shareholder servicing
plan (the "Servicing Plan") with respect to Investor A Shares of the Funds.
Pursuant to the Servicing Plan, the Funds may pay Servicing Agents that have
entered into a Servicing Agreement with Nations Fund for certain shareholder
support services that are provided by the Servicing Agents. Payments under the
Funds' Servicing Plan are calculated daily and paid monthly at a rate or rates
set from time to time by the Funds, provided that the annual rate may not exceed
0.25% of the average daily net asset value of each Fund's Investor A Shares. The
shareholder services provided by Servicing Agents may include general
shareholder liaison services; processing purchase, exchange, and redemption
requests from Customers and placing orders with Stephens or the Transfer Agent;
processing dividend and distribution payments from a Fund on behalf of
Customers; providing information periodically to Customers, including
information showing their position in Investor A Shares; providing
sub-accounting with respect to Investor A Shares beneficially owned by Customers
or the information necessary for sub-accounting; responding to inquiries from
Customers concerning their investment in Investor A Shares; arranging for bank
wires; and providing such other similar services as may be reasonably requested.
Nations Fund may suspend or reduce payments under the Servicing Plan at any
time, and payments are subject to the continuation of the Servicing Plan
described above and the terms of the Servicing Agreements. See the SAIs for more
details on the Servicing Plan.
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Nations Fund understands that Agents may charge fees to their Customers who are
the owners of a Fund's Investor A Shares for various services provided in
connection with a Customer's account. These fees would be in addition to any
amounts received by a Selling Agent under its Sales Support Agreement with
Stephens or by a Servicing Agent under its Servicing Agreement with Nations
Fund. The Sales Support Agreements and Servicing Agreements require Agents to
disclose to their Customers any compensation payable to the Agent by Stephens or
Nations Fund and any other compensation payable by the Customers for various
services provided in connection with their accounts. Customers should read this
Prospectus in light of the terms governing their accounts with their Agents.
How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Selling Agent that transmitted the original purchase order. Redemption
orders are effected at the net asset value per share next determined after
receipt of the order by Stephens or by the Transfer Agent. The Selling Agents
are responsible for transmitting redemption orders to Stephens or to the
Transfer Agent and for crediting their Customer's account with the redemption
proceeds on a timely basis. No charge for wiring redemption payments is imposed
by Nations Fund.
Redemption orders must be received on a Business Day before 2:00 p.m., Eastern
time (12 noon, Eastern time, with respect to Nations Tax Exempt Fund), and
payment will normally be wired the same day to Selling Agents. Nations Fund
reserves the right to wire redemption proceeds within three Business Days after
receiving the redemption order if, in the judgment of NationsBank, an earlier
payment could adversely impact a Fund. However, redemption proceeds for shares
purchased by check may not be remitted until at least 15 days after the date of
purchase to ensure that the check has cleared; a certified check, however, is
deemed to be cleared immediately. Redemption orders received by Stephens or by
the Transfer Agent after 2:00 p.m., Eastern time (12 noon, Eastern time, with
respect to Nations Tax Exempt Fund), will be processed on the next Business Day.
Nations Fund may redeem a shareholder's Investor A Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of a
Selling Agent pursuant to arrangements between the Selling Agent and its
Customers. Nations Fund also may redeem shares of the Funds involuntarily or
make payment for redemption in readily marketable securities or other property
under certain circumstances in accordance with the 1940 Act.
Prior to effecting a redemption of Investor A Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to Nations Fund have previously been
made. Nations Fund may require any additional information reasonably necessary
to evidence that a redemption has been duly authorized.
Free checkwriting is available with respect to Investor A Shares of the Funds.
With this service, a shareholder may write checks in the
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amount of $250 or more. To obtain checks, a shareholder must complete the
signature section included within the Account Application Form. To establish
this checkwriting service after opening an account in one of the Funds, the
shareholder must contact his/her Selling Agent by telephone or mail to obtain an
Application Form. A shareholder will receive the dividends and distributions
declared on the shares to be redeemed up to the day that a check is presented to
the Custodian for payment. Upon 30 days' prior written notice to shareholders,
the checkwriting privilege may be modified or terminated. An investor cannot
close an account in the Funds by writing a check.
AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of a Fund if the value of the
Investor A Shares in his/her accounts within the Nations Fund Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Shareholders who elect to establish an AWP may receive a monthly,
quarterly or annual check or automatic transfer to a checking or savings account
in a stated amount of not less than $25 on or about the 10th or 25th day of the
applicable month of withdrawal. Investor A Shares will be redeemed as necessary
to meet withdrawal payments. Withdrawals will reduce principal and may
eventually deplete the shareholder's account. If a shareholder desires to
establish an AWP after opening an account, a signature guarantee will be
required. An AWP may be terminated by a shareholder on 30 days' written notice
to his/her Selling Agent or by Nations Fund at any time.
How To Exchange Shares
SHARES PURCHASED DIRECTLY THROUGH A SELLING AGENT, STEPHENS OR THE TRANSFER
AGENT: The exchange feature enables a shareholder of Investor A Shares of a
Money Market Fund to acquire Investor A Shares of another Money Market Fund when
that shareholder believes that a shift between Funds is an appropriate
investment decision. Except as described below, Investor A Shares of a Money
Market Fund may not be exchanged for any class of any non-money market fund of
Nations Fund.
An investor who owns his or her shares through a Nations Fund IRA that initially
invests in Investor A Shares of a Money Market Fund may exchange those shares
for Investor A or Investor N Shares of a non-money market fund offered by
Nations Fund. In the event of such an exchange into Investor A Shares of a
non-money market fund, the shareholder would be subject to the sales charge that
otherwise would be applicable to the purchase of such Investor A Shares.
Additionally, Investor A or Investor N Shares of a non-money market fund
acquired through such an exchange will, upon redemption, be subject to the
contingent deferred sales charge ("CDSC") schedule applicable to the acquired
shares. For purposes of determining the applicable rate of the CDSC, the date of
the exchange will be deemed to be the date of purchase of the Investor A or
Investor N Shares.
SHARES ACQUIRED THROUGH THE NATIONS FUND AUTOMATIC EXCHANGE FEATURE: An investor
who is participating in the Nations Fund Automatic Exchange Feature ("AEF") may
acquire Investor A or Investor C Shares of a non-money market fund offered by
Nations Fund (other than Investor C Shares of Nations Short-Term Income Fund and
Nations Short Term Municipal Income Fund). In the event of such an exchange into
Investor A Shares of a non-money market fund, the shareholder would be subject
to the sales charge that otherwise would be applicable
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to the purchase of such Investor A Shares. In addition, Investor A or Investor C
Shares of a non-money market fund acquired through such exchange will, upon
redemption, be subject to the CDSC schedule applicable to the acquired shares.
For purposes of determining the applicable rate of the CDSC, the date of the
exchange will be deemed to be the date of the purchase of the Investor A or
Investor C Shares. The AEF requires a minimum exchange amount of $25 on a
bi-monthly, monthly or quarterly basis. Exchanges will occur on or about the
15th and/or 30th day of the applicable month. The AEF may be established by
directing a request to the Transfer Agent by Telephone or in writing. For more
information concerning the AEF, contact your Selling Agent.
SHARES ACQUIRED THROUGH AN EXCHANGE OF INVESTOR A SHARES OF A NON-MONEY MARKET
FUND: The exchange feature enables a shareholder who acquires Investor A Shares
of a Money Market Fund through an exchange of Investor A Shares of a non-money
market fund to re-exchange such shares for shares of the same class of any other
fund of Nations Fund.
GENERAL: An exchange of Investor A Shares for shares of another fund is made on
the basis of the next calculated net asset value per share of each fund after
the exchange order is received. The Funds and each of the other funds of Nations
Funds may limit the number of times this exchange feature may be exercised by a
shareholder within a specified period of time. Also, the exchange feature may be
terminated or revised at any time by Nations Fund upon such notice as may be
required by applicable regulatory agencies (presently sixty days for termination
or material revision), provided that the exchange feature may be terminated or
materially revised without notice under certain unusual circumstances.
The current prospectus for each fund of Nations Fund describes its investment
objective(s) and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for Federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within ninety days after the shares are purchased.
Nations Fund reserves the right to reject any exchange request. Only shares that
may legally be sold in the state of the investor's residence may be acquired in
an exchange. Only shares of a class that is accepting investments generally may
be acquired in an exchange.
Investor A Shares may be exchanged by directing a request directly to the
Selling Agent through which the original Investor A Shares were purchased or in
some cases Stephens or the Transfer Agent. Your exchange feature may be governed
by your account agreement with your Selling Agent.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. In such event, shares may be exchanged by mailing your
request directly to the Selling Agent through which the original shares were
purchased. Investors should consult their Selling Agent or Stephens for further
information regarding exchanges.
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How The Funds Value Their Shares
The net asset value of a share of each class of shares in the Funds is
calculated by dividing the total value of its assets, less liabilities, by the
number of shares in the class outstanding. Shares are valued as of 2:00 p.m.,
Eastern time (1:00 p.m., Eastern time, with respect to Nations Tax Exempt Fund),
on each Business Day. Currently, the days on which the Federal Reserve Bank of
New York is closed (other than weekends) are: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Memorial Day (observed), Independence Day, Labor
Day, Columbus Day, Thanksgiving Day and Christmas Day.
The assets of each Fund are valued based upon the amortized cost method.
Although Nations Fund seeks to maintain the net asset value per share of these
Funds at $1.00, there can be no assurance that their net asset value per share
will not vary.
How Dividends And Distributions Are
Made; Tax Information
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income of the Funds
are declared daily to shareholders at 2:00 p.m., Eastern time (1:00 p.m.,
Eastern time, with respect to Nations Tax Exempt Fund), on the day of
declaration. Investor A Shares begin earning dividends on the day the purchase
order is executed and continue earning dividends through and including the day
before the redemption order is executed (E.G., the settlement date). Dividends
are paid within five Business Days after the end of each month. Dividends are
paid in the form of additional Investor A Shares of the same Fund unless the
Customer has elected prior to the date of distribution to receive payment in
cash. Such election, or any revocation thereof, must be made in writing to the
Transfer Agent and will become effective with respect to dividends paid after
its receipt. Your dividend election may be governed by your account agreement
with your Selling Agent. Dividends are paid in cash within five Business Days
after a shareholder's complete redemption of his/her Investor A Shares in a
Fund. To the extent that there are any net short-term capital gains, they will
be paid at least annually.
Each Fund's net investment income available for distribution to the holders of
Investor A Shares will be reduced by the amount of sales support and shareholder
servicing fees paid to Selling Agents and Servicing Agents, respectively. Each
Fund's net investment income available for distribution to the holders of
Investor A Shares will be reduced by the amount of retail transfer agency fees
payable to the Transfer Agent applicable to the Investor A Shares.
TAX INFORMATION: Each Fund intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Fund of liability for Federal income taxes on amounts
distributed in accordance with the Code.
Each Fund intends to distribute substantially all of its investment company
taxable income and net tax-exempt income each taxable year. Distributions by the
Nations Prime Fund, Nations Treasury Fund and Nations Government Money
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Market Fund will be taxable as ordinary income to shareholders who are not
currently exempt from Federal income taxes, whether such income is received in
cash or reinvested in additional shares. (Federal income taxes for distributions
to an IRA are generally deferred under the Code.) These distributions will not
qualify for the dividends received deduction for corporate shareholders.
Dividends received from Nations Treasury Fund and Nations Government Money
Market Fund may qualify as tax-exempt dividends for state income tax purposes in
some states. The Funds do not expect to realize any long- term capital gains,
and therefore, do not expect to distribute any capital gains dividends.
Each year, shareholders will be notified as to the amount and Federal tax status
of all dividends (and capital gains, if applicable) paid during the prior year.
Such dividends (and capital gains) may be subject to state and local taxes.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by the Fund on December 31 of such year
in the event such dividends are actually paid during January of the following
year.
Federal law requires Nations Fund to withhold 31% from any dividends (other than
exempt-interest dividends) paid by Nations Fund and/or redemptions (including
exchange redemptions) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply, or
if the Internal Revenue Service has notified Nations Fund that the Taxpayer
Identification Number listed on a shareholder account is incorrect according to
its records, or that the shareholder is subject to backup withholding. Amounts
withheld are applied to the shareholder's Federal tax liability, and a refund
may be obtained from the Internal Revenue Service if withholding results in
overpayment of taxes. Federal law also requires the Funds to withhold 30% or the
applicable tax treaty rate from dividends paid to certain nonresident alien,
non-U.S. partnership and non-U.S. corporation shareholder accounts.
NATIONS TAX EXEMPT FUND: As a regulated investment company, the Nations Tax
Exempt Fund is permitted to pass through to its shareholders tax-exempt income
("exempt-interest dividends") subject to certain requirements which the Fund
intends to satisfy. The Fund does not intend to earn investment company taxable
income or long-term capital gains; to the extent that it does earn taxable
income or realize long-term capital gains, distributions to shareholders from
such sources will be subject to Federal income tax. Exempt-interest dividends
may be treated by shareholders as items of interest excludable from their
federal gross income under Section 103(a) of the Code unless, under the
circumstances applicable to the particular shareholder, the exclusion would be
disallowed. (See Nations Fund Trust's SAI under "Additional Information
Concerning Taxes.") Distributions of net investment income by the Nations Tax
Exempt Fund may be taxable to investors under state or local law even though a
substantial portion of such distribution may be derived from interest on
tax-exempt obligations which, if realized directly, would be exempt from such
income taxes.
If the Nations Tax Exempt Fund should hold certain private activity bonds issued
after August 7, 1986, shareholders must include, as an item of tax preference,
the portion of dividends paid by the Fund that is attributable to interest on
such bonds in their Federal alternative minimum taxable income for purposes of
determining liability (if any) for the 28% alternative minimum tax applicable to
individuals and the 20% alternative minimum tax and the environmental tax
applicable to corporations. Corporate
share-
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holders must also take all exempt-interest dividends into account in determining
certain adjustments for Federal alternative minimum and environmental tax
purposes. The environmental tax applicable to corporations is imposed at the
rate of 0.12% on the excess of the corporation's modified Federal alternative
minimum taxable income over $2,000,000. Shareholders receiving Social Security
benefits should note that all exempt-interest dividends will be taken into
account in determining the taxability of such benefits. To the extent, if any,
dividends paid to shareholders are derived from taxable income or from long-term
or short-term capital gains, such dividends will not be exempt from Federal
income tax and also may be subject to state and local taxes.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important Federal tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisers with respect to their specific tax
situations as well as with respect to state and local taxes. Further tax
information is contained in the SAIs.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAIs contain more
information concerning such investments.
ASSET BACKED SECURITIES: Asset Backed Securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset Backed
Securities consist of both mortgage and non-mortgage backed securities.
Interests in pools of these assets differ from other forms of debt securities,
which normally provide for periodic payment of interest in fixed amounts with
principal paid at maturity or specified call dates. Instead, Asset Backed
Securities provide periodic payments which generally consist of both interest
and principal payments.
Mortgage backed securities represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself. Mortgage backed securities include
mortgage pass-through securities, collateralized mortgage obligations ("CMOs"),
parallel pay CMOs, planned amortization class CMOs ("PAC Bonds") and stripped
mortgage-backed securities ("SMBS"), including interest-only and principal-only
SMBS. SMBS may be more volatile than other debt securities. For additional
information concerning mortgage backed securities, see the related SAI.
Non-mortgage backed securities include interests in pools of receivables, such
as motor vehicle installment purchase obligations and credit card receivables.
Such securities are generally issued as pass-through certificates, which
represent undivided fractional ownership interests in the underlying pools of
assets. Such securities also may be debt instruments, which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits
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and bankers' acceptances. The Nations Prime Fund generally limits investments in
bank instruments to (a) U.S. dollar-denominated obligations of U.S. banks which
have total assets exceeding $1 billion and which are members of the Federal
Deposit Insurance Corporation (including obligations of foreign branches of such
banks) or of the 75 largest foreign commercial banks in terms of total assets;
or (b) U.S. dollar-denominated bank instruments issued by other banks believed
by NationsBank to present minimal credit risks. For purposes of the foregoing,
total assets may be determined on the basis of the bank's most recent annual
financial statements.
The Nations Prime Fund may invest up to 100% of its assets in obligations issued
by banks. All Funds (except Nations Prime Fund) will limit their investments in
bank obligations so they do not exceed 25% of each Fund's total assets at the
time of purchase. The Nations Prime Fund may invest in U.S. dollar-denominated
obligations issued by foreign branches of domestic banks ("Eurodollar"
obligations) and domestic branches of foreign banks ("Yankee dollar"
obligations).
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. Reverse
repurchase agreements may be considered to be borrowings. The Funds may borrow
money from banks for temporary purposes in amounts of up to one-third of their
respective total assets, provided that borrowings in excess of 5% of the value
of the Funds' total assets must be repaid prior to the purchase of portfolio
securities. The Funds are parties to a Line of Credit Agreement with Mellon
Bank, N.A. Advances under the agreement are taken primarily for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities.
When the Fund invests in a reverse repurchase agreement, it sells a portfolio
security to another party, such as a bank or broker-dealer, in return for cash,
and agrees to buy the security back at a future date and price. Reverse
repurchase agreements may be used to provide cash to satisfy unusually heavy
redemption requests without having to sell portfolio securities, or for other
temporary or emergency purposes. In addition, the Nations Treasury Fund may use
reverse repurchase agreements for the purpose of investing the proceeds in
tri-party repurchase agreements as discussed below. Generally, the effect of
such a transaction is that the Funds can recover all or most of the cash
invested in the portfolio securities involved during the term of the reverse
repurchase agreement, while they will be able to keep the interest income
associated with those portfolio securities. Such transactions are only
advantageous if the interest cost to the Funds of the reverse repurchase
transac-
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tion is less than the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Funds are obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Funds' use
of the proceeds of the agreement may be restricted pending a determination by
the other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The Fund
only enters into reverse repurchase agreements (and repurchase agreements) with
counterparties that are deemed by NationsBank to be credit worthy. Reverse
repurchase agreements are speculative techniques involving leverage, and are
subject to asset coverage requirements if the Funds do not establish and
maintain a segregated account (as described above). Under the requirements of
the 1940 Act, the Funds are required to maintain an asset coverage (including
the proceeds of the borrowings) of at least 300% of all borrowings. Depending on
market conditions, the Funds' asset coverage and other factors at the time of a
reverse repurchase, the Funds may not establish a segregated account when
NationsBank believes it is not in the best interests of the Funds to do so. In
this case, such reverse repurchase agreements will be considered borrowings
subject to the asset coverage described above.
The Nations Treasury Fund has entered into an arrangement whereby it reinvests
the proceeds of a reverse repurchase agreement in a tri-party repurchase
agreement and receives the net interest rate differential.
COMMERCIAL INSTRUMENTS: Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or foreign
corporations and foreign commercial banks. The Nations Prime Fund will limit
purchases of commercial instruments to instruments which: (a) if rated by at
least two NRSROs are rated in the highest rating category for short-term debt
obligations given by such organizations, or if only rated by one such
organization, are rated in the highest rating category for short-term debt
obligations given by such organization; or (b) if not rated, are (i) comparable
in priority and security to a class of short-term instruments of the same issuer
that has such rating(s), or (ii) of comparable quality to such instruments as
determined by Nations Fund, Inc.'s Board of Directors on the advice of
NationsBank.
Investments by a Fund in commercial paper will consist of issues rated in a
manner consistent with such Fund's investment policies and objectives. In
addition, a Fund may acquire unrated commercial paper and corporate bonds that
are determined by the NationsBank at the time of purchase to be of comparable
quality to rated instruments that may be acquired by a Fund. Commercial
instruments include variable rate master demand notes, which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate, and variable and floating rate
instruments.
The Nations Prime Fund also may purchase short-term participation interests in
loans extended by banks to companies, provided that
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both such banks and companies meet the quality standards set forth above.
FOREIGN SECURITIES: Foreign securities include obligations of foreign
corporations and banks as well as obligations of foreign governments and their
political subdivisions (which will be limited to direct government obligations
and government-guaranteed securities). Such investments may subject a Fund to
special investment risks, including future political and economic developments,
the possible imposition of withholding taxes on interest income, possible
seizure or nationalization of foreign deposits, the possible establishment of
exchange controls, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. In addition, foreign issuers in general may be subject to different
accounting, auditing, reporting, and record keeping standards than those
applicable to domestic companies, and securities of foreign issuers may be less
liquid and their prices more volatile than those of comparable domestic issuers.
Investments in foreign securities may present additional risks, whether made
directly or indirectly, including the political or economic instability of the
issuer or the country of issue and the difficulty of predicting international
trade patterns. In addition, there may be less publicly available information
about a foreign company than about a U.S. company. Further, foreign stock
markets are generally not as developed or efficient as those in the U.S., and in
most foreign markets volume and liquidity are less than in the U.S. Fixed
commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign stock exchanges, brokers, and companies
than in the U.S. With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.
GUARANTEED INVESTMENT CONTRACTS: Guaranteed investment contracts ("GICs") are
investment instruments issued by highly rated insurance companies. Pursuant to
such contracts, a Fund may make cash contributions to a deposit fund of the
insurance company's general or separate accounts. The insurance company then
credits to a Fund guaranteed interest. The insurance company may assess periodic
charges against a GIC for expense and service costs allocable to it, and the
charges will be deducted from the value of the deposit fund. The purchase price
paid for a GIC becomes part of the general assets of the issuer, and the
contract is paid from the general assets of the issuer.
A Fund will only purchase GICs from issuers which, at the time of purchase, meet
quality and credit standards established by NationsBank. Generally, GICs are not
assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not currently exist.
Also, a Fund may not receive the principal amount of a GIC from the insurance
company on seven days' notice or less. Therefore, GICs are generally considered
to be illiquid investments.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Money Market Funds will
not knowingly invest more than 10% of the value of their respective net assets
in securities that are illiquid or such lower percentage as may be required by
the states in which the appropriate Fund sells its shares. Repurchase agreements
and time deposits that do not provide for payment to a Fund within seven days
after notice, guaranteed investment contracts and some commercial paper issued
in reliance
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<PAGE>
upon the exemption in Section 4(2) of the Securities Act of 1933, as amended
(the "1933 Act") (other than variable amount master demand notes with maturities
of nine months or less), are subject to the limitation on illiquid securities.
In addition, interests in privately arranged loans acquired by the Nations Prime
Fund may be subject to this limitation.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by a Fund's Board of Trustees or Board of Directors or
NationsBank, acting under guidelines approved and monitored by the Fund's Board,
that an adequate trading market exists for that security.
INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of its
portfolio from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. NationsBank expects to enter into these
transactions on behalf of a Fund primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipated purchasing at a later
date rather than for speculative purposes. A Fund will not sell interest rate
caps or floors that it does not own.
MONEY MARKET INSTRUMENTS: The term "money market instruments" refers to
instruments with remaining maturities of 397 days or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may
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<PAGE>
draw on a reserve fund, the restoration of which is a moral commitment but not a
legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable or floating rate instruments issued by
industrial development authorities and other governmental entities. While there
may not be an active secondary market with respect to a particular instrument
purchased by a Fund, a Fund may demand payment of the principal and accrued
interest on the instrument or may resell it to a third party as specified in the
instruments. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of the instrument if the issuer defaulted on its
payment obligation or during periods the Fund is not entitled to exercise its
demand rights, and the Fund could, for these or other reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by a
Fund will be determined by NationsBank to be of comparable quality at the time
of purchase to instruments rated "high quality" by any major rating service. An
issuer's obligation to pay the principal of the note may be backed by an
unconditional bank letter or line of credit, guarantee, or commitment to lend.
Municipal securities also may include participations in privately arranged loans
to municipal borrowers, some of which may be referred to as "municipal leases",
and units of participation in trusts holding pools of tax-exempt leases. Such
loans in most cases are not backed by the taxing authority of the issuers and
may have limited marketability or may be marketable only by virtue of a
provision requiring repayment following demand by the lender. Such loans made by
a Fund may have a demand provision permitting the Fund to require payment within
seven days. Participations in such loans, however, may not have such a demand
provision and may not be otherwise marketable. To the extent these securities
are illiquid, they will be subject to each Fund's limitation on investments in
illiquid securities. As it deems appropriate, NationsBank will establish
procedures to monitor the credit standing of each such municipal borrower,
including its ability to meet contractual payment obligations.
Municipal participation interests may be purchased from financial institutions,
and give the purchaser an undivided interest in one or more underlying municipal
security. To the extent that municipal participation interests are considered to
be "illiquid securities" such instruments are subject to each Fund's limitation
on the purchase of illiquid securities.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to municipal securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified municipal securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and without
intending to exercise its rights thereunder for trading purposes.
Although each Fund does not presently intend to do so on a regular basis, each
may invest more than 25% of its total assets in municipal securities that are
payable solely from revenues of similar projects if such investment is deemed
necessary or appropriate by NationsBank. To the extent that more than 25% of a
Fund's total assets are invested in municipal securities that are payable from
the revenues of similar projects, a Fund will be subject to the peculiar risks
presented by such projects to a greater extent than it would be if its assets
were not so concentrated.
OTHER INVESTMENT COMPANIES: A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other
28
<PAGE>
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that a Fund bears directly in
connection with its own operations.
REPURCHASE AGREEMENTS: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker-dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
uninvested cash. A risk associated with repurchase agreements is the failure of
the seller to repurchase the securities as agreed, which may cause a Fund to
suffer a loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the limit
stated above. A Fund may enter into joint repurchase agreements jointly with
other investment portfolios of Nations Fund and Nations Institutional Reserves.
SECURITIES LENDING: To increase return on portfolio securities, certain of the
Funds may lend their portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. There is a risk of delay in receiving
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by NationsBank to be credit worthy and
when, in its judgment, the income to be earned from the loan justifies the
attendant risks. The aggregate of all outstanding loans of a Fund may not exceed
30% of the value of its total assets.
SHORT-TERM TRUST OBLIGATIONS: Nations Prime Fund may invest in short-term
obligations issued by special purpose trusts established to acquire specific
issues of government or corporate securities. Such obligations entitle the Fund
to a proportional fractional interest in payments received by the trust, either
from the underlying securities owned by the trust or pursuant to other
arrangements entered into by the trust. A trust may enter into a swap
arrangement with a highly rated investment firm, pursuant to which the trust
grants to the counterparty certain of its rights with respect to the securities
owned by the trust in exchange for the obligation of the counterparty to make
payments to the trust according to an established formula. The trust obligations
purchased by the Fund must satisfy the quality and maturity requirements
generally applicable to the Fund pursuant to Rule 2a-7 under the 1940 Act.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indexes, non-U.S. interest rates and foreign currencies, that
have been approved by the Commodity Futures Trading Commission ("CFTC") for
investment by U.S. investors, for the purpose of hedging against changes in
values of a Fund's securities or changes in the prevailing levels of interest
rates or currency exchange rates. The contracts entail certain risks, including
but not limited to the following: no assurance that futures contracts
transactions can be offset at favorable prices; possible reduction of a Fund's
total return due to the use of hedging; possible lack of liquidity due to daily
limits on price fluctuation; imperfect correlation between the contracts and the
securities or currencies being hedged; and potential losses in excess of the
amount invested in the futures contracts themselves.
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks
29
<PAGE>
than trading on domestic exchanges. For example, some foreign exchanges are
principal markets for which no common clearing facility exists and a trader may
look only to the broker for performance of the contract. In addition, unless a
Fund hedges against fluctuations in the exchange rate between the U.S. dollar
and the currencies in which trading is done on foreign exchanges, any profits
that such Fund might realize could be eliminated by adverse changes in the
exchange rate, or the Fund could incur losses as a result of those changes.
U.S. GOVERNMENT OBLIGATIONS: U.S. Government obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. Obligations of U.S.
Government agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
E.G., Government National Mortgage Association certificates; in other cases
interest and principal are not guaranteed, E.G., obligations of the Federal Home
Loan Bank System and the Federal Farm Credit Bank. No assurance can be given
that the U.S. Government would provide financial support to government-sponsored
instrumentalities if it is not obligated to do so by law.
VARIABLE AND FLOATING RATE INSTRUMENTS: Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks and corporations
may carry variable or floating rates of interest. Such instruments bear interest
rates which are not fixed, but which vary with changes in specified market rates
or indices, such as a Federal Reserve composite index. A variable rate demand
instrument is an obligation with a variable or floating interest rate and an
unconditional right of demand on the part of the holder to receive payment of
unpaid principal and accrued interest. An instrument with a demand period
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities takes
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
Appendix B -- Description Of Ratings
The following summarizes the highest two ratings used by S&P for corporate and
municipal bonds:
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
To provide more detailed indications of credit quality, the AA rating may be
modified by the
30
<PAGE>
addition of a plus or minus sign to show relative standing within this major
rating category.
The following summarizes the highest two ratings used by Moody's for corporate
and municipal bonds:
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa. The modifier 1 indicates that the bond being rated ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category. With regard to municipal bonds, those bonds in the
Aa groups which Moody's believes possess the strongest investment attributes are
designated by the symbols Aa1.
The following summarizes the highest two ratings used by D&P for bonds:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major category.
The following summarizes the highest two ratings used by Fitch for bonds:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major rating category.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash
31
<PAGE>
flows, superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The two highest rating categories of D&P for short-term debt are Duff 1 and Duff
2. D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the
highest rating category. Duff 1+ indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be minor.
Duff 1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. Duff 2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
The following summarizes the two highest rating categories used by Fitch for
short-term obligations:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
BankWatch ratings are based upon a qualitative and quantitative analysis of
all
seg-
32
<PAGE>
ments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a
recommendation to buy or sell securities of any of these companies.
Further, BankWatch does not suggest specific investment criteria for
individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood
of untimely payment of principal or interest over the term to maturity of
the rated instrument. The following are the two highest investment grade
ratings used by BankWatch for long-term debt:
AAA -- The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA -- The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 -- The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
The following summarizes the two highest long-term ratings used by IBCA:
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk albeit not very significantly.
The following summarizes the two highest short-term debt ratings used by IBCA:
A1+ -- Obligations supported by the highest capacity for timely repayment
and possessing a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
33
<PAGE>
NATIONS FUND TRUST
NATIONS GOVERNMENT MONEY MARKET FUND
SUPPLEMENT DATED JANUARY 30, 1996 TO PROSPECTUSES DATED SEPTEMBER 30, 1995
The Prospectuses for the Trust A, Trust B, Investor A, Investor B,
Investor C and Investor D Shares of NATIONS GOVERNMENT MONEY MARKET FUND are
hereby supplemented as follows:
1. By substituting the following for the second sentence in the
first paragraph in the section entitled "HOW TO BUY SHARES -- EFFECTIVE TIME OF
PURCHASES":
A purchase order must be received by Stephens or by the
Transfer Agent by 2:00 p.m., Eastern time (12:00 noon, Eastern time,
with respect to Nations Tax Exempt Fund and Nations Government Money
Market Fund).
2. By substituting the following for the first three
sentences in the second paragraph in the section entitled "HOW
TO REDEEM SHARES":
Redemption orders must be received on a Business Day before
2:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Tax Exempt Fund and Nations Government Money Market Fund), and
payment will normally be wired the same day to Selling Agents. Nations
Fund reserves the right to wire redemption proceeds within five Business
Days after receiving the redemption order if, in the judgment of
NationsBank, an earlier payment could adversely impact a Fund.
Redemption orders received by Stephens or by the Transfer Agent after
2:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Tax Exempt Fund and Nations Government Money Market Fund), will
be processed on the next Business Day.
3. By substituting the following for the second sentence in
the first paragraph in the section entitled "HOW THE FUNDS VALUE THEIR SHARES":
Shares are valued as of 2:00 p.m., Eastern time (1:00 p.m.,
Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund), on each Business Day.
4. By substituting the following for the first sentence in the
first paragraph in the section entitled "HOW DIVIDENDS AND DISTRIBUTIONS ARE
MADE; TAX INFORMATION -- DIVIDENDS AND DISTRIBUTIONS":
Dividends from net investment income of each Fund are
declared daily to shareholders at 2:00 p.m., Eastern time (1:00 p.m.
Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund) on the day of declaration.
1
<PAGE>
Prospectus
INVESTOR B SHARES
SEPTEMBER 30, 1995
This Prospectus describes the four investment
portfolios (each a "Fund" and collectively, the
"Money Market Funds"), listed in the column to the
right, of the Nations Fund Family ("Nations Fund" or
"Nations Fund Family"). This Prospectus describes
one class of shares of each Money Market
Fund -- Investor B Shares.
EACH MONEY MARKET FUND SEEKS TO MAINTAIN A NET ASSET
VALUE OF $1.00 PER SHARE. INVESTMENTS IN THE FUNDS
ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE
FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely the information
about the Funds that a prospective purchaser of
Investor B Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust and Nations Fund, Inc. is
contained in separate Statements of Additional
Information (the "SAIs"), which have been filed with
the Securities and Exchange Commission (the "SEC")
and are available upon request without charge by
writing or calling Nations Fund at its address or
telephone number shown below. The SAIs bear the same
date as this Prospectus and are incorporated by
reference in their entirety into this Prospectus.
SHARES OF NATIONS FUND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. (CAROLINAS) ("NATIONSBANK") OR
ANY OF ITS AFFILIATES. SUCH SHARES ARE NOT INSURED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
FUNDS INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
NATIONSBANK IS THE INVESTMENT ADVISER AND, TOGETHER
WITH ITS AFFILIATES, PROVIDES CERTAIN OTHER SERVICES
TO NATIONS FUND, FOR WHICH THEY ARE COMPENSATED.
STEPHENS INC., WHICH IS NOT AFFILIATED WITH
NATIONSBANK, IS THE SPONSOR AND ADMINISTRATOR AND
SERVES AS THE DISTRIBUTOR FOR NATIONS FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Nations Prime Fund
Nations Treasury Fund
Nations Government
Money Market Fund
Nations Tax Exempt
Fund
For purchase, redemption and
performance information
call:
1-800-626-2275
or write:
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
(Nations Fund Logo appears
here)
MMPB
<PAGE>
Table Of Contents
About The Funds
Expenses Summary 3
Financial Highlights 4
Objectives 5
How Objectives are Pursued 6
How Performance is Shown 8
How the Funds are Managed 8
Organization and History 10
About Your Investment
How to Buy Shares 11
Shareholder Servicing and Distribution Plans 12
How to Redeem Shares 13
How to Exchange Shares 14
How the Funds Value Their Shares 14
How Dividends and Distributions are Made; Tax
Information 15
Appendix A -- Portfolio Securities 16
Appendix B -- Description of Ratings 21
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAIS
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY NATIONS FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY NATIONS FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds. The
following table summarizes shareholder transaction and operating expenses for
Investor B Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Nations Nations
Nations Prime Nations Treasury Government Money Tax Exempt
Fund Fund Market Fund Fund
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Deferred Sales Charge None None None None
ANNUAL FUND OPERATING EXPENSES*
(as a percentage of average net assets)
Management Fees1 .14% .17% .16% .17%
Rule 12b-1 Fees1 .00% .00% .00% .00%
Shareholder Servicing Fees1 .25% .25% .25% .20%
Other Expenses .16% .13% .14% .13%
Total Operating Expenses1 .55% .55% .55% .50%
</TABLE>
* The Funds and Stephens have voluntarily agreed to limit the total charges
against each Fund's net assets for sales distribution activities and/or
servicing of shareholder accounts to no more than .25% of each Fund's average
net assets per annum. This limitation will not be terminated without prior
notice to shareholders.
1 After any waivers and reimbursements.
EXAMPLES:
You would pay the following expenses on a $1,000 investment in Investor B Shares
of the indicated Fund, assuming (1) a 5% annual return and (2) redemption at the
end of each time period.
<TABLE>
<CAPTION>
Nations
Nations Nations Government Nations
Prime Treasury Money Tax Exempt
Fund Fund Market Fund Fund
<S> <C> <C> <C> <C>
1 Year $ 6 $ 6 $ 6 $ 5
3 Years $18 $18 $18 $16
5 Years $31 $31 $31 $28
10 Years $69 $69 $69 $63
</TABLE>
The purpose of the foregoing table is to assist an investor in understanding the
various shareholder transaction and operating expenses that an investor in each
Fund will bear either directly or indirectly. The "Other Expenses" figures
contained in the above table are based on estimated amounts for the Funds'
current fiscal year and reflect anticipated fee waivers and reimbursements.
There is no assurance that these fee waivers and reimbursements will continue
beyond the current fiscal year. If fee waivers and/or reimbursements are
discontinued, the amounts contained in the "Examples" above may increase. For
more complete descriptions of the Funds' operating expenses, see "How the Funds
Are Managed."
3
<PAGE>
Absent fee waivers and reimbursements, "Management Fees," "Rule 12b-1 Fees,"
"Shareholder Servicing Fees" and "Total Operating Expenses" for Investor B
Shares of the indicated Fund would be as follows: Nations Prime Fund -- .20%,
.10%, .25% and .71%, respectively; Nations Treasury Fund -- .20%, .10%, .25% and
.68%, respectively; Nations Government Money Market Fund -- .40%, .10%, .25% and
.89%, respectively; and Nations Tax Exempt Fund -- .40%, .10%, .25% and .88%,
respectively.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Financial Highlights
The audited financial information on the following pages has been derived from
the financial statements of Nations Fund Trust and Nations Fund, Inc. Price
Waterhouse is the independent accountant to Nations Fund Trust and Nations Fund,
Inc. The reports of Price Waterhouse for the most recent fiscal years of Nations
Fund Trust and Nations Fund, Inc. accompany the financial statements for such
periods and are incorporated by reference in the SAIs, which are available upon
request. Shareholders of a Fund will receive unaudited semi-annual reports
describing the Fund's investment operations and annual financial statements
audited by the Fund's independent accountant.
FOR AN INVESTOR B SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS PRIME FUND
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
INVESTOR B SHARES 05/31/95 05/31/94*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0493 0.0015
Dividends from net investment income (0.0493) (0.0015)
Net asset value, end of period $ 1.00 $ 1.00
Total return++ 5.03% 0.15%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 216,973 $ 2
Ratio of operating expenses to average net assets 0.56% 0.55%+
Ratio of net investment income to average net assets 4.97% 2.95%+
Ratio of operating expenses to average net assets without waivers and reimbursements 0.64% 0.62%+
Net investment income per share without waivers and reimbursements $ 0.0485 $ 0.0015
</TABLE>
* The Nations Prime Fund Investor B Shares commenced operations on May 11,
1994.
+ Annualized.
++ Total return represents aggregrate total return for the period indicated and
does not reflect the deduction of any applicable sales charge.
NATIONS TREASURY FUND
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
INVESTOR B SHARES 05/31/95 05/31/94*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0468 0.0015
Dividends from net investment income (0.0468) (0.0015)
Distributions from net realized capital gains (0.0000)** -
Net asset value, end of period $ 1.00 $ 1.00
Total return++ 4.76% 0.14%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 52,564 $ 2
Ratio of operating expenses to average net assets 0.56% 0.55%+
Ratio of net investment income to average net assets 4.73% 2.72%+
Ratio of operating expenses to average net assets without waivers and reimbursements 0.61% 0.61%+
Net investment income per share without waivers and reimbursements $ 0.0463 $ 0.0014
</TABLE>
* The Nations Treasury Fund Investor B Shares commenced operations on May 16,
1994.
** Amount represents less than $0.0001.
+ Annualized.
++ Total return represents aggregrate total return for the period indicated and
does not reflect the deduction of any applicable sales charge.
4
<PAGE>
FOR AN INVESTOR B SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
05/31/95 11/30/94*
INVESTOR B SHARES (UNAUDITED)
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0267 0.0222
Distributions:
Dividends from net investment income (0.0267) (0.0222)
Dividends from net realized gains -- (0.0000)#
Total distributions (0.0267) (0.0222)
Net asset value, end of period $ 1.00 $ 1.00
Total return++ 2.69% 2.24%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 28,565 $ 11,955
Ratio of operating expenses to average net assets 0.55%+ 0.55%+
Ratio of net investment income to average net assets 5.36%+ 3.54%+
Ratio of operating expenses to average net assets before fee waivers 0.81%+ 0.84%+
Net investment income per share before fee waivers $ 0.0254 $ 0.0206
</TABLE>
* The Nations Money Market Fund Investor B Shares commenced operations on May
17, 1994.
+ Annualized.
++ Total return represents aggregrate total return for the period indicated.
# Value represents less than $(0.0001) per share.
NATIONS TAX EXEMPT FUND
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
05/31/95 11/30/94*
INVESTOR B SHARES (UNAUDITED)
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0171 0.0141
Dividends from net investment income (0.0171) (0.0141)
Net asset value, end of period $ 1.00 $ 1.00
Total return++ 1.72% 1.43%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 76,691 $ 3
Ratio of operating expenses to average net assets 0.50%+ 0.47%+
Ratio of net investment income to average net assets 3.44%+ 2.39%+
Ratio of operating expenses to average net assets before fee waivers 0.75%+ 0.79%+
Net investment income per share before fee waivers $ 0.0159 $ 0.0118
</TABLE>
* The Nations Tax Exempt Fund Investor B Shares commenced operations on May 17,
1994.
+ Annualized.
++ Total return represents aggregrate total return for the period indicated.
Objectives
Each Money Market Fund, described below, endeavors to achieve its investment
objective by investing in a diversified portfolio of high quality money market
instruments with maturities of 397 days or less from the date of purchase.
Securities subject to repurchase agreements may bear longer maturities.
NATIONS PRIME FUND: The Nations Prime Fund's investment objective is to seek the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS TREASURY FUND: The Nations Treasury Fund's investment objective is the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS GOVERNMENT MONEY MARKET FUND: The Nations Government Money Market Fund's
investment objective is to seek as high a level of current income as is
consistent with liquidity and stability of principal.
NATIONS TAX EXEMPT FUND: The Nations Tax Exempt Fund's investment objective is
to seek as high a level of current interest income exempt from Federal income
taxes as is consistent with liquidity and stability of principal.
5
<PAGE>
How Objectives Are Pursued
NATIONS PRIME FUND: In pursuing its investment objective, the Fund may invest in
U.S. Treasury bills, notes and bonds and other instruments issued directly by
the U.S. Government ("U.S. Treasury Obligations"), other obligations issued or
guaranteed as to payment of principal and interest by the U.S. Government, its
agencies or instrumentalities ("U.S. Government Obligations"), bank and
commercial instruments that may be available in the money markets, high quality
short-term taxable obligations issued by state and local governments, their
agencies and instrumentalities and repurchase agreements relating to U.S.
Government Obligations. The Fund also may purchase securities issued by other
investment companies, consistent with the Fund's investment objective and
policies, and may engage in reverse repurchase agreements. The Fund also may
invest in guaranteed investment contracts and in instruments issued by trusts,
including pass-through certificates representing participations in, or debt
instruments backed by, the securities and other assets owned by the trust. In
addition, the Fund may lend its portfolio securities to qualified institutional
investors. For more information concerning these instruments, see "Appendix A."
NATIONS TREASURY FUND: In pursuing its investment objective, the Fund invests in
U.S. Treasury Obligations and repurchase agreements secured by such obligations.
The Fund also may purchase securities issued by other investment companies,
consistent with the Fund's investment objective and policies, and may engage in
reverse repurchase agreements. The Fund also may lend its portfolio securities
to qualified institutional investors. For more information concerning these
instruments, see "Appendix A."
NATIONS GOVERNMENT MONEY MARKET FUND: In pursuing its investment objective, the
Fund invests in U.S. Government Obligations and repurchase agreements relating
to such obligations. The Fund also may purchase securities issued by other
investment companies, consistent with the Fund's investment objective and
policies, and may engage in reverse repurchase agreements. The Fund also may
lend its portfolio securities to qualified institutional investors. For more
information concerning these instruments, see "Appendix A."
NATIONS TAX EXEMPT FUND: In pursuing its investment objective, the Fund invests
in a diversified portfolio of obligations issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia, and
their political subdivisions, agencies, instrumentalities and authorities, the
interest on which, in the opinion of counsel to the issuer or bond counsel, is
exempt from regular Federal income tax ("Municipal Securities"). The Fund will
not knowingly purchase securities the interest on which is subject to such tax.
A portion of the Fund's assets, however, may be invested in private activity
bonds, the interest on which may be treated as a specific tax preference item
under the Federal alternative minimum tax. See "How Dividends and Distributions
Are Made; Tax Information."
The Fund invests in Municipal Securities which are determined to present minimal
credit risks and which at the time of purchase are considered to be of "high
quality" -- E.G., rated "AA" or higher by Duff & Phelps Credit Rating Co.
("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard & Poor's Corporation
("S&P"), IBCA Limited or its affiliate IBCA Inc. (collectively "IBCA"), or
Thomson BankWatch, Inc. ("BankWatch") or "Aa" or higher by Moody's Investors
Service, Inc. ("Moody's"), in the case of bonds; rated "Duff 1" or higher by
D&P, "F-1" or higher by Fitch, "SP-1" by S&P, or "MIG-1" by Moody's in the case
of notes; rated "Duff 1" or higher by D&P, "F-1" or higher by Fitch, or "VMIG-1"
by Moody's in the case of variable rate demand notes; or rated "Duff 1" or
higher by D&P, "F-1" or higher by Fitch, "A-1" or higher by S&P, or "Prime-1" by
Moody's in the case of tax-exempt commercial paper. D&P, Fitch, S&P, Moody's,
IBCA and BankWatch are the six nationally recognized statistical rating
organizations (collectively, "NRSROs"). Securities that are unrated at the time
of purchase will be determined to be of comparable quality by NationsBank
pursuant to guidelines approved by Nations Fund Trust's Board of Trustees. The
applicable Municipal Securities ratings are described in "Appendix B."
The payment of principal and interest on most securities purchased by the Fund
will depend upon the ability of the issuers to meet their obligations. The
District of Columbia, each state, each of their political subdivisions,
agencies, instrumentalities, and authorities and each multi-state agency of
which a state is a member is a separate "issuer" as that term is used in this
Prospectus and the related SAI. The non-governmental user of facilities financed
by private activity bonds also is considered to be an "issuer." For more
information concerning Municipal Securities, see "Appendix A -- Municipal
Securities."
The Fund may hold uninvested cash reserves pending investment, during temporary
defensive periods, or if, in the opinion of NationsBank, desirable tax-exempt
obligations are unavailable. Uninvested cash reserves will not earn income. As a
matter of fundamental policy, under normal market conditions, at least 80% of
the Fund's net assets will be invested in Municipal Securities. Investments in
private activity bonds, the interest on which may be treated as a specific tax
preference item under the Federal alternative minimum tax, will not be treated
as Municipal Securities in determining whether the
6
<PAGE>
Fund is in compliance with this 80% requirement. The Fund also may invest in
securities issued by other investment companies that invest in securities
consistent with the Fund's investment objective and policies. For more
information concerning the Fund's investments, see "Appendix A."
RISK CONSIDERATIONS: Although NationsBank will seek to achieve the investment
objective of each Fund, there is no assurance that it will be able to do so. No
single Fund should be considered, by itself, to provide a complete investment
program for any investor. Investments in a Fund are not insured against loss of
principal. For additional risk information regarding the Funds' investment in
particular instruments, see "Appendix A -- Portfolio Securities."
INVESTMENT LIMITATIONS: The Funds are subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed with respect to a particular Fund without the
affirmative vote of the holders of a majority of that Fund's outstanding shares.
Other investment limitations that cannot be changed without such a vote of
shareholders are described in the Funds' SAIs.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
tax-exempt securities issued by state or municipal governments and their
political subdivisions are not considered members of any industry. In addition,
this limitation does not apply to investments in obligations of domestic banks.)
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or are privately
placed), may enter into repurchase agreements and may lend portfolio securities
in accordance with its investment policies.
3. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of such Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, such Fund will not
hold more than 10% of the voting securities of any issuer.
In addition, as a matter of non-fundamental policy, the Nations Tax Exempt Fund
may not purchase any securities other than obligations the interest on which is
exempt from Federal income tax and stand-by commitments with respect to such
obligations. The investment objectives and policies of the Funds, unless
otherwise specified, may be changed without shareholder approval. If the
investment objective or policies of a Fund change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus and the SAIs. Should a Fund determine that any such
commitment is no longer in its best interests, it may consider terminating sales
of its shares in the states involved.
In order for the Funds to value their investments on the basis of amortized cost
(see "How the Funds Value Their Shares"), investments must be in accordance with
the requirements of Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "1940 Act"), some of which are described below. These include
maturity, quality and diversification requirements. Maturity is limited to a
dollar-weighted average portfolio maturity of 90 days or less. Quality
requirements generally limit investments to U.S. dollar denominated instruments
determined to present minimal credit risks and that, at the time of acquisition,
are rated in the top two rating categories by the required number of NRSROs (at
least two or, if only one NRSRO has rated the security, that one NRSRO) or, if
unrated by any NRSRO, are (i) comparable in priority and security to a class of
short-term securities of the same issuer that has the required rating, or (ii)
determined to be comparable in quality to securities having the required rating.
The diversification requirements provide generally that a Money Market Fund
(except the Nations Tax Exempt Fund) may not at the time of acquisition invest
more than 5% of its assets in securities of any one issuer or invest more than
5% of its assets in securities (and no more than 1% in any one issuer) that have
not been rated in the highest category by the required number of NRSROs or, if
unrated, are described in (i) or (ii) above. Securities issued by the U.S.
Government, its agencies, authorities or instrumentalities, and
fully-collateralized repurchase agreements secured by such obligations, are
exempt from the quality requirements, other than minimal credit risk. In the
event that a Fund's investment restrictions or permissible investments are more
restrictive than the requirements of Rule 2a-7, the Fund's own restrictions will
govern.
7
<PAGE>
How Performance Is Shown
From time to time, a Fund may advertise the "yield" and "effective yield" of a
class of shares, and Nations Tax Exempt Fund may advertise the "tax equivalent
yield" of a class of shares. YIELD, EFFECTIVE YIELD AND TAX-EQUIVALENT YIELD
FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE
PERFORMANCE.
The "yield" of a class of shares in a Fund refers to the income generated by an
investment in such class over a seven-day period identified in the
advertisement. This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly, but, when annualized, the income
earned by an investment in a class of shares in a Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. The
"tax-equivalent yield" of each class of shares in the Nations Tax Exempt Fund
shows the level of taxable yield needed to produce an after-tax equivalent to
such class's tax-free yield. This is done by increasing the class's yield
(calculated as above) by the amount necessary to reflect the payment of Federal
income tax at a stated tax rate. The tax-equivalent yield will always be higher
than the "yield" of a class of shares in the Nations Tax Exempt Fund.
Since yields fluctuate, yield data cannot necessarily be used to compare an
investment in the Funds with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed-upon or guaranteed fixed
yield for a stated period of time. Any fees charged by selling and/or servicing
agents to their customers' accounts for automatic investment or other cash
management services will not be included in calculations of yield.
In addition to Investor B Shares, the Funds offer Trust A, Trust B, Investor A,
Investor C and Investor D Shares. Each class of shares may bear different sales
charges, shareholder servicing fees and other expenses, which may cause the
performance of a class to differ from the performance of the other classes.
Performance quotations will be computed separately for each class of the Funds'
shares. The Funds' annual report contains additional performance information and
is available upon request without charge from the Funds' distributor or your
selling agent.
How The Funds Are Managed
The business and affairs of Nations Fund Trust and Nations Fund, Inc. are
managed under the direction of its Board of Trustees and Board of Directors,
respectively. Nations Fund Trust's SAI contains the names of and general
background information concerning each Trustee of Nations Fund Trust. Nations
Fund, Inc.'s SAI contains the names of and general background information
concerning each Director of Nations Fund, Inc.
Nations Fund and NationsBank have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially comply in all
material respects with the recommendations set forth in the May 9, 1994 Report
of the Advisory Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISER: NationsBank, through its investment management division,
serves as investment adviser to the Funds. NationsBank is an indirect wholly
owned subsidiary of NationsBank Corporation, a bank holding company organized as
a North Carolina corporation. NationsBank has its principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255.
NationsBank provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking.
Subject to the general supervision of Nations Fund Trust's Board of Trustees and
Nations Fund, Inc.'s Board of Directors, and in accordance with each Fund's
investment policies, NationsBank formulates guidelines and lists of approved
investments for each Fund, makes decisions with respect to and places orders for
each Fund's purchases and sales of portfolio securities and maintains records
relating to such purchases and sales. With respect to the Nations Tax Exempt
Fund, NationsBank is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with
NationsBank or which have sold shares in such Fund, if NationsBank believes that
the quality of the transaction and the commission are comparable to what they
would be with other qualified brokerage firms. From time to time, to the extent
consistent with its investment objective, policies and restrictions, each Fund
may invest in securities of companies with which NationsBank has a
8
<PAGE>
lending relationship. For the services provided and expenses assumed pursuant to
various Investment Advisory Agreements, NationsBank is entitled to receive
advisory fees, computed daily and paid monthly, at the annual rates of: 0.25% of
the first $250 million of the combined average daily net assets of both Nations
Prime Fund and Nations Treasury Fund, plus 0.20% of the combined average daily
net assets of such Funds in excess of $250 million; and 0.40% of the average
daily net assets of each of Nations Government Money Market Fund and Nations Tax
Exempt Fund.
From time to time, NationsBank may waive (either voluntarily or pursuant to
applicable state limitations) advisory fees payable by a Fund. For the fiscal
year ended November 30, 1994, after waivers, Nations Fund Trust paid NationsBank
fees at the rate of 0.16% and 0.09% of the average daily net assets of the
Nations Government Money Market Fund and the Nations Tax Exempt Fund,
respectively. For the fiscal year ended May 31, 1995, after waivers, Nations
Fund, Inc. paid NationsBank fees at the rate of 0.13% and 0.16% of the average
daily net assets of the Nations Prime Fund and Nations Treasury Fund,
respectively.
Morrison & Foerster, counsel to Nations Fund and special counsel to NationsBank,
has advised Nations Fund and NationsBank that NationsBank may perform the
services contemplated by the Investment Advisory Agreements without violation of
the Glass-Steagall Act or other applicable banking laws or regulations. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent NationsBank from
continuing to perform, in whole or in part, such services. If NationsBank were
prohibited from performing any such services, it is expected that the Board of
Trustees of Nations Fund Trust and the Board of Directors of Nations Fund, Inc.
would recommend to each Fund's shareholders that they approve a new advisory
agreement with another entity or entities qualified to perform such services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
Nations Fund pursuant to Administration Agreements. Pursuant to the terms of the
Administration Agreements, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of
First Data Corporation, with principal offices at One Exchange Place, Boston,
Massachusetts 02109, serves as the co-administrator of the Funds pursuant to
Co-Administration Agreements. Under the Co-Administration Agreements, TSSG
provides various administrative and accounting services to the Funds, including
performing calculations necessary to determine net asset values and dividends,
preparing tax returns and financial statements and maintaining the portfolio
records and certain general accounting records for the Funds. For the services
rendered pursuant to the Administration and Co-Administration Agreements,
Stephens and TSSG are entitled to receive a combined fee at the annual rate of
up to 0.10% of each Fund's average daily net assets. For the fiscal year ended
November 30, 1994, after waivers, Nations Fund Trust paid its administrators
fees at the rate of 0.09% of the average daily net assets of Nations Government
Money Market Fund and Nations Tax Exempt Fund. For the fiscal year ended May 31,
1995, after waivers, Nations Fund, Inc. paid its administrators fees at the rate
of 0.09% of the average daily net assets of Nations Prime Fund and Nations
Treasury Fund.
It is anticipated that beginning in November of 1995, NationsBank will serve as
sub-administrator for Nations Fund pursuant to a Sub-Administration Agreement.
Pursuant to the terms of the Sub-Administration Agreement, NationsBank will
assist Stephens in supervising, coordinating and monitoring various aspects of
the Funds' administrative operations. For providing such services, NationsBank
shall be entitled to receive a monthly fee from Stephens based on an annual rate
of .01% of the Funds' average daily net assets.
Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker-dealer with principal
offices at 111 Center Street, Little Rock, Arkansas 72201. Nations Fund has
entered into a distribution agreement with Stephens which provides that Stephens
has the exclusive right to distribute shares of the Funds. Stephens may pay
service fees or commissions to selling agents that assist customers in
purchasing Investor B Shares of the Funds. See "Shareholder Servicing and
Distribution Plans."
NationsBank of Texas, N.A., serves as each Fund's custodian (the "Custodian").
The Custodian is located at 1401 Elm Street, Dallas, Texas 75202 and is a wholly
owned subsidiary of NationsBank Corporation. In return for providing custodial
services, the Custodian is entitled to receive, in addition to out-of-pocket
expenses, fees payable monthly (i) at the rate of 1.25% of 1% of the average
daily net assets of each Fund, (ii) $10.00 per repurchase collateral transaction
by the Funds, and
9
<PAGE>
(iii) $15.00 per purchase, sale and maturity transaction involving the Funds.
TSSG serves as transfer agent (the "Transfer Agent") for each Fund's Investor B
Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
Price Waterhouse LLP serves as independent accountant to Nations Funds. Their
address is 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES: The accrued expenses of each Fund, as well as certain expenses
attributable to Investor B Shares, are deducted from accrued income before
dividends are declared. The respective Funds' expenses include, but are not
limited to: fees paid to NationsBank, Stephens and TSSG; interest; Directors' or
Trustees' fees; federal and state securities registration and qualification
fees; brokerage fees and commissions; costs of preparing and printing
prospectuses for regulatory purposes and for distribution to existing
shareholders; charges of the Custodian and Transfer Agent; certain insurance
premiums; outside auditing and legal expenses; costs of shareholder reports and
shareholder meetings; other expenses which are not expressly assumed by
NationsBank, Stephens or TSSG under their respective agreements with Nations
Fund; and any extraordinary expenses. Investor B Shares may bear certain class
specific retail transfer agency expenses and also bear certain additional
shareholder service and distribution costs. Any general expenses of Nations Fund
Trust and/or of Nations Fund, Inc. that are not readily identifiable as
belonging to a particular investment portfolio are allocated among all
portfolios in the proportion that the assets of a portfolio bears to the assets
of Nations Fund Trust and/or of Nations Fund, Inc. or in such other manner as
the Board of Trustees or Board of Directors deems appropriate.
Organization And History
The Funds are members of the Nations Fund Family, which consists of Nations Fund
Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc. and Nations
Institutional Reserves (formerly known as The Capitol Mutual Funds). The Nations
Fund Family currently has 44 distinct investment portfolios and total assets in
excess of $16 billion.
NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. The Funds currently offer six classes of shares -- Trust A
Shares, Trust B Shares, Investor A Shares, Investor B Shares, Investor C Shares
and Investor D Shares. This Prospectus relates only to the Investor B Shares of
Nations Government Money Market Fund and Nations Tax Exempt Fund of Nations Fund
Trust. To obtain additional information regarding the Funds' other classes of
shares which may be available to you, contact your Selling Agent (as defined
below) or Nations Fund at 1-800-626-2275.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund and
shareholders of a fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See Nations Fund Trust's SAI for examples of instances
where the 1940 Act requires voting by fund.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose or vote with respect to more than 25% of the outstanding shares of
Nations Fund Trust and therefore could be considered to be a controlling person
of Nations Fund Trust for purposes of the 1940 Act. In addition, as of August
31, 1995, the following persons owned of record 25% or more of the Investor B
Shares of the indicated Funds and therefore could be considered controlling
persons of such Funds for purposes of the 1940 Act: Nations Government Money
Market Fund, Barbara Fasken; Nations Tax Exempt Fund, Jacob George Harris and
Sondra G. Harris. For more detailed information concerning the percentage of
each class or series of shares over which NationsBank and its affiliates
possessed or shared power to dispose or vote as of a certain date, see Nations
Fund Trust's SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
NATIONS FUND, INC.: Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no
10
<PAGE>
operations prior to December 15, 1986. As of the date of this Prospectus, the
authorized capital stock of Nations Fund, Inc. consists of 270,000,000,000
shares of common stock, par value of $.001 per share, which are divided into
series or portfolios, each of which consists of separate classes of shares. This
Prospectus relates only to the Investor B Shares of Nations Prime Fund and
Nations Treasury Fund of Nations Fund, Inc. To obtain additional information
regarding the Funds' other classes of shares which may be available to you,
contact your Selling Agent (as defined below) or Nations Fund at 1-800-626-2275.
Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such fund
or class. In the event of dissolution or liquidation, holders of each class will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of that portion of the assets allocated to that class held in the
respective fund of Nations Fund, Inc., less (b) the liabilities of Nations Fund,
Inc. attributable to the respective fund or class or allocated among the funds
or classes based on the respective liquidation value of each fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of Directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of Nations Fund, Inc.'s outstanding shares.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s shares.
Nations Fund, Inc.'s shares, when issued, will be fully paid and non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Fund, Inc. and therefore could be considered to be a controlling person
of Nations Fund, Inc. for purposes of the 1940 Act. In addition, as of August
31, 1995, Barbara Fasken owned of record 25% or more of the Nations Government
Money Market Fund and therefore could be considered a controlling person of such
class for purposes of The 1940 Act. For more detailed information concerning the
percentage of each class or series over which NationsBank and its affiliates
possessed or shared power to dispose or vote as of a certain date, see Nations
Fund, Inc.'s SAI. It is anticipated that Nations Fund, Inc. will not hold annual
shareholder meetings, except when required by the 1940 Act or Maryland law.
Because this Prospectus combines disclosure on two separate investment
companies, there is a possibility that one investment company could become
liable for a misstatement, inaccuracy or incomplete disclosure in this
Prospectus concerning the other investment company. Nations Fund Trust and
Nations Fund, Inc. have entered into an indemnification agreement that creates a
right of indemnification from the investment company responsible for any such
misstatement, inaccuracy or incomplete disclosure that may appear in this
Prospectus.
About Your Investment
How To Buy Shares
Stephens has established various procedures for pur-
chasing Investor B Shares in order to accommodate different investors. Purchase
orders may be placed through banks, broker/dealers or other financial
institutions (including certain affiliates of NationsBank) that have entered
into sales support agreements ("Sales Support Agreements") with Stephens
("Selling Agents").
There is a minimum initial investment of $25,000; the minimum subsequent
investment is $1,000, except for investments pursuant to the Systematic
Investment Plan described below and reinvested dividends. Investor B Shares of
the Money Market Funds are purchased at net asset value per share without the
imposition of a sales charge. Purchases may be effected only on days on which
the Federal Reserve Bank of New York is open for business (a "Business Day").
The Selling Agents have entered into Sales Support Agreements with Stephens
under which they will provide sales support assistance to their Customers who
own Investor B Shares. In addition, banks, broker/dealers or other financial
institutions (including certain affiliates of NationsBank) that have entered
into shareholder servicing agreements ("Servicing Agreements") will provide
various shareholder services for their Customers who own Investor B Shares
("Servicing Agents"). Selling Agents and Servicing Agents are sometimes referred
to hereafter as "Agents." From time to time the Agents, Stephens, and Nations
Fund may agree to voluntarily reduce the fees payable for shareholder services
and sales support services. See "Shareholder Servicing and Distribution Plans."
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Nations Fund reserves the right to reject any purchase order. The issuance of
Investor B Shares is recorded on the books of the Funds, and share certificates
are not issued unless expressly requested in writing. Certificates are not
issued for fractional shares.
EFFECTIVE TIME OF PURCHASES: Purchases will be effected only when federal funds
are available for investment on the Business Day the purchase order is received
by Stephens or by the Transfer Agent. A purchase order must be received by
Stephens or by the Transfer Agent by 2:00 p.m., Eastern time (12:00 noon,
Eastern time, with respect to Nations Tax Exempt Fund). Absent prior arrangement
with Stephens or the Transfer Agent, purchase orders received after such time on
any given day will not be accepted; notice thereof will be given to the Selling
Agent transmitting the order, and any funds received will be returned promptly
to the sending Selling Agent. Any late purchase orders that are not rejected
pursuant to such a prior arrangement will be executed on the following Business
Day. If federal funds are not available by 4:00 p.m., Eastern time, the order
will be canceled. Investor B Shares are purchased at the net asset value per
share next determined after receipt of the order by Stephens or by the Transfer
Agent.
The Selling Agents are responsible for transmitting orders for purchases by
their Customers and delivering required funds on a timely basis. Stephens is
responsible for transmitting orders it receives to Nations Fund.
SYSTEMATIC INVESTMENT PLAN: Under the Funds' Systematic Investment Plan ("SIP")
a shareholder may automatically purchase Investor B Shares. On a bi-monthly,
monthly or quarterly basis, a shareholder may direct cash to be transferred
automatically from his/her checking or savings account at any bank to his/her
Fund account. Transfers will occur on or about the 15th and/or 30th day of the
applicable month. The systematic investment amount may be in any amount from
$500. For more information concerning the SIP, contact your Selling Agent.
TELEPHONIC TRANSACTIONS: An investor may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How to Redeem Shares" and "How to
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. You should be aware that by electing the telephone transaction feature
you may be giving up a measure of security that you may have if you were to
authorize written requests only. You may bear the risk of any resulting losses
from a telephone transaction. Nations Fund will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and if Nations
Fund and its service providers fail to employ such measures, they may be liable
for any losses due to unauthorized or fraudulent instructions. Nations Fund
requires a form of personal identification prior to acting upon instructions
received by telephone and provides written confirmation to shareholders of each
telephone share transaction. In addition, Nations Fund reserves the right to
record all telephone conversations.
Shareholder Servicing And Distribution Plans
SHAREHOLDER SERVICING PLAN: The Funds' shareholder servicing plan ("Servicing
Plan") permits each Fund to compensate Servicing Agents for certain shareholder
support services that are provided by the Servicing Agents to their Customers
that own Investor B Shares. Payments under the Servicing Plan will be calculated
daily and paid monthly at a rate set from time to time by the Board of Directors
or the Board of Trustees, provided that the annual rate may not exceed 0.25% of
the average daily net asset value of a Fund's Investor B Shares. The shareholder
services provided by Servicing Agents may include general shareholder liaison
services; processing purchase, exchange and redemption requests from Customers
and placing orders with Stephens or the Transfer Agent; processing dividend and
distribution payments from a Fund on behalf of Customers; providing sales
information periodically to Customers, including information showing their
positions in Investor B Shares; providing sub-accounting with respect to
Investor B Shares beneficially owned by Customers or the information necessary
for sub-accounting; responding to inquiries from Customers concerning their
investment in Investor B Shares; arranging for bank wires; and providing such
other similar services as may be reasonably requested.
Nations Fund may suspend or reduce payments under the Servicing Plan at any
time, and payments are subject to the continuation of the Funds' Servicing Plan
described above and the terms of the Servicing Agreements. See the SAI for more
details on the Servicing Plan.
DISTRIBUTION PLAN: Pursuant to Rule 12b-1 under the 1940 Act, the Directors and
Trustees also have approved a Distribution Plan with respect to Investor B
Shares of the Funds. Pursuant to the Distribution Plan, each Fund may compensate
or reimburse Stephens for expenses incurred in connection with sales support
services. Payments under the Distribution Plan will be calculated daily and paid
monthly at a rate or rates set from time to time by the Board of Directors or
Board of Trustees provided that the annual rate may not exceed 0.10% of the
average daily net asset value of a Fund's Investor B Shares. Payments to
Stephens pursuant to the Distri-
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bution Plan will be used (i) to compensate Selling Agents for providing sales
support assistance relating to Investor B Shares, (ii) for promotional
activities intended to result in the sale of Investor B Shares such as to pay
for the preparation, printing and distribution of prospectuses to other than
current shareholders, and (iii) to compensate Selling Agents for providing sales
support services with respect to their Customers who are, from time to time,
beneficial and record holders of Investor B Shares. Fees received by Stephens
pursuant to the Distribution Plan will not be used to pay any interest expenses,
carrying charges or other financing costs (except to the extent permitted by the
SEC) and will not be used to pay any general and administrative expenses of
Stephens.
Nations Fund and Stephens may suspend or reduce payments under the Distribution
Plan at any time, and payments are subject to the continuation of the Funds'
Distribution Plan described above and the terms of the Sales Support Agreement
between Selling Agents and Stephens. See the SAIs for more details on the
Distribution Plan.
Nations Fund understands that Selling Agents and/or Servicing Agents may charge
fees to their Customers who are the owners of Investor B Shares for various
services provided in connection with a Customer's account. These fees would be
in addition to any amounts received by a Selling Agent under its Sales Support
Agreement with Stephens or by a Servicing Agent under its Shareholder Servicing
Agreement with Nations Fund. The Sales Support Agreements and Shareholder
Servicing Agreements require Agents to disclose to their Customers any
compensation payable to the Agents by Stephens or Nations Fund and any other
compensation payable by the Customers for various services provided in
connection with their accounts. Customers of Agents should read this Prospectus
in light of the terms governing their accounts with their Agents.
How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Selling Agent that transmitted the original purchase order. Redemption
orders are effected at the net asset value per share next determined after
receipt of the order by Stephens or by the Transfer Agent. The Selling Agents
are responsible for transmitting redemption orders to Stephens or to the
Transfer Agent and for crediting their Customer's account with the redemption
proceeds on a timely basis. No charge for wiring redemption payments is imposed
by Nations Fund.
Redemption orders must be received on a Business Day before 2:00 p.m., Eastern
time (12:00 noon, Eastern time, with respect to Nations Tax Exempt Fund), and
payment will normally be wired the same day to Selling Agents. Nations Fund
reserves the right to wire redemption proceeds within three Business Days after
receiving the redemption orders if, in the judgment of NationsBank, an earlier
payment could adversely impact a Fund. However, redemption proceeds for shares
purchased by check may not be remitted until at least 15 days after the date of
purchase to ensure that the check has cleared; a certified check, however, is
deemed to be cleared immediately. Redemption orders received by Stephens or by
the Transfer Agent after 2:00 p.m., Eastern time (12:00 noon, Eastern time, with
respect to Nations Tax Exempt Fund), will be processed on the next Business Day.
Nations Fund may redeem a shareholder's Investor B Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of a
Selling Agent pursuant to arrangements between the Selling Agent and its
Customers. Nations Fund also may redeem shares of a Fund involuntarily or make
payment for redemption in readily marketable securities or other property under
certain circumstances in accordance with the 1940 Act.
Prior to effecting a redemption of Investor B Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to Nations Fund have previously been
made. Nations Fund may require any additional information reasonably necessary
to evidence that a redemption has been duly authorized.
Free checkwriting is available with respect to Investor B Shares of the Funds.
With this service, a shareholder may write checks in the amount of $500 or more.
To obtain checks, a shareholder must complete the signature section included
within the Account Application Form. To establish this checkwriting service
after opening an account in one of the Funds, the shareholder must contact
his/her Selling Agent by telephone or mail to obtain an Application Form. A
shareholder will receive the dividends and distributions declared on the shares
to be redeemed up to the day that a check is presented to the Custodian for
payment. Upon 30 days' prior written notice to shareholders, the checkwriting
privilege may be modified or terminated. An investor cannot close an account in
a Fund by writing a check.
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AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of a Fund if the value of the
Investor B Shares in his/her accounts within the Nations Fund Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Shareholders who elect to establish an AWP may receive a monthly,
quarterly or annual check or automatic transfer to a checking or savings account
in a stated amount of not less than $500 on or about the 10th or 25th day of the
applicable month of withdrawal. Investor B Shares will be redeemed as necessary
to meet withdrawal payments. Withdrawals will reduce principal and may
eventually deplete the shareholder's account. If a shareholder desires to
establish an AWP after opening an account, a signature guarantee will be
required. An AWP may be terminated by a shareholder on 30 days' written notice
to his/her Selling Agent or by Nations Fund at any time.
How To Exchange Shares
The exchange feature enables a shareholder of Investor B Shares of a Money
Market Fund to acquire Investor B Shares of another Money Market Fund when that
shareholder believes that a shift between Funds is an appropriate investment
decision. An exchange of Investor B Shares for Investor B Shares of another
Money Market Fund is made on the basis of the next calculated net asset value
per share of each Fund after the exchange order is received.
The Funds and each of the other funds of Nations Fund may limit the number of
times this exchange feature may be exercised by a shareholder within a specified
period of time. Also, the exchange feature may be terminated or revised at any
time by Nations Fund upon such notice as may be required by applicable
regulatory agencies (presently sixty days for termination or material revision),
provided that the exchange feature may be terminated or materially revised
without notice under certain unusual circumstances.
The current prospectus for each fund of Nations Fund describes its investment
objective and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for Federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within ninety days after the shares are purchased.
Nations Fund reserves the right to reject any exchange request. Only shares that
may legally be sold in the state of the investor's residence may be acquired in
an exchange. Only shares of a class that is accepting investments generally may
be acquired in an exchange.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. In such event, shares may be exchanged by mailing your
request directly to the Selling Agent through which the original shares were
purchased. Investors should consult their Selling Agent or Stephens for further
information regarding exchanges.
Investor B Shares may be exchanged by directing a request directly to the
Selling Agent through which the original Investor B Shares were purchased or in
some cases Stephens or the Transfer Agent. Investors should consult their
Selling Agent or Stephens for further information regarding exchanges. Your
exchange feature may be governed by your account agreement with your Selling
Agent.
How The Funds Value Their Shares
The net asset value of a share of each class of shares in the Funds is
calculated by dividing the total value of its assets, less liabilities, by the
number of shares in the class outstanding. Shares are valued as of 2:00 p.m.,
Eastern time (1:00 p.m., Eastern time, with respect to Nations Tax Exempt Fund),
on each Business Day. Currently, the days on which the Federal Reserve Bank of
New York is closed (other than weekends) are: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Memorial Day (observed), Independence Day, Labor
Day, Columbus Day, Thanksgiving Day and Christmas Day.
The assets of each Fund are valued based upon the amortized cost method.
Although Nations Fund seeks to maintain the net asset value per share of these
Funds at $1.00, there can be no assurance that their net asset value per share
will not vary.
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How Dividends And Distributions Are Made;
Tax Information
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income of each Fund
are declared daily to shareholders at 2:00 p.m., Eastern time (1:00 p.m.,
Eastern time, with respect to Nations Tax Exempt Fund), on the day of
declaration Investor B Shares begin earning dividends on the day the purchase
order is executed and continue earning dividends through and including the day
before the redemption order is executed (E.G., the settlement date). Dividends
are paid within five Business Days after the end of each month. Dividends are
paid in the form of additional Investor B Shares of the same Fund unless the
Customer has elected prior to the date of distribution to receive payment in
cash. Such election, or any revocation thereof, must be made in writing to the
Fund's Transfer Agent and will become effective with respect to dividends paid
after its receipt. Your dividend election may be governed by your account
agreement with your Selling Agent. Dividends are paid in cash within five
Business Days after a shareholder's complete redemption of his/her Investor B
Shares in a Fund. To the extent that there are any net short-term capital gains,
they will be paid at least annually.
Each Fund's net investment income available for distribution to the holders of
Investor B Shares will be reduced by the amount of sales support and shareholder
servicing fees paid to Selling Agents and Servicing Agents, respectively. Each
Fund's net investment income available for distribution to the holders of
Investor B Shares will be reduced by the amount of retail transfer agency fees
allocated to Investor B Shares.
TAXES: Each Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"). Such qualification
relieves a Fund of liability for Federal income taxes on amounts distributed in
accordance with the Code.
Each Fund intends to distribute substantially all of its investment company
taxable income and net tax-exempt income each taxable year. Distributions by the
Nations Prime Fund, Nations Treasury Fund and Nations Government Money Market
Fund will be taxable as ordinary income to shareholders who are not currently
exempt from Federal income taxes, whether such income is received in cash or
reinvested in additional shares. (Federal income taxes for distributions to an
IRA are generally deferred under the Code.) These distributions will not qualify
for the dividends received deduction for corporate shareholders.
Dividends received from Nations Treasury Fund and Nations Government Money
Market Fund may qualify as tax-exempt dividends for state income tax purposes in
some states. The Funds do not expect to realize any long-term capital gains, and
therefore, do not expect to distribute any capital gains dividends.
Each year, shareholders will be notified as to the amount and Federal tax status
of all dividends (and capital gains, if applicable) paid during the prior year.
Such dividends (and capital gains) may be subject to state and local taxes.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by the Fund on December 31 of such year
in the event such dividends are actually paid during January of the following
year.
Federal law requires Nations Fund to withhold 31% from any dividends (other than
exempt-interest dividends) paid by Nations Fund and/or redemptions (including
exchange redemptions) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply, or
if the Internal Revenue Service has notified Nations Fund that the Taxpayer
Identification Number listed on a shareholder account is incorrect according to
its records, or that the shareholder is subject to backup withholding. Amounts
withheld are applied to the shareholder's Federal tax liability, and a refund
may be obtained from the Internal Revenue Service if withholding results in
overpayment of taxes. Federal law also requires the Funds to withhold 30% or the
applicable tax treaty rate from dividends paid to certain nonresident alien,
non-U.S. partnership and non-U.S. corporation shareholder accounts.
NATIONS TAX EXEMPT FUND: As a regulated investment company, the Nations Tax
Exempt Fund is permitted to pass through to its shareholders tax-exempt income
("exempt-interest dividends") subject to certain requirements which the Fund
intends to satisfy. The Fund does not intend to earn investment company taxable
income or long-term capital gains; to the extent that it does earn taxable
income or realize long-term capital gains, distributions to shareholders from
such sources will be subject to Federal income tax. Exempt-interest dividends
may be treated by shareholders as items of interest excludable from their
federal gross income under Section 103(a) of the Code unless, under the
circumstances applicable to the particular shareholder, the exclusion would be
disallowed. (See Nations Fund Trust's SAI under "Additional Information
Concerning Taxes.") Distributions of net investment income by the Nations Tax
Exempt Fund
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may be taxable to investors under state or local law even though a substantial
portion of such distribution may be derived from interest on tax-exempt
obligations which, if realized directly, would be exempt from such income taxes.
If Nations Tax Exempt Fund should hold certain private activity bonds issued
after August 7, 1986, shareholders must include, as an item of tax preference,
the portion of dividends paid by the Fund that is attributable to interest on
such bonds in their Federal alternative minimum taxable income for purposes of
determining liability (if any) for the 28% alternative minimum tax applicable to
individuals and the 20% alternative minimum tax and the environmental tax
applicable to corporations. Corporate shareholders must also take all
exempt-interest dividends into account in determining certain adjustments for
Federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed at the rate of 0.12% on the excess of
the corporation's modified Federal alternative minimum taxable income over
$2,000,000. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits. To the extent, if any, dividends paid to
shareholders are derived from taxable income or from long-term or short-term
capital gains, such dividends will not be exempt from Federal income tax and
also may be subject to state and local taxes.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important Federal tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisers with respect to their specific tax
situations as well as with respect to state and local taxes. Further tax
information is contained in the SAIs.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAIs contain more
information concerning such investments.
ASSET BACKED SECURITIES: Asset Backed Securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset Backed
Securities consist of both mortgage and non-mortgage backed securities.
Interests in pools of these assets differ from other forms of debt securities,
which normally provide for periodic payment of interest in fixed amounts with
principal paid at maturity or specified call dates. Instead, Asset Backed
Securities provide periodic payments which generally consist of both interest
and principal payments.
Mortgage backed securities represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself. Mortgage backed securities include
mortgage pass-through securities, collateralized mortgage obligations ("CMOs"),
parallel pay CMOs, planned amortization class CMOs ("PAC Bonds") and stripped
mortgage-backed securities ("SMBS"), including interest-only and principal-only
SMBS. SMBS may be more volatile than other debt securities. For additional
information concerning mortgage backed securities, see the related SAI.
Non-mortgage backed securities include interests in pools of receivables, such
as motor vehicle installment purchase obligations and credit card receivables.
Such securities are generally issued as pass-through certificates, which
represent undivided fractional ownership interests in the underlying pools of
assets. Such securities also may be debt instruments, which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. The Nations Prime Fund generally limits
investments in bank instruments to (a) U.S. dollar-denominated obligations of
U.S. banks which have total assets exceeding $1 billion and which are members of
the Federal Deposit Insurance Corporation (including obligations of foreign
branches of such banks) or of the 75 largest foreign commercial banks in terms
of total assets; or (b) U.S. dollar-denominated bank instruments issued by other
banks believed by NationsBank to present minimal credit risks. For purposes of
the foregoing, total assets may be determined on the basis of the bank's most
recent annual financial statements.
The Nations Prime Fund may invest up to 100% of its assets in obligations issued
by banks. All other Funds will limit their investments in bank obligations so
they do not exceed 25% of each Fund's total assets at the time of purchase. The
Nations Prime Fund may invest in U.S. dollar-denominated obligations issued by
foreign branches of domestic banks ("Eurodollar" obligations) and domestic
branches of foreign banks ("Yankee dollar" obligations).
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of
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domestic issuers, a foreign jurisdiction might impose withholding taxes on
interest income payable on such obligations, deposits may be seized or
nationalized, foreign governmental restrictions such as exchange controls may be
adopted which might adversely affect the payment of principal of and interest on
such obligations, the selection of foreign obligations may be more difficult
because there may be less publicly available information concerning foreign
issuers, there may be difficulties in enforcing a judgment against a foreign
issuer or the accounting, auditing and financial reporting standards, practices
and requirements applicable to foreign issuers may differ from those applicable
to domestic issuers. In addition, foreign banks are not subject to examination
by U.S. Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Funds' total assets must be repaid prior to the purchase of
portfolio securities. The Funds are parties to a Line of Credit Agreement with
Mellon Bank, N.A. Advances under the agreement are taken primarily for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities.
Reverse repurchase agreements may be considered to be borrowings. When the Fund
invests in a reverse repurchase agreement, it sells a portfolio security to
another party, such as a bank or broker-dealer, in return for cash, and agrees
to buy the security back at a future date and price. Reverse repurchase
agreements may be used to provide cash to satisfy unusually heavy redemption
requests without having to sell portfolio securities, or for other temporary or
emergency purposes. In addition, the Nations Treasury Fund may use reverse
repurchase agreements for the purpose of investing the proceeds in tri-party
repurchase agreements as discussed below. Generally, the effect of such a
transaction is that the Funds can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while they will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Funds of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Fund is obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Fund's use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The Fund
only enters into reverse repurchase agreements (and repurchase agreements) with
counterparties that are deemed by NationsBank to be credit worthy. Reverse
repurchase agreements are speculative techniques involving leverage, and are
subject to asset coverage requirements if the Fund does not establish and
maintain a segregated account (as described above). Under the requirements of
the 1940 Act, a Fund is required to maintain an asset coverage (including the
proceeds of the borrowings) of at least 300% of all borrowings. Depending on
market conditions, the Fund's asset coverage and other factors at the time of a
reverse repurchase, the Funds may not establish a segregated account when
NationsBank believes it is not in the best interests of the Funds to do so. In
this case, such reverse repurchase agreements will be considered borrowings
subject to the asset coverage described above.
The Nations Treasury Fund has entered into an arrangement whereby it reinvests
the proceeds of a reverse repurchase agreement in a tri-party repurchase
agreement and receives the net interest rate differential.
COMMERCIAL INSTRUMENTS: Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or foreign
corporations and foreign commercial banks. The Nations Prime Fund will limit
purchases of commercial instruments to instruments which: (a) if rated by at
least two NRSROs, are rated in the highest rating category for short-term debt
obligations given by such organizations, or if only rated by one such
organization, are rated in the highest rating category for short-term debt
obligations given by such organization; or (b) if not rated, are (i) comparable
in priority and security to a class of short-term instruments of the same issuer
that has such rating(s), or (ii) of comparable quality to such instruments as
determined by Nations Fund, Inc.'s Board of Directors on the advice of
NationsBank.
Investments by a Fund in commercial paper will consist of issues rated in a
manner consistent with such Fund's investment policies and objectives. In
addition, a Fund may acquire unrated commercial paper and corporate bonds that
are determined by NationsBank at the time of purchase to be of comparable
quality to rated instruments that may be acquired by a Fund. Commercial
instruments include variable rate master demand notes, which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic
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adjustments in the interest rate, and variable and floating rate instruments.
The Nations Prime Fund also may purchase short-term participation interests in
loans extended by banks to companies, provided that both such banks and
companies meet the quality standards set forth above.
FOREIGN SECURITIES: Foreign securities include obligations of foreign
corporations and banks as well as obligations of foreign governments and their
political subdivisions (which will be limited to direct government obligations
and government-guaranteed securities). Such investments may subject a Fund to
special investment risks, including future political and economic developments,
the possible imposition of withholding taxes on interest income, possible
seizure or nationalization of foreign deposits, the possible establishment of
exchange controls, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. In addition, foreign issuers in general may be subject to different
accounting, auditing, reporting, and record keeping standards than those
applicable to domestic companies, and securities of foreign issuers may be less
liquid and their prices more volatile than those of comparable domestic issuers.
Investments in foreign securities may present additional risks, whether made
directly or indirectly, including the political or economic instability of the
issuer or the country of issue and the difficulty of predicting international
trade patterns. In addition, there may be less publicly available information
about a foreign company than about a U.S. company. Further, foreign stock
markets are generally not as developed or efficient as those in the U.S., and in
most foreign markets volume and liquidity are less than in the U.S. Fixed
commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign stock exchanges, brokers, and companies
than in the U.S. With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.
GUARANTEED INVESTMENT CONTRACTS: Guaranteed investment contracts ("GICs") are
investment instruments issued by highly rated insurance companies. Pursuant to
such contracts, a Fund may make cash contributions to a deposit fund of the
insurance company's general or separate accounts. The insurance company then
credits to a Fund guaranteed interest. The insurance company may assess periodic
charges against a GIC for expense and service costs allocable to it, and the
charges will be deducted from the value of the deposit fund. The purchase price
paid for a GIC becomes part of the general assets of the issuer, and the
contract is paid from the general assets of the issuer.
A Fund will only purchase GICs from issuers which, at the time of purchase, meet
quality and credit standards established by NationsBank. Generally, GICs are not
assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not currently exist.
Also, a Fund may not receive the principal amount of a GIC from the insurance
company on seven days' notice or less. Therefore, GICs are generally considered
to be illiquid investments.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Money Market Funds will
not knowingly invest more than 10% of the value of their respective net assets
in securities that are illiquid or such lower percentage as may be required by
the states in which the Funds sells their shares. Repurchase agreements and time
deposits that do not provide for payment to a Fund within seven days after
notice, guaranteed investment contracts and some commercial paper issued in
reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act") (other than variable amount master demand notes with
maturities of nine months or less), are subject to the limitation on illiquid
securities. In addition, interests in privately arranged loans acquired by the
Nations Prime Fund may be subject to this limitation.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by a Fund's Board of Trustees or Board of Directors or
NationsBank, acting under guidelines approved and monitored by the Fund's Board,
that an adequate trading market exists for that security.
INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of its
portfolio from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a pre-
18
<PAGE>
determined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate cap. The purchase of
an interest rate floor entitles the purchaser to receive payments of interest on
a notional principal amount from the party selling such interest rate floor.
NationsBank expects to enter into these transactions on behalf of a Fund
primarily to preserve a return or spread on a particular investment or portion
of its portfolio or to protect against any increase in the price of securities
the Fund anticipated purchasing at a later date rather than for speculative
purposes. A Fund will not sell interest rate caps or floors that it does not
own.
MONEY MARKET INSTRUMENTS: The term "money market instruments" refers to
instruments with remaining maturities of 397 days or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable or floating rate instruments issued by
industrial development authorities and other governmental entities. While there
may not be an active secondary market with respect to a particular instrument
purchased by a Fund, a Fund may demand payment of the principal and accrued
interest on the instrument or may resell it to a third party as specified in the
instruments. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of the instrument if the issuer defaulted on its
payment obligation or during periods the Fund is not entitled to exercise its
demand rights, and the Fund could, for these or other reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by a
Fund will be determined by NationsBank to be of comparable quality at the time
of purchase to instruments rated "high quality" by any major rating service. An
issuer's obligation to pay the principal of the note may be backed by an
unconditional bank letter or line of credit, guarantee, or commitment to lend.
Municipal securities also may include participations in privately arranged loans
to municipal borrowers, some of which may be referred to as "municipal leases",
and units of participation in trusts holding pools of tax-exempt leases. Such
loans in most cases are not backed by the taxing authority of the issuers and
may have limited marketability or may be marketable only by virtue of a
provision requiring repayment following demand by the lender. Such loans made by
a Fund may have a demand provision permitting the Fund to require payment within
seven days. Participations in such loans, however, may not have such a demand
provision and may not be otherwise marketable. To the extent these securities
are illiquid, they will be subject to each Fund's limitation on investments in
illiquid securities. As it deems appropriate, NationsBank will establish
procedures to monitor the credit standing of each such municipal borrower,
including its ability to meet contractual payment obligations.
Municipal participation interests may be purchased from financial institutions,
and give the purchaser an undivided interest in one or more underlying municipal
security. To the extent that municipal participation interests are considered to
be "illiquid securities" such instruments are subject to each Fund's limitation
on the purchase of illiquid securities.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to municipal securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified municipal securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and without
intending to exercise its rights thereunder for trading purposes.
Although each Fund does not presently intend to do so on a regular basis, each
may invest more than 25% of its total assets in municipal securities that are
payable solely from revenues of similar projects if such investment is deemed
necessary or appropriate by NationsBank. To the extent that more than 25% of a
Fund's total assets are invested in municipal securities that are payable from
the revenues of similar projects, a Fund will be subject to the peculiar risks
presented by such projects to a greater extent than it would be if its assets
were not so concentrated.
OTHER INVESTMENT COMPANIES: A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another invest-
19
<PAGE>
ment company, a Fund would bear, along with other shareholders, its pro rata
portion of the other investment company's expenses, including advisory fees.
These expenses would be in addition to the advisory and other expenses that a
Fund bears directly in connection with its own operations.
REPURCHASE AGREEMENTS: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker-dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
uninvested cash. A risk associated with repurchase agreements is the failure of
the seller to repurchase the securities as agreed, which may cause a Fund to
suffer a loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the limit
stated above. A Fund may enter into joint repurchase agreements jointly with
other investment portfolios of Nations Fund and Nations Institutional Reserves.
SECURITIES LENDING: To increase return on portfolio securities, certain of the
Funds may lend their portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. There is a risk of delay in receiving
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by NationsBank to be credit worthy and
when, in its judgment, the income to be earned from the loan justifies the
attendant risks. The aggregate of all outstanding loans of a Fund may not exceed
30% of the value of its total assets.
SHORT-TERM TRUST OBLIGATIONS: Nations Prime Fund may invest in short-term
obligations issued by special purpose trusts established to acquire specific
issues of government or corporate securities. Such obligations entitle the Fund
to a proportional fractional interest in payments received by the trust, either
from the underlying securities owned by the trust or pursuant to other
arrangements entered into by the trust. A trust may enter into a swap
arrangement with a highly rated investment firm, pursuant to which the trust
grants to the counterparty certain of its rights with respect to the securities
owned by the trust in exchange for the obligation of the counterparty to make
payments to the trust according to an established formula. The trust obligations
purchased by the Fund must satisfy the quality and maturity requirements
generally applicable to the Fund pursuant to Rule 2a-7 under the 1940 Act.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indexes, non-U.S. interest rates and foreign currencies, that
have been approved by the Commodity Futures Trading Commission ("CFTC") for
investment by U.S. investors, for the purpose of hedging against changes in
values of a Fund's securities or changes in the prevailing levels of interest
rates or currency exchange rates. The contracts entail certain risks, including
but not limited to the following: no assurance that futures contracts
transactions can be offset at favorable prices; possible reduction of a Fund's
total return due to the use of hedging; possible lack of liquidity due to daily
limits on price fluctuation; imperfect correlation between the contracts and the
securities or currencies being hedged; and potential losses in excess of the
amount invested in the futures contracts themselves.
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
for which no common clearing facility exists and a trader may look only to the
broker for performance of the contract. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the
currencies in which trading is done on foreign exchanges, any profits that such
Fund might realize could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes.
U.S. GOVERNMENT OBLIGATIONS: U.S. Government obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. Obligations of U.S.
Government agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
E.G., Government National Mortgage Association certificates; in other cases
interest and principal are not guaranteed, E.G., obligations of the Federal Home
Loan Bank System and the Federal Farm Credit Bank. No assurance can be given
that the U.S. Government would provide financial support to government-sponsored
instrumentalities if it is not obligated to do so by law.
VARIABLE AND FLOATING RATE INSTRUMENTS: Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks and corporations
may carry variable or floating rates of interest. Such instruments bear interest
rates which are not fixed, but which vary with changes in
20
<PAGE>
specified market rates or indices, such as a Federal Reserve composite index. A
variable rate demand instrument is an obligation with a variable or floating
interest rate and an unconditional right of demand on the part of the holder to
receive payment of unpaid principal and accrued interest. An instrument with a
demand period exceeding seven days may be considered illiquid if there is no
secondary market for such security.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities takes
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
Appendix B -- Description of Ratings
The following summarizes the highest two ratings used by S&P for corporate and
municipal bonds:
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major rating category.
The following summarizes the highest two ratings used by Moody's for corporate
and municipal bonds:
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa. The modifier 1 indicates that the bond being rated ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category. With regard to municipal bonds, those bonds in the
Aa groups which Moody's believes possess the strongest investment attributes are
designated by the symbols Aa1.
The following summarizes the highest two ratings used by D&P for bonds:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major category.
The following summarizes the highest two ratings used by Fitch for bonds:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major rating category.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong pro-
21
<PAGE>
tection from established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The two highest rating categories of D&P for short-term debt are Duff 1 and Duff
2. D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the
highest rating category. Duff 1+ indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be minor.
Duff 1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. Duff 2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
The following summarizes the two highest rating categories used by Fitch for
short-term obligations:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following are the two highest investment grade ratings used by
BankWatch for long-term debt:
AAA -- The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA -- The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 -- The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
The following summarizes the two highest long-term ratings used by IBCA:
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
22
<PAGE>
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk albeit not very significantly.
The following summarizes the two highest short-term debt ratings used by IBCA:
A1+ -- Obligations supported by the highest capacity for timely repayment
and possessing a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
23
<PAGE>
NATIONS FUND TRUST
NATIONS GOVERNMENT MONEY MARKET FUND
SUPPLEMENT DATED JANUARY 30, 1996 TO PROSPECTUSES DATED SEPTEMBER 30, 1995
The Prospectuses for the Trust A, Trust B, Investor A, Investor B,
Investor C and Investor D Shares of NATIONS GOVERNMENT MONEY MARKET FUND are
hereby supplemented as follows:
1. By substituting the following for the second sentence in the
first paragraph in the section entitled "HOW TO BUY SHARES -- EFFECTIVE TIME OF
PURCHASES":
A purchase order must be received by Stephens or by the
Transfer Agent by 2:00 p.m., Eastern time (12:00 noon, Eastern time,
with respect to Nations Tax Exempt Fund and Nations Government Money
Market Fund).
2. By substituting the following for the first three
sentences in the second paragraph in the section entitled "HOW
TO REDEEM SHARES":
Redemption orders must be received on a Business Day before
2:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Tax Exempt Fund and Nations Government Money Market Fund), and
payment will normally be wired the same day to Selling Agents. Nations
Fund reserves the right to wire redemption proceeds within five Business
Days after receiving the redemption order if, in the judgment of
NationsBank, an earlier payment could adversely impact a Fund.
Redemption orders received by Stephens or by the Transfer Agent after
2:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Tax Exempt Fund and Nations Government Money Market Fund), will
be processed on the next Business Day.
3. By substituting the following for the second sentence in
the first paragraph in the section entitled "HOW THE FUNDS VALUE THEIR SHARES":
Shares are valued as of 2:00 p.m., Eastern time (1:00 p.m.,
Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund), on each Business Day.
4. By substituting the following for the first sentence in the
first paragraph in the section entitled "HOW DIVIDENDS AND DISTRIBUTIONS ARE
MADE; TAX INFORMATION -- DIVIDENDS AND DISTRIBUTIONS":
Dividends from net investment income of each Fund are
declared daily to shareholders at 2:00 p.m., Eastern time (1:00 p.m.
Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund) on the day of declaration.
1
<PAGE>
Prospectus
INVESTOR C SHARES
SEPTEMBER 30, 1995
This Prospectus describes the four investment portfolios
listed in the column to the right (each a "Fund" and
collectively the "Money Market Funds") of the Nations Fund
Family ("Nations Fund" or "Nations Fund Family"). This
ProNations Government spectus describes one class of shares
of each Money Market Fund -- Investor C Shares.
EACH MONEY MARKET FUND SEEKS TO MAINTAIN A NET ASSET VALUE OF
$1.00 PER SHARE. INVESTMENTS IN THE MONEY MARKET FUNDS ARE
NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE
MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely the information
about the Funds that a prospective purchaser of
Investor C Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust and Nations Fund, Inc. is
contained in separate Statements of Additional
Information (the "SAIs"), which have been filed with
the Securities and Exchange Commission (the "SEC")
and are available upon request without charge by
writing or calling Nations Fund at its address or
telephone number shown below. The SAIs bear the same
date as this Prospectus and are incorporated by
reference in their entirety into this Prospectus.
SHARES OF NATIONS FUND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. (CAROLINAS) ("NATIONSBANK") OR
ANY OF ITS AFFILIATES. SUCH SHARES ARE NOT INSURED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
FUNDS INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
NATIONSBANK IS THE INVESTMENT ADVISER AND, TOGETHER
WITH ITS AFFILIATES, PROVIDES CERTAIN OTHER SERVICES
TO NATIONS FUND, FOR WHICH THEY ARE COMPENSATED.
STEPHENS INC., WHICH IS NOT AFFILIATED WITH
NATIONSBANK, IS THE SPONSOR AND ADMINISTRATOR AND
SERVES AS THE DISTRIBUTOR FOR NATIONS FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Nations Prime Fund
Nations Treasury Fund
Money Market Fund
Nations Tax
Exempt Fund
For purchase, redemption and
performance information
call:
1-800-321-7854
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
NATIONS FUND [logo]
<PAGE>
Table Of Contents
About The
Funds
Expenses Summary 3
Financial Highlights 4
Objectives 6
How Objectives are Pursued 6
How Performance is Shown 8
How the Funds are Managed 8
Organization and History 10
About Your
Investment
How to Buy Shares 11
Shareholder Servicing Plan 12
How to Redeem Shares 13
How to Exchange Shares 13
How the Funds Value their Shares 14
How Dividends and Distributions are Made; Tax
Information 14
Appendix A -- Portfolio Securities 16
Appendix B -- Description of Ratings 21
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAIS
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
NATIONS FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY NATIONS FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds. The
following table summarizes shareholder transaction and operating expenses for
Investor C Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations
Government Nations Tax
Nations Nations Money Exempt
SHAREHOLDER TRANSACTION EXPENSES Prime Fund Treasury Fund Market Fund Fund
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Deferred Sales Charge None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees1 .14% .17% .16% .17%
Rule 12b-1 Fees None None None None
Shareholder Servicing Fees1 .25% .25% .25% .15%
Other Expenses .16% .13% .19% .14%
Total Operating Expenses1 .55% .55% .60% .46%
</TABLE>
1 After any waivers and reimbursements.
EXAMPLES:
You would pay the following expenses on a $1,000 investment in Investor C Shares
of the indicated Fund, assuming (1) a 5% annual return and (2) redemption at the
end of each time period.
<TABLE>
<CAPTION>
Nations
Nations Government Nations Tax
Nations Prime Treasury Money Market Exempt
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
1 Year $ 6 $ 6 $ 6 $ 5
3 Years $18 $18 $19 $15
5 Years $31 $31 $33 $26
10 Years $69 $69 $75 $58
</TABLE>
The purpose of the foregoing table is to assist an investor in understanding the
various shareholder transaction and operating expenses that an investor in each
Fund will bear either directly or indirectly. The "Other Expenses" figures
contained in the above table are based on estimated amounts for the Funds'
current fiscal year and reflect anticipated fee waivers and reimbursements.
There is no assurance that any fee waivers and reimbursements will continue
beyond the current fiscal year. If fee waivers and/or reimbursements are
discontinued, the amounts contained in the "Examples" above may increase. For
more complete descriptions of the Funds' operating expenses, see "How the Funds
are Managed."
Absent fee waivers and reimbursements, "Management Fees," "Shareholder Servicing
Fees" and "Total Operating Expenses" for Investor C Shares of the indicated Fund
would have been as follows: Nations Prime Fund -- .20%, .25% and .61%,
respectively; Nations Treasury Fund -- .20%, .25% and .58%, respectively;
Nations Government Money Market Fund -- .40%, .25% and .84%, respectively; and
Nations Tax Exempt Fund -- .40%, .25% and .79%, respectively.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
3
<PAGE>
Financial Highlights
The audited financial information on the following pages has been derived from
the financial statements of Nations Fund Trust and Nations Fund, Inc. Price
Waterhouse LLP is the independent accountant to Nations Fund Trust and Nations
Fund, Inc. The reports of Price Waterhouse LLP for the most recent fiscal years
of Nations Fund Trust and Nations Fund, Inc. accompany the financial statements
for such periods and are incorporated by reference in the SAIs, which are
available upon request. Shareholders of a Fund will receive unaudited
semi-annual reports describing the Fund's investment operations and annual
financial statements audited by the Funds' independent accountant.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS PRIME FUND
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
INVESTOR C SHARES 05/31/95 05/31/94*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0493 0.0155
Dividends from net investment income (0.0493) (0.0155)
Net asset value, end of period $ 1.00 $ 1.00
Total return++ 5.03% 1.58%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 53,451 $ 1,481
Ratio of operating expenses to average net assets 0.56% 0.55%+
Ratio of net investment income to average net assets 4.97% 2.95%+
Ratio of operating expenses to average net assets without waivers and reimbursements 0.64% 0.62%+
Net investment income per share without waivers and reimbursements $ 0.0485 $ 0.0151
</TABLE>
* The Nations Prime Fund Investor C Shares commenced operations on November 26,
1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charge.
NATIONS TREASURY FUND
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
INVESTOR C SHARES 05/31/95 05/31/94*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0468 0.0019
Dividends from net investment income (0.0468) (0.0019)
Distributions from net realized capital gains (0.0000)** --
Net asset value, end of period $ 1.00 $ 1.00
Total return++ 4.76% 0.19%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 6,373 $ 191
Ratio of operating expenses to average net assets 0.56% 0.55%+
Ratio of net investment income to average net assets 4.73% 2.72%+
Ratio of operating expenses to average net assets without waivers and reimbursements 0.61% 0.61%+
Net investment income per share without waivers and reimbursements $ 0.0463 $ 0.0019
</TABLE>
* The Nations Treasury Fund Investor C Shares commenced operations on May 11,
1994.
** Amount represents less than $0.0001.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charge.
4
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED
05/31/95 PERIOD
INVESTOR C SHARES (UNAUDITED) ENDED 11/30/94*
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0266 0.0290
Distributions:
Dividends from net investment income (0.0266) (0.0290)
Dividends from net realized gains -- (0.0000)#
Total distributions (0.0266) (0.0290)
Net asset value, end of period $ 1.00 $ 1.00
Total return++ 2.68% 2.72%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 1,081 $ 476
Ratio of operating expenses to average net assets 0.55%+ 0.55%+
Ratio of net investment income to average net assets 5.36%+ 3.54%+
Ratio of operating expenses to average net assets before fee waivers 0.81%+ 0.84%+
Net investment income per share before fee waivers $ 0.0253 $ 0.0268
</TABLE>
* The Nations Government Money Market Fund Investor C Shares commenced
operations on March 21, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
# Value represents less than $(0.0001) per share.
NATIONS TAX EXEMPT FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD
05/31/95 ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94*
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0173 0.0203
Dividends from net investment income (0.0173) (0.0203)
Net asset value, end of period $ 1.00 $ 1.00
Total return++ 1.74% 1.90%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 26,093 $ 25,704
Ratio of operating expenses to average net assets 0.45%+ 0.42%+
Ratio of net investment income to average net assets 3.49%+ 2.44%+
Ratio of operating expenses to average net assets before fee waivers 0.70%+ 0.74%+
Net investment income per share before fee waivers $ 0.0160 $ 0.0177
</TABLE>
* The Nations Tax Exempt Fund Investor C Shares commenced operations on March
7, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
5
<PAGE>
Objectives
Each Money Market Fund, described below, endeavors to achieve its investment
objective by investing in a diversified portfolio of high quality money market
instruments with maturities of 397 days or less from the date of purchase.
Securities subject to repurchase agreements may bear longer maturities. Although
NationsBank will seek to achieve the investment objective of each Fund, there is
no assurance that it will be able to do so. No Fund should be considered, by
itself, to provide a complete investment program for any investor.
NATIONS PRIME FUND: The Nations Prime Fund's investment objective is to seek the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS TREASURY FUND: The Nations Treasury Fund's investment objective is the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS GOVERNMENT MONEY MARKET FUND: The Nations Government Money Market Fund's
investment objective is to seek as high a level of current income as is
consistent with liquidity and stability of principal.
NATIONS TAX EXEMPT FUND: The Nations Tax Exempt Fund's investment objective is
to seek as high a level of current interest income exempt from Federal income
taxes as is consistent with liquidity and stability of principal.
How Objectives Are Pursued
NATIONS PRIME FUND: In pursuing its investment objective, the Fund may invest in
U.S. Treasury bills, notes and bonds and other instruments issued directly by
the U.S. Government ("U.S. Treasury Obligations"), other obligations issued or
guaranteed as to payment of principal and interest by the U.S. Government, its
agencies or instrumentalities ("U.S. Government Obligations"), bank and
commercial instruments that may be available in the money markets, high quality
short-term taxable obligations issued by state and local governments, their
agencies and instrumentalities and repurchase agreements relating to U.S.
Government Obligations. The Fund also may purchase securities issued by other
investment companies, consistent with the Fund's investment objective and
policies, and may engage in reverse repurchase agreements. The Fund also may
invest in guaranteed investment contracts and instruments issued by trusts,
including pass-through certificates representing participations in, or debt
instruments backed by, the securities and other assets owned by the trust. In
addition, the Fund may lend its portfolio securities to qualified institutional
investors. For more information concerning these instruments, see "Appendix A."
NATIONS TREASURY FUND: In pursuing its investment objective, the Fund invests in
U.S. Treasury Obligations and repurchase agreements secured by such obligations.
The Fund also may purchase securities issued by other investment companies,
consistent with the Fund's investment objective and policies, and may engage in
reverse repurchase agreements. The Fund also may lend its portfolio securities
to qualified institutional investors. For more information concerning these
instruments, see "Appendix A."
NATIONS GOVERNMENT MONEY MARKET FUND: In pursuing its investment objective, the
Fund invests in U.S. Government Obligations and repurchase agreements relating
to such obligations. The Fund also may purchase securities issued by other
investment companies, consistent with the Fund's investment objective and
policies, and may engage in reverse repurchase agreements. The Fund also may
lend its portfolio securities to qualified institutional investors. For more
information concerning these instruments, see "Appendix A."
NATIONS TAX EXEMPT FUND: In pursuing its investment objective, the Fund invests
in a diversified portfolio of obligations issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia, and
their political subdivisions, agencies, instrumentalities and authorities, the
interest on which, in the opinion of counsel to the issuer or bond counsel, is
exempt from regular Federal income tax ("Municipal Securities"). The Fund will
not knowingly purchase securities the interest on which is subject to such tax.
A portion of the Fund's assets, however, may be invested in private activity
bonds, the interest on which may be treated as a specific tax preference item
under the Federal alternative minimum tax. See "How Dividends and Distributions
Are Made; Tax Information."
The Fund invests in Municipal Securities which are determined to present minimal
credit risks and which at the time of purchase are considered to be of "high
quality" -- E.G., rated "AA" or higher by Duff & Phelps Credit Rating Co.
("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard & Poor's Corporation
("S&P"), IBCA Limited or its affiliate IBCA Inc. (collectively "IBCA"), or
Thomson BankWatch, Inc. ("BankWatch") or "Aa" or higher by Moody's Investors
Service, Inc. ("Moody's"), in the case of bonds; rated "Duff 1" or higher by
D&P, "F-1" or higher by Fitch, "SP-1" by S&P, or "MIG-1" by Moody's in the case
of notes; rated
6
<PAGE>
"Duff 1" or higher by D&P, "F-1" or higher by Fitch, or "VMIG-1" by Moody's in
the case of variable rate demand notes; or rated "Duff 1" or higher by D&P,
"F-1" or higher by Fitch, "A-1" or higher by S&P, or "Prime-1" by Moody's in the
case of tax-exempt commercial paper. D&P, Fitch, S&P, Moody's, IBCA and
BankWatch are the six nationally recognized statistical rating organizations
(collectively, "NRSROs"). Securities that are unrated at the time of purchase
will be determined to be of comparable quality by NationsBank pursuant to
guidelines approved by Nations Fund Trust's Board of Trustees. The applicable
Municipal Securities ratings are described in "Appendix B."
The payment of principal and interest on most securities purchased by the Fund
will depend upon the ability of the issuers to meet their obligations. The
District of Columbia, each state, each of their political subdivisions,
agencies, instrumentalities and authorities and each multi-state agency of which
a state is a member is a separate "issuer" as that term is used in this
Prospectus and the related SAI. The non-governmental user of facilities financed
by private activity bonds also is considered to be an "issuer." For more
information concerning Municipal Securities, see "Appendix A -- Municipal
Securities."
The Fund may hold uninvested cash reserves pending investment, during temporary
defensive periods, or if, in the opinion of NationsBank, desirable tax-exempt
obligations are unavailable. Uninvested cash reserves will not earn income. As a
matter of fundamental policy, under normal market conditions, at least 80% of
the Fund's net assets will be invested in Municipal Securities. Investments in
private activity bonds, the interest on which may be treated as a specific tax
preference item under the Federal alternative minimum tax, will not be treated
as Municipal Securities in determining whether the Fund is in compliance with
this 80% requirement. The Fund also may invest in securities issued by other
investment companies that invest in securities consistent with the Fund's
investment objective and policies. For more information concerning the Fund's
investments, see "Appendix A."
RISK CONSIDERATIONS: Although NationsBank will seek to achieve the investment
objective of each Fund, there is no assurance that it will be able to do so. No
single Fund should be considered, by itself, to provide a complete investment
program for any investor. Investments in a Fund are not insured against loss of
principal. For additional risk information regarding the Funds' investment in
particular instruments, see "Appendix A -- Portfolio Securities."
INVESTMENT LIMITATIONS: The Funds are subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed with respect to a particular Fund without the
affirmative vote of the holders of a majority of that Fund's outstanding shares.
Other investment limitations that cannot be changed without such a vote of
shareholders are described in each Fund's SAI.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
tax-exempt securities issued by state or municipal governments and their
political subdivisions are not considered members of any industry. In addition,
this limitation does not apply to investments in obligations of domestic banks.)
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or are privately
placed), may enter into repurchase agreements and may lend portfolio securities
in accordance with its investment policies.
3. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of such Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, such Fund will not
hold more than 10% of the voting securities of any issuer.
In addition, as a matter of non-fundamental policy, the Nations Tax Exempt Fund
may not purchase any securities other than obligations the interest on which is
exempt from Federal income tax and stand-by commitments with respect to such
obligations. The investment objective and policies of the Funds, unless
otherwise specified, may be changed without shareholder approval. If the
investment objective or policies of a Fund change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus or the SAIs. Should a Fund determine that any such
commitment is no longer in its best interests, it may consider terminating sales
of its shares in the states involved.
In order for the Funds to value their investments on the basis of amortized cost
(see "How the Funds Value Their Shares"), investments must be in accordance with
the requirements of Rule 2a-7 under the Investment Company Act of 1940, as
amended ("1940 Act"), some of which are described below. These include maturity,
qual-
7
<PAGE>
ity and diversification requirements. Maturity is limited to a dollar-weighted
average portfolio maturity of 90 days or less. Quality requirements generally
limit investments to U.S. dollar denominated instruments determined to present
minimal credit risks which, at the time of acquisition, are rated in the top two
rating categories by the required number of NRSROs (at least two or, if only one
NRSRO has rated the security, that one NRSRO) or, if unrated by any NRSRO, are
(i) comparable in priority and security to a class of short-term securities of
the same issuer that has the required rating, or (ii) determined to be
comparable in quality to securities having the required rating. The
diversification requirements provide generally that a Money Market Fund (except
the Nations Tax Exempt Fund) may not at the time of acquisition invest more than
5% of its assets in securities of any one issuer or invest more than 5% of its
assets in securities (and no more than 1% in any one issuer) that have not been
rated in the highest category by the required number of NRSROs or, if unrated,
are described in (i) or (ii) above. Securities issued by the U.S. Government,
its agencies, authorities or instrumentalities, and fully-collateralized
repurchase agreements secured by such obligations, are exempt from the quality
requirements, other than minimal credit risk. In the event that a Fund's
investment restrictions or permissible investments are more restrictive than the
requirements of Rule 2a-7, the Fund's own restrictions will govern.
How Performance Is Shown
From time to time the Funds may advertise the yield and effective yield on a
class of shares and the Nations Tax Exempt Fund also may advertise the
tax-equivalent yield of a class of shares. YIELD, EFFECTIVE YIELD AND TAX
EQUIVALENT YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED
TO INDICATE FUTURE PERFORMANCE. The "yield" of a class of shares in a Fund
refers to the income generated by an investment in such class over a seven-day
period identified in the advertisement. This income is then "annualized." That
is, the amount of income generated by the investment during that week is assumed
to be generated each week over a 52-week period and is shown as a percentage of
the investment. The "effective yield" is calculated similarly, but, when
annualized, the income earned by an investment in a class of shares in a Fund is
assumed to be reinvested. The "effective yield" will be slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment. The
"tax-equivalent yield" of each class of shares in the Nations Tax Exempt Fund
shows the level of taxable yield needed to produce an after-tax equivalent to
such class's tax-free yield. This is done by increasing the class's yield
(calculated as above) by the amount necessary to reflect the payment of Federal
income tax at a stated tax rate.
Since yields fluctuate, yield data cannot necessarily be used to compare an
investment in the Funds with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed-upon or guaranteed fixed
yield for a stated period of time. Any fees charged by servicing agents to their
customers' accounts for automatic investment or other cash management services
will not be included in calculations of yield.
In addition to Investor C Shares, the Funds offer Trust A, Trust B, Investor A,
Investor B and Investor D Shares. Each class of shares may bear different sales
charges, shareholder servicing fees and other expenses, which may cause the
performance of a class to differ from the performance of the other classes.
Performance quotations will be computed separately for each class of a Fund's
shares. Each Fund's annual report contains additional performance information
and is available upon request without charge from the Funds' distributor or your
servicing agent.
How The Funds Are Managed
The business and affairs of Nations Fund Trust and Nations Fund, Inc. are
managed under the direction of its Board of Trustees and Board of Directors,
respectively. Nations Fund Trust's SAI contains the names of and general
background information concerning each Trustee of Nations Fund Trust. Nations
Fund, Inc.'s SAI contains the names of and general background information
concerning each Director of Nations Fund, Inc.
Nations Fund and NationsBank have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially comply in all
material respects with the recommendations set forth in the May 9, 1994 Report
of the Advisory Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISER: NationsBank, through its investment management division,
serves as investment adviser to the Funds. NationsBank is an indirect wholly
owned subsidiary of NationsBank Corporation, a bank holding company organized as
a North Carolina corporation.
8
<PAGE>
NationsBank has its principal offices at One NationsBank Plaza, Charlotte, North
Carolina 28255.
NationsBank provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking.
Subject to the general supervision of Nations Fund Trust's Board of Trustees and
Nations Fund, Inc.'s Board of Directors, and in accordance with each Fund's
investment policies, NationsBank formulates guidelines and lists of approved
investments for each Fund, makes decisions with respect to and places orders for
each Fund's purchases and sales of portfolio securities and maintains records
relating to such purchases and sales. With respect to the Nations Tax Exempt
Fund, NationsBank is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with
NationsBank or which have sold shares in such Fund, if NationsBank believes that
the quality of the transaction and the commission are comparable to what they
would be with other qualified brokerage firms. From time to time, to the extent
consistent with its investment objective, policies and restrictions, each Fund
may invest in securities of companies with which NationsBank has a lending
relationship. For the services provided and expenses assumed pursuant to various
Investment Advisory Agreements, NationsBank is entitled to receive advisory
fees, computed daily and paid monthly, at the annual rates of: 0.25% of the
first $250 million of the combined average daily net assets of both Nations
Prime Fund and Nations Treasury Fund, plus 0.20% of the combined average daily
net assets of such Funds in excess of $250 million; and 0.40% of the average
daily net assets of each of Nations Government Money Market Fund and Nations Tax
Exempt Fund.
From time to time, NationsBank may waive (either voluntarily or pursuant to
applicable state limitations) advisory fees payable by a Fund. For the fiscal
year ended November 30, 1994, after waivers, Nations Fund Trust paid NationsBank
advisory fees at the rate of 0.16% and 0.09% of the average daily net assets of
the Nations Government Money Market Fund and Nations Tax Exempt Fund,
respectively. For the fiscal year ended May 31, 1995, after waivers, Nations
Fund, Inc. paid NationsBank fees at the rate of 0.13% and 0.16% of the average
daily net assets of Nations Prime Fund and Nations Treasury Fund, respectively.
Morrison & Foerster, counsel to Nations Fund and special counsel to NationsBank,
has advised Nations Fund and NationsBank that NationsBank may perform the
services contemplated by the Investment Advisory Agreements without violation of
the Glass-Steagall Act or other applicable banking laws or regulations. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent NationsBank from
continuing to perform, in whole or in part, such services. If NationsBank were
prohibited from performing any such services, it is expected that the Board of
Trustees of Nations Fund Trust and the Board of Directors of Nations Fund, Inc.
would recommend to each Fund's shareholders that they approve a new advisory
agreement with another entity or entities qualified to perform such services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
Nations Fund pursuant to Administration Agreements. Pursuant to the terms of the
Administration Agreements, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of
First Data Corporation, with principal offices at One Exchange Place, Boston,
Massachusetts 02109, serves as the co-administrator of the Funds pursuant to
Co-Administration Agreements. Under the Co-Administration Agreements, TSSG
provides various administrative and accounting services to the Funds, including
performing calculations necessary to determine net asset values and dividends,
preparing tax returns and financial statements and maintaining the portfolio
records and certain general accounting records for the Funds. For the services
rendered pursuant to the Administration and Co-Administration Agreements,
Stephens and TSSG are entitled to receive a combined fee at the annual rate of
up to 0.10% of each Fund's average daily net assets. For the fiscal year ended
November 30, 1994, after waivers, Nations Fund Trust paid its administrators
fees at the rate of 0.09% of the average daily net assets of Nations Government
Money Market Fund and Nations Tax Exempt Fund. For the fiscal year ended May 31,
1995, after waivers, Nations Fund, Inc. paid its administrators fees at the
indicated rate of the following Funds' average daily net assets: Nations Prime
Fund -- 0.09%; and Nations Treasury Fund -- 0.09%.
It is anticipated that beginning in November of 1995, NationsBank will serve as
sub-administrator for Nations
9
<PAGE>
Fund pursuant to a Sub-Administration Agreement. Pursuant to the terms of the
Sub-Administration Agreement, NationsBank will assist Stephens in supervising,
coordinating and monitoring various aspects of the Funds' administrative
operations. For providing such services, NationsBank shall be entitled to
receive a monthly fee from Stephens based on an annual rate of .01% of the
Funds' average daily net assets.
Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker-dealer with principal
offices at 111 Center Street, Little Rock, Arkansas 72201. Nations Fund has
entered into a distribution agreement with Stephens which provides that Stephens
has the exclusive right to distribute shares of the Funds. Stephens may pay
service fees or commissions to servicing agents that assist customers in
purchasing Investor C Shares of the Funds. See "Shareholder Servicing Plan."
NationsBank of Texas, N.A., serves as each Fund's custodian (the "Custodian").
The Custodian is located at 1401 Elm Street, Dallas, Texas 75202 and is a wholly
owned subsidiary of NationsBank Corporation. In return for providing custodial
services, the Custodian is entitled to receive, in addition to out-of-pocket
expenses, fees payable monthly (i) at the rate of 1.25% of 1% of the average
daily net assets of each Fund, (ii) $10.00 per repurchase collateral transaction
by the Funds, and (iii) $15.00 per purchase, sale and maturity transaction
involving the Funds.
TSSG serves as transfer agent (the "Transfer Agent") for each Fund's Investor C
Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
Price Waterhouse LLP serves as independent accountant to Nations Funds. Their
address is 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES: The accrued expenses of each Fund, as well as certain expenses
attributable to Investor C Shares are deducted from accrued income before
dividends are declared. The respective Fund's expenses include, but are not
limited to: fees paid to NationsBank, Stephens and TSSG; interest; Directors' or
Trustees' fees; federal and state securities registration and qualification
fees; brokerage fees and commissions; costs of preparing and printing
prospectuses for regulatory purposes and for distribution to existing
shareholders; charges of the Custodian and Transfer Agent; certain insurance
premiums; outside auditing and legal expenses; costs of shareholder reports and
shareholder meetings; other expenses which are not expressly assumed by
NationsBank, Stephens or TSSG under their respective agreements with Nations
Fund; and any extraordinary expenses. Investor C Shares may bear certain class
specific retail transfer agency expenses and also bear certain additional
shareholder service costs. Any general expenses of Nations Fund Trust and/or of
Nations Fund, Inc. that are not readily identifiable as belonging to a
particular investment portfolio are allocated among all portfolios in the
proportion that the assets of a portfolio bears to the assets of Nations Fund
Trust and/or Nations Fund, Inc. or in such other manner as the Board of Trustees
or Board of Directors deems appropriate.
Organization And History
The Funds are members of the Nations Fund Family, which consists of Nations Fund
Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc. and Nations
Institutional Reserves (formerly known as The Capitol Mutual Funds). The Nations
Fund Family currently has 44 distinct investment portfolios and total assets in
excess of $16 billion.
NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. The Funds currently offer six classes of shares -- Trust A
Shares, Trust B Shares, Investor A Shares, Investor B Shares, Investor C Shares
and Investor D Shares. This Prospectus relates only to the Investor C Shares of
Nations Government Money Market Fund and Nations Tax Exempt Fund of Nations Fund
Trust. To obtain additional information regarding the Funds' other classes of
shares which may be available to you, contact your Selling Agent (as defined
below) or Nations Fund at 1-800-321-7854.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund and
shareholders of a fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class of shares. See the
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SAI for examples of instances where the 1940 Act requires voting by fund.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose or vote with respect to more than 25% of the outstanding shares of
Nations Fund Trust and therefore could be considered to be a controlling person
of Nations Fund Trust for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series of shares over
which NationsBank and its affiliates possessed or shared power to dispose or
vote as of a certain date, see Nations Fund Trust's SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
NATIONS FUND, INC.: Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no operations prior to December 15, 1986. As of the date of
this Prospectus, the authorized capital stock of Nations Fund, Inc. consists of
270,000,000,000 shares of common stock, par value of $.001 per share, which are
divided into series or portfolios, each of which consists of separate classes of
shares. This Prospectus relates only to the Investor C Shares of the Nations
Prime Fund and Nations Treasury Fund of Nations Fund, Inc. To obtain additional
information regarding the Funds' other classes of shares which may be available
to you, contact your Selling Agent (as defined below) or Nations Fund at
1-800-321-7854.
Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such fund
or class. In the event of dissolution or liquidation, holders of each class will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of that portion of the assets allocated to that class held in the
respective fund of Nations Fund, Inc., less (b) the liabilities of Nations Fund,
Inc. attributable to the respective fund or class or allocated among the funds
or classes based on the respective liquidation value of each fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of Directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of Nations Fund, Inc.'s outstanding shares.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s shares.
Nations Fund, Inc.'s shares, when issued, will be fully paid and non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Fund, Inc. and therefore could be considered to be a controlling person
of Nations Fund, Inc. for purposes of the 1940 Act. In addition, as of August
31, 1995, Lois H. Bohler owned of record 25% or more of the Investor C Shares of
the Nations Treasury Fund and therefore could be considered a controlling person
of such class for purposes of the 1940 Act. For more detailed information
concerning the percentage of each class or series over which NationsBank and its
affiliates possessed or shared power to dispose or vote as of a certain date,
see Nations Fund, Inc.'s SAI. It is anticipated that Nations Fund, Inc. will not
hold annual shareholder meetings, except when required by the 1940 Act or
Maryland law.
Because this Prospectus combines disclosure on two separate investment
companies, there is a possibility that one investment company could become
liable for a misstatement, inaccuracy or incomplete disclosure in this
Prospectus concerning the other investment company. Nations Fund Trust and
Nations Fund, Inc. have entered into an indemnification agreement that creates a
right of indemnification from the investment company responsible for any such
misstatement, inaccuracy or incomplete disclosure that may appear in this
Prospectus.
About Your Investment
How To Buy Shares
Stephens has established various procedures for purchasing Investor C Shares in
order to accommodate different investors. Purchase orders may be placed through
banks, broker/dealers or other financial institutions (including certain
affiliates of NationsBank) that have entered into shareholder servicing
agreements ("Servicing Agreements") with Stephens ("Servicing Agents").
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Investors exchanging Investor N Shares of a non-money market fund of the Nations
Fund Family for Investor C Shares of the Money Market Funds and investors who
have entered into managed account arrangements with a Servicing Agent are
eligible to invest in Investor C Shares of the Funds. Under a managed account
arrangement investors would be provided with some or all of the following types
of services or features: automated investment of excess account cash balances;
debit cards; checking privileges; direct deposit; automatic bill payment;
federal funds transfer; travelers checks; charge card protection; and periodic
summary account statements.
Investor C Shares of the Money Market Funds are purchased at net asset value per
share without the imposition of a sales charge. Purchases may be effected only
on days on which the Federal Reserve Bank of New York is open for business (a
"Business Day").
Servicing Agents will perform various shareholder services for their customers
("Customers") who from time to time own of record or beneficially Investor C
Shares. From time to time the Servicing Agents and the Funds may agree to
voluntarily reduce the fees payable for shareholder services. See "Shareholder
Servicing Plan."
Nations Fund reserves the right to reject any purchase order. The issuance of
Investor C Shares is recorded on the books of the Funds and share certificates
are not issued.
EFFECTIVE TIME OF PURCHASES: Purchases will be effected only when federal funds
are available for investment on the Business Day the purchase order is received
by Stephens or by the Transfer Agent. A purchase order must be received by
Stephens or by the Transfer Agent by 2:00 p.m., Eastern time (12 noon, Eastern
time, with respect to Nations Tax Exempt Fund). Absent prior arrangement with
Stephens or the Transfer Agent, purchase orders received after such time on any
given day will not be accepted; notice thereof will be given to the Servicing
Agent transmitting the order, and any funds received will be returned promptly
to the sending Servicing Agent. Any late purchase orders that are not rejected
pursuant to such a prior arrangement will be executed on the following Business
Day. If federal funds are not available by 4:00 p.m., Eastern time, the order
will be canceled. Investor C Shares are purchased at the net asset value per
share next determined after receipt of the order by Stephens or by the Transfer
Agent.
The Servicing Agents are responsible for transmitting orders for purchases by
their Customers and delivering required funds on a timely basis. Stephens is
responsible for transmitting orders it receives to Nations Fund.
TELEPHONIC TRANSACTIONS: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How to Redeem Shares" and "How to
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. You should be aware that by electing the telephone transaction
feature, you may be giving up a measure of security that you may have if you
were to authorize requests in writing only. You may bear the risk of any
resulting losses from a telephone transaction. Nations Fund will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, and if Nations Fund and its service providers fail to employ such
measures, they may be liable for any losses due to unauthorized or fraudulent
instructions. Nations Fund requires a form of personal identification prior to
acting upon instructions received by telephone and provides written confirmation
to shareholders of each telephone share transaction. In addition, Nations Fund
reserves the right to record all telephone conversations.
Shareholder Servicing Plan
The Directors and Trustees have approved a Shareholder Servicing Plan (the
"Servicing Plan") with respect to Investor C Shares of each Fund. Pursuant to
the Servicing Plan, a Fund may pay Servicing Agents that have entered into a
Servicing Agreement with Nations Fund for certain shareholder support services
that are provided by the Servicing Agents. Payments under the Servicing Plan
will be calculated daily and paid monthly at a rate set from time to time by the
Board of Directors or the Board of Trustees, provided that the annual rate may
not exceed 0.25% of the average daily net asset value of a Fund's Investor C
Shares. The shareholder services provided by Servicing Agents may include
general shareholder liaison services; pro-
cessing purchase, exchange and redemption requests from Customers and placing
orders with Stephens or the Transfer Agent; processing dividend and distribution
payments from a Fund on behalf of Customers; providing sales information
periodically to Customers, including information showing their positions in
Investor C Shares; providing sub-accounting with respect to Investor C Shares
beneficially owned by Customers or the information necessary for sub-accounting;
responding to inquiries from Customers concerning their investment in Investor C
Shares; arranging for bank wires; and providing such other similar services as
may be reasonably requested.
Nations Fund understands that Servicing Agents may charge fees to their
Customers who are the owners of Investor C Shares for additional services
provided in connection with their Customers' accounts. These fees would be in
addition to any amounts which may be
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received by Servicing Agents under a Servicing Agreement with Nations Fund. The
Servicing Agreements require Servicing Agents to disclose to their Customers any
compensation payable to the Servicing Agents by Nations Fund and any other
compensation payable by Customers in connection with the investment of their
assets in Investor C Shares. Customers should read this Prospectus in light of
the terms governing their accounts with their Servicing Agents.
Nations Fund may suspend or reduce payments under the Servicing Plan at any
time, and payments are subject to the continuation of the Funds' Servicing Plan
described above and the terms of the Servicing Agreements. See the SAIs for more
details on the Servicing Plan.
How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Servicing Agent that transmitted the original purchase order. Redemption
orders are effected at the net asset value per share next determined after
receipt of the order by Stephens or by the Transfer Agent. The Servicing Agents
are responsible for transmitting redemption orders to Stephens or to the
Transfer Agent and for crediting their Customer's account with the redemption
proceeds on a timely basis. No charge for wiring redemption payments is imposed
by Nations Fund.
Redemption orders must be received on a Business Day before 2:00 p.m., Eastern
time (12 noon, Eastern time, with respect to Nations Tax Exempt Fund), and
payment will normally be wired the same day to Servicing Agents. Nations Fund
reserves the right to wire redemption proceeds within three Business Days after
receiving the redemption orders if, in the judgment of NationsBank, an earlier
payment could adversely impact a Fund. However, redemption proceeds for shares
purchased by check may not be remitted until at least 15 days after the date of
purchase to ensure that the check has cleared; a certified check, however, is
deemed to be cleared immediately. Redemption orders received by Stephens or by
the Transfer Agent after 2:00 p.m., Eastern time (12 noon, Eastern time, with
respect to Nations Tax Exempt Fund), will be processed on the next Business Day.
Nations Fund may redeem a shareholder's Investor C Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of a
Servicing Agent pursuant to arrangements between the Servicing Agent and its
Customers. Nations Fund also may redeem shares of a Fund involuntarily or make
payment for redemption in readily marketable securities or other property under
certain circumstances in accordance with the 1940 Act.
Prior to effecting a redemption of Investor C Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to Nations Fund have previously been
made. Nations Fund may require any additional information reasonably necessary
to evidence that a redemption has been duly authorized.
How To Exchange Shares
SHARES PURCHASED DIRECTLY THROUGH A SERVICING AGENT: Investor C Shares of a
Money Market Fund purchased directly through a Servicing Agent may not be
exchanged for shares of another fund of Nations Fund.
SHARES ACQUIRED THROUGH AN EXCHANGE: The exchange feature enables a shareholder
who acquires Investor C Shares of a Money Market Fund through an exchange of
Investor N Shares of a non-money market fund or a permissible exchange of
Investor A Shares of Nations Short-Term Income Fund or Nations Short-Term
Municipal Income Fund to re-exchange such shares for Investor C Shares of
another Money Market Fund, Investor N Shares of any non-money market fund of
Nations Fund (except Nations Short-Term Income Fund and Nations Short-Term
Municipal Income Fund) or for Investor A Shares of Nations Short-Term Income
Fund or Nations Short-Term Municipal Income Fund. A re-exchange of Investor C
Shares for shares of another fund is made on the basis of the next calculated
net asset value per share of each fund after the exchange order is received.
If a shareholder acquires Investor C Shares of a Money Market Fund through an
exchange, the acquired shares (and any other Investor A or Investor C Shares
acquired through a re-exchange of such shares) will remain subject to the
contingent deferred sales charge ("CDSC") schedule applicable to the Investor N
Shares of the non-money market fund last exchanged. A redemption of shares
acquired through an exchange will, in all events, be subject to the highest CDSC
schedule applicable to
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any shares that were exchanged within the 30 days prior to the redemption.
The holding period (for the purpose of determining the applicable rate of the
CDSC) does not accrue as long as the investor holds Investor C Shares of a Money
Market Fund or Investor A Shares of Nations Short-Term Income Fund or Nations
Short-Term Municipal Income Fund. As a result, the CDSC that is ultimately
charged upon redemption is based upon the total holding period of Investor N
Shares of a non-money market fund that charges a CDSC.
The Funds and each of the other funds of Nations Funds may limit the number of
times this exchange feature may be exercised by a shareholder within a specified
period of time. Also, the exchange feature may be terminated or revised at any
time by Nations Fund upon such notice as may be required by applicable
regulatory agencies (presently sixty days for termination or material revision),
provided that the exchange feature may be terminated or materially revised
without notice under certain unusual circumstances.
The current prospectus for each fund of Nations Fund describes its investment
objective(s) and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for Federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within ninety days after the shares are purchased.
Nations Fund reserves the right to reject any exchange request. Only shares that
may legally be sold in the state of the investor's residence may be acquired in
an exchange. Only shares of a class that is accepting investments generally may
be acquired in an exchange.
Investor C Shares may be exchanged by directing a request directly to the
Servicing Agent through which the original Investor C Shares were acquired or in
some cases to Stephens or the Transfer Agent. Your exchange feature may be
governed by your account agreement with your Servicing Agent.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. In such event, shares may be exchanged by mailing your
request directly to the Servicing Agent through which the original shares were
purchased. Investors should consult their Servicing Agent or Stephens for
further information regarding exchanges.
How The Funds Value Their Shares
The net asset value of a share of each class of shares in the Funds is
calculated by dividing the total value of its assets, less liabilities, by the
number of shares in the class outstanding. Shares are valued as of 2:00 p.m.,
Eastern time (1:00 p.m., Eastern time, with respect to Nations Tax Exempt Fund),
on each Business Day. Currently, the days on which the Federal Reserve Bank of
New York is closed (other than weekends) are: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Memorial Day (observed), Independence Day, Labor
Day, Columbus Day, Thanksgiving Day and Christmas Day.
The assets of each Money Market Fund are valued based upon the amortized cost
method. Although Nations Fund seeks to maintain the net asset value per share of
these Funds at $1.00, there can be no assurance that their net asset value per
share will not vary.
How Dividends And Distributions Are Made;
Tax Information
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income of each Fund
are declared daily to shareholders at 2:00 p.m., Eastern time (1:00 p.m.,
Eastern time, with respect to Nations Tax Exempt Fund), on the day of
declaration. Investor C Shares begin earning dividends on the day the purchase
order is executed and continue earning dividends through and including the day
before the redemption order is executed (E.G., the settlement date). Dividends
are paid within five Business Days after the end of each month. Dividends are
paid in the form of additional Investor C Shares of the same Fund unless the
Customer has elected prior to the date of distribution to receive payment in
cash. Such election, or any revocation thereof, must be made in writing to the
Funds' Transfer Agent and will become effective with respect to dividends paid
after its receipt. Your dividend election may be governed by your account
agreement with your Servicing Agent. Dividends are paid in
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cash within five Business Days after a shareholder's complete redemption of
his/her Investor C Shares in a Fund. To the extent that there are any net
short-term capital gains, they will be paid at least annually.
Each Fund's net investment income available for distribution to the holders of
Investor C Shares will be reduced by the amount of shareholder servicing fees
paid to Servicing Agents and by the amount of retail transfer agency fees
payable to the Transfer Agent applicable to Investor C Shares.
TAX INFORMATION: Each Fund intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Fund of liability for Federal income taxes on amounts
distributed in accordance with the Code.
Each Fund intends to distribute substantially all of its investment company
taxable income and net tax-exempt income each taxable year. Distributions by the
Nations Prime Fund, Nations Treasury Fund and Nations Government Money Market
Fund will be taxable as ordinary income to shareholders who are not currently
exempt from Federal income taxes, whether such income is received in cash or
reinvested in additional shares. (Federal income taxes for distributions to an
Individual Retirement Account are generally deferred under the Code.) These
distributions will not qualify for the dividends received deduction for
corporate shareholders.
Dividends received from Nations Treasury Fund and Nations Government Money
Market Fund may qualify as tax-exempt dividends for state income tax purposes in
some states. The Funds do not expect to realize any long-term capital gains, and
therefore, do not expect to distribute any capital gains dividends.
Each year, shareholders will be notified as to the amount and Federal tax status
of all dividends (and capital gains, if applicable) paid during the prior year.
Such dividends (and capital gains) may be subject to state and local taxes.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by the Fund on December 31 of such year
in the event such dividends are actually paid during January of the following
year.
Federal law requires Nations Fund to withhold 31% from any dividends (other than
exempt-interest dividends) paid by Nations Fund and/or redemptions (including
exchange redemptions) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply, or
if the Internal Revenue Service has notified Nations Fund that the Taxpayer
Identification Number listed on a shareholder account is incorrect according to
its records, or that the shareholder is subject to backup withholding. Amounts
withheld are applied to the shareholder's Federal tax liability, and a refund
may be obtained from the Internal Revenue Service if withholding results in
overpayment of taxes. Federal law also requires the Fund to withhold 30% or the
applicable tax treaty rate from dividends paid to certain nonresident alien,
non-U.S. partnership and non-U.S. corporation shareholder accounts.
NATIONS TAX EXEMPT FUND: As a regulated investment company, the Nations Tax
Exempt Fund is permitted to pass through to its shareholders tax-exempt income
("exempt-interest dividends") subject to certain requirements which the Fund
intends to satisfy. The Fund does not intend to earn investment company taxable
income or long-term capital gains; to the extent that it does earn taxable
income or realize long-term capital gains, distributions to shareholders from
such sources will be subject to Federal income tax. Exempt-interest dividends
may be treated by shareholders as items of interest excludable from their
federal gross income under Section 103(a) of the Code unless under the
circumstances applicable to the particular shareholder the exclusion would be
disallowed. (See the related SAI under "Additional Information Concerning
Taxes.") Distributions of net investment income by the Nations Tax Exempt Fund
may be taxable to investors under state or local law even though a substantial
portion of such distribution may be derived from interest on tax-exempt
obligations which, if realized directly, would be exempt from such income taxes.
If the Nations Tax Exempt Fund should hold certain private activity bonds issued
after August 7, 1986, shareholders must include, as an item of tax preference,
the portion of dividends paid by the Fund that is attributable to interest on
such bonds in their Federal alternative minimum taxable income for purposes of
determining liability (if any) for the 28% alternative minimum tax applicable to
individuals and the 20% alternative minimum tax and the environmental tax
applicable to corporations. Corporate shareholders must also take all
exempt-interest dividends into account in determining certain adjustments for
Federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed at the rate of 0.12% on the excess of
the corporation's modified Federal alternative minimum taxable income over
$2,000,000. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits. To the extent, if any, dividends paid to
shareholders are derived from taxable income or from long-term or short-term
capital gains, such dividends will not be exempt from Federal income tax and
also may be subject to state and local taxes.
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The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important Federal tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisers with respect to their specific tax
situations as well as with respect to state and local taxes. Further tax
information is contained in the SAIs.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAIs contain more
information concerning such investments.
ASSET BACKED SECURITIES: Asset Backed Securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset Backed
Securities consist of both mortgage and non-mortgage backed securities.
Interests in pools of these assets differ from other forms of debt securities,
which normally provide for periodic payment of interest in fixed amounts with
principal paid at maturity or specified call dates. Instead, Asset Backed
Securities provide periodic payments which generally consist of both interest
and principal payments.
Mortgage backed securities represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself. Mortgage backed securities include
mortgage pass-through securities, collateralized mortgage obligations ("CMOs"),
parallel pay CMOs, planned amortization class CMOs ("PAC Bonds") and stripped
mortgage-backed securities ("SMBS"), including interest-only and principal-only
SMBS. SMBS may be more volatile than other debt securities. For additional
information concerning mortgage backed securities, see the related SAI.
Non-mortgage backed securities include interests in pools of receivables, such
as motor vehicle installment purchase obligations and credit card receivables.
Such securities are generally issued as pass-through certificates, which
represent undivided fractional ownership interests in the underlying pools of
assets. Such securities also may be debt instruments, which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. The Nations Prime Fund generally limits
investments in bank instruments to (a) U.S. dollar-denominated obligations of
U.S. banks which have total assets exceeding $1 billion and which are members of
the Federal Deposit Insurance Corporation (including obligations of foreign
branches of such banks) or of the 75 largest foreign commercial banks in terms
of total assets; or (b) U.S. dollar-denominated bank instruments issued by other
banks believed by NationsBank to present minimal credit risks. For purposes of
the foregoing, total assets may be determined on the basis of the bank's most
recent annual financial statements.
The Nations Prime Fund may invest up to 100% of its assets in obligations issued
by banks. All Funds (except Nations Prime Fund) will limit their investments in
bank obligations so they do not exceed 25% of each Fund's total assets at the
time of purchase. The Nations Prime Fund may invest in U.S. dollar-denominated
obligations issued by foreign branches of domestic banks ("Eurodollar"
obligations) and domestic branches of foreign banks ("Yankee dollar"
obligations).
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Funds' total assets must be repaid prior to the purchase of
portfolio securities. The Funds are parties to a Line of Credit Agreement with
Mellon Bank, N.A. Advances under the agreement are taken primarily
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for temporary or emergency purposes, including the meeting of redemption
requests that otherwise might requre the untimely disposition of securities.
Reverse repurchase agreements may be considered to be borrowings. When the Fund
invests in a reverse repurchase agreement, it sells a portfolio security to
another party, such as a bank or broker-dealer, in return for cash, and agrees
to buy the security back at a future date and price. Reverse repurchase
agreements may be used to provide cash to satisfy unusually heavy redemption
requests without having to sell portfolio securities, or for other temporary or
emergency purposes. In addition, the Nations Treasury Fund may use reverse
repurchase agreements for the purpose of investing the proceeds in tri-party
repurchase agreements as discussed below. Generally, the effect of such a
transaction is that the Funds can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while they will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Funds of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Fund is obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Fund's use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The Fund
only enters into reverse repurchase agreements (and repurchase agreements) with
counterparties that are deemed by NationsBank to be credit worthy. Reverse
repurchase agreements are speculative techniques involving leverage, and are
subject to asset coverage requirements if the Fund does not establish and
maintain a segregated account (as described above). Under the requirements of
the 1940 Act, the Funds are required to maintain an asset coverage (including
the proceeds of the borrowings) of at least 300% of all borrowings. Depending on
market conditions, the Fund's asset coverage and other factors at the time of a
reverse repurchase, a Fund may not establish a segregated account when
NationsBank believes it is not in the best interests of the Fund to do so. In
this case, such reverse repurchase agreements will be considered borrowings
subject to the asset coverage described above.
The Nations Treasury Fund has entered into an arrangement whereby it reinvests
the proceeds of a reverse repurchase agreement in a tri-party repurchase
agreement and receives the net interest rate differential.
COMMERCIAL INSTRUMENTS: Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or foreign
corporations and foreign commercial banks. The Nations Prime Fund will limit
purchases of commercial instruments to instruments which: (a) if rated by at
least two NRSROs, are rated in the highest rating category for short-term debt
obligations given by such organizations, or if only rated by one such
organization, are rated in the highest rating category for short-term debt
obligations given by such organization; or (b) if not rated, are (i) comparable
in priority and security to a class of short-term instruments of the same issuer
that has such rating(s), or (ii) of comparable quality to such instruments as
determined by Nations Fund, Inc.'s Board of Directors on the advice of
NationsBank.
Investments by a Fund in commercial paper will consist of issues rated in a
manner consistent with such Fund's investment policies and objectives. In
addition, a Fund may acquire unrated commercial paper and corporate bonds that
are determined by NationsBank at the time of purchase to be of comparable
quality to rated instruments that may be acquired by a Fund. Commercial
instruments include variable rate master demand notes, which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate, and variable and floating rate
instruments.
The Nations Prime Fund also may purchase short-term participation interests in
loans extended by banks to companies, provided that both such banks and
companies meet the quality standards set forth above.
FOREIGN SECURITIES: Foreign securities include obligations of foreign
corporations and banks as well as obligations of foreign governments and their
political subdivisions (which will be limited to direct government obligations
and government-guaranteed securities). Such investments may subject a Fund to
special investment risks, including future political and economic developments,
the possible imposition of withholding taxes on interest income, possible
seizure or nationalization of foreign deposits, the possible establishment of
exchange controls, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. In addition, foreign issuers in general may be subject to
dif-
17
<PAGE>
ferent accounting, auditing, reporting, and record keeping standards than those
applicable to domestic companies, and securities of foreign issuers may be less
liquid and their prices more volatile than those of comparable domestic issuers.
Investments in foreign securities may present additional risks, whether made
directly or indirectly, including the political or economic instability of the
issuer or the country of issue and the difficulty of predicting international
trade patterns. In addition, there may be less publicly available information
about a foreign company than about a U.S. company. Further, foreign stock
markets are generally not as developed or efficient as those in the U.S., and in
most foreign markets volume and liquidity are less than in the U.S. Fixed
commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign stock exchanges, brokers, and companies
than in the U.S. With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.
GUARANTEED INVESTMENT CONTRACTS: Guaranteed investment contracts ("GICs") are
investment instruments issued by highly rated insurance companies. Pursuant to
such contracts, a Fund may make cash contributions to a deposit fund of the
insurance company's general or separate accounts. The insurance company then
credits to a Fund guaranteed interest. The GICs provide that this guaranteed
interest will not be less than a certain minimum rate. The insurance company may
assess periodic charges against a GIC for expense and service costs allocable to
it, and the charges will be deducted from the value of the deposit fund. The
purchase price paid for a GIC becomes part of the general assets of the issuer,
and the contract is paid from the general assets of the issuer.
A Fund will only purchase GICs from issuers which, at the time of purchase, meet
quality and credit standards established by NationsBank. Generally, GICs are not
assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not currently exist.
Also, a Fund may not receive the principal amount of a GIC from the insurance
company on seven days' notice or less. Therefore, GICs are generally considered
to be illiquid investments.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Money Market Funds will
not knowingly invest more than 10% of the value of their respective net assets
in securities that are illiquid or such lower percentage as may be required by
the states in which the appropriate Fund sells its shares. Repurchase agreements
and time deposits that do not provide for payment to a Fund within seven days
after notice, guaranteed investment contracts and some commercial paper issued
in reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act") (other than variable amount master demand notes with
maturities of nine months or less), are subject to the limitation on illiquid
securities. In addition, interests in privately arranged loans acquired by the
Nations Prime Fund may be subject to this limitation.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by a Fund's Board of Trustees or Board of Directors or
NationsBank, acting under guidelines approved and monitored by the Fund's Board,
that an adequate trading market exists for that security.
INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of its
portfolio from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. NationsBank expects to enter into these
transactions on behalf of a Fund primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipated purchasing at a later
date rather than for speculative purposes. A Fund will not sell interest rate
caps or floors that it does not own.
MONEY MARKET INSTRUMENTS: The term "money market instruments" refers to
instruments with remaining
18
<PAGE>
maturities of 397 days or less. Money market instruments may include, among
other instruments, certain U.S. Treasury obligations, U.S. Government
obligations, bank instruments, commercial instruments, repurchase agreements and
municipal securities. Such instruments are described in this Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable or floating rate instruments issued by
industrial development authorities and other governmental entities. While there
may not be an active secondary market with respect to a particular instrument
purchased by a Fund, a Fund may demand payment of the principal and accrued
interest on the instrument or may resell it to a third party as specified in the
instruments. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of the instrument if the issuer defaulted on its
payment obligation or during periods the Fund is not entitled to exercise its
demand rights, and the Fund could, for these or other reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by a
Fund will be determined by NationsBank to be of comparable quality at the time
of purchase to instruments rated "high quality" by any major rating service. An
issuer's obligation to pay the principal of the note may be backed by an
unconditional bank letter or line of credit, guarantee, or commitment to lend.
Municipal securities also may include participations in privately arranged loans
to municipal borrowers, some of which may be referred to as "municipal leases",
and units of participation in trusts holding pools of tax-exempt leases. Such
loans in most cases are not backed by the taxing authority of the issuers and
may have limited marketability or may be marketable only by virtue of a
provision requiring repayment following demand by the lender. Such loans made by
a Fund may have a demand provision permitting the Fund to require payment within
seven days. Participations in such loans, however, may not have such a demand
provision and may not be otherwise marketable. To the extent these securities
are illiquid, they will be subject to each Fund's limitation on investments in
illiquid securities. As it deems appropriate, NationsBank will establish
procedures to monitor the credit standing of each such municipal borrower,
including its ability to meet contractual payment obligations.
Municipal participation interests may be purchased from financial institutions,
and give the purchaser an undivided interest in one or more underlying municipal
security. To the extent that municipal participation interests are considered to
be "illiquid securities" such instruments are subject to each Fund's limitation
on the purchase of illiquid securities.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to municipal securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified municipal securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and without
intending to exercise its rights thereunder for trading purposes.
Although each Fund does not presently intend to do so on a regular basis, each
may invest more than 25% of its total assets in municipal securities that are
payable solely from revenues of similar projects if such investment is deemed
necessary or appropriate by NationsBank. To the extent that more than 25% of a
Fund's total assets are invested in municipal securities that are payable from
the revenues of similar projects, a Fund will be subject to the peculiar risks
presented by such projects to a greater extent than it would be if its assets
were not so concentrated.
OTHER INVESTMENT COMPANIES: A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
REPURCHASE AGREEMENTS: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker-dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This
tech-
19
<PAGE>
nique offers a method of earning income on uninvested cash. A risk associated
with repurchase agreements is the failure of the seller to repurchase the
securities as agreed, which may cause a Fund to suffer a loss if the market
value of such securities declines before they can be liquidated on the open
market. Repurchase agreements with a duration of more than seven days are
considered illiquid securities and are subject to the limit stated above. A Fund
may enter into joint repurchase agreements jointly with other investment
portfolios of Nations Fund and Nations Institutional Reserves.
SECURITIES LENDING: To increase return on portfolio securities, certain of the
Funds may lend their portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. There is a risk of delay in receiving
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by NationsBank to be credit worthy and
when, in its judgment, the income to be earned from the loan justifies the
attendant risks. The aggregate of all outstanding loans of a Fund may not exceed
30% of the value of its total assets.
SHORT-TERM TRUST OBLIGATIONS: Nations Prime Fund may invest in short-term
obligations issued by special purpose trusts established to acquire specific
issues of government or corporate securities. Such obligations entitle the Fund
to a proportional fractional interest in payments received by the trust, either
from the underlying securities owned by the trust or pursuant to other
arrangements entered into by the trust. A trust may enter into a swap
arrangement with a highly rated investment firm, pursuant to which the trust
grants to the counterparty certain of its rights with respect to the securities
owned by the trust in exchange for the obligation of the counterparty to make
payments to the trust according to an established formula. The trust obligations
purchased by the Fund must satisfy the quality and maturity requirements
generally applicable to the Fund pursuant to Rule 2a-7 under the 1940 Act.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indexes, non-U.S. interest rates and foreign currencies, that
have been approved by the Commodity Futures Trading Commission ("CFTC") for
investment by U.S. investors, for the purpose of hedging against changes in
values of a Fund's securities or changes in the prevailing levels of interest
rates or currency exchange rates. The contracts entail certain risks, including
but not limited to the following: no assurance that futures contracts
transactions can be offset at favorable prices; possible reduction of a Fund's
total return due to the use of hedging; possible lack of liquidity due to daily
limits on price fluctuation; imperfect correlation between the contracts and the
securities or currencies being hedged; and potential losses in excess of the
amount invested in the futures contracts themselves.
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
for which no common clearing facility exists and a trader may look only to the
broker for performance of the contract. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the
currencies in which trading is done on foreign exchanges, any profits that such
Fund might realize could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes.
U.S. GOVERNMENT OBLIGATIONS: U.S. Government obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. Obligations of U.S.
Government agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
E.G., Government National Mortgage Association certificates; in other cases
interest and principal are not guaranteed, E.G., obligations of the Federal Home
Loan Bank System and the Federal Farm Credit Bank. No assurance can be given
that the U.S. Government would provide financial support to government-sponsored
instrumentalities if it is not obligated to do so by law.
VARIABLE AND FLOATING RATE INSTRUMENTS: Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks and corporations
may carry variable or floating rates of interest. Such instruments bear interest
rates which are not fixed, but which vary with changes in specified market rates
or indices, such as a Federal Reserve composite index. A variable rate demand
instrument is an obligation with a variable or floating interest rate and an
unconditional right of demand on the part of the holder to receive payment of
unpaid principal and accrued interest. An instrument with a demand period
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues
20
<PAGE>
of securities on a "when-issued", "delayed delivery" or "forward commitment"
basis occurs when the payment for and delivery of securities takes place at a
future date. Because actual payment for and delivery of such securities
generally take place 15 to 45 days after the purchase date, purchasers of such
securities bear the risk that interest rates on debt securities at the time of
delivery may be higher or lower than those contracted for on the security
purchased.
Appendix B -- Description of Ratings
The following summarizes the highest two ratings used by S&P for corporate and
municipal bonds:
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major rating category.
The following summarizes the highest two ratings used by Moody's for corporate
and municipal bonds:
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa. The modifier 1 indicates that the bond being rated ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category. With regard to municipal bonds, those bonds in the
Aa groups which Moody's believes possess the strongest investment attributes are
designated by the symbols Aa1.
The following summarizes the highest two ratings used by D&P for bonds:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major category.
The following summarizes the highest two ratings used by Fitch for bonds:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major rating category.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
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<PAGE>
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The two highest rating categories of D&P for short-term debt are Duff 1 and Duff
2. D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the
highest rating category. Duff 1+ indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be minor.
Duff 1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. Duff 2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
The following summarizes the two highest rating categories used by Fitch for
short-term obligations:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following are the two highest investment grade ratings used by
BankWatch for long-term debt:
AAA -- The highest category; indicates ability to repay principal and interest
on a timely basis is very high.
AA -- The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk versus
issues rated in the highest category.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 -- The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
The following summarizes the two highest long-term ratings used by IBCA:
22
<PAGE>
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk albeit not very significantly.
The following summarizes the two highest short-term debt ratings used by IBCA:
A1+ -- Obligations supported by the highest capacity for timely repayment
and possessing a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
23
<PAGE>
NATIONS FUND TRUST
NATIONS GOVERNMENT MONEY MARKET FUND
SUPPLEMENT DATED JANUARY 30, 1996 TO PROSPECTUSES DATED SEPTEMBER 30, 1995
The Prospectuses for the Trust A, Trust B, Investor A, Investor B,
Investor C and Investor D Shares of NATIONS GOVERNMENT MONEY MARKET FUND are
hereby supplemented as follows:
1. By substituting the following for the second sentence in the
first paragraph in the section entitled "HOW TO BUY SHARES -- EFFECTIVE TIME OF
PURCHASES":
A purchase order must be received by Stephens or by the
Transfer Agent by 2:00 p.m., Eastern time (12:00 noon, Eastern time,
with respect to Nations Tax Exempt Fund and Nations Government Money
Market Fund).
2. By substituting the following for the first three
sentences in the second paragraph in the section entitled "HOW
TO REDEEM SHARES":
Redemption orders must be received on a Business Day before
2:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Tax Exempt Fund and Nations Government Money Market Fund), and
payment will normally be wired the same day to Selling Agents. Nations
Fund reserves the right to wire redemption proceeds within five Business
Days after receiving the redemption order if, in the judgment of
NationsBank, an earlier payment could adversely impact a Fund.
Redemption orders received by Stephens or by the Transfer Agent after
2:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Tax Exempt Fund and Nations Government Money Market Fund), will
be processed on the next Business Day.
3. By substituting the following for the second sentence in
the first paragraph in the section entitled "HOW THE FUNDS VALUE THEIR SHARES":
Shares are valued as of 2:00 p.m., Eastern time (1:00 p.m.,
Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund), on each Business Day.
4. By substituting the following for the first sentence in the
first paragraph in the section entitled "HOW DIVIDENDS AND DISTRIBUTIONS ARE
MADE; TAX INFORMATION -- DIVIDENDS AND DISTRIBUTIONS":
Dividends from net investment income of each Fund are
declared daily to shareholders at 2:00 p.m., Eastern time (1:00 p.m.
Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund) on the day of declaration.
1
<PAGE>
Prospectus
INVESTOR D SHARES
SEPTEMBER 30, 1995
This Prospectus describes the four investment
portfolios (each a "Fund" and collectively, the
"Money Market Funds"), listed in the column to the
right, of the Nations Fund Family ("Nations Fund" or
"Nations Fund Family"). This Prospectus describes
one class of shares of each Money Market
Fund -- Investor D Shares.
EACH MONEY MARKET FUND SEEKS TO MAINTAIN A NET ASSET
VALUE OF $1.00 PER SHARE. INVESTMENTS IN THE FUNDS
ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE
FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely the information
about the Funds that a prospective purchaser of
Investor D Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust and Nations Fund, Inc. is
contained in separate Statements of Additional
Information (the "SAIs"), which have been filed with
the Securities and Exchange Commission (the "SEC")
and are available upon request without charge by
writing or calling Nations Fund at its address or
telephone number shown below. The SAIs bear the same
date as this Prospectus and are incorporated by
reference in their entirety into this Prospectus.
SHARES OF NATIONS FUND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. (CAROLINAS) ("NATIONSBANK") OR
ANY OF ITS AFFILIATES. SUCH SHARES ARE NOT INSURED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE
FUNDS INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
NATIONSBANK IS THE INVESTMENT ADVISER AND, TOGETHER
WITH ITS AFFILIATES, PROVIDES CERTAIN OTHER SERVICES
TO NATIONS FUND, FOR WHICH THEY ARE COMPENSATED.
STEPHENS INC., WHICH IS NOT AFFILIATED WITH
NATIONSBANK, IS THE SPONSOR AND ADMINISTRATOR AND
SERVES AS THE DISTRIBUTOR FOR NATIONS FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Nations Prime Fund
Nations Treasury Fund
Nations Government
Money Market Fund
Nations Tax Exempt
Fund
For purchase, redemption and
performance information
call:
1-800-321-7854
or write:
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
NATIONS FUNDS [logo]
MMPD
<PAGE>
Table Of Contents
About The Funds
Expenses Summary 3
Financial Highlights 4
Objectives 5
How Objectives are Pursued 6
How Performance is Shown 8
How the Funds are Managed 8
Organization and History 10
About Your Investment
How to Buy Shares 11
Shareholder Servicing and Distribution Plans 12
How to Redeem Shares 13
How to Exchange Shares 14
How the Funds Value Their Shares 15
How Dividends and Distributions are Made; Tax
Information 15
Appendix A -- Portfolio Securities 16
Appendix B -- Description of Ratings 21
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAIS
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY NATIONS FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY NATIONS FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds. The
following table summarizes shareholder transaction and operating expenses for
Investor D Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
<TABLE>
<CAPTION>
Nations Nations
Nations Prime Nations Treasury Government Money Tax Exempt
SHAREHOLDER TRANSACTION EXPENSES Fund Fund Market Fund Fund
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Deferred Sales Charge .00%1 .00%1 .00%1 .00%1
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees2 .14% .17% .16% .17%
Rule 12b-1 Fees .45% .45% .45% .45%
Shareholder Servicing Fees .25% .25% .25% .25
Other Expenses .16% .13% .14% .13%
Total Fund Operating Expenses2 1.00% 1.00% 1.00% 1.00%
</TABLE>
1 Shares acquired through an exchange remain subject to the contingent deferred
sales charge ("CDSC") schedule applicable to the shares exchanged. See "How to
Buy Shares" and "How to Sell Shares -- Contingent Deferred Sales Charge"
below.
2 After any waivers and reimbursements.
EXAMPLES:
You would pay the following expenses on a $1,000 investment in Investor D Shares
of the indicated Fund, assuming (1) a 5% annual return and (2) redemption at the
end of each time period.
<TABLE>
<CAPTION>
Nations
Nations Nations Government Nations
Prime Treasury Money Tax Exempt
Fund Fund Market Fund Fund
<S> <C> <C> <C> <C>
1 Year $10 $10 $10 $10
3 Years $32 $32 $32 $32
</TABLE>
The purpose of the foregoing table is to assist an investor in understanding the
various shareholder transaction and operating expenses that an investor in each
Fund will bear either directly or indirectly. Because Investor D Shares were not
offered during the Funds' most recent fiscal year, the "Other Expenses" figures
contained in the above table are based on estimated amounts for the Funds'
current fiscal year and reflect anticipated fee waivers and reimbursements.
There is no assurance that these fee waivers and reimbursements will continue
beyond the current fiscal year. If fee waivers and/or reimbursements are
discontinued, the amounts contained in the "Examples" above may increase.
Long-term shareholders in a Fund could pay more in sales charges than the
economic equivalent of the maximum front-end sales charges applicable to mutual
funds sold by members of the National Association of Securities Dealers, Inc.
For more complete descriptions of the Funds' operating expenses, see "How the
Funds Are Managed."
3
<PAGE>
Absent fee waivers and reimbursements, "Management Fees" and "Total Fund
Operating Expenses" for Investor D Shares of the indicated Fund would be as
follows: Nations Prime Fund -- .20% and 1.06%, respectively; Nations Treasury
Fund -- .20% and 1.03%, respectively; Nations Government Money Market
Fund -- .40% and 1.24%, respectively; and Nations Tax Exempt Fund -- .40% and
1.23%, respectively.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Financial Highlights
The audited financial information on the following pages has been derived from
the financial statements of Nations Fund Trust and Nations Fund, Inc. Price
Waterhouse LLP is the independent accountant to Nations Fund Trust and Nations
Fund, Inc. The reports of Price Waterhouse LLP for the most recent fiscal years
of Nations Fund Trust and Nations Fund, Inc. accompany the financial statements
for such periods and are incorporated by reference in the SAIs, which are
available upon request. Shareholders of a Fund will receive unaudited
semi-annual reports describing the Fund's investment operations and annual
financial statements audited by the Funds' independent accountant.
FOR AN INVESTOR D SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS PRIME FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR D SHARES 05/31/95*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0173
Dividends from net investment income (0.0173)
Net asset value, end of period $ 1.00
Total return++ 1.74%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 0.55%+
Ratio of net investment income to average net assets 4.98%+
Ratio of operating expenses to average net assets without waivers and reimbursements 0.63%+
Net investment income per share without waivers and reimbursements $ 0.0165
</TABLE>
* The Nations Prime Fund Investor D Shares commenced operations on February 9,
1995.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
NATIONS TREASURY FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR D SHARES 05/31/95*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0167
Dividends from net investment income (0.0167)
Net asset value, end of period $ 1.00
Total return++ 1.67%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 0.55%+
Ratio of net investment income to average net assets 4.74%+
Ratio of operating expenses to average net assets without waivers and reimbursements 0.60%+
Net investment income per share without waivers and reimbursements $ 0.0162
</TABLE>
* The Nations Treasury Fund Investor D Shares commenced operations on February
9, 1995.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
4
<PAGE>
FOR AN INVESTOR D SHARE OUTSTANDING THROUGHOUT THE PERIOD
NATIONS GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION> 05/31/95*
PERIOD
ENDED
05/31/95*
INVESTOR D SHARES (UNAUDITED)
<S> <C>
Net asset value, beginning of period $ 1.00
Net investment income 0.0166
Distributions:
Dividends from net investment income (0.0166)
Dividends from net realized gains --
Total distributions (0.0166)
Net asset value, end of period $ 1.00
Total return++ 1.64%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 2
Ratio of operating expenses to average net assets 0.55%+
Ratio of net investment income to average net assets 5.36%+
Ratio of operating expenses to average net assets before fee waivers 0.81%+
Net investment income per share before fee waivers $ 0.0156
</TABLE>
* The Nations Government Money Market Fund Investor D Shares commenced
operations on February 10, 1995.
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
NATIONS TAX EXEMPT FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
05/31/95*
INVESTOR D SHARES (UNAUDITED)
<S> <C>
Net asset value, beginning of period $ 1.00
Net investment income 0.0111
Dividends from net investment income (0.0111)
Net asset value, end of period $ 1.00
Total return++ 1.09%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 0.45%+
Ratio of net investment income to average net assets 3.49%+
Ratio of operating expenses to average net assets before fee waivers 0.70%+
Net investment income per share before fee waivers $ 0.0101
</TABLE>
* The Nations Tax Exempt Fund Investor D Shares commenced operations on
February 10, 1995.
+ Annualized.
++ Total return represents aggregate total return for the period indicated.
Objectives
Each Money Market Fund, described below, endeavors to achieve its investment
objective by investing in a diversified portfolio of high quality money market
instruments with maturities of 397 days or less from the date of purchase.
Securities subject to repurchase agreements may bear longer maturities. Although
NationsBank will seek to achieve the investment objective of each Fund, there is
no assurance that it will be able to do so. No Fund should be considered, by
itself, to provide a complete investment program for any investor.
NATIONS PRIME FUND: The Nations Prime Fund's investment objective is to seek the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS TREASURY FUND: The Nations Treasury Fund's investment objective is the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS GOVERNMENT MONEY MARKET FUND: The Nations Government Money Market Fund's
investment objective is to seek as high a level of current income as is
consistent with liquidity and stability of principal.
NATIONS TAX EXEMPT FUND: The Nations Tax Exempt Fund's investment objective is
to seek as high a level of current interest income exempt from Federal income
taxes as is consistent with liquidity and stability of principal.
5
<PAGE>
How Objectives Are Pursued
NATIONS PRIME FUND: In pursuing its investment objective, the Fund may invest in
U.S. Treasury bills, notes and bonds and other instruments issued directly by
the U.S. Government ("U.S. Treasury Obligations"), other obligations issued or
guaranteed as to payment of principal and interest by the U.S. Government, its
agencies or instrumentalities ("U.S. Government Obligations"), bank and
commercial instruments that may be available in the money markets, high quality
short-term taxable obligations issued by state and local governments, their
agencies and instrumentalities and repurchase agreements relating to U.S.
Government Obligations. The Fund also may purchase securities issued by other
investment companies, consistent with the Fund's investment objective and
policies, and may engage in reverse repurchase agreements. The Fund also may
invest in guaranteed investment contracts and in instruments issued by trusts,
including pass-through certificates representing participations in, or debt
instruments backed by, the securities and other assets owned by the trust. In
addition, the Fund may lend its portfolio securities to qualified institutional
investors. For more information concerning these instruments, see "Appendix A."
NATIONS TREASURY FUND: In pursuing its investment objective, the Fund invests in
U.S. Treasury Obligations and repurchase agreements secured by such obligations.
The Fund also may purchase securities issued by other investment companies,
consistent with the Fund's investment objective and policies, and may engage in
reverse repurchase agreements. The Fund also may lend its portfolio securities
to qualified institutional investors. For more information concerning these
instruments, see "Appendix A."
NATIONS GOVERNMENT MONEY MARKET FUND: In pursuing its investment objective, the
Fund invests in U.S. Government Obligations and repurchase agreements relating
to such obligations. The Fund also may purchase securities issued by other
investment companies, consistent with the Fund's investment objective and
policies, and may engage in reverse repurchase agreements. The Fund also may
lend its portfolio securities to qualified institutional investors. For more
information concerning these instruments, see "Appendix A."
NATIONS TAX EXEMPT FUND: In pursuing its investment objective, the Fund invests
in a diversified portfolio of obligations issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia, and
their political subdivisions, agencies, instrumentalities and authorities, the
interest on which, in the opinion of counsel to the issuer or bond counsel, is
exempt from regular Federal income tax ("Municipal Securities"). The Fund will
not knowingly purchase securities the interest on which is subject to such tax.
A portion of the Fund's assets, however, may be invested in private activity
bonds, the interest on which may be treated as a specific tax preference item
under the Federal alternative minimum tax. See "How Dividends and Distributions
Are Made; Tax Information."
The Fund invests in Municipal Securities which are determined to present minimal
credit risks and which at the time of purchase are considered to be of "high
quality" -- E.G., rated "AA" or higher by Duff & Phelps Credit Rating Co.
("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard & Poor's Corporation
("S&P"), IBCA Limited or its affiliate IBCA Inc. (collectively "IBCA"), or
Thomson BankWatch, Inc. ("BankWatch") or "Aa" or higher by Moody's Investors
Service, Inc. ("Moody's"), in the case of bonds; rated "Duff 1" or higher by
D&P, "F-1" or higher by Fitch, "SP-1" by S&P, or "MIG-1" by Moody's in the case
of notes; rated "Duff 1" or higher by D&P, "F-1" or higher by Fitch, or "VMIG-1"
by Moody's in the case of variable rate demand notes; or rated "Duff 1" or
higher by D&P, "F-1" or higher by Fitch, "A-1" or higher by S&P, or "Prime-1" by
Moody's in the case of tax-exempt commercial paper. D&P, Fitch, S&P, Moody's,
IBCA and BankWatch are the six nationally recognized statistical rating
organizations (collectively, "NRSROs"). Securities that are unrated at the time
of purchase will be determined to be of comparable quality by NationsBank
pursuant to guidelines approved by Nations Fund Trust's Board of Trustees. The
applicable Municipal Securities ratings are described in "Appendix B."
The payment of principal and interest on most securities purchased by the Fund
will depend upon the ability of the issuers to meet their obligations. The
District of Columbia, each state, each of their political subdivisions,
agencies, instrumentalities and authorities and each multi-state agency of which
a state is a member is a separate "issuer" as that term is used in this
Prospectus and the related SAI. The non-governmental user of facilities financed
by private activity bonds also is considered to be an "issuer." For more
information concerning Municipal Securities, see "Appendix A -- Municipal
Securities."
The Fund may hold uninvested cash reserves pending investment, during temporary
defensive periods, or if, in the opinion of NationsBank, desirable tax-exempt
obligations are unavailable. Uninvested cash reserves will not earn income. As a
matter of fundamental policy, under normal market conditions, at least 80% of
the Fund's net assets will be invested in Municipal Securities. Investments in
private activity bonds, the interest on which may be treated as a specific tax
preference item under the Federal alternative minimum tax, will not be treated
as Municipal Securities in determining whether the
6
<PAGE>
Fund is in compliance with this 80% requirement. The Fund also may invest in
securities issued by other investment companies that invest in securities
consistent with the Fund's investment objective and policies. For more
information concerning the Fund's investments, see "Appendix A."
RISK CONSIDERATIONS: Although NationsBank will seek to achieve the investment
objective of each Fund, there is no assurance that it will be able to do so. No
single Fund should be considered, by itself, to provide a complete investment
program for any investor. Investments in a Fund are not insured against loss of
principal. For additional risk information regarding the Funds' investments in
particular instruments, see "Appendix A -- Portfolio Securities."
INVESTMENT LIMITATIONS: The Funds are subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed with respect to a particular Fund without the
affirmative vote of the holders of a majority of that Fund's outstanding shares.
Other investment limitations that cannot be changed without such a vote of
shareholders are described in the Funds' SAIs.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
tax-exempt securities issued by state or municipal governments and their
political subdivisions are not considered members of any industry. In addition,
this limitation does not apply to investments in obligations of domestic banks.)
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or are privately
placed), may enter into repurchase agreements and may lend portfolio securities
in accordance with its investment policies.
3. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of such Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, such Fund will not
hold more than 10% of the voting securities of any issuer.
In addition, as a matter of non-fundamental policy, the Nations Tax Exempt Fund
may not purchase any securities other than obligations the interest on which is
exempt from Federal income tax and stand-by commitments with respect to such
obligations. The investment objectives and policies of the Funds, unless
otherwise specified, may be changed without shareholder approval. If the
investment objective or policies of a Fund change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus and the SAIs. Should a Fund determine that any such
commitment is no longer in its best interests, it may consider terminating sales
of its shares in the states involved.
In order for the Funds to value their investments on the basis of amortized cost
(see "How the Funds Value Their Shares"), investments must be in accordance with
the requirements of Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "1940 Act"), some of which are described below. These include
maturity, quality and diversification requirements. Maturity is limited to a
dollar-weighted average portfolio maturity of 90 days or less. Quality
requirements generally limit investments to U.S. dollar denominated instruments
determined to present minimal credit risks and that, at the time of acquisition,
are rated in the top two rating categories by the required number of NRSROs (at
least two or, if only one NRSRO has rated the security, that one NRSRO) or, if
unrated by any NRSRO, are (i) comparable in priority and security to a class of
short-term securities of the same issuer that has the required rating, or (ii)
determined to be comparable in quality to securities having the required rating.
The diversification requirements provide generally that a Money Market Fund
(except the Nations Tax Exempt Fund) may not at the time of acquisition invest
more than 5% of its assets in securities of any one issuer or invest more than
5% of its assets in securities (and no more than 1% in any one issuer) that have
not been rated in the highest category by the required number of NRSROs or, if
unrated, are described in (i) or (ii) above. Securities issued by the U.S.
Government, its agencies, authorities or instrumentalities, and
fully-collateralized repurchase agreements secured by such obligations are
exempt from the quality requirements, other than minimal credit risk. In the
event that a Fund's investment restrictions or permissible investments are more
restrictive than the requirements of Rule 2a-7, the Fund's own restrictions will
govern.
7
<PAGE>
How Performance Is Shown
From time to time, a Fund may advertise the "yield" and "effective yield" of a
class of shares, and Nations Tax Exempt Fund may advertise the "tax equivalent
yield" of a class of shares. YIELD, EFFECTIVE YIELD AND TAX-EQUIVALENT YIELD
FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE
PERFORMANCE.
The "yield" of a class of shares in a Fund refers to the income generated by an
investment in such class over a seven-day period identified in the
advertisement. This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly, but, when annualized, the income
earned by an investment in a class of shares in a Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. The
"tax-equivalent yield" of each class of shares in the Nations Tax Exempt Fund
shows the level of taxable yield needed to produce an after-tax equivalent to
such class's tax-free yield. This is done by increasing the class's yield
(calculated as above) by the amount necessary to reflect the payment of Federal
income tax at a stated tax rate. The tax-equivalent yield will always be higher
than the "yield" of a class of shares in the Nations Tax Exempt Fund.
Since yields fluctuate, yield data cannot necessarily be used to compare an
investment in the Funds with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed-upon or guaranteed fixed
yield for a stated period of time. Any fees charged by selling and/or servicing
agents to their customers' accounts for automatic investment or other cash
management services will not be included in calculations of yield.
In addition to Investor D Shares, the Funds offer Trust A, Trust B, Investor A,
Investor B and Investor C Shares. Each class of shares may bear different sales
charges, shareholder servicing fees, loads and other expenses, which may cause
the performance of a class to differ from the performance of the other classes.
Performance quotations will be computed separately for each class of the Funds'
shares. The Funds' annual report contains additional performance information and
is available upon request without charge from the Funds' distributor or your
selling agent.
How The Funds Are Managed
The business and affairs of Nations Fund Trust and Nations Fund, Inc. are
managed under the direction of its Board of Trustees and Board of Directors,
respectively. Nations Fund Trust's SAI contains the names of and general
background information concerning each Trustee of Nations Fund Trust. Nations
Fund, Inc.'s SAI contains the names of and general background information
concerning each Director of Nations Fund, Inc.
Nations Fund and NationsBank have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially comply in all
material respects with the recommendations set forth in the May 9, 1994 Report
of the Advisory Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISER: NationsBank, through its investment management division,
serves as investment adviser to the Funds. NationsBank is an indirect wholly
owned subsidiary of NationsBank Corporation, a bank holding company organized as
a North Carolina corporation. NationsBank has its principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255.
NationsBank provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking.
Subject to the general supervision of Nations Fund Trust's Board of Trustees and
Nations Fund, Inc.'s Board of Directors, and in accordance with each Fund's
investment policies, NationsBank formulates guidelines and lists of approved
investments for each Fund, makes decisions with respect to and places orders for
each Fund's purchases and sales of portfolio securities and maintains records
relating to such purchases and sales. With respect to the Nations Tax Exempt
Fund, NationsBank is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with
NationsBank or which have sold shares in such Fund, if NationsBank believes that
the quality of the transaction and the commission are comparable to what they
would be with other qualified brokerage firms. From time to time, to the extent
consistent with its investment objective, policies and restrictions, each Fund
may invest in securities of companies with which NationsBank has a
8
<PAGE>
lending relationship. For the services provided and expenses assumed pursuant to
various Investment Advisory Agreements, NationsBank is entitled to receive
advisory fees, computed daily and paid monthly, at the annual rates of: 0.25% of
the first $250 million of the combined average daily net assets of both Nations
Prime Fund and Nations Treasury Fund, plus 0.20% of the combined average daily
net assets of such Funds in excess of $250 million; and 0.40% of the average
daily net assets of each of Nations Government Money Market Fund and Nations Tax
Exempt Fund.
From time to time, NationsBank may waive (either voluntarily or pursuant to
applicable state limitations) advisory fees payable by a Fund. For the fiscal
year ended November 30, 1994, after waivers, Nations Fund Trust paid NationsBank
fees at the rate of 0.16% and 0.09% of the average daily net assets of the
Nations Government Money Market Fund and the Nations Tax Exempt Fund,
respectively. For the fiscal year ended May 31, 1995, after waivers, Nations
Fund, Inc. paid NationsBank fees at the rate of 0.13% and 0.16% of the average
daily net assets of the Nations Prime Fund and Nations Treasury Fund,
respectively.
Morrison & Foerster, counsel to Nations Fund and special counsel to NationsBank,
has advised Nations Fund and NationsBank that NationsBank may perform the
services contemplated by the Investment Advisory Agreements without violation of
the Glass-Steagall Act or other applicable banking laws or regulations. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent NationsBank from
continuing to perform, in whole or in part, such services. If NationsBank were
prohibited from performing any such services, it is expected that the Board of
Trustees of Nations Fund Trust and the Board of Directors of Nations Fund, Inc.
would recommend to each Fund's shareholders that they approve a new advisory
agreement with another entity or entities qualified to perform such services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
Nations Fund pursuant to Administration Agreements. Pursuant to the terms of the
Administration Agreements, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of
First Data Corporation, with principal offices at One Exchange Place, Boston,
Massachusetts 02109, serves as the co-administrator of the Funds pursuant to
Co-Administration Agreements. Under the Co-Administration Agreements, TSSG
provides various administrative and accounting services to the Funds, including
performing calculations necessary to determine net asset values and dividends,
preparing tax returns and financial statements and maintaining the portfolio
records and certain general accounting records for the Funds. For the services
rendered pursuant to the Administration and Co-Administration Agreements,
Stephens and TSSG are entitled to receive a combined fee at the annual rate of
up to 0.10% of each Fund's average daily net assets. For the fiscal year ended
November 30, 1994, after waivers, Nations Fund Trust paid its administrators
fees at the rate of 0.09% of the average daily net assets of Nations Government
Money Market Fund and Nations Tax Exempt Fund. For the fiscal year ended May 31,
1995, after waivers, Nations Fund, Inc. paid its administrators fees at the rate
of 0.09% of the average daily net assets of Nations Prime Fund and Nations
Treasury Fund.
It is anticipated that beginning in November of 1995, NationsBank will serve as
sub-administrator for Nations Fund pursuant to a Sub-Administration Agreement.
Pursuant to the terms of the Sub-Administration Agreement, NationsBank will
assist Stephens in supervising, coordinating and monitoring various aspects of
the Funds' administrative operations. For providing such services, NationsBank
shall be entitled to receive a monthly fee from Stephens based on an annual rate
of .01% of the Funds' average daily net assets.
Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker-dealer with principal
offices at 111 Center Street, Little Rock, Arkansas 72201. Nations Fund has
entered into distribution agreements with Stephens which provide that Stephens
has the exclusive right to distribute shares of the Funds. Stephens may pay
service fees or commissions to selling agents that assist customers in
purchasing Investor D Shares of the Funds. See "Shareholder Servicing and
Distribution Plans."
NationsBank of Texas, N.A., serves as each Fund's custodian (the "Custodian").
The Custodian is located at 1401 Elm Street, Dallas, Texas 75202 and is a wholly
owned subsidiary of NationsBank Corporation. In return for providing custodial
services, the Custodian is entitled to receive, in addition to out-of-pocket
expenses, fees payable monthly (i) at the rate of 1.25% of 1% of the average
daily net assets of each Fund, (ii) $10.00 per repurchase collateral transaction
by the Funds, and
9
<PAGE>
(iii) $15.00 per purchase, sale and maturity transaction involving the Funds.
TSSG serves as transfer agent (the "Transfer Agent") for each Fund's Investor D
Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
Price Waterhouse LLP serves as independent accountant to Nations Funds. Their
address is 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES: The accrued expenses of each Fund, as well as certain expenses
attributable to Investor D Shares, are deducted from accrued income before
dividends are declared. The Funds' expenses include, but are not limited to:
fees paid to NationsBank, Stephens and TSSG; interest; Directors' or Trustees'
fees; federal and state securities registration and qualification fees;
brokerage fees and commissions; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings; other
expenses which are not expressly assumed by NationsBank, Stephens or TSSG under
their respective agreements with Nations Fund; and any extraordinary expenses.
Investor D Shares may bear certain class specific retail transfer agency
expenses and also bear certain additional shareholder service and distribution
costs. Any general expenses of Nations Fund Trust and/or of Nations Fund, Inc.
that are not readily identifiable as belonging to a particular investment
portfolio are allocated among all portfolios in the proportion that the assets
of a portfolio bears to the assets of Nations Fund Trust and/or of Nations Fund,
Inc. or in such other manner as the Board of Trustees or Board of Directors
deems appropriate.
Organization And History
The Funds are members of the Nations Fund Family, which consists of Nations Fund
Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc. and Nations
Institutional Reserves (formerly known as The Capitol Mutual Funds). The Nations
Fund Family currently has 44 distinct investment portfolios and total assets in
excess of $16 billion.
NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. The Funds currently offer six separate classes of
shares -- Investor A, Investor B, Investor C, Investor D, Trust A and Trust B
Shares. This Prospectus relates only to the Investor D Shares of Nations
Government Money Market Fund and Nations Tax Exempt Fund of Nations Fund Trust.
To obtain additional information regarding the Funds' other classes of shares
which may be available to you, contact your Selling Agent (as defined below) or
Nations Fund at 1-800-321-7854.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund and
shareholders of a fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See the SAI for examples of instances where the 1940
Act requires voting by fund.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose or vote with respect to more than 25% of the outstanding shares of
Nations Fund Trust and therefore could be considered to be a controlling person
of Nations Fund Trust for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series of shares over
which NationsBank and its affiliates possessed or shared power to dispose or
vote as of a certain date, see Nations Fund Trust's SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
NATIONS FUND, INC.: Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no operations prior to December 15, 1986. As of the date of
this Prospectus, the authorized capital stock of Nations Fund, Inc. consists of
270,000,000,000 shares of common stock, par value of $.001 per share, which are
divided into series or portfolios, each of which consists of separate classes of
shares. This Prospectus relates only to the Investor D Shares of Nations Prime
Fund and Nations Treasury Fund of Nations Fund, Inc. To obtain
addi-
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tional information regarding the Funds' other classes of shares which may be
available to you, contact your Selling Agent (as defined below) or Nations Fund
at 1-800-321-7854.
Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such fund
or class. In the event of dissolution or liquidation, holders of each class will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of that portion of the assets allocated to that class held in the
respective fund of Nations Fund, Inc., less (b) the liabilities of Nations Fund,
Inc. attributable to the respective fund or class or allocated among the funds
or classes based on the respective liquidation value of each fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of Directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of Nations Fund, Inc.'s outstanding shares.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s shares.
Nations Fund, Inc.'s shares, when issued, will be fully paid and non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Fund, Inc. and therefore could be considered to be a controlling person
of Nations Fund, Inc. for purposes of the 1940 Act. In addition, as of August
31, 1995, William O. Kirker owned of record 25% or more of the Nations Prime
Fund and therefore could be considered a controlling person of such class for
purposes of the 1940 Act. For more detailed information concerning the
percentage of each class or series over which NationsBank and its affiliates
possessed or shared power to dispose or vote as of a certain date, see Nations
Fund, Inc.'s SAI. It is anticipated that Nations Fund, Inc. will not hold annual
shareholder meetings, except when required by the 1940 Act or Maryland law.
Because this Prospectus combines disclosure on two separate investment
companies, there is a possibility that one investment company might become
liable for a misstatement, inaccuracy or incomplete disclosure in this
Prospectus concerning the other investment company. Nations Fund Trust and
Nations Fund, Inc. have entered into an indemnification agreement that creates a
right of indemnification from the investment company responsible for any such
misstatement, inaccuracy or incomplete disclosure that may appear in this
Prospectus.
About Your Investment
How To Buy Shares
Investor D Shares of the Funds are offered only as an exchange option to
existing shareholders of Investor C Shares of a non-money market fund of the
Nations Fund Family (the "Non-Money Market Funds") pursuant to the exchange
privilege described in the relevant, then current prospectus for Investor C
Shares of the Non-Money Market Funds. Exchange orders for Investor D Shares of
the Funds may be placed with banks, broker/dealers or other financial
institutions (including certain affiliates of NationsBank) that have entered
into sales support agreements with Stephens ("Selling Agents") or a shareholder
servicing agreement with Nations Fund ("Servicing Agents").
The Investor C Shares exchanged for Investor D Shares of a Fund must have a
current value of at least $1,000. No sales load or exchange fee is imposed upon
the purchase of Investor D Shares of a Fund through an exchange. Purchases may
be effected only on days on which the Federal Reserve Bank of New York is open
for business (a "Business Day").
The Selling Agents have entered into Sales Support Agreements with Stephens
under which they will provide sales support assistance to their Customers who
own Investor D Shares. In addition, the Servicing Agents have entered into
shareholder servicing agreements ("Servicing Agreements") under which they will
provide various shareholder services for their Customers who own Investor D
Shares ("Servicing Agents"). Selling Agents and Servicing Agents are sometimes
referred to hereafter as "Agents." From time to time the Agents, Stephens, and
Nations Fund may agree to voluntarily reduce the fees payable for shareholder
services and sales support services. See "Shareholder Servicing and Distribution
Plans."
Nations Fund reserves the right to reject any purchase order. The issuance of
Investor D Shares is recorded on the books of the Funds, and share certificates
are not issued unless expressly requested in writing. Certificates are not
issued for fractional shares.
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EFFECTIVE TIME OF EXCHANGES: Exchanges will be effected only when federal funds
are available for investment on the Business Day the exchange order is received
by Stephens or by the Transfer Agent. An Exchange order must be received by
Stephens or by the Transfer Agent by 4:00 p.m., Eastern time. Investor D Shares
are purchased at the net asset value per share next determined after receipt of
the exchange order by Stephens or by the Transfer Agent.
The Selling Agents are responsible for transmitting exchange orders by their
Customers. Stephens is responsible for transmitting orders it receives to
Nations Fund.
TELEPHONIC TRANSACTIONS: An investor may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How to Redeem Shares" and "How to
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. You should be aware that by electing the telephone transaction feature
you may be giving up a measure of security that you may have if you were to
authorize written requests only. You may bear the risk of any resulting losses
from a telephone transaction. Nations Fund will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and if Nations
Fund and its service providers fail to employ such measures, they may be liable
for any losses due to unauthorized or fraudulent instructions. Nations Fund
requires a form of personal identification prior to acting upon instructions
received by telephone and provides written confirmation to shareholders of each
telephone share transaction. In addition, Nations Fund reserves the right to
record all telephone conversations.
Shareholder Servicing And Distribution Plans
SHAREHOLDER SERVICING PLAN: The Funds' shareholder servicing plan ("Servicing
Plan") permits each Fund to compensate Servicing Agents for certain shareholder
support services that are provided by the Servicing Agents to their Customers
that own Investor D Shares. Payments under the Servicing Plan will be calculated
daily and paid monthly at a rate set from time to time by the Board of Trustees
or the Board of Directors, provided that the annual rate may not exceed 0.25% of
the average daily net asset value of a Fund's Investor D Shares. The shareholder
services provided by Servicing Agents may include general shareholder liaison
services; processing purchase, exchange and redemption requests from Customers
and placing orders with Stephens or the Transfer Agent; processing dividend and
distribution payments from a Fund on behalf of Customers; providing sales
information periodically to Customers, including information showing their
positions in Investor D Shares; providing sub-accounting with respect to
Investor D Shares beneficially owned by Customers or the information necessary
for sub-accounting; responding to inquiries from Customers concerning their
investment in Investor D Shares; arranging for bank wires; and providing such
other similar services as may be reasonably requested.
Nations Fund may suspend or reduce payments under the Servicing Plan at any
time, and payments are subject to the continuation of the Funds' Servicing Plan
described above and the terms of the Servicing Agreements. See the SAIs for more
details on the Servicing Plan.
DISTRIBUTION PLAN: Pursuant to Rule 12b-1 under the 1940 Act, the Trustees and
Directors also have approved a Distribution Plan with respect to Investor D
Shares of the Funds. Pursuant to the Distribution Plan, each Fund may compensate
or reimburse Stephens for any activities or expenses primarily intended to
result in the sale of Investor D Shares. Payments under the Distribution Plan
will be calculated daily and paid monthly at a rate or rates set from time to
time by the Board of Trustees or Board of Directors provided that the annual
rate may not exceed 0.45% of the average daily net asset value of a Fund's
Investor D Shares. Payments to Stephens pursuant to the Distribution Plan will
be used primarily to compensate or reimburse Stephens for distribution services
provided by Stephens and related expenses incurred by Stephens, including
payments by Stephens to compensate or reimburse Selling Agents for sales support
services provided, and related expenses incurred by, such Selling Agents.
Nations Fund and Stephens may suspend or reduce payments under the Distribution
Plan at any time, and payments are subject to the continuation of the Funds'
Distribution Plan described above and the terms of the Sales Support Agreement
between Selling Agents and Stephens. See the SAIs for more details on the
Distribution Plan.
Nations Fund understands that Selling Agents and/or Servicing Agents may charge
fees to their Customers who are the owners of Investor D Shares for various
services provided in connection with a Customer's account. These fees would be
in addition to any amounts received by a Selling Agent under its Sales Support
Agreement with Stephens or by a Servicing Agent under its Shareholder Servicing
Agreement with Nations Fund. The Sales Support Agreements and Shareholder
Servicing Agreements require Agents to disclose to their Customers any
compensation payable to the Agents by Stephens or Nations Fund and any other
compensation payable by the Customers for various services provided in
connec-
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tion with their accounts. Customers of Agents should read this Prospectus in
light of the terms governing their accounts with their Agents.
How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Selling Agent that transmitted the original purchase order. Redemption
orders are effected at the net asset value per share, less any applicable CDSC,
next determined after receipt of the order by Stephens or by the Transfer Agent.
The Selling Agents are responsible for transmitting redemption orders to
Stephens or to the Transfer Agent and for crediting their Customer's account
with the redemption proceeds on a timely basis. No charge for wiring redemption
payments is imposed by Nations Fund.
Redemption orders must be received on a Business Day before 2:00 p.m., Eastern
time (12:00 noon, Eastern time, with respect to Nations Tax Exempt Fund), and
payment will normally be wired the same day to Selling Agents. Nations Fund
reserves the right to wire redemption proceeds within three Business Days after
receiving the redemption orders if, in the judgment of NationsBank, an earlier
payment could adversely impact a Fund. However, redemption proceeds for shares
purchased by check may not be remitted until at least 15 days after the date of
purchase to ensure that the check has cleared; a certified check, however, is
deemed to be cleared immediately. Redemption orders received by Stephens or by
the Transfer Agent after 2:00 p.m., Eastern time (12:00 noon, Eastern time, with
respect to Nations Tax Exempt Fund), will be processed on the next Business Day.
Nations Fund may redeem a shareholder's Investor D Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of a
Selling Agent pursuant to arrangements between the Selling Agent and its
Customers. Nations Fund also may redeem shares of a Fund involuntarily or make
payment for redemption in readily marketable securities or other property under
certain circumstances in accordance with the 1940 Act.
Prior to effecting a redemption of Investor D Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to Nations Fund have previously been
made. Nations Fund may require any additional information reasonably necessary
to evidence that a redemption has been duly authorized.
CONTINGENT DEFERRED SALES CHARGE: Subject to certain waivers specified below,
Investor D Shares of a Fund will be subject to a CDSC of 1.00% if redeemed
within one year of the initial purchase of the Investor C Shares exchanged for
the Investor D Shares being redeemed. The CDSC is imposed on the lesser of the
net asset value of the Investor D Shares redeemed or the initial purchase price
of the Investor C Shares exchanged to acquire the Investor D Shares being
redeemed. No CDSC is imposed on increases in net asset value above the initial
purchase price of the exchanged Investor C Shares, including shares acquired by
reinvestment of distributions.
Solely for purposes of determining the period of time that has elapsed from the
initial purchase of any Investor C Shares, all purchases during a month will be
aggregated and deemed to have been made on the last day of the month. In
determining whether a CDSC is applicable to a redemption, the calculation will
be made in the manner that results in the lowest possible charge being assessed.
In this regard, it will be assumed that the redemption is first of shares held
for the longest period of time or shares acquired pursuant to reinvestment of
dividends or distributions. The charge will not be applied to dollar amounts
representing an increase in the net asset value since the time of initial
purchase of Investor C Shares.
The CDSC will be waived on redemptions of Investor D Shares (i) following the
death or disability (as defined in the Code) of a shareholder (including a
registered joint owner), (ii) in connection with the following retirement plan
distributions: (a) by qualified plans, (except in cases of plan level
terminations), (b) distributions from an IRA following attainment of age 59 1/2;
(c) a tax-free return of an excess contribution to an IRA, and (d) distributions
from a qualified retirement plan that are not subject to the 10% additional
Federal withdrawal tax pursuant to Section 72(t)(2) of the Code, (iii) effected
pursuant to Nations Fund's right to liquidate a shareholder's account if the
aggregate net asset value of the Investor Shares held in the account is less
than the minimum account size, (iv) in connection with the combination of
Nations Fund with any other registered investment company by merger, acquisition
of assets or by any other transaction, and (v) effected pursuant to the
Automatic Withdrawal Plan discussed below, provided that such redemptions do not
exceed, on an annual basis, 12% of the net asset value of the Investor Shares in
the account. Shareholders are responsible for providing evidence sufficient to
establish that they are eligible for any waiver
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of the CDSC. Nations Fund may terminate any waiver of the CDSC by providing
notice in the Prospectus, but any such termination would affect only shares
purchased after such termination.
AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by a shareholder of a Fund if the value of the Investor Shares in
his/her accounts within the Nations Fund Family (valued at the net asset value
at the time of the establishment of the AWP) equals $10,000 or more.
Shareholders who elect to establish an AWP may receive a monthly, quarterly or
annual check or automatic transfer to a checking or savings account in a stated
amount of not less than $25 on or about the 10th or 25th day of the applicable
month of withdrawal. Investor D Shares will be redeemed as necessary to meet
withdrawal payments. Withdrawals will reduce principal and may eventually
deplete the shareholder's account. If a shareholder desires to establish an AWP
after opening an account, a signature guarantee will be required. An AWP may be
terminated by a shareholder on 30 days' written notice to his/her Selling Agent
or by Nations Fund at any time.
How To Exchange Shares
The exchange feature enables a shareholder of Investor D Shares of a Money
Market Fund to re-exchange such shares for Investor C Shares of a Non-Money
Market Fund or Investor D Shares of another Money Market Fund when that
shareholder believes that a shift between funds is an appropriate investment
decision. However, a shareholder may not exchange Investor D Shares of a Fund
for Investor C Shares of Nations Short-Term Income Fund and Nations Short-Term
Municipal Income Fund until one year has elapsed since the original purchase of
the Investor C Shares exchanged to acquire the subject Investor D Shares. For
purposes of determining whether one year has elapsed from the initial purchase
of any Investor C Shares, all purchases during a month will be aggregated and
deemed to have been made on the last day of the month. An exchange of Investor D
Shares for shares of another fund is made on the basis of the next calculated
net asset value per share of each fund after the exchange order is received.
No CDSC will be imposed in connection with an exchange of Investor D Shares that
meets the requirements discussed in this section. If a shareholder acquires
shares in exchange for Investor D Shares of a Fund, the acquired shares will
remain subject to the CDSC applicable to the Investor C Shares exchanged to
acquire the subject Investor D Shares. In addition, the remaining period of time
(if any) that the CDSC will be in effect will be computed from the time of the
initial purchase of the previously held Investor C Shares.
The Funds and each of the other funds of Nations Fund may limit the number of
times this exchange feature may be exercised by a shareholder within a specified
period of time. Also, the exchange feature may be terminated or revised at any
time by Nations Fund upon such notice as may be required by applicable
regulatory agencies (presently sixty days for termination or material revision),
provided that the exchange feature may be terminated or materially revised
without notice under certain unusual circumstances.
The current prospectus for each fund of Nations Fund describes its investment
objective and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for Federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within ninety days after the shares are purchased.
Nations Fund reserves the right to reject any exchange request. Only shares that
may legally be sold in the state of the investor's residence may be acquired in
an exchange. Only shares of a class that is accepting investments generally may
be acquired in an exchange.
Investor D Shares may be exchanged by directing a request directly to the Agent
through which the original Investor D Shares were purchased or in some cases
Stephens or the Transfer Agent. During periods of significant economic or market
change, telephone exchanges may be difficult to complete. In such event, shares
may be exchanged by mailing your request directly to the Agent through which the
original shares were purchased. Investors should consult their Agent or Stephens
for further information regarding exchanges. Your exchange feature may be
governed by your account agreement with your Agent.
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How The Funds Value Their Shares
The net asset value of a share of each class of shares in the Funds is
calculated by dividing the total value of its assets, less liabilities, by the
number of shares in the class outstanding. Shares are valued as of 2:00 p.m.,
Eastern time (12 noon, Eastern time, with respect to Nations Tax Exempt Fund),
on each Business Day. Currently, the days on which the Federal Reserve Bank of
New York is closed (other than weekends) are: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Memorial Day (observed), Independence Day, Labor
Day, Columbus Day, Thanksgiving Day and Christmas Day.
The assets of each Fund are valued based upon the amortized cost method.
Although Nations Fund seeks to maintain the net asset value per share of these
Funds at $1.00, there can be no assurance that their net asset value per share
will not vary.
How Dividends And Distributions Are Made;
Tax Information
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income of each Fund
are declared daily to shareholders at 2:00 p.m., Eastern time (12 noon, Eastern
time, with respect to Nations Tax Exempt Fund), on the day of declaration.
Investor D Shares begin earning dividends on the day the purchase order is
executed and continue earning dividends through and including the day before the
redemption order is executed (E.G., the settlement date). Dividends are paid
within five Business Days after the end of each month. Dividends are paid in the
form of additional Investor D Shares of the same Fund unless the Customer has
elected prior to the date of distribution to receive payment in cash. Such
election, or any revocation thereof, must be made in writing to the Funds'
Transfer Agent and will become effective with respect to dividends paid after
its receipt. Your dividend election may be governed by your account agreement
with your Selling Agent. Dividends are paid in cash within five Business Days
after a shareholder's complete redemption of his/her Investor D Shares in a
Fund. To the extent that there are any net short-term capital gains, they will
be paid at least annually.
Each Fund's net investment income available for distribution to the holders of
Investor D Shares will be reduced by the amount of sales support and shareholder
servicing fees paid to Selling Agents and Servicing Agents, respectively. Each
Fund's net investment income available for distribution to the holders of
Investor D Shares will be reduced by the amount of retail transfer agency fees
allocated to Investor D Shares.
TAXES: Each Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"). Such qualification
relieves a Fund of liability for Federal income taxes on amounts distributed in
accordance with the Code.
Each Fund intends to distribute substantially all of its investment company
taxable income and net tax-exempt income each taxable year. Distributions by the
Nations Prime Fund, Nations Treasury Fund and Nations Government Money Market
Fund will be taxable as ordinary income to shareholders who are not currently
exempt from Federal income taxes, whether such income is received in cash or
reinvested in additional shares. (Federal income taxes for distributions to an
IRA are generally deferred under the Code.) These distributions will not qualify
for the dividends received deduction for corporate shareholders.
Dividends received from Nations Treasury Fund and Nations Government Money
Market Fund may qualify as tax-exempt dividends for state income tax purposes in
some states. The Funds do not expect to realize any long-term capital gains, and
therefore, do not expect to distribute any capital gains dividends.
Each year, shareholders will be notified as to the amount and Federal tax status
of all dividends (and capital gains, if applicable) paid during the prior year.
Such dividends (and capital gains) may be subject to state and local taxes.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by the Fund on December 31 of such year
in the event such dividends are actually paid during January of the following
year.
Federal law requires Nations Fund to withhold 31% from any dividends (other than
exempt-interest dividends) paid by Nations Fund and/or redemptions (including
exchange redemptions) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply, or
if the Internal Revenue Service has notified Nations Fund that the Taxpayer
Identification Number listed on a shareholder account is incorrect according to
its records, or that the shareholder is subject to backup
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withholding. Amounts withheld are applied to the shareholder's Federal tax
liability, and a refund may be obtained from the Internal Revenue Service if
withholding results in overpayment of taxes. Federal law also requires the Funds
to withhold 30% or the applicable tax treaty rate from dividends paid to certain
nonresident alien, non-U.S. partnership and non-U.S. corporation shareholder
accounts.
NATIONS TAX EXEMPT FUND: As a regulated investment company, the Nations Tax
Exempt Fund is permitted to pass through to its shareholders tax-exempt income
("exempt-interest dividends") subject to certain requirements which the Fund
intends to satisfy. The Fund does not intend to earn investment company taxable
income or long-term capital gains; to the extent that it does earn taxable
income or realize long-term capital gains, distributions to shareholders from
such sources will be subject to Federal income tax. Exempt-interest dividends
may be treated by shareholders as items of interest excludable from their
federal gross income under Section 103(a) of the Code unless, under the
circumstances applicable to the particular shareholder, the exclusion would be
disallowed. (See Nations Fund Trust's SAI under "Additional Information
Concerning Taxes.") Distributions of net investment income by the Nations Tax
Exempt Fund may be taxable to investors under state or local law even though a
substantial portion of such distributions may be derived from interest on
tax-exempt obligations which, if realized directly, would be exempt from such
income taxes.
If Nations Tax Exempt Fund should hold certain private activity bonds issued
after August 7, 1986, shareholders must include, as an item of tax preference,
the portion of dividends paid by the Fund that is attributable to interest on
such bonds in their Federal alternative minimum taxable income for purposes of
determining liability (if any) for the 28% alternative minimum tax applicable to
individuals and the 20% alternative minimum tax and the environmental tax
applicable to corporations. Corporate shareholders must also take all
exempt-interest dividends into account in determining certain adjustments for
Federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed at the rate of 0.12% on the excess of
the corporation's modified Federal alternative minimum taxable income over
$2,000,000. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits. To the extent, if any, dividends paid to
shareholders are derived from taxable income or from long-term or short-term
capital gains, such dividends will not be exempt from Federal income tax and
also may be subject to state and local taxes.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important Federal tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisers with respect to their specific tax
situations as well as with respect to state and local taxes. Further tax
information is contained in the SAIs.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAIs contain more
information concerning such investments.
ASSET BACKED SECURITIES: Asset Backed Securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset Backed
Securities consist of both mortgage and non-mortgage backed securities.
Interests in pools of these assets differ from other forms of debt securities,
which normally provide for periodic payment of interest in fixed amounts with
principal paid at maturity or specified call dates. Instead, Asset Backed
Securities provide periodic payments which generally consist of both interest
and principal payments.
Mortgage backed securities represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself. Mortgage backed securities include
mortgage pass-through securities, collateralized mortgage obligations ("CMOs"),
parallel pay CMOs, planned amortization class CMOs ("PAC Bonds") and stripped
mortgage-backed securities ("SMBS"), including interest-only and principal-only
SMBS. SMBS may be more volatile than other debt securities. For additional
information concerning mortgage backed securities, see the related SAI.
Non-mortgage backed securities include interests in pools of receivables, such
as motor vehicle installment purchase obligations and credit card receivables.
Such securities are generally issued as pass-through certificates, which
represent undivided fractional ownership interests in the underlying pools of
assets. Such securities also may be debt instruments, which are also known as
collateralized obligations and are generally issued as
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the debt of a special purpose entity organized solely for the purpose of owning
such assets and issuing such debt.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. The Nations Prime Fund generally limits
investments in bank instruments to (a) U.S. dollar-denominated obligations of
U.S. banks which have total assets exceeding $1 billion and which are members of
the Federal Deposit Insurance Corporation (including obligations of foreign
branches of such banks) or of the 75 largest foreign commercial banks in terms
of total assets; or (b) U.S. dollar-denominated bank instruments issued by other
banks believed by NationsBank to present minimal credit risks. For purposes of
the foregoing, total assets may be determined on the basis of the bank's most
recent annual financial statements.
The Nations Prime Fund may invest up to 100% of its assets in obligations issued
by banks. All other Funds will limit their investments in bank obligations so
they do not exceed 25% of each Fund's total assets at the time of purchase. The
Nations Prime Fund may invest in U.S. dollar-denominated obligations issued by
foreign branches of domestic banks ("Eurodollar" obligations) and domestic
branches of foreign banks ("Yankee dollar" obligations).
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Funds' total assets must be repaid prior to the purchase of
portfolio securities. The Funds are parties to a Line of Credit Agreement with
Mellon Bank, N.A. Advances under the agreement are taken primarily for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities.
Reverse repurchase agreements may be considered to be borrowings. When the Fund
invests in a reverse repurchase agreement, it sells a portfolio security to
another party, such as a bank or broker-dealer, in return for cash, and agrees
to buy the security back at a future date and price. Reverse repurchase
agreements may be used to provide cash to satisfy unusually heavy redemption
requests without having to sell portfolio securities, or for other temporary or
emergency purposes. In addition, the Nations Treasury Fund may use reverse
repurchase agreements for the purpose of investing the proceeds in tri-party
repurchase agreements as discussed below. Generally, the effect of such a
transaction is that the Funds can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while they will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Funds of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Fund is obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Fund's use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The Fund
only enters into reverse repurchase agreements (and repurchase agreements) with
counterparties that are deemed by NationsBank to be credit worthy. Reverse
repurchase agreements are speculative techniques involving leverage, and are
subject to asset coverage requirements if the Fund does not establish and
maintain a segregated account (as described above). Under the requirements of
the 1940 Act, a Fund is required to maintain an asset coverage (including the
proceeds of the borrowings) of at least 300% of all borrowings. Depending on
market conditions, the Fund's asset coverage and other factors at the time of a
reverse repurchase, the Funds may not establish a segregated
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account when NationsBank believes it is not in the best interests of the Funds
to do so. In this case, such reverse repurchase agreements will be considered
borrowings subject to the asset coverage described above.
The Nations Treasury Fund has entered into an arrangement whereby it reinvests
the proceeds of a reverse repurchase agreement in a tri-party repurchase
agreement and receives the net interest rate differential.
COMMERCIAL INSTRUMENTS: Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or foreign
corporations and foreign commercial banks. The Nations Prime Fund will limit
purchases of commercial instruments to instruments which: (a) if rated by at
least two NRSROs, are rated in the highest rating category for short-term debt
obligations given by such organizations, or if only rated by one such
organization, are rated in the highest rating category for short-term debt
obligations given by such organization; or (b) if not rated, are (i) comparable
in priority and security to a class of short-term instruments of the same issuer
that has such rating(s), or (ii) of comparable quality to such instruments as
determined by Nations Fund, Inc.'s Board of Directors on the advice of
NationsBank.
Investments by a Fund in commercial paper will consist of issues rated in a
manner consistent with such Fund's investment policies and objectives. In
addition, a Fund may acquire unrated commercial paper and corporate bonds that
are determined by NationsBank at the time of purchase to be of comparable
quality to rated instruments that may be acquired by a Fund. Commercial
instruments include variable rate master demand notes, which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate, and variable and floating rate
instruments.
The Nations Prime Fund also may purchase short-term participation interests in
loans extended by banks to companies, provided that both such banks and
companies meet the quality standards set forth above.
FOREIGN SECURITIES: Foreign securities include obligations of foreign
corporations and banks as well as obligations of foreign governments and their
political subdivisions (which will be limited to direct government obligations
and government-guaranteed securities). Such investments may subject a Fund to
special investment risks, including future political and economic developments,
the possible imposition of withholding taxes on interest income, possible
seizure or nationalization of foreign deposits, the possible establishment of
exchange controls, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. In addition, foreign issuers in general may be subject to different
accounting, auditing, reporting, and record keeping standards than those
applicable to domestic companies, and securities of foreign issuers may be less
liquid and their prices more volatile than those of comparable domestic issuers.
Investments in foreign securities may present additional risks, whether made
directly or indirectly, including the political or economic instability of the
issuer or the country of issue and the difficulty of predicting international
trade patterns. In addition, there may be less publicly available information
about a foreign company than about a U.S. company. Further, foreign stock
markets are generally not as developed or efficient as those in the U.S., and in
most foreign markets volume and liquidity are less than in the U.S. Fixed
commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign stock exchanges, brokers, and companies
than in the U.S. With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.
GUARANTEED INVESTMENT CONTRACTS: Guaranteed investment contracts ("GICs") are
investment instruments issued by highly rated insurance companies. Pursuant to
such contracts, a Fund may make cash contributions to a deposit fund of the
insurance company's general or separate accounts. The insurance company then
credits to a Fund guaranteed interest. The insurance company may assess periodic
charges against a GIC for expense and service costs allocable to it, and the
charges will be deducted from the value of the deposit fund. The purchase price
paid for a GIC becomes part of the general assets of the issuer, and the
contract is paid from the general assets of the issuer.
A Fund will only purchase GICs from issuers which, at the time of purchase, meet
quality and credit standards established by NationsBank. Generally, GICs are not
assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not currently exist.
Also, a Fund may not receive the principal amount of a GIC from the insurance
company on seven days' notice or less. Therefore, GICs are generally considered
to be illiquid investments.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Money Market Funds will
not knowingly invest more than 10% of the value of their respective net assets
in securities that are illiquid or such lower percentage as may be required by
the states in which the Funds sells their shares. Repurchase agreements and
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time deposits that do not provide for payment to a Fund within seven days after
notice, guaranteed investment contracts and some commercial paper issued in
reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act") (other than variable amount master demand notes with
maturities of nine months or less), are subject to the limitation on illiquid
securities. In addition, interests in privately arranged loans acquired by the
Nations Prime Fund may be subject to this limitation.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by a Fund's Board of Trustees or Board of Directors or
NationsBank, acting under guidelines approved and monitored by the Fund's Board,
that an adequate trading market exists for that security.
INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of its
portfolio from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments.
A Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. NationsBank expects to enter into these
transactions on behalf of a Fund primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipated purchasing at a later
date rather than for speculative purposes. A Fund will not sell interest rate
caps or floors that it does not own.
MONEY MARKET INSTRUMENTS: The term "money market instruments" refers to
instruments with remaining maturities of 397 days or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable or floating rate instruments issued by
industrial development authorities and other governmental entities. While there
may not be an active secondary market with respect to a particular instrument
purchased by a Fund, a Fund may demand payment of the principal and accrued
interest on the instrument or may resell it to a third party as specified in the
instruments. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of the instrument if the issuer defaulted on its
payment obligation or during periods the Fund is not entitled to exercise its
demand rights, and the Fund could, for these or other reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by a
Fund will be determined by NationsBank to be of comparable quality at the time
of purchase to instruments rated "high quality" by any major rating service. An
issuer's obligation to pay the principal of the note may be backed by an
unconditional bank letter or line of credit, guarantee, or commitment to lend.
Municipal securities also may include participations in privately arranged loans
to municipal borrowers, some of which may be referred to as "municipal leases",
and units of participation in trusts holding pools of tax-exempt leases. Such
loans in most cases are not backed by the taxing authority of the issuers and
may have limited marketability or may be marketable only by virtue of a
provision requiring repayment following demand by
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the lender. Such loans made by a Fund may have a demand provision permitting the
Fund to require payment within seven days. Participations in such loans,
however, may not have such a demand provision and may not be otherwise
marketable. To the extent these securities are illiquid, they will be subject to
each Fund's limitation on investments in illiquid securities. As it deems
appropriate, NationsBank will establish procedures to monitor the credit
standing of each such municipal borrower, including its ability to meet
contractual payment obligations.
Municipal participation interests may be purchased from financial institutions,
and give the purchaser an undivided interest in one or more underlying municipal
security. To the extent that municipal participation interests are considered to
be "illiquid securities" such instruments are subject to each Fund's limitation
on the purchase of illiquid securities.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to municipal securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified municipal securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and without
intending to exercise its rights thereunder for trading purposes.
Although each Fund does not presently intend to do so on a regular basis, each
may invest more than 25% of its total assets in municipal securities that are
payable solely from revenues of similar projects if such investment is deemed
necessary or appropriate by NationsBank. To the extent that more than 25% of a
Fund's total assets are invested in municipal securities that are payable from
the revenues of similar projects, a Fund will be subject to the peculiar risks
presented by such projects to a greater extent than it would be if its assets
were not so concentrated.
OTHER INVESTMENT COMPANIES: A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
REPURCHASE AGREEMENTS: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker-dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
uninvested cash. A risk associated with repurchase agreements is the failure of
the seller to repurchase the securities as agreed, which may cause a Fund to
suffer a loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the limit
stated above. A Fund may enter into joint repurchase agreements jointly with
other investment portfolios of Nations Fund and Nations Institutional Reserves.
SECURITIES LENDING: To increase return on portfolio securities, certain of the
Funds may lend their portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. There is a risk of delay in receiving
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by NationsBank to be credit worthy and
when, in its judgment, the income to be earned from the loan justifies the
attendant risks. The aggregate of all outstanding loans of a Fund may not exceed
30% of the value of its total assets.
SHORT-TERM TRUST OBLIGATIONS: Nations Prime Fund may invest in short-term
obligations issued by special purpose trusts established to acquire specific
issues of government or corporate securities. Such obligations entitle the Fund
to a proportional fractional interest in payments received by the trust, either
from the underlying securities owned by the trust or pursuant to other
arrangements entered into by the trust. A trust may enter into a swap
arrangement with a highly rated investment firm, pursuant to which the trust
grants to the counterparty certain of its rights with respect to the securities
owned by the trust in exchange for the obligation of the counterparty to make
payments to the trust according to an established formula. The trust obligations
purchased by the Fund must satisfy the quality and maturity requirements
generally applicable to the Fund pursuant to Rule 2a-7 under the 1940 Act.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indexes, non-U.S. interest rates and foreign currencies, that
have been approved by the Commodity Futures Trading Commission ("CFTC") for
investment by U.S. investors, for the purpose of hedging against changes in
values of a Fund's securities or changes in the prevailing levels of interest
rates or currency exchange rates. The contracts entail certain risks, including
but not limited to the following: no assurance that futures contracts
transactions can be offset at favorable prices; possible reduction of a Fund's
total return due to the use of hedging; possible lack of liquidity due to daily
limits on price fluctuation; imperfect
cor-
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relation between the contracts and the securities or currencies being hedged;
and potential losses in excess of the amount invested in the futures contracts
themselves.
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
for which no common clearing facility exists and a trader may look only to the
broker for performance of the contract. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the
currencies in which trading is done on foreign exchanges, any profits that such
Fund might realize could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes.
U.S. GOVERNMENT OBLIGATIONS: U.S. Government obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. Obligations of U.S.
Government agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
E.G., Government National Mortgage Association certificates; in other cases
interest and principal are not guaranteed, E.G., obligations of the Federal Home
Loan Bank System and the Federal Farm Credit Bank. No assurance can be given
that the U.S. Government would provide financial support to government-sponsored
instrumentalities if it is not obligated to do so by law.
VARIABLE AND FLOATING RATE INSTRUMENTS: Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks and corporations
may carry variable or floating rates of interest. Such instruments bear interest
rates which are not fixed, but which vary with changes in specified market rates
or indices, such as a Federal Reserve composite index. A variable rate demand
instrument is an obligation with a variable or floating interest rate and an
unconditional right of demand on the part of the holder to receive payment of
unpaid principal and accrued interest. An instrument with a demand period
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities takes
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
Appendix B -- Description of Ratings
The following summarizes the highest two ratings used by S&P for corporate and
municipal bonds:
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major rating category.
The following summarizes the highest two ratings used by Moody's for corporate
and municipal bonds:
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa. The modifier 1 indicates that the bond being rated ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the
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bond ranks in the lower end of its generic rating category. With regard to
municipal bonds, those bonds in the Aa groups which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa1.
The following summarizes the highest two ratings used by D&P for bonds:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major category.
The following summarizes the highest two ratings used by Fitch for bonds:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
To provide more detailed indications of credit quality, the AA rating may be
modified by the addition of a plus or minus sign to show relative standing
within this major rating category.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The two highest rating categories of D&P for short-term debt are Duff 1 and Duff
2. D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the
highest rating category. Duff 1+ indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be minor.
Duff 1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. Duff 2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
The following summarizes the two highest rating categories used by Fitch for
short-term obligations:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while
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sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following are the two highest investment grade ratings used by
BankWatch for long-term debt:
AAA -- The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA -- The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 -- The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
The following summarizes the two highest long-term ratings used by IBCA:
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk albeit not very significantly.
The following summarizes the two highest short-term debt ratings used by IBCA:
A1+ -- Obligations supported by the highest capacity for timely repayment
and possessing a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
23
<PAGE>
Prospectus
INVESTOR A SHARES
SEPTEMBER 30, 1995
AS SUPPLEMENTED ON
JANUARY 19, 1996
This Prospectus describes the nineteen investment
portfolios listed in the column to the right (each a
"Fund" and collectively the "Tax-Exempt Funds") of
Nations Fund Trust, a managed investment company
which is part of the Nations Fund Family ("Nations
Fund" or "Nations Fund Family"). This Prospectus
describes one class of shares of the Tax-Exempt
Funds -- Investor A Shares.
This Prospectus sets forth concisely the information
about the Funds that prospective purchasers of
Investor A Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust is contained in a separate
Statement of Additional Information (the "SAI"),
which has been filed with the Securities and
Exchange Commission (the "SEC") and is available
upon request without charge by writing or calling
Nations Fund at its address or telephone number
shown below. The SAI bears the same date as this
Prospectus and is incorporated by reference in its
entirety into this Prospectus. NationsBanc Advisors,
Inc. ("NBAI") is the investment adviser to the
Funds. TradeStreet Investment Associates, Inc.
("TradeStreet") is sub-investment adviser to the
Funds. As used herein the "Adviser" shall mean NBAI
and/or TradeStreet as the context may require.
SHARES OF NATIONS FUND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. ("NATIONSBANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
NATIONSBANK AND CERTAIN OF ITS AFFILIATES PROVIDE
CERTAIN OTHER SERVICES TO NATIONS FUND, FOR WHICH
THEY ARE COMPENSATED. STEPHENS INC., WHICH IS NOT
AFFILIATED WITH NATIONSBANK, IS THE SPONSOR AND
ADMINISTRATOR AND SERVES AS THE DISTRIBUTOR FOR
NATIONS FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
TAX-EXEMPT FUNDS
Nations Short-Term Municipal Income Fund
Nations Intermediate Municipal Bond Fund
Nations Municipal Income Fund
Nations Florida Intermediate
Municipal Bond Fund
Nations Florida Municipal Bond Fund
Nations Georgia Intermediate
Municipal Bond Fund
Nations Georgia Municipal Bond Fund
Nations Maryland Intermediate
Municipal Bond Fund
Nations Maryland Municipal
Bond Fund
Nations North Carolina Intermediate Municipal Bond Fund
Nations North Carolina Municipal Bond Fund
Nations South Carolina Intermediate Municipal Bond Fund
Nations South Carolina Municipal Bond Fund
Nations Tennessee Intermediate Municipal Bond Fund
Nations Tennessee Municipal
Bond Fund
Nations Texas Intermediate
Municipal Bond Fund
Nations Texas Municipal Bond Fund
Nations Virginia Intermediate
Municipal Bond Fund
Nations Virginia Municipal
Bond Fund
For purchase, redemption and
performance information
call:
1-800-321-7854
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
(Nations Fund Logo)
MUNIPROA
<PAGE>
Table Of Contents
About The Funds
Expenses Summary 3
Financial Highlights 6
Objectives 18
How Objectives are Pursued 19
How Performance is Shown 22
How the Funds are Managed 22
Organization and History 25
About Your
Investment
How to Buy Shares 26
Shareholder Servicing and Distribution Plans 27
How to Redeem Shares 28
How to Exchange Shares 29
How the Funds Value their Shares 30
How Dividends and Distributions are Made; Tax
Information 31
Appendix A -- Portfolio Securities 32
Appendix B -- Description of Ratings 37
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAI
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
NATIONS FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY NATIONS FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Expenses Summary
Expenses are one of several factors to consider when investing in a Fund. The
following tables summarize shareholder transaction and operating expenses for
the Investor A Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in Investor A Shares of a Fund
over specified periods.
INVESTOR A SHARES
<TABLE>
<CAPTION>
Nations Nations Nations Florida
SHAREHOLDER Short-Term Intermediate Intermediate Nations Florida
TRANSACTION Municipal Income Municipal Bond Nations Municipal Municipal Bond Municipal Bond
EXPENSES Fund Fund Income Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed
on Purchases (as a
percentage of offering
price) None None None None None
Maximum Deferred Sales
Charge (as a percentage
of the lower of the
original purchase price
or redemption proceeds)1 None None None None None
ANNUAL FUND
OPERATING
EXPENSES
(as a percentage of
average net assets)
Management Fees2 .30% .30% .40% .30% .40%
Rule 12b-1 Fees (including
shareholder servicing
fees)2 .20%3 .20% .20% .20% .20%
Other Expenses .25% .25% .25% .25% .25%
Total Operating Expenses2 .75% .75% .85% .75% .85%
</TABLE>
<TABLE>
<CAPTION>
Nations Georgia
SHAREHOLDER Intermediate Nations Georgia
TRANSACTION Municipal Bond Municipal Bond
EXPENSES Fund Fund
<S> <C> <C>
Maximum Sales Load Imposed
on Purchases (as a
percentage of offering
price) None None
Maximum Deferred Sales
Charge (as a percentage
of the lower of the
original purchase price
or redemption proceeds)1 None None
ANNUAL FUND
OPERATING
EXPENSES
(as a percentage of
average net assets)
Management Fees2 .30% .40%
Rule 12b-1 Fees (including
shareholder servicing
fees)2 .20% .20%
Other Expenses .25% .25%
Total Operating Expenses2 .75% .85%
</TABLE>
1 Investor A Shares that were purchased prior to January 1, 1996 remain subject
to the Deferred Sales Charge applicable at the time of purchase. See "How to
Redeem Shares -- Contingent Deferred Sales Charge."
2 After any waivers and reimbursements.
3 Shareholder servicing fees for Nations Short-Term Municipal Income Fund are
paid pursuant to a separate Shareholder Servicing Plan. See "Shareholder
Servicing and Distribution Plans."
3
<PAGE>
INVESTOR A SHARES
<TABLE>
<CAPTION>
Nations
Nations Maryland North Carolina Nations
Intermediate Nations Maryland Intermediate North Carolina
SHAREHOLDER TRANSACTION Municipal Bond Municipal Bond Municipal Bond Municipal Bond
EXPENSES Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None None None None
Maximum Deferred Sales Charge (as a
percentage of the lower of the original
purchase price or redemption proceeds)1 None None None None
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of average net assets)
Management Fees2 .30% .40% .30% .40%
Rule 12b-1 Fees (including shareholder
servicing fees)2 .20% .20% .20% .20%
Other Expenses .25% .25% .30% .25%
Total Operating Expenses2 .75% .85% .80% .85%
</TABLE>
<TABLE>
<CAPTION>
Nations
South Carolina Nations
Intermediate South Carolina
SHAREHOLDER TRANSACTION Municipal Bond Municipal Bond
EXPENSES Fund Fund
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None None
Maximum Deferred Sales Charge (as a
percentage of the lower of the original
purchase price or redemption proceeds)1 None None
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of average net assets)
Management Fees2 .30% .40%
Rule 12b-1 Fees (including shareholder
servicing fees)2 .20% .20%
Other Expenses .24% .25%
Total Operating Expenses2 .74% .85%
</TABLE>
<TABLE>
<CAPTION>
Nations
Nations Tennessee Texas
Intermediate Nations Tennessee Intermediate Nations
SHAREHOLDER TRANSACTION Municipal Bond Municipal Bond Municipal Bond Texas Municipal
EXPENSES Fund Fund Fund Bond Fund
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price) None None None None
Maximum Deferred Sales Charge (as a
percentage of the lower of the original
purchase price or redemption proceeds)1 None None None None
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of average net assets)
Management Fees2 .30% .40% .30% .40%
Rule 12b-1 Fees (including shareholder
servicing fees)2 .20% .20% .20% .20%
Other Expenses .30% .25% .30% .25%
Total Operating Expenses2 .80% .85% .80% .85%
</TABLE>
<TABLE>
<CAPTION>
Nations Virginia
Intermediate Nations Virginia
SHAREHOLDER TRANSACTION Municipal Bond Municipal Bond
EXPENSES Fund Fund
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price) None None
Maximum Deferred Sales Charge (as a
percentage of the lower of the original
purchase price or redemption proceeds)1 None None
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of average net assets)
Management Fees2 .40% .40%
Rule 12b-1 Fees (including shareholder
servicing fees)2 .20% .20%
Other Expenses .25% .25%
Total Operating Expenses2 .85% .85%
</TABLE>
1 Investor A Shares that were purchased prior to January 1, 1996 remain subject
to the Deferred Sales Charge applicable at the time of purchase. See "How to
Redeem Shares -- Contingent Deferred Sales Charge."
2 After any waivers and reimbursements.
4
<PAGE>
EXAMPLES: You would pay the following expenses on a $1,000 investment in
Investor A Shares of the indicated Fund, assuming (1) a 5% annual return and (2)
redemption at the end of each time period.
INVESTOR A SHARES
<TABLE>
<CAPTION>
Nations Short-Term Nations Nations Florida
Municipal Income Intermediate Nations Municipal Intermediate Nations Florida
Fund Municipal Bond Fund Income Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C> <C> <C>
1 Year $ 8 $ 8 $ 9 $ 8 $ 9
3 Years $ 24 $ 24 $ 27 $ 24 $ 27
5 Years $ 42 $ 42 $ 47 $ 42 $ 47
10 Years $ 93 $ 93 $ 105 $ 93 $ 105
</TABLE>
<TABLE>
<CAPTION>
Nations Georgia Nations Maryland
Intermediate Nations Georgia Intermediate
Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C>
1 Year $ 8 $ 9 $ 8
3 Years $ 24 $ 27 $ 24
5 Years $ 42 $ 47 $ 42
10 Years $ 93 $ 105 $ 93
</TABLE>
<TABLE>
<CAPTION>
Nations
Nations South Nations
North Carolina Nations Carolina South
Nations Maryland Intermediate North Carolina Intermediate Carolina Municipal
Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C>
1 Year $ 9 $ 8 $ 9 $ 8 $ 9
3 Years $ 27 $ 24 $ 27 $ 24 $ 27
5 Years $ 47 $ 42 $ 47 $ 42 $ 47
10 Years $ 105 $ 93 $ 105 $ 93 $ 105
</TABLE>
<TABLE>
<CAPTION>
Nations Tennessee Nations
Intermediate Nations Tennessee Texas Intermediate
Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C>
1 Year $ 8 $ 9 $ 8
3 Years $ 24 $ 27 $ 24
5 Years $ 42 $ 47 $ 42
10 Years $ 93 $ 105 $ 93
</TABLE>
<TABLE>
<CAPTION>
Nations Nations Virginia
Texas Municipal Intermediate Nations Virginia
Bond Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C>
1 Year $ 9 $ 9 $ 9
3 Years $ 27 $ 27 $ 27
5 Years $ 47 $ 47 $ 47
10 Years $ 105 $ 105 $ 105
</TABLE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor A Shares of the Funds will bear either directly or indirectly. The
"Other Expenses" figures in the above tables for Investor A Shares of the
following Funds are based on estimated amounts for the Fund's current fiscal
year and reflect anticipated fee waivers and reimbursements: Nations Florida
Intermediate Municipal Bond Fund, Nations Florida Municipal Bond Fund, Nations
Georgia Municipal Bond Fund, Nations Maryland Municipal Bond Fund, Nations North
Carolina Intermediate Municipal Bond Fund, Nations North Carolina Municipal Bond
Fund, Nations South Carolina Municipal Bond Fund, Nations Tennessee Intermediate
Municipal Bond Fund, Nations Tennessee Municipal Bond Fund, Nations Texas
Intermediate Municipal Bond Fund, Nations Texas Municipal Bond Fund and Nations
Virginia Municipal Bond Fund. The figures for the other Funds reflect amounts
incurred during the Fund's most recent fiscal year and have been adjusted as
necessary to reflect current service provider fees. There is no assurance that
any fee waivers and reimbursements will continue beyond the current fiscal year.
If fee waivers and/or reimbursements are discontinued, the amounts contained in
the "Examples" above may increase. For more complete descriptions of the Funds'
operating expenses, see "How the Funds are Managed." For a more complete
description of the Rule 12b-1 and shareholder servicing fees payable by the
Funds, see "Shareholder Servicing and Distribution Plans."
5
<PAGE>
Absent fee waivers and reimbursements, "Management Fees," "Rule 12b-1 Fees" and
"Total Operating Expenses" for the Investor A Shares of the Funds would have
been as follows: Nations Municipal Income Fund -- .60%, .25% and 1.10%,
respectively; Nations Short-Term Municipal Income Fund -- .50%, .50%, and 1.25%,
respectively; Nations Intermediate Municipal Bond Fund, Nations Florida
Intermediate Municipal Bond Fund, Nations Georgia Intermediate Municipal Bond
Fund, Nations Maryland Intermediate Municipal Bond Fund and Nations Virginia
Intermediate Municipal Bond Fund -- .50%, .25% and 1.00%, respectively; Nations
South Carolina Intermediate Municipal Bond Fund -- .50%, .25% and .99%,
respectively; Nations North Carolina Intermediate Municipal Bond Fund, Nations
Tennessee Intermediate Municipal Bond Fund and Nations Texas Intermediate
Municipal Bond -- .50%, .75%, and 1.05%, respectively; and Nations Florida
Municipal Bond Fund, Nations Georgia Municipal Bond Fund, Nations Maryland
Municipal Bond Fund, Nations North Carolina Municipal Bond Fund, Nations South
Carolina Municipal Bond Fund, Nations Tennessee Municipal Bond Fund, Nations
Texas Municipal Bond Fund and Nations Virginia Municipal Bond Fund -- .60%, .25%
and 1.10%, respectively.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Financial Highlights
The following audited financial information has been derived from the financial
statements of Nations Fund Trust. Price Waterhouse LLP, is the independent
accountant to Nations Fund Trust. The reports of Price Waterhouse LLP for
Nations Fund Trust's most recent fiscal year accompany the financial statements
for such period and are incorporated by reference in the SAI, which is available
upon request. Shareholders of a Fund will receive unaudited semi-annual reports
describing the Fund's investment operations and annual financial statements
audited by the Funds' independent accountant.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SHORT-TERM MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.69 $ 9.96
Net investment income 0.24 0.36
Net realized and unrealized gain/(loss) on investments 0.26 (0.27)
Net increase in net assets resulting from investment operations 0.50 0.09
Distributions:
Dividends from net investment income (0.24) (0.36)
Distributions from net realized capital gains -- (0.00)#
Total distributions (0.24) (0.36)
Net asset value, end of period $ 9.95 $ 9.69
Total return++ 4.91% 0.90%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,765 $ 217
Ratio of operating expenses to average net assets 0.61%+ 0.52%
Ratio of net investment income to average net assets 4.30%+ 3.65%
Portfolio turnover rate 33% 57%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.17%+ 0.99%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.21 $ 0.33
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.98
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.02)
Net increase in net assets resulting from investment operations 0.01
Distributions:
Dividends from net investment income (0.03)
Distributions from net realized capital gains --
Total distributions (0.03)
Net asset value, end of period $ 9.96
Total return++ 0.06%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 731
Ratio of operating expenses to average net assets 0.24%+
Ratio of net investment income to average net assets 3.01%+
Portfolio turnover rate 45%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.19%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.02
</TABLE>
* The Nations Short-Term Municipal Income Fund's Investor A Shares commenced
operations on November 2, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
6
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.24 $ 10.11
Net investment income 0.23 0.42
Net realized and unrealized gain/(loss) on investments 0.74 (0.86)
Net increase/(decrease) in net assets resulting from investment operations 0.97 (0.44)
Distributions:
Dividends from net investment income (0.23) (0.42)
Distributions in excess of net investment income -- (0.00)#
Distributions from net realized capital gains -- (0.01)
Total distributions (0.23) (0.43)
Net asset value, end of period $ 9.98 $ 9.24
Total return++ 10.63% (4.48)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 988 $ 172
Ratio of operating expenses to average net assets 0.61%+ 0.53%
Ratio of net investment income to average net assets 4.83%+ 4.41%
Portfolio turnover rate 20% 51%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 0.99%+ 1.06%
Net investment income per share before fee waivers and/or expense
reimbursements 0.21 $ 0.38
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.10
Net investment income 0.12
Net realized and unrealized gain/(loss) on investments 0.01
Net increase/(decrease) in net assets resulting from investment operations 0.13
Distributions:
Dividends from net investment income (0.12)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.12)
Net asset value, end of period $ 10.11
Total return++ 1.28%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 68
Ratio of operating expenses to average net assets 0.39%+
Ratio of net investment income to average net assets 3.92%+
Portfolio turnover rate 23%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.11%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.10
</TABLE>
* The Nations Intermediate Municipal Bond Fund's Investor A Shares commenced
operations on August 17, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
7
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR
05/31/95 ENDED ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.64 $ 11.33 $ 10.65 $ 10.25
Net investment income 0.29 0.55 0.57 0.58
Net realized and unrealized gain/(loss)
on investments 1.14 (1.44) 0.72 0.41
Net increase/(decrease) in net assets
resulting from investment operations 1.43 (0.89) 1.29 0.99
Distributions:
Dividends from net investment income (0.29) (0.55) (0.57) (0.58)
Distributions in excess of net
investment income -- (0.00)# -- --
Distributions from net realized capital
gains -- (0.25) (0.04) (0.01)
Total distributions (0.29) (0.80) (0.61) (0.59)
Net asset value, end of period $ 10.78 $ 9.64 $ 11.33 $ 10.65
Total return++ 14.97% (8.34)% 12.37% 9.88%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 25,140 $ 23,754 $ 28,415 $ 21,056
Ratio of operating expenses to average
net assets 0.81%+ 0.79% 0.60% 0.52%
Ratio of operating expenses to average
net assets including interest expense -- -- -- 0.80%
Ratio of net investment income to
average net assets 5.61%+ 5.24% 5.09% 5.42%
Portfolio turnover rate 24% 63% 48% 19%
Ratio of operating expenses to average
net assets before fee waivers and/or
expense reimbursements 1.10%+ 1.08% 0.99% 0.99%
Net investment income per share before
fee waivers and/or expense
reimbursements $ 0.27 $ 0.52 $ 0.53 $ 0.53
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/91*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.52
Net realized and unrealized gain/(loss)
on investments 0.25
Net increase/(decrease) in net assets
resulting from investment operations 0.77
Distributions:
Dividends from net investment income (0.52)
Distributions in excess of net
investment income --
Distributions from net realized capital
gains --
Total distributions (0.52)
Net asset value, end of period $ 10.25
Total return++ 7.87%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 7,234
Ratio of operating expenses to average
net assets 0.20%+
Ratio of operating expenses to average
net assets including interest expense --
Ratio of net investment income to
average net assets 6.07%+
Portfolio turnover rate 54%
Ratio of operating expenses to average
net assets before fee waivers and/or
expense reimbursements 0.88%+
Net investment income per share before
fee waivers and/or expense
reimbursements $ 0.45
</TABLE>
* The Nations Municipal Income Fund's Investor A Shares commenced operations
on February 1, 1991.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
8
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.61 $ 10.50
Net investment income 0.23 0.43
Net realized and unrealized gain/(loss) on investments 0.82 (0.88)
Net increase/(decrease) in net assets resulting from investment operations 1.05 (0.45)
Distributions:
Dividends from net investment income (0.23) (0.43)
Distributions in excess of net investment income -- (0.00)#
Distributions from net realized gains -- (0.01)
Total distributions (0.23) (0.44)
Net asset value, end of period $ 10.43 $ 9.61
Total return++ 11.04% (4.43)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) 2,170 $ 2,114
Ratio of operating expenses to average net assets 0.75%+ 0.73%
Ratio of operating expenses to average net assets including interest expense 0.76%+ --
Ratio of net investment income to average net assets 4.61%+ 4.26%
Portfolio turnover rate 17% 34%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 0.97%+ 0.94%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.22 $ 0.41
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.99
Net investment income 0.42
Net realized and unrealized gain/(loss) on investments 0.51
Net increase/(decrease) in net assets resulting from investment operations 0.93
Distributions:
Dividends from net investment income (0.42)
Distributions in excess of net investment income --
Distributions from net realized gains --
Total distributions (0.42)
Net asset value, end of period $ 10.50
Total return++ 9.44%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,261
Ratio of operating expenses to average net assets 0.59%+
Ratio of operating expenses to average net assets including interest expense --
Ratio of net investment income to average net assets 4.13%+
Portfolio turnover rate 15%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 0.95%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.39
</TABLE>
* The Nations Florida Intermediate Municipal Bond Fund Investor A Shares
commenced operations on December 14, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NATIONS FLORIDA MUNICIPAL BOND FUND
SIX MONTHS
ENDED
05/31/95
INVESTOR A SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.40
Net investment income 0.25
Net realized and unrealized gain/(loss) on investments 1.11
Net increase/(decrease) in net assets resulting from investment operations 1.36
Dividends from net investment income (0.25)
Net asset value, end of period $ 9.51
Total return++ 16.34%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,640
Ratio of operating expenses to average net assets 0.53%+
Ratio of net investment income to average net assets 5.47%+
Portfolio turnover rate 9%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.15%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.22
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.98
Net investment income 0.47
Net realized and unrealized gain/(loss) on investments (1.58)
Net increase/(decrease) in net assets resulting from investment operations (1.11)
Dividends from net investment income (0.47)
Net asset value, end of period $ 8.40
Total return++ (11.35)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,024
Ratio of operating expenses to average net assets 0.39%+
Ratio of net investment income to average net assets 5.37%+
Portfolio turnover rate 46%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.09%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.42
</TABLE>
* The Nations Florida Municipal Bond Fund Investor A Shares commenced
operations on December 10, 1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
9
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.82 $ 10.82 $ 10.28
Net investment income 0.24 0.47 0.48
Net realized and unrealized gain/(loss) on investments 0.78 (0.98) 0.57
Net increase/(decrease) in net assets resulting from
investment operations 1.02 (0.51) 1.05
Distributions:
Dividends from net investment income (0.24) (0.47) (0.48)
Distributions in excess of net investment income -- (0.00)# --
Distributions from net realized capital gains -- (0.02) (0.03)
Total distributions (0.24) (0.49) (0.51)
Net asset value, end of period $ 10.60 $ 9.82 $ 10.82
Total return++ 10.46% (4.87)% 10.37%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 10,397 $ 10,401 $ 16,752
Ratio of operating expenses to average net assets 0.75%+ 0.72% 0.61%
Ratio of operating expenses to average net assets including
interest expense -- 0.73% --
Ratio of net investment income to average net assets 4.65%+ 4.56% 4.42%
Portfolio turnover rate 13% 22% 6%
Ratio of operating expenses to average net assets before fee
waivers and/or expense reimbursements 0.95%+ 0.93% 0.92%
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.23 $ 0.45 $ 0.45
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.98
Net investment income 0.30
Net realized and unrealized gain/(loss) on investments 0.30
Net increase/(decrease) in net assets resulting from
investment operations 0.60
Distributions:
Dividends from net investment income (0.30)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.30)
Net asset value, end of period $ 10.28
Total return++ 6.12%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3,809
Ratio of operating expenses to average net assets 0.34%+
Ratio of operating expenses to average net assets including
interest expense --
Ratio of net investment income to average net assets 5.01%+
Portfolio turnover rate 12%
Ratio of operating expenses to average net assets before fee
waivers and/or expense reimbursements 0.91%+
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.27
</TABLE>
* The Nations Georgia Intermediate Municipal Bond Fund Investor A Shares
commenced operations on May 4, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NATIONS GEORGIA MUNICIPAL BOND FUND
SIX MONTHS
ENDED
05/31/95
INVESTOR A SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.38
Net investment income 0.25
Net realized and unrealized gain/(loss) on investments 1.09
Net increase/(decrease) in net assets resulting from investment operations 1.34
Dividends from net investment income (0.25)
Net asset value, end of period $ 9.47
Total return++ 16.14%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 7
Ratio of operating expenses to average net assets 0.54%+
Ratio of net investment income to average net assets 5.48%+
Portfolio turnover rate 17%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.19%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.22
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.99
Net investment income 0.47
Net realized and unrealized gain/(loss) on investments (1.61)
Net increase/(decrease) in net assets resulting from investment operations (1.14)
Dividends from net investment income (0.47)
Net asset value, end of period $ 8.38
Total return++ (11.71)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 6
Ratio of operating expenses to average net assets 0.39%+
Ratio of net investment income to average net assets 5.42%+
Portfolio turnover rate 35%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.22%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.40
</TABLE>
* The Nations Georgia Municipal Bond Fund Investor A Shares commenced
operations on December 30, 1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
10
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR
05/31/95 ENDED ENDED ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92 11/30/91
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 10.00 $ 11.09 $ 10.72 $ 10.44 $ 10.21
Net investment income 0.24 0.48 0.51 0.54 0.60
Net realized and unrealized
gain/(loss) on investments 0.79 (0.99) 0.44 0.31 0.24
Net increase/(decrease) in net
assets resulting from
investment operations 1.03 (0.51) 0.95 0.85 0.84
Distributions:
Dividends from net investment
income (0.24) (0.48) (0.51) (0.54) (0.60)
Distributions from net realized
capital gains (0.03) (0.10) (0.07) (0.03) (0.01)
Distributions in excess of net
realized capital gains -- (0.00)# -- -- --
Total distributions (0.27) (0.58) (0.58) (0.57) (0.61)
Net asset value, end of period $ 10.76 $ 10.00 $ 11.09 $ 10.72 $ 10.44
Total return++ 10.46% (4.82)% 8.96% 8.32%+++ 8.46%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000's) $ 21,789 $ 22,145 $ 22,144 $ 20,092 $ 9,934
Ratio of operating expenses to
average net assets 0.75%+ 0.71% 0.64% 0.48% 0.20%
Ratio of net investment income to
average net assets 4.69%+ 4.55% 4.58% 4.98% 5.76%
Portfolio turnover rate 7% 22% 26% 38% 26%
Ratio of operating expenses to
average net assets before fee
waivers and/or expense
reimbursements 0.97%+ 0.91% 0.88% 0.87% 0.71%
Net investment income per share
before fee waivers and/or
expense reimbursements $ 0.23 $ 0.46 $ 0.48 $ 0.50 $ 0.55
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/90*
<S> <C>
Operating performance:
Net asset value, beginning of
period $ 10.00
Net investment income 0.16
Net realized and unrealized
gain/(loss) on investments 0.21
Net increase/(decrease) in net
assets resulting from
investment operations 0.37
Distributions:
Dividends from net investment
income (0.16)
Distributions from net realized
capital gains --
Distributions in excess of net
realized capital gains --
Total distributions (0.16)
Net asset value, end of period $ 10.21
Total return++ 3.72%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000's) $ 2,228
Ratio of operating expenses to
average net assets 0.21%+
Ratio of net investment income to
average net assets 6.12%+
Portfolio turnover rate 49%
Ratio of operating expenses to
average net assets before fee
waivers and/or expense
reimbursements 0.84%+
Net investment income per share
before fee waivers and/or
expense reimbursements $ 0.13
</TABLE>
* The Nations Maryland Intermediate Municipal Bond Fund Investor A Shares
commenced operations on September 1, 1990.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
11
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NATIONS MARYLAND MUNICIPAL BOND FUND
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 8.37 $ 9.77
Net investment income 0.24 0.49
Net realized and unrealized gain/(loss) on investments 1.02 (1.40)
Net increase/(decrease) in net assets resulting from investment operations 1.26 (0.91)
Dividends from net investment income (0.24) (0.49)
Net asset value, end of period $ 9.39 $ 8.37
Total return++ 15.18% (9.59)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 572 $ 9
Ratio of operating expenses to average net assets 0.54%+ 0.39%
Ratio of net investment income to average net assets 5.23%+ 5.30%
Portfolio turnover rate 5% 39%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.22%+ 1.48%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.21 $ 0.41
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.80
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.03)
Net increase/(decrease) in net assets resulting from investment operations --
Dividends from net investment income (0.03)
Net asset value, end of period $ 9.77
Total return++ 0.05%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 6
Ratio of operating expenses to average net assets 0.13%+
Ratio of net investment income to average net assets 3.97%+
Portfolio turnover rate 1%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.76%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.02
</TABLE>
* The Nations Maryland Municipal Bond Fund Investor A Shares commenced
operations on November 4, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.53 $ 10.46
Net investment income 0.22 0.42
Net realized and unrealized gain/(loss) on investments 0.81 (0.88)
Net increase/(decrease) in net assets resulting from investment operations 1.03 (0.46)
Distributions:
Dividends from net investment income (0.22) (0.42)
Distributions from net realized capital gains (0.01) (0.05)
Total distributions (0.23) (0.47)
Net asset value, end of period $ 10.33 $ 9.53
Total return++ 10.87% (4.51)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 9,658 $ 8,896
Ratio of operating expenses to average net assets 0.76%+ 0.73%
Ratio of net investment income to average net assets 4.37%+ 4.20%
Portfolio turnover rate 36% 37%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.02%+ 1.00%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.21 $ 0.40
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.01
Net investment income 0.42
Net realized and unrealized gain/(loss) on investments 0.45
Net increase/(decrease) in net assets resulting from investment operations 0.87
Distributions:
Dividends from net investment income (0.42)
Distributions from net realized capital gains --
Total distributions (0.42)
Net asset value, end of period $ 10.46
Total return++ 8.76%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 13,749
Ratio of operating expenses to average net assets 0.57%+
Ratio of net investment income to average net assets 4.08%+
Portfolio turnover rate 29%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.00%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.38
</TABLE>
* The Nations North Carolina Intermediate Municipal Bond Fund Investor A Shares
commenced operations on December 14, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
12
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 8.36 $ 9.85
Net investment income 0.25 0.50
Net realized and unrealized gain/(loss) on investments 1.11 (1.49)
Net increase/(decrease) in net assets resulting from investment operations 1.36 (0.99)
Dividends from net investment income (0.25) (0.50)
Net asset value, end of period $ 9.47 $ 8.36
Total return++ 16.39% (10.41)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,244 $ 1,161
Ratio of operating expenses to average net assets 0.51%+ 0.39%
Ratio of net investment income to average net assets 5.45%+ 5.35%
Portfolio turnover rate 20% 29%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.13%+ 1.10%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.22 $ 0.43
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.97
Net investment income 0.04
Net realized and unrealized gain/(loss) on investments (0.12)
Net increase/(decrease) in net assets resulting from investment operations (0.08)
Dividends from net investment income (0.04)
Net asset value, end of period $ 9.85
Total return++ (0.80)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,085
Ratio of operating expenses to average net assets 0.09%+
Ratio of net investment income to average net assets 3.97%+
Portfolio turnover rate 10%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.21%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.03
</TABLE>
* The Nations North Carolina Municipal Bond Fund Investor A Shares commenced
operations on November 1, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.76 $ 10.61 $ 10.18
Net investment income 0.24 0.48 0.48
Net realized and unrealized gain/(loss) on investments 0.74 (0.84) 0.43
Net increase/(decrease) in net assets resulting from
investment operations 0.98 (0.36) 0.91
Distributions:
Dividends from net investment income (0.24) (0.48) (0.48)
Distributions in excess of net investment income -- (0.00)# --
Distributions from net realized capital gains -- (0.01) --
Total distributions (0.24) (0.49) (0.48)
Net asset value, end of period $ 10.50 $ 9.76 $ 10.61
Total return++ 10.18% (3.54)% 9.16%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 16,147 $ 16,378 $ 20,024
Ratio of operating expenses to average net assets 0.75%+ 0.72% 0.60%
Ratio of operating expenses to average net assets
including interest expense 0.76%+ -- --
Ratio of net investment income to average net assets 4.83%+ 4.64% 4.53%
Portfolio turnover rate 6% 30% 11%
Ratio of operating expenses to average net assets before
fee waivers and/or expense reimbursements 0.96%+ 0.93% 0.90%
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.23 $ 0.46 $ 0.45
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.98
Net investment income 0.30
Net realized and unrealized gain/(loss) on investments 0.20
Net increase/(decrease) in net assets resulting from
investment operations 0.50
Distributions:
Dividends from net investment income (0.30)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.30)
Net asset value, end of period $ 10.18
Total return++ 5.03%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 7,414
Ratio of operating expenses to average net assets 0.33%+
Ratio of operating expenses to average net assets
including interest expense --
Ratio of net investment income to average net assets 4.83%+
Portfolio turnover rate 7%
Ratio of operating expenses to average net assets before
fee waivers and/or expense reimbursements 0.85%+
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.27
</TABLE>
* The Nations South Carolina Intermediate Municipal Bond Fund Investor A
Shares commenced operations on May 5, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
13
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SOUTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 8.65 $ 9.86
Net investment income 0.26 0.50
Net realized and unrealized gain/(loss) on investments 1.08 (1.21)
Net increase/(decrease) in net assets resulting from investment operations 1.34 (0.71)
Dividends from net investment income (0.26) (0.50)
Net asset value, end of year $ 9.73 $ 8.65
Total return++ 15.60% (7.45)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 201 $ 140
Ratio of operating expenses to average net assets 0.54%+ 0.39%
Ratio of net investment income to average net assets 5.48%+ 5.30%
Portfolio turnover rate 5% 14%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1,19%+ 1.30%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.23 $ 0.42
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.87
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.01)
Net increase/(decrease) in net assets resulting from investment operations 0.02
Dividends from net investment income (0.03)
Net asset value, end of year $ 9.86
Total return++ 0.21%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 14
Ratio of operating expenses to average net assets 0.10%+
Ratio of net investment income to average net assets 4.16%+
Portfolio turnover rate 8%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.63%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.02
</TABLE>
* The Nations South Carolina Municipal Bond Fund Investor A Shares commenced
operations on November 8, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.30 $ 10.18
Net investment income 0.22 0.43
Net realized and unrealized gain/(loss) on investments 0.72 (0.87)
Net increase/(decrease) in net assets resulting from investment operations 0.94 (0.44)
Distributions:
Dividends from net investment income (0.22) (0.43)
Distributions in excess of net investment income -- (0.00)#
Distributions from net realized capital gains -- (0.01)
Total distributions (0.22) (0.44)
Net asset value, end of period $ 10.02 $ 9.30
Total return++ 10.23% (4.41)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 8,234 $ 7,831
Ratio of operating expenses to average net assets 0.76%+ 0.70%
Ratio of operating expenses to average net assets including interest expense -- 0.71%
Ratio of net investment income to average net assets 4.60%+ 4.38%
Portfolio turnover rate 17% 41%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.07%+ 1.07%
Net investment income per share before fee waivers and/or expense reimbursements $ 0.21 $ 0.40
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.29
Net realized and unrealized gain/(loss) on investments 0.18
Net increase/(decrease) in net assets resulting from investment operations 0.47
Distributions:
Dividends from net investment income (0.29)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.29)
Net asset value, end of period $ 10.18
Total return++ 4.68%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 15,573
Ratio of operating expenses to average net assets 0.42%+
Ratio of operating expenses to average net assets including interest expense --
Ratio of net investment income to average net assets 4.16%+
Portfolio turnover rate 16%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.09%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.24
</TABLE>
* The Nations Tennessee Intermediate Municipal Bond Fund Investor A Shares
commenced operations on April 2, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
14
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NATIONS TENNESSEE MUNICIPAL BOND FUND
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 8.58 $ 9.80
Net investment income 0.25 0.50
Net realized and unrealized gain/(loss) on investments 1.05 (1.22)
Net increase/(decrease) in net assets resulting from investment operations 1.30 (0.72)
Dividends from net investment income (0.25) (0.50)
Net asset value, end of period $ 9.63 $ 8.58
Total return++ 15.36% (7.58)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 97 $ 43
Ratio of operating expenses to average net assets 0.54%+ 0.39%
Ratio of net investment income to average net assets 5.52%+ 5.38%
Portfolio turnover rate 30% 38%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.30%+ 1.38%
Net investment income per share before fee waivers and/or expense reimbursements $ 0.22 $ 0.42
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.88
Net investment income 0.04
Net realized and unrealized gain/(loss) on investments (0.08)
Net increase/(decrease) in net assets resulting from investment operations (0.04)
Dividends from net investment income (0.04)
Net asset value, end of period $ 9.80
Total return++ (0.43)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 34
Ratio of operating expenses to average net assets 0.17%+
Ratio of net investment income to average net assets 4.31%+
Portfolio turnover rate 3%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.86%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.03
</TABLE>
* The Nations Tennessee Municipal Bond Fund Investor A Shares commenced
operations on November 2, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.53 $ 10.35
Net investment income 0.22 0.42
Net realized and unrealized gain/(loss) on investments 0.65 (0.79)
Net increase/(decrease) in net assets resulting from investment operations 0.87 (0.37)
Distributions:
Dividends from net investment income (0.22) (0.42)
Distributions in excess of net investment income -- (0.00)#
Distributions from net realized capital gains -- (0.03)
Total distributions (0.22) (0.45)
Net asset value, end of period $ 10.18 $ 9.53
Total return++ 9.24% (3.66)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 832 $ 718
Ratio of operating expenses to average net assets 0.76%+ 0.73%
Ratio of net investment income to average net assets 4.52%+ 4.22%
Portfolio turnover rate 38% 61%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.00%+ 0.96%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.21 $ 0.40
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.15
Net investment income 0.37
Net realized and unrealized gain/(loss) on investments 0.20
Net increase/(decrease) in net assets resulting from investment operations 0.57
Distributions:
Dividends from net investment income (0.37)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.37)
Net asset value, end of period $ 10.35
Total return++ 5.64%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 968
Ratio of operating expenses to average net assets 0.59%+
Ratio of net investment income to average net assets 4.28%+
Portfolio turnover rate 63%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 0.97%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.34
</TABLE>
* The Nations Texas Intermediate Municipal Bond Fund Investor A Shares
commenced operations on February 4, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
15
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TEXAS MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTOR A SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.39
Net investment income 0.25
Net realized and unrealized gain/(loss) on investments 1.05
Net increase/(decrease) in net assets resulting from investment operations 1.30
Dividends from net investment income (0.25)
Net asset value, end of period $ 9.44
Total return++ 15.65%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 95
Ratio of operating expenses to average net assets 0.54%+
Ratio of net investment income to average net assets 5.53%+
Portfolio turnover rate 35%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.19%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.22
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.92
Net investment income 0.47
Net realized and unrealized gain/(loss) on investments (1.53)
Net increase/(decrease) in net assets resulting from investment operations (1.06)
Dividends from net investment income (0.47)
Net asset value, end of period $ 8.39
Total return++ (10.98)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 55
Ratio of operating expenses to average net assets 0.40%+
Ratio of net investment income to average net assets 5.34%+
Portfolio turnover rate 107%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.24%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.39
</TABLE>
* The Nations Texas Municipal Bond Fund Investor A Shares commenced operations
on December 17, 1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
16
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR
05/31/95 ENDED ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.94 $ 10.99 $ 10.59 $ 10.34
Net investment income 0.24 0.48 0.51 0.54
Net realized and unrealized
gain/(loss) on investments 0.73 (0.96) 0.42 0.29
Net increase/(decrease) in net
assets resulting from investment
operations 0.97 (0.48) 0.93 0.83
Distributions:
Dividends from net investment income (0.24) (0.48) (0.51) (0.54)
Distributions from net realized
capital gains -- (0.09) (0.02) (0.04)
Distributions in excess of net
realized capital gains -- (0.00)# -- --
Total distributions (0.24) (0.57) (0.53) (0.58)
Net asset value, end of period $ 10.67 $ 9.94 $ 10.99 $ 10.59
Total return++ 9.92% (4.52)% 8.91% 8.18%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 77,223 $ 79,412 $ 103,689 $ 76,650
Ratio of operating expenses to
average net assets 0.82%+ 0.79% 0.72% 0.65%
Ratio of net investment income to
average net assets 4.74%+ 4.58% 4.65% 5.04%
Portfolio turnover rate 10% 14% 26% 13%
Ratio of operating expenses to
average net assets before fee
waivers and/or expense
reimbursements 1.02%+ 0.91% 0.84% 0.97%
Net investment income per share
before fee waivers and/or expense
reimbursements $ 0.23 $ 0.47 $ 0.49 $ 0.50
</TABLE>
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
INVESTOR A SHARES 11/30/91 11/30/90*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.14 $ 10.08
Net investment income 0.58 0.61
Net realized and unrealized
gain/(loss) on investments 0.21 0.11
Net increase/(decrease) in net
assets resulting from investment
operations 0.79 0.72
Distributions:
Dividends from net investment income (0.58) (0.66)
Distributions from net realized
capital gains (0.01) --
Distributions in excess of net
realized capital gains -- --
Total distributions (0.59) (0.66)
Net asset value, end of period $ 10.34 $ 10.14
Total return++ 8.04%+++ 7.41%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 44,540 $ 24,303
Ratio of operating expenses to
average net assets 0.45% 0.26%+
Ratio of net investment income to
average net assets 5.67% 6.09%+
Portfolio turnover rate 24% 19%
Ratio of operating expenses to
average net assets before fee
waivers and/or expense
reimbursements 0.73% 0.80%+
Net investment income per share
before fee waivers and/or expense
reimbursements $ 0.55 $ 0.55
</TABLE>
* The Nations Virginia Intermediate Municipal Bond Fund Investor A Shares
commenced operations on December 5, 1989.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
17
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS VIRGINIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 8.29 $ 9.77
Net investment income 0.25 0.49
Net realized and unrealized gain/(loss) on investments 1.07 (1.48)
Net increase/(decrease) in net assets resulting from investment operations 1.32 (0.99)
Dividends from net investment income (0.25) (0.49)
Net asset value, end of period $ 9.36 $ 8.29
Total return++ 16.05% (10.44)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 420 $ 168
Ratio of operating expenses to average net assets 0.54%+ 0.39%
Ratio of net investment income to average net assets 5.51%+ 5.34%
Portfolio turnover rate 0% 61%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.18%+ 1.17%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.23 $ 0.43
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.84
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.07)
Net increase/(decrease) in net assets resulting from investment operations (0.04)
Dividends from net investment income (0.03)
Net asset value, end of period $ 9.77
Total return++ (0.42)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 25
Ratio of operating expenses to average net assets 0.10%+
Ratio of net investment income to average net assets 3.88%+
Portfolio turnover rate 0%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.30%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.02
</TABLE>
* The Nations Virginia Municipal Bond Fund Investor A Shares commenced
operations on November 8, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
Objectives
NATIONS SHORT-TERM MUNICIPAL INCOME FUND, NATIONS INTERMEDIATE MUNICIPAL BOND
FUND AND NATIONS MUNICIPAL INCOME FUND: The investment objective of Nations
Short-Term Municipal Income Fund and Nations Municipal Income Fund is to seek a
high level of current interest income that is exempt from Federal income taxes.
Such Funds invest primarily in investment grade obligations issued by or on
behalf of states, territories, and possessions of the United States, the
District of Columbia, and their political subdivisions, agencies,
instrumentalities, and authorities, the interest on which, in the opinion of
counsel to the issuer or bond counsel, is exempt from Federal income taxes
("Municipal Securities").
The Nations Intermediate Municipal Bond Fund's investment objective is to seek
higher than money market yields by investing primarily in intermediate-term,
investment grade Municipal Securities which make interest payments that are
exempt from Federal income taxes.
During normal market conditions, at least 80% of the total assets of Nations
Intermediate Municipal Bond Fund and Nations Municipal Income Fund will be
invested in Municipal Securities with remaining maturities of 40 years or less.
The average dollar weighted effective maturity of the Nations Municipal Income
Fund will be at least five years, except during temporary defensive periods.
During normal market conditions, the average dollar weighted effective maturity
of Nations Short-Term Municipal Income Fund will be three years or less. The
average dollar weighted effective maturity of Nations Intermediate Municipal
Bond Fund will be between three and ten years, except during temporary defensive
periods.
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND, NATIONS GEORGIA INTERMEDIATE
MUNICIPAL BOND FUND, NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND, NATIONS
NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND, NATIONS SOUTH CAROLINA
INTERMEDIATE MUNICIPAL BOND FUND, NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND
FUND, NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND AND NATIONS VIRGINIA
INTERMEDIATE MUNICIPAL BOND FUND, SOMETIMES COLLECTIVELY REFERRED TO AS THE
"STATE INTERMEDIATE MUNICIPAL BOND FUNDS," AND NATIONS FLORIDA MUNICIPAL BOND
FUND, NATIONS GEORGIA MUNICIPAL BOND FUND, NATIONS MARYLAND MUNICIPAL BOND FUND,
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND, NATIONS SOUTH CAROLINA MUNICIPAL
BOND FUND, NATIONS TENNESSEE MUNICIPAL BOND FUND, NATIONS TEXAS MUNICIPAL BOND
FUND AND NATIONS VIRGINIA MUNICIPAL BOND FUND, SOMETIMES COLLECTIVELY REFERRED
TO AS THE "STATE MUNICIPAL BOND FUNDS": As described below, each of these Funds
seeks to provide
18
<PAGE>
investors with as high a level of income exempt from Federal income taxes as is
consistent with prudent investing, while seeking preservation of shareholders'
capital. Each Fund also seeks to provide a maximum level of income which is
exempt from the personal income taxes, if any, for resident shareholders of the
Fund's respective state.
The Nations Florida Intermediate Municipal Bond Fund's and Nations Florida
Municipal Bond Fund's investment objective is to seek a high level of current
interest income exempt from Federal income taxes and the Florida state
intangibles tax, consistent with the relative stability of principal. The
Nations Georgia Intermediate Municipal Bond Fund's and Nations Georgia Municipal
Bond Fund's investment objective is to seek a high level of current interest
income exempt from Federal and Georgia state income taxes and state intangibles
taxes, consistent with relative stability of principal. The Nations Maryland
Intermediate Municipal Bond Fund's and Nations Maryland Municipal Bond Fund's
investment objective is to seek a high level of current interest income exempt
from both Federal and Maryland state income taxes, consistent with relative
stability of principal. The Nations North Carolina Intermediate Municipal Bond
Fund's and Nations North Carolina Municipal Bond Fund's investment objective is
to seek a high level of current interest income exempt from Federal and North
Carolina state income taxes and state intangibles taxes, consistent with the
relative stability of principal. The Nations South Carolina Intermediate
Municipal Bond Fund's and Nations South Carolina Municipal Bond Fund's
investment objective is to seek a high level of current interest income exempt
from both Federal and South Carolina state income taxes, consistent with
relative stability of principal. The Nations Tennessee Intermediate Municipal
Bond Fund's and Nations Tennessee Municipal Bond Fund's investment objective is
to seek a high level of current interest income exempt from both Federal and
Tennessee state income taxes, consistent with relative stability of principal.
The Nations Texas Intermediate Municipal Bond Fund's and Nations Texas Municipal
Bond Fund's investment objective is to seek a high level of current interest
income exempt from Federal income taxes, consistent with the relative stability
of principal. The Nations Virginia Intermediate Municipal Bond Fund's and
Nations Virginia Municipal Bond Fund's investment objective is to seek a high
level of current interest income exempt from both Federal and Virginia state
income taxes, consistent with relative stability of principal.
Each of the above State Intermediate Municipal Bond Funds and State Municipal
Bond Funds operates as a non-diversified fund (except to the extent
diversification is required for Federal income tax purposes). For these tax
purposes, with respect to 50% of the value of its assets, each Fund invests no
more than 5% of such assets in securities of a single issuer (except the U.S.
Government or its agencies or instrumentalities). Each Fund may not invest more
than 25% of its assets in the securities of a single issuer. The average dollar
weighted effective maturity of each of the State Intermediate Municipal Bond
Funds will be between three and ten years, except during temporary defensive
periods. The average dollar weighted effective maturity of the State Municipal
Bond Funds will be at least five years, except during temporary defensive
periods. The value of the Funds' portfolios can be expected to vary inversely
with changes in prevailing interest rates.
How Objectives Are Pursued
NATIONS SHORT-TERM MUNICIPAL INCOME FUND, NATIONS INTERMEDIATE MUNICIPAL BOND
FUND AND NATIONS MUNICIPAL INCOME FUND: Under normal market conditions, the
Nations Short-Term Municipal Income Fund, Nations Intermediate Municipal Bond
Fund and Nations Municipal Income Fund will invest at least 65% of the total
value of their assets in Municipal Securities which will be rated investment
grade at the time of purchase by at least one of the following rating agencies:
Standard & Poor's Corporation ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Duff & Phelps Credit Rating Co. ("D&P"), Fitch Investors Service,
Inc. ("Fitch"), IBCA Limited or its affiliate IBCA Inc. (collectively "IBCA"),
or Thomson BankWatch, Inc. ("BankWatch") or, if unrated, determined by the
Adviser to be of comparable quality at the time of purchase to rated obligations
that may be acquired by a Fund. Obligations rated in the lowest of the top four
investment grade rating categories (e.g. rated "BBB" by S&P or "Baa" by Moody's)
have speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations.
Subsequent to its purchase by a Fund, an issue of Municipal Securities may cease
to be rated, or its rating may be reduced below the minimum rating required for
purchase by a Fund. The Adviser will consider such an event in determining
whether a Fund should continue to hold the obligation. See "Appendix B" for a
description of these rating designations.
Up to 35% of the assets of Nations Short-Term Municipal Income Fund, Nations
Intermediate Municipal Bond Fund and Nations Municipal Income Fund may be
invested in lower-quality Municipal Securities rated "B" or better by Moody's or
S&P, or if not so rated, determined by the Adviser to be of comparable quality.
Secur-
19
<PAGE>
ities which are rated "B" generally lack characteristics of the desirable
investment, and assurance of interest and principal payment over any long period
of time may be small. Non-investment-grade debt securities are sometimes
referred to as "high yield bonds" or "junk bonds," tend to have speculative
characteristics, generally involve more risk of principal and income than higher
rated securities, and have yields and market values that tend to fluctuate more
than higher quality securities. See "Appendix A -- Lower-Rated Debt Securities."
During temporary defensive periods, the Funds may invest in short-term taxable
obligations in such proportions as, in the opinion of the Adviser, prevailing
market or economic conditions warrant. Taxable obligations that may be acquired
by a Fund include short-term U.S. Government obligations, repurchase agreements,
and short-term debt securities. Under normal market conditions, each Fund's
investments in taxable obligations and private activity bonds (see "Appendix
A -- Municipal Securities"), the interest on which may be treated as a specific
tax preference item under the Federal alternative minimum tax, will not exceed
20% of its total assets at the time of purchase. The Funds may hold uninvested
cash reserves pending investment or during defensive periods. The value of a
Fund's portfolio generally will vary inversely with changes in prevailing
interest rates. For additional information concerning the Funds' investment
practices, see "Appendix A."
STATE INTERMEDIATE MUNICIPAL BOND FUNDS AND STATE MUNICIPAL BOND FUNDS: Under
normal market conditions, at least 65% of the total value of the assets of the
State Intermediate Municipal Bond Funds and the State Municipal Bond Funds will
be invested in municipal bonds, and substantially all of each Fund's assets will
be invested in debt instruments, issued by or on behalf of the pertinent state
and its political subdivisions, agencies, instrumentalities and authorities.
Dividends paid by each of these Funds which are derived from interest
attributable to tax-exempt obligations of the pertinent state and that state's
political subdivisions, agencies, instrumentalities and authorities, as well as
certain other governmental issuers such as Puerto Rico, will be exempt from
regular Federal income taxes and (with the exception of Texas and Florida) the
income tax of the pertinent state. Texas and Florida do not impose a state
income tax; however, Florida, Georgia and North Carolina do impose a state
intangibles tax. Dividends derived from interest on obligations of other
governmental issuers will be exempt from regular Federal income taxes, but
generally will be subject to state income tax (with the exception of Texas and
Florida). (See "How Dividends and Distributions are Made; Tax Information.")
During normal market conditions and as a matter of fundamental investment
policy, each of these Funds will invest at least 80% of its total net assets in
obligations the interest on which will be exempt from regular Federal income tax
and (with the exception of Texas and Florida) the income tax of the pertinent
state.
Municipal Securities acquired by the Funds will be rated investment grade at the
time of purchase by D&P, Fitch, S&P, Moody's, IBCA or BankWatch or, if unrated,
determined by the Adviser to be of comparable quality at the time of purchase to
rated obligations that may be acquired by the Funds. Obligations rated in the
lowest of the top four investment grade rating categories (e.g. rated "BBB" by
S&P or "Baa" by Moody's) have speculative characteristics, and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade debt obligations. Subsequent to its purchase by a Fund, an issue of
Municipal Securities may cease to be rated, or its rating may be reduced below
the minimum rating required for purchase by a Fund. The Adviser will consider
such an event in determining whether a Fund should continue to hold the
obligation. See "Appendix B" below for a description of these rating
designations.
The Funds also may invest in Municipal Securities with stated maturities of less
than one year, which are determined to present minimal credit risks and which at
the time of purchase are considered to be of high quality, issued by or on
behalf of states, territories, and possessions of the United States, the
District of Columbia, and their political subdivisions, agencies,
instrumentalities, and authorities, and the interest on which, in the opinion of
counsel to the issuer or bond counsel, is exempt from regular Federal income
taxes.
During temporary defensive periods, the Funds may invest in short-term taxable
obligations in such proportions as, in the opinion of the Adviser, prevailing
market or economic conditions warrant. Taxable obligations that may be acquired
by the Funds include short-term U.S. Government obligations; repurchase
agreements; options; and futures contracts. Under normal market conditions, each
Fund's investments in taxable obligations and private activity bonds (see
"Appendix A -- Municipal Securities"), the interest on which may be treated as a
specific tax preference item under the Federal alternative minimum tax, will not
exceed 20% of its total assets at the time of purchase. The Funds also may hold
uninvested cash reserves pending investment or during defensive periods. For
additional information concerning the Funds' investment practices, see "Appendix
A."
GENERAL: Each Fund may invest in certain specified derivative securities,
including: interest rate swaps, caps and floors for hedging purposes;
exchange-traded options; over-the-counter options executed with primary dealers,
including long calls and puts and covered calls to enhance return; and U.S. and
foreign exchange-traded financial futures and options thereon approved by the
Commodity Futures Trading Commission ("CFTC") for
20
<PAGE>
market exposure risk-management. Each Fund also may lend its portfolio
securities to qualified institutional investors and may invest in restricted,
private placement and other illiquid securities. Additionally, each Fund may
purchase securities issued by other investment companies, consistent with the
Fund's investment objective and policies.
PORTFOLIO TURNOVER: Generally, the Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. If a Fund's annual portfolio turnover rate exceeds 100%, it may
result in higher brokerage costs and possible tax consequences for the Fund and
its shareholders. For the Funds' portfolio turnover rates, see "Financial
Highlights."
RISK CONSIDERATIONS: Although the Adviser will seek to achieve the investment
objective of each Fund, there is no assurance that it will be able to do so. No
single Fund should be considered, by itself, to provide a complete investment
program for any investor. Investments in a Fund are not insured against loss of
principal.
The value of a Fund's investments in debt securities will tend to decrease when
interest rates rise and increase when interest rates fall. In general,
longer-term debt instruments tend to fluctuate in value more than shorter-term
debt instruments in response to interest rate movements. In addition, debt
securities that are not backed by the United States Government are subject to
credit risk, which is the risk that the issuer may not be able to pay principal
and/or interest when due. Since each of the State Intermediate Municipal Bond
Funds and State Municipal Bond Funds invests primarily in securities issued by
entities located in a single state, such Funds are more susceptible to changes
in value due to political or economic changes affecting that state or its
subdivisions.
Certain of the Funds' investments constitute derivative securities, which are
securities whose value is derived, at least in part, from an underlying index or
reference rate. There are certain types of derivative securities that can, under
certain circumstances, significantly increase a purchaser's exposure to market
or other risks. The Funds' investment adviser, however, only purchases
derivative securities in circumstances where it believes such purchases are
consistent with the Fund's investment objective and do not unduly increase the
Fund's exposure to market or other risks. For additional risk information
regarding the Funds' investments in particular instruments, see "Appendix
A -- Portfolio Securities."
INVESTMENT LIMITATIONS: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAI.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
tax-exempt securities issued by state or municipal governments and their
political subdivisions are not considered members of any industry.)
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
Nations Short-Term Municipal Income Fund, Nations Intermediate Municipal Bond
Fund and Nations Municipal Income Fund may not:
Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's
total assets would be invested in the securities of such issuer, except
that up to 25% of the value of the Fund's total assets may be invested
without regard to these limitations and with respect to 75% of such Fund's
assets, such Fund will not hold more than 10% of the voting securities of
any issuer.
The State Intermediate Municipal Bond Funds and the State Municipal Bond Funds
may not:
Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 25% of the value of a Fund's
total assets would be invested in the securities of one issuer, and with
respect to 50% of such Fund's total assets, more than 5% of its assets
would be invested in the securities of one issuer.
As a matter of fundamental policy, except during defensive periods, the State
Intermediate Municipal Bond Funds and the State Municipal Bond Funds will invest
at least 80% of their respective total net assets in Municipal Securities the
interest on which is exempt from Federal income taxes and the pertinent state's
income taxes (with the exception of Texas and Florida). Similarly, as a matter
of fundamental policy, except during defensive periods, the Nations Short-Term
Municipal Income Fund, Nations Intermediate Municipal Bond Fund and
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Nations Municipal Income Fund will invest at least 80% of their respective total
net assets in Municipal Securities the interest on which is exempt from Federal
income taxes. For purposes of these fundamental policies, private activity bonds
are included in the term "Municipal Securities" only if the interest paid
thereon is exempt from Federal income taxes and not treated as a specific tax
preference item under the Federal alternative minimum tax.
The investment objective and policies of each Fund, unless otherwise specified,
may be changed without a vote of the Fund's shareholders. If the investment
objective or policies of a Fund change, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current position
and needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus and the SAI. Should a Fund determine that any such
commitment is no longer in the best interests of the Fund, it may consider
terminating sales of its shares in the states involved.
How Performance Is Shown
From time to time a Fund may advertise the total return, yield and
tax-equivalent yield on a class of shares. TOTAL RETURN, YIELD AND
TAX-EQUIVALENT YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a class of shares
of a Fund may be calculated on an average annual total return basis or an
aggregate total return basis. Average annual total return refers to the average
annual compounded rates of return on a class of shares over one-, five-, and
ten-year periods or the life of a Fund (as stated in the advertisement) that
would equate an initial amount invested at the beginning of a stated period to
the ending redeemable value of the investment (reflecting the deduction of any
applicable contingent deferred sales charge ("CDSC")), assuming the reinvestment
of all dividend and capital gains distributions. Aggregate total return reflects
the total percentage change in the value of the investment over the measuring
period, again assuming the reinvestment of all dividends and capital gain
distributions. Total return may also be presented for other periods or may not
reflect a deduction of the CDSC.
"Yield" is calculated by dividing the annualized net investment income per share
during a recent 30-day (or one month) period of a class of shares of a Fund by
the maximum public offering price per share on the last day of that period. The
yield on a class of shares does not reflect deduction of any applicable CDSC.
The "tax-equivalent yield" of a class of shares of a Fund also may be quoted
from time to time, which shows the level of taxable yield needed to produce an
after-tax equivalent to the particular class's tax-free yield. This is done by
increasing such class's yield (calculated as above) by the amount necessary to
reflect the payment of Federal income tax at a stated tax rate.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of the Fund's portfolio and the Fund's
operating expenses. Investment performance also often reflects the risks
associated with a Fund's investment objective and policies. These factors should
be considered when comparing a Fund's investment results to those of other
mutual funds and other investment vehicles. Since yields fluctuate, yield data
cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
In addition to Investor A Shares, the Funds offer Trust A, Trust B, Investor C
and Investor N Shares. Each class of shares may bear different sales charges,
shareholder servicing fees, loads and other expenses, which may cause the
performance of a class to differ from the performance of the other classes.
Total return and yield quotations will be computed separately for each class of
the Funds' shares. Any quotation of total return or yield not reflecting CDSCs
would be reduced if such charges were reflected. Any fees charged by a selling
agent and/or servicing agent directly to its customers' accounts in connection
with investments in the Funds will not be included in calculations of total
return or yield. The Funds' annual report contains additional performance
information and is available upon request without charge from the Funds'
distributor or your selling agent.
How The Funds Are Managed
The business and affairs of Nations Fund Trust are managed under the direction
of its Trustees. The SAI contains the names of and general background
information concerning the Trustees of Nations Fund Trust.
Nations Fund and the Adviser have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially
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comply in all material respects with the recommendations set forth in the May 9,
1994 Report of the Advisory Group on Personal Investing of the Investment
Company Institute.
INVESTMENT ADVISER: NationsBanc Advisors, Inc., serves as investment adviser to
the Funds. NBAI is a wholly owned subsidiary of NationsBank, which in turn is a
wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation. NBAI has its principal
offices at One NationsBank Plaza, Charlotte, North Carolina 28255.
TradeStreet Investment Associates, Inc., with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as sub-investment
adviser to the Funds. TradeStreet is a wholly owned subsidiary of NationsBank,
which in turn is a wholly owned banking subsidiary of NationsBank Corporation, a
bank holding company organized as a North Carolina corporation.
TradeStreet provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking.
Subject to the general supervision of the Trustees of Nations Fund Trust, and in
accordance with each Fund's investment policies, the Adviser formulates
guidelines and lists of approved investments for each Fund, makes decisions with
respect to and places orders for each Fund's purchases and sales of portfolio
securities and maintains records relating to such purchases and sales. The
Adviser is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions which are affiliated with the Adviser or
which have sold shares in the Funds, if the Adviser believes that the quality of
the transaction and the commission are comparable to what they would be with
other qualified brokerage firms. From time to time, to the extent consistent
with their investment objectives, policies and restrictions, the Funds may
invest in securities of companies with which NationsBank has a lending
relationship. For the services provided and expenses assumed pursuant to an
Investment Advisory Agreement, NBAI is entitled to receive advisory fees,
computed daily and paid monthly, at the annual rates of: 0.50% of the average
daily net assets of each of Nations Short-Term Municipal Income Fund, Nations
Intermediate Municipal Bond Fund and the State Intermediate Municipal Bond
Funds; and 0.60% of the average daily net assets of each of Nations Municipal
Income Fund and the State Municipal Bond Funds.
For the services provided and the expenses assumed pursuant to a sub-advisory
agreement, NBAI will pay TradeStreet sub-advisory fees, computed daily and paid
monthly, at the annual rates of 0.07% of the average daily net assets of each
Fund.
From time to time, NBAI and/or TradeStreet may waive (either voluntarily or
pursuant to applicable state limitations) advisory fees payable by a Fund. For
the fiscal year ended November 30, 1994, after waivers, Nations Fund Trust paid
NationsBank under a prior Advisory Agreement advisory fees at the indicated rate
of the Funds' average daily net assets: Nations Short-Term Municipal Income
Fund -- 0.10%; Nations Intermediate Municipal Bond Fund -- 0%; Nations Municipal
Income Fund -- 0.32%; Nations Florida Intermediate Municipal Bond Fund -- 0.30%;
Nations Florida Municipal Bond Fund -- 0%; Nations Georgia Intermediate
Municipal Bond Fund -- 0.30%; Nations Georgia Municipal Bond Fund -- 0%; Nations
Maryland Intermediate Municipal Bond Fund -- 0.30%; Nations Maryland Municipal
Bond Fund -- 0%; Nations North Carolina Intermediate Municipal Bond
Fund -- 0.24%; Nations North Carolina Municipal Bond Fund -- 0%; Nations South
Carolina Intermediate Municipal Bond Fund -- 0.30%; Nations South Carolina
Municipal Bond Fund -- 0%; Nations Tennessee Intermediate Municipal Bond
Fund -- 0.15%; Nations Tennessee Municipal Bond Fund -- 0%; Nations Texas
Intermediate Municipal Bond Fund -- 0.28%; Nations Texas Municipal Bond
Fund -- 0%; Nations Virginia Intermediate Municipal Bond Fund -- 0.38%; and
Nations Virginia Municipal Bond Fund -- 0%.
Michele M. Poirier is responsible for the management of Nations Municipal Income
Fund, Nations Florida Intermediate Municipal Bond Fund, Nations Florida
Municipal Bond Fund, Nations Georgia Intermediate Municipal Bond Fund, Nations
Georgia Municipal Bond Fund, Nations South Carolina Intermediate Municipal Bond
Fund and Nations South Carolina Municipal Bond Fund. Ms. Poirier is a Vice
President and Fixed Income Portfolio Manager and is responsible for over $1
billion in tax-exempt assets. She joined NationsBank in 1990 and is the
principal portfolio manager for 9 municipal bond mutual funds and 6 municipal
bond common trust funds. Ms. Poirier has over 20 years of investment experience
from positions previously held in management, sales and trading at Financial
Service Corporation, Bankers Trust Company and The Robinson-Humphrey Company,
respectively. She earned a B.B.A. in marketing from Georgia State University.
Mathew M. Kiselak, a Vice President and Fixed Income Portfolio Manager
responsible for over $600 million in assets is responsible for the management of
Nations Short-Term Municipal Income Fund, Nations North Carolina Intermediate
Municipal Bond Fund, Nations North Carolina Municipal Bond Fund, Nations
Tennessee Intermediate Municipal Bond Fund, Nations Tennessee Municipal Bond
Fund and Nations Texas Intermediate Municipal Bond Fund and Nations Texas
Municipal
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Bond Fund. Mr. Kiselak joined NationsBank in 1992 and has over seven years of
investment experience. Prior to joining NationsBank, Mr. Kiselak was a
tax-exempt portfolio manager and bank credit analyst for Reich & Tang Inc. He
received his B.A. in economics from Pace University.
John C. Kohl, a Senior Vice President and Fixed Income Portfolio Manager, has
been the principal portfolio manager of Nations Intermediate Municipal Bond
Fund, Nations Maryland Intermediate Municipal Bond Fund, Nations Maryland
Municipal Bond Fund, Nations Virginia Intermediate Municipal Bond Fund and
Nations Virginia Municipal Bond Fund since August 1994. Mr. Kohl, who has over
15 years of investment experience, joined NationsBank in 1994 and currently is
responsible for managing over $1 billion in tax-exempt assets. Prior to joining
NationsBank, Mr. Kohl was chief investment officer for a life insurance company,
fixed-income group manager for the personal trust group of a large midwestern
bank, and an asset-liability management consultant. Mr. Kohl received a joint
B.A. in Economics and North American Studies from McGill University in Montreal
and has continued his studies at The American University and the J.L. Kellogg
Graduate School of Management.
Morrison & Foerster LLP, counsel to Nations Fund and special counsel to
NationsBank, has advised Nations Fund and NationsBank that subsidiaries of
NationsBank may perform the services contemplated by the Investment Advisory
Agreement without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. Such counsel has pointed out, however, that there
are no controlling judicial or administrative interpretations or decisions and
that future judicial or administrative interpretations of, or decisions relating
to, present federal or state statutes, including the Glass-Steagall Act, and
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as future changes in such statutes,
regulations and judicial or administrative decisions or interpretations, could
prevent such subsidiaries of NationsBank from continuing to perform, in whole or
in part, such services. If such subsidiaries of NationsBank were prohibited from
performing any such services, it is expected that the Trustees of Nations Fund
Trust would recommend to the Funds' shareholders that they approve a new
advisory agreement with another entity or entities qualified to perform such
services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
the Funds pursuant to an Administration Agreement. Pursuant to the terms of the
Administration Agreement, Stephens provides various administrative and corporate
secretarial services to the Funds, including providing general oversight of
other service providers, office space, utilities and various legal and
administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of
First Data Corporation, with principal offices at One Exchange Place, Boston,
Massachusetts 02109, serves as the co-administrator of the Funds pursuant to a
Co-Administration Agreement. Under the Co-Administration Agreement, TSSG
provides various administrative and accounting services to the Funds, including
performing calculations necessary to determine net asset values and dividends,
preparing tax returns and financial statements and maintaining the portfolio
records and certain general accounting records for the Funds. For the services
rendered pursuant to the Administration and Co-Administration Agreements,
Stephens and TSSG are entitled to receive a combined fee at the annual rate of
up to 0.10% of each Fund's average daily net assets. For the fiscal year ended
November 30, 1994, after waivers, Nations Fund Trust paid its administrators
fees at the indicated rate of the Funds' average daily net assets: Nations
Intermediate Municipal Bond Fund, Nations Municipal Income Fund, Nations Florida
Intermediate Municipal Bond Fund, Nations Georgia Intermediate Municipal Bond
Fund, Nations Maryland Intermediate Municipal Bond Fund, Nations North Carolina
Intermediate Municipal Bond Fund, Nations South Carolina Intermediate Municipal
Bond Fund, Nations Tennessee Intermediate Municipal Bond Fund, Nations Texas
Intermediate Municipal Bond Fund and Nations Virginia Intermediate Municipal
Bond Fund -- 0.09%. Nations Short-Term Municipal Income Fund, Nations North
Carolina Municipal Bond Fund, Nations Tennessee Municipal Bond Fund and Nations
Texas Municipal Bond Fund -- 0.06%; Nations Florida Municipal Bond
Fund -- 0.07%; and Nations Georgia Municipal Bond Fund, Nations Maryland
Municipal Bond Fund, Nations South Carolina Municipal Bond Fund and Nations
Virginia Municipal Bond Fund -- 0.05%.
NationsBank serves as sub-administrator for Nations Fund pursuant to a
Sub-Administration Agreement. Pursuant to the terms of the Sub-Administration
Agreement, NationsBank assists Stephens in supervising, coordinating and
monitoring various aspects of the Funds' administrative operations. For
providing such services, NationsBank shall be entitled to receive a monthly fee
from Stephens based on an annual rate of .01% of the Funds' average daily net
assets.
Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker-dealer with principal
offices at 111 Center Street, Little Rock, Arkansas 72201. Nations Fund has
entered into a distribution agreement with Stephens which provides that Stephens
has the exclusive right to distribute shares of the Funds.
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Stephens may pay service fees or commissions to selling agents that assist
customers in purchasing Investor Shares of the Funds. See "Shareholder Servicing
and Distribution Plans."
NationsBank of Texas, N.A. (the "Custodian") serves as custodian for the assets
of each Fund. The Custodian is located at 1401 Elm Street, Dallas, Texas 75202
and is a wholly owned subsidiary of NationsBank Corporation. In return for
providing custodial services, the Custodian is entitled to receive, in addition
to out-of-pocket expenses, fees payable monthly (i) at the rate of 1.25% of 1%
of the average daily net assets of each Fund, (ii) $10.00 per repurchase
collateral transaction by the Funds, and (iii) $15.00 per purchase, sale and
maturity transaction involving the Funds.
TSSG serves as transfer agent (the "Transfer Agent") for the Funds' Investor
Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
Price Waterhouse LLP serves as independent accountant to Nations Fund. Their
address is 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES: The accrued expenses of a Fund, as well as certain expenses
attributable to Investor A Shares, are deducted from accrued income before
dividends are declared. Each Fund's expenses include, but are not limited to:
fees paid to the Adviser, NationsBank, Stephens and TSSG; interest; trustees'
fees and federal and state securities registration and qualification fees;
brokerage fees and commissions; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings; other
expenses which are not expressly assumed by the Adviser, NationsBank, Stephens
or TSSG under their respective agreements with Nations Fund; and any
extraordinary expenses. Investor Shares may bear certain class specific retail
transfer agency expenses and also bear certain additional shareholder service
and/or sales support costs. Any general expenses of Nations Fund Trust that are
not readily identifiable as belonging to a particular investment portfolio are
allocated among all portfolios in the proportion that the assets of a portfolio
bear to the assets of Nations Fund Trust or in such other manner as the Board of
Trustees deems appropriate.
Organization And History
The Funds are members of the Nations Fund Family, which consists of Nations Fund
Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc. and Nations
Institutional Reserves (formerly known as The Capitol Mutual Funds). The Nations
Fund Family currently has 44 distinct investment portfolios and total assets in
excess of $16 billion. Nations Fund Trust was organized as a Massachusetts
business trust on May 6, 1985. The Funds currently offer five classes of
shares -- Trust A Shares, Trust B Shares, Investor A Shares, Investor C Shares
and Investor N Shares. This Prospectus relates only to the Investor A Shares of
Nations Municipal Income Fund, Nations Short-Term Municipal Income Fund, Nations
Intermediate Municipal Bond Fund, Nations Florida Intermediate Municipal Bond
Fund, Nations Florida Municipal Bond Fund, Nations Georgia Intermediate
Municipal Bond Fund, Nations Georgia Municipal Bond Fund, Nations Maryland
Intermediate Municipal Bond Fund, Nations Maryland Municipal Bond Fund, Nations
North Carolina Intermediate Municipal Bond Fund, Nations North Carolina
Municipal Bond Fund, Nations South Carolina Intermediate Municipal Bond Fund,
Nations South Carolina Municipal Bond Fund, Nations Tennessee Intermediate
Municipal Bond Fund, Nations Tennessee Municipal Bond Fund, Nations Texas
Intermediate Municipal Bond Fund, Nations Texas Municipal Bond Fund, Nations
Virginia Intermediate Municipal Bond Fund and Nations Virginia Municipal Bond
Fund. To obtain additional information regarding the Funds' other classes of
shares which may be available to you, contact your Selling Agent (as defined
below) or Nations Fund at 1-800-321-7854.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class of shares. See the SAI for examples of instances where
the Investment Company Act of 1940 (the "1940 Act") requires voting by fund.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose or vote with respect to more than 25% of the outstanding shares of
Nations
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Fund Trust and therefore could be considered to be a controlling person of
Nations Fund Trust for purposes of the 1940 Act. In addition, as of August 31,
1995, the following persons owned of record 25% or more of Investor A Shares of
the Funds and therefore could be considered controlling persons of such class
for purposes of the 1940 Act: Nations Short-Term Municipal Income Fund, Carl W.
Cheek and Ralph Jerry Parker; Nations Municipal Bond Fund, Marion B. Shaller
Trust; Nations North Carolina Municipal Bond Fund, Harlan D. Green & Raydell S.
Greene; Nations South Carolina Intermediate Municipal Bond Fund, James T.
Pearce; Nations South Carolina Municipal Bond Fund, Jerome C. Cuppia Jr. Trust;
Nations Tennessee Municipal Bond Fund, Allene Ellis & Joyce Rose, Nations Texas
Municipal Bond Fund, Hal B. Jennings & Flora Gene Jennings Trust and Nations
Virginia Municipal Bond Fund, William P. Moore & Vera W. Moore. For more
detailed information concerning the percentage of each class or series of shares
over which NationsBank and its affiliates possessed or shared power to dispose
or vote as of a certain date, see the SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
About Your Investment
How To Buy Shares
Stephens has established various procedures for purchasing Investor A Shares in
order to accommodate different investors. Purchase orders for Investor A Shares
may be placed through banks, broker/dealers or other financial institutions
(including certain affiliates of NationsBank) that have entered into a
shareholder servicing agreement ("Servicing Agreement") with Nations Fund
("Servicing Agents") and a sales support agreement ("Sales Support Agreement")
with Stephens ("Selling Agents").
Customers may invest in Investor A Shares through a Nations Fund Personal
Investment Planner account, which is a managed agency/asset allocation account
established with NBAI (an "Account"). Investments through an Account are
governed by the terms and conditions of the Account, which are set forth in the
Client Agreement and Disclosure Statement provided by NBAI to each investor who
establishes an Account. Because of the nature of the Account, certain of the
features described in this Prospectus are not available to investors purchasing
Investor A Shares through an Account. Potential investors through an Account
should refer to the Client Agreement and Disclosure Statement for more
information regarding the Account, including information regarding the fees and
expenses charged in connection with an Account.
There is a minimum initial investment of $1,000. The minimum subsequent
investment is $100, except for investments pursuant to the Systematic Investment
Plan described below.
Investor A Shares may be purchased at net asset value per share. Purchases may
be effected on days on which the New York Stock Exchange (the "Exchange") is
open for business (a "Business Day").
With respect to Investor A Shares, the Servicing Agents have entered into
Servicing Agreements with Nations Fund whereby they will provide various
shareholder services to their customers ("Customers") who own Investor A Shares.
Servicing Agents and Selling Agents are sometimes referred to hereafter as
"Agents." From time to time the Agents, Stephens and Nations Fund may agree to
voluntarily reduce the maximum fees payable for sales support or shareholder
services.
Nations Fund reserves the right to reject any purchase order. The issuance of
Investor A Shares is recorded on the books of the Funds and share certificates
are not issued unless expressly requested in writing. Certificates are not
issued for fractional shares.
EFFECTIVE TIME OF PURCHASES: Purchase orders for Investor A Shares in the Funds
which are received by Stephens or by the Transfer Agent before the close of
regular trading hours on the Exchange (currently 4:00 p.m., Eastern time) on any
Business Day are priced according to the net asset value determined on that day
but are not executed until 4:00 p.m., Eastern time, on the Business Day on which
immediately available funds in payment of the purchase price are received by the
Funds' Custodian. Such payment must be received not later than 4:00 p.m.,
Eastern time, by the third Business Day following receipt of the order. If funds
are not received by such date, the order will not be accepted and notice thereof
will be given to the Agent placing the order. Payment for orders which are not
received or
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accepted will be returned after prompt inquiry to the sending Agent.
The Agents are responsible for transmitting orders for purchases of Investor A
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Fund.
SYSTEMATIC INVESTMENT PLAN: Under the Funds' Systematic Investment Plan ("SIP")
a shareholder may automatically purchase Investor A Shares. On a bi-monthly,
monthly or quarterly basis, shareholders may direct cash to be transferred
automatically from their checking or savings account at any bank to their Fund
account. Transfers will occur on or about the 15th and/or 30th day of the
applicable month. The systematic investment amount may be in any amount from $25
to $100,000. For more information concerning the SIP, contact your Agent.
TELEPHONIC TRANSACTIONS: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How to Redeem Shares" and "How to
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. You should be aware that by electing the telephone transaction
feature, you may be giving up a measure of security that you may have if you
were to authorize written requests only. You may bear the risk of any resulting
losses from a telephone transaction. Nations Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
and if Nations Fund and its service providers fail to employ such measures, they
may be liable for any losses due to unauthorized or fraudulent instructions.
Nations Fund requires a form of personal identification prior to acting upon
instructions received by telephone and provides written confirmation to
shareholders of each telephone share transaction. In addition, Nations Fund
reserves the right to record all telephone conversations.
Shareholder Servicing And Distribution Plans
The Funds' Shareholder Servicing and Distribution Plan (the "Investor A Plan"),
adopted pursuant to Rule 12b-1 under the 1940 Act, permits each Fund to
compensate (i) Servicing Agents and Selling Agents for services provided to
their Customers in connection with Investor A Shares and (ii) Stephens for
distribution-related expenses incurred in connection with Investor A Shares.
Nations Short-Term Municipal Income Fund, however, may not pay for shareholder
services under the Investor A Plan. Aggregate payments under the Funds' Investor
A Plan are calculated daily and paid monthly at a rate or rates set from time to
time by each Fund, provided that the annual rate may not exceed 0.25% of the
average daily net asset value of the Investor A Shares of the Fund.
The fees payable to Servicing Agents under the Investor A Plan are used
primarily to compensate or reimburse Servicing Agents for shareholder services
provided, and related expenses incurred, by such Servicing Agents. The
shareholder services provided by Servicing Agents may include: (i) aggregating
and processing purchase and redemption requests for Investor A Shares from
Customers and transmitting net purchase and redemption orders to Stephens or the
Transfer Agent; (ii) providing Customers with a service that invests the assets
of their accounts in Investor A Shares pursuant to specific or preauthorized
instructions; (iii) processing dividend and distribution payments from a Fund on
behalf of Customers; (iv) providing information periodically to Customers
showing their positions in Investor A Shares; (v) arranging for bank wires; and
(vi) providing general shareholder liaison services. Nations Short-Term
Municipal Income Fund, however, may not pay for shareholder services under the
Investor A Plan. The fees payable to Selling Agents are used primarily to
compensate or reimburse Selling Agents for providing sales support assistance in
connection with the sale of Investor A Shares to Customers, which may include
forwarding sales literature and advertising provided by Nations Fund to
Customers.
The fees under the Investor A Plan also may be used to reimburse Stephens for
distribution-related expenses actually incurred by Stephens, including, but not
limited to, expenses of organizing and conducting sales seminars, printing
prospectuses and statements of additional information (and supplements thereto)
and reports for other than existing shareholders, preparation and distribution
of advertising and sales literature and the costs of administering the Investor
A Plan.
Stephens may, from time to time, at its expense or as an expense for which it
may be reimbursed under the Investor A Plan, pay a bonus or other consideration
or incentive to Agents who sell a minimum dollar amount of shares of the Funds
during a specified period of time. Stephens also may, from time to time, pay
additional consideration to Agents not to exceed 1.00% of the offering price per
share on all sales of Investor A Shares as an expense of Stephens or for which
Stephens may be reimbursed under the Investor A Plan or upon receipt of a CDSC.
Any such additional consideration or incentive program may be terminated at any
time by Stephens.
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In addition, Stephens has established a non-cash compensation program, pursuant
to which broker/dealers or financial institutions that sell shares of the Funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise. This non-cash compensation program may be
amended or terminated at any time by Stephens.
Nations Fund and Stephens may suspend or reduce payments under the Investor A
Plan at any time, and payments are subject to the continuation of the Investor A
Plan described above and the terms of the Servicing Agreements and Sales Support
Agreements. See the SAI for more details on the Investor A Plan.
In addition, the Trustees have approved a Shareholder Servicing Plan (the
"Servicing Plan") with respect to the Investor A Shares of the Nations
Short-Term Municipal Income Fund. Pursuant to its Servicing Plan, the Nations
Short-Term Municipal Income Fund may pay Servicing Agents that have entered into
a Servicing Agreement with Nations Fund for certain shareholder support services
that are provided by the Servicing Agents. Payments under the Fund's Servicing
Plan may not exceed 0.25% of the average daily net asset value of the Fund's
Investor A Shares. The shareholder services provided by Servicing Agents
include, but are not limited to, those listed above with respect to the Investor
A Plan. Nations Fund may suspend or reduce payments under the Servicing Plan at
any time, and payments are subject to the continuation of the Servicing Plan
described above and the terms of the Servicing Agreements. See the SAI for more
details on the Servicing Plan.
Nations Fund understands that Agents may charge fees to their Customers who are
the owners of the Funds' Investor Shares in connection with a Customer's
account. These fees would be in addition to any amounts received by a Selling
Agent under its Sales Support Agreement with Stephens or by a Servicing Agent
under its Servicing Agreement with Nations Fund. The Sales Support Agreements
and Servicing Agreements require Agents to disclose to their Customers any
compensation payable to the Agent by Stephens or Nations Fund and any other
compensation payable by the Customers for various services provided in
connection with their accounts. Customers should read this Prospectus in light
of the terms governing their accounts with their Agents.
How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders are
effected at the net asset value per share next determined after receipt of the
order by Stephens or by the Transfer Agent, less any applicable CDSC. The Agents
are responsible for transmitting redemption orders to Stephens or to the
Transfer Agent and for crediting their Customer's account with the redemption
proceeds on a timely basis. No charge for wiring redemption payments is imposed
by Nations Fund. Except for any CDSC which may be applicable upon redemption of
Investor A Shares, as described below, there is no redemption charge.
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens or by the Transfer Agent.
However, redemption proceeds for shares purchased by check may not be remitted
until at least 15 days after the date of purchase to ensure that the check has
cleared; a certified check, however, is deemed to be cleared immediately.
Nations Fund may redeem a shareholder's Investor Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of an Agent
pursuant to arrangements between the Agent and its Customers. Nations Fund also
may redeem shares of a Fund involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
Prior to effecting a redemption of Investor A Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to Nations Fund have previously been
made. Nations Fund may require any additional information reasonably necessary
to evidence that a redemption has been duly authorized.
CONTINGENT DEFERRED SALES CHARGE: Subject to certain waivers specified below,
Investor A Shares of the Funds that were purchased prior to January 1, 1996 in
amounts of $1 million or more or through the Nations Personal Investment Planner
will be subject to a CDSC equal to 1.00% of the lesser of the net asset value or
the purchase price of the shares being redeemed if such shares are redeemed
within one year of purchase, declining to 0.50% in the second year after
purchase and eliminated thereafter. No CDSC is imposed on increases in
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net asset value above the initial purchase price, including shares acquired by
reinvestment of distributions.
Solely for purposes of determining the period of time that has elapsed from the
purchase of any Investor A Shares, all purchases are deemed to have been made on
the trade date of the transaction. In determining whether a CDSC is applicable
to a redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares held for the longest period of time or shares
acquired pursuant to reinvestment of dividends or distributions. The charge will
not be applied to dollar amounts representing an increase in the net asset value
since the time of purchase.
The CDSC will be waived on redemptions of Investor A Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as amended
(the "Code")) of a shareholder (including a registered joint owner), (ii)
effected pursuant to Nations Fund's right to liquidate a shareholder's account
if the aggregate net asset value of the Investor Shares held in the account is
less than the minimum account size, (iii) in connection with the combination of
Nations Fund with any other registered investment company by merger, acquisition
of assets or by any other transaction, and (iv) effected pursuant to the
Automatic Withdrawal Plan discussed below, provided that such redemptions do not
exceed, on an annual basis, 12% of the net asset value of the Investor A Shares
in the account. Shareholders are responsible for providing evidence sufficient
to establish that they are eligible for any waiver of the CDSC.
Within 120 days after a redemption of Investor A Shares of a Fund, a shareholder
may reinvest any portion of the proceeds of such redemption in Investor A Shares
of the same Fund. The amount which may be so reinvested is limited to an amount
up to, but not exceeding, the redemption proceeds (or to the nearest full share
if fractional shares are not purchased). A shareholder exercising this privilege
would receive a pro rata credit for any CDSC paid in connection with the prior
redemption. A shareholder may not exercise this privilege with the proceeds of a
redemption of shares previously purchased through the reinvestment privilege. In
order to exercise this privilege, a written order for the purchase of Investor A
Shares must be received by the Transfer Agent or by Stephens within 120 days
after the redemption.
AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of the Funds if the value of the
Investor A Shares in his/her account within the Nations Fund Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Investor A Shares redeemed under the AWP will not be subject to a CDSC,
provided that the shares so redeemed do not exceed, on an annual basis, 12% of
the net asset value of the Investor A Shares in the account. Otherwise, any
applicable CDSC will be imposed on shares redeemed under the AWP. Shareholders
who elect to establish an AWP may receive a monthly, quarterly or annual check
or automatic transfer to a checking or savings account in a stated amount of not
less than $25 on or about the 10th or 25th day of the applicable month of
withdrawal. Investor A Shares will be redeemed (net of any applicable CDSC) as
necessary to meet withdrawal payments. Withdrawals will reduce principal and may
eventually deplete the shareholder's account. If a shareholder desires to
establish an AWP after opening an account, a signature guarantee will be
required. AWPs may be terminated by shareholders on 30 days' written notice to
their Agent or by Nations Fund at any time.
How To Exchange Shares
Except as described below, the exchange feature enables a shareholder of
Investor A Shares of a Nations Fund non-money market fund (including the Funds)
to acquire shares of the same class that are offered by any other fund of
Nations Fund when the shareholder believes that a shift between funds is an
appropriate investment decision. A qualifying exchange is based on the next
calculated net asset value per share of each fund after the exchange order is
received.
No CDSC will be imposed in connection with an exchange of Investor A Shares that
meets the requirements discussed in this section. If Investor A Shares of the
Funds are exchanged for shares of the same class of another fund, any CDSC
applicable to the original shares purchased will be applied upon the redemption
of the acquired shares. The holding period of such Investor A Shares (for
purposes of determining whether a CDSC is applicable upon redemption) will be
computed from the time of the initial purchase of the Investor A Shares of the
Funds. Notwithstanding the foregoing, if a shareholder redeems shares acquired
through an exchange, the shareholder will be subject to the highest CDSC
schedule applicable to any shares that were exchanged within 30 days prior to
the redemption.
INVESTOR A SHARES OF NATIONS SHORT-TERM MUNICIPAL INCOME FUND ACQUIRED IN
EXCHANGE FOR INVESTOR N SHARES: Notwithstanding the foregoing, Investor A Shares
of the Nations Short-Term Municipal Income Fund acquired directly or indirectly
in exchange for Investor N Shares of another non-money market fund may be
re-exchanged only for Investor N Shares of another non-money market fund,
Investor C Shares of a
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money market fund of Nations Fund or Investor A Shares of Nations Short-Term
Income Fund.
If a shareholder acquires Investor A Shares of the Nations Short-Term Municipal
Income Fund in exchange for Investor N Shares of another non-money market fund,
the acquired shares (and any Investor A or Investor C Shares acquired through
the exchange of such shares) will remain subject to the CDSC schedule applicable
to the Investor N Shares of the non-money market fund last exchanged. A
redemption of shares acquired through an exchange of Investor N Shares will, in
all events, be subject to the highest CDSC schedule applicable to any shares
that were exchanged within 30 days prior to the redemption.
Additionally, the holding period (for the purpose of determining the applicable
rate of the CDSC) does not accrue while the shares owned are Investor A Shares
of the Nations Short-Term Municipal Income Fund or Nations Short-Term Income
Fund or Investor C Shares of a money market fund. As a result, the CDSC that is
ultimately charged upon redemption is based upon the total period of time the
shareholder holds Investor N Shares of any fund that charges a CDSC.
AUTOMATIC EXCHANGE FEATURE: Under the Funds' Automatic Exchange Feature ("AEF"),
a shareholder may automatically exchange at least $25 on a monthly or quarterly
basis. Shareholder may direct proceeds to be exchanged from one Nations Fund to
another as allowed by the applicable exchange rules within the prospectus.
Exchanges will occur on or about the 15th and/or 30th day of the applicable
month. The shareholder must have an existing position in both Funds in order to
establish the AEF. This feature may be established by directing a request to the
Transfer Agent by telephone or in writing. For additional information, please
contact your selling agent.
GENERAL: The Funds and each of the other funds of Nations Fund may limit the
number of times this exchange feature may be exercised by a shareholder within a
specified period of time. Also, the exchange feature may be terminated or
revised at any time by Nations Fund upon such notice as may be required by
applicable regulatory agencies (presently 60 days for termination or material
revision), absent unusual circumstances.
The current prospectus for each fund of Nations Fund describes its investment
objective and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for Federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.
The Investor A Shares exchanged must have a current value of at least $1,000
(except for exchanges through the AEF). Nations Fund reserves the right to
reject any exchange request. Only shares that may legally be sold in the state
of the investor's residence may be acquired in an exchange. Only shares of a
class that is accepting investments generally may be acquired in an exchange. An
investor may telephone an exchange request by calling his/her Agent which is
responsible for transmitting such request to Stephens or to the Transfer Agent.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. In such event, shares may be exchanged by mailing the
request directly to the Agent through which the original shares were purchased.
An investor should consult his/her Agent or Stephens for further information
regarding exchanges.
How The Funds Value Their Shares
The Funds calculate the net asset value of a share of each class by dividing the
total value of its assets, less liabilities, by the number of shares in the
class outstanding. Shares are valued as of the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on each Business Day. Currently,
the days on which the Exchange is closed (other than weekends) are: New Year's
Day, Presidents' Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Portfolio securities for which
market quotations are readily available are valued at market value. Short-term
investments that will mature in 60 days or less are valued at amortized cost,
which approximates market value. All other securities and assets are valued at
their fair value following procedures approved by the Trustees.
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How Dividends And Distributions Are Made;
Tax Information
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income are declared
daily and paid monthly by the Funds. Each Fund's net realized capital gains
(including net short-term capital gains) are distributed at least annually.
Distributions from capital gains are made after applying any available capital
loss carryovers. Distributions paid by the Funds with respect to one class of
shares may be greater or less than those paid with respect to another class of
shares due to the different expenses of the different classes.
The net asset value of Investor A Shares will be reduced by the amount of any
dividend or distribution. Certain Selling or Servicing Agents may provide for
the reinvestment of dividends in the form of additional Investor A Shares of the
same class of the same Fund. Dividends and distributions are paid in cash within
five Business Days of the end of the month or quarter to which the dividend
relates. Dividends and distributions payable to a shareholder are paid in cash
within five Business Days after a shareholder's complete redemption of his/her
Investor A Shares.
TAX INFORMATION: Each Fund intends to qualify as a "regulated investment
company" under the Code. Such qualification relieves a Fund of liability for
Federal income taxes on amounts distributed in accordance with the Code.
As regulated investment companies, the Funds are permitted to pass through to
their shareholders tax-exempt income ("exempt-interest dividends") subject to
certain requirements which the Funds intend to satisfy. Distributions from
taxable income will be taxable as ordinary income to shareholders whether such
income is received in cash or reinvested in additional shares. The policy of the
Funds is to pay to their shareholders an amount equal to at least 90% of their
exempt-interest income and their investment company taxable income. Exempt-
interest dividends may be treated by shareholders as items of interest
excludable from their Federal gross income under Section 103(a) of the Code
unless under the circumstances applicable to the particular shareholder the
exclusion would be disallowed. (See the SAI under "Additional Information
Concerning Taxes.") Distributions from the Funds will not qualify for the
dividends-received deduction for corporate shareholders. Distributions of net
investment income by Nations Municipal Income Fund, Nations Short-Term Municipal
Income Fund and Nations Intermediate Municipal Bond Fund may be taxable to
investors even though a substantial portion of such distributions may be derived
from interest on tax-exempt obligations which, if realized directly, would be
exempt from such income taxes.
Substantially all of a Fund's net realized long-term capital gains will be
distributed at least annually. The Funds will generally have no tax liability
with respect to such gains, and the distributions will be taxable to
shareholders as long-term capital gains, regardless of how long the shareholders
have held the Fund's shares and whether such gains are received in cash or
reinvested in additional shares.
Each year, shareholders will be notified as to the amount and federal tax status
of all dividends and capital gains paid during the prior year. Such dividends
and capital gains may be subject to state and local taxes, as discussed more
fully below and in the SAI.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by a Fund on December 31 of such year in
the event such dividends are actually paid during January of the following year.
Federal law requires Nations Fund to withhold 31% from any dividends (other than
exempt-interest dividends) paid by Nations Fund and/or redemptions (including
exchange redemptions) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply, or
if the Internal Revenue Service has notified Nations Fund that the Taxpayer
Identification Number listed on a shareholder account is incorrect according to
its records, or that the shareholder is subject to backup withholding. Amounts
withheld are applied to the shareholder's Federal tax liability, and a refund
may be obtained from the Internal Revenue Service if withholding results in
overpayment of taxes. Federal law also requires the Funds to withhold 30% or the
applicable tax treaty rate from dividends paid to certain nonresident alien,
non-U.S. partnership and non-U.S. corporation shareholder accounts.
If any of the Funds should hold certain private activity bonds issued after
August 7, 1986, shareholders must include, as an item of tax preference, the
portion of dividends paid by the Fund that is attributable to interest on such
bonds in their Federal alternative minimum taxable income for purposes of
determining liability (if any) for the 28% alternative minimum tax applicable to
individuals and the 20% alternative minimum tax and the environmental tax
applicable to corporations. Corporate shareholders must also take all
exempt-interest dividends into account in determining certain adjustments for
Federal alternative minimum and environmental tax
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purposes. The environmental tax applicable to corporations is imposed at the
rate of 0.12% on the excess of the corporation's modified Federal alternative
minimum taxable income over $2,000,000. Shareholders receiving Social Security
benefits should note that all exempt-interest dividends will be taken into
account in determining the taxability of such benefits.
With respect to the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds, it is anticipated that exempt-interest dividends derived
from tax-exempt interest paid on municipal obligations of the pertinent state
and that state's political subdivisions, agencies, instrumentalities, and
authorities, and certain other issuers, including Puerto Rico and Guam, will be
exempt from state income tax with respect to those states which impose a state
income tax. Florida and Texas do not impose income taxes, but Florida, Georgia
and North Carolina impose a tax upon tangible personal property which may apply
to shares of the Funds held by residents of those states. Florida has issued a
Technical Assistance Advisement indicating that shares of the Nations Florida
Intermediate Municipal Bond Fund and the Nations Florida Municipal Bond Fund
will not be subject to Florida's intangibles tax, subject to certain
requirements which these two Funds intend to satisfy. See the SAI for further
details about state tax treatment relevant to shareholders of the Funds.
In addition to annual disclosures as to Federal tax consequences of dividends
and distributions, shareholders of the State Intermediate Municipal Bond Funds
and the State Municipal Bond Funds will also be advised as to the state tax
consequences of dividends and distributions made each year.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning.
Accordingly, potential investors should consult their tax advisers with specific
reference to their own tax situations. Further tax information is contained in
the SAI.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAI contains more
information concerning such investments.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. Each Fund will limit its investments in
bank obligations so they do not exceed 25% of each Fund's total assets at the
time of purchase.
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Funds' total assets must be repaid prior to the purchase of
portfolio securities. The Funds are parties to a Line of Credit Agreement with
Mellon Bank, N.A. Advances under the agreement are taken primarily for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities.
Reverse repurchase agreements and dollar roll transactions may be considered to
be borrowings. When a Fund invests in a reverse repurchase agreement, it sells a
portfolio security to another party, such as a bank or broker-dealer, in return
for cash, and agrees to buy the security back at a future date and price.
Reverse repurchase agreements may be used to provide cash to satisfy unusually
heavy redemption requests without having to sell portfolio securities, or for
other temporary or emergency purposes.
FIXED INCOME INVESTING: The performance of the fixed-income debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. A Fund's share
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price and yield depend, in part, on the maturity and quality of its debt
instruments.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS: Certain of the Funds may
attempt to reduce the overall level of investment risk of particular securities
and attempt to protect a Fund against adverse market movements by investing in
futures, options and other derivative instruments. These include the purchase
and writing of options on securities (including index options) and options on
foreign currencies, and investing in futures contracts for the purchase or sale
of instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign government, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and swaps
and swap-related products such as interest rate swaps, currency swaps, caps,
collars and floors.
The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable position.
Additional risks inherent in the use of futures, options, forward contracts and
swaps include: imperfect correlation between the price of futures, options and
forward contracts and movements in the prices of the securities or currencies
being hedged; the possible absence of a liquid secondary market for any
particular instrument at any time; and the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. A Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks, is
contained in the SAI.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Funds will not knowingly
invest more than 15% of the value of their respective net assets in securities
that are illiquid or such lower percentage as may be required by the states in
which the appropriate Fund sells its shares. Repurchase agreements and time
deposits that do not provide for payment to a Fund within seven days after
notice, guaranteed investment contracts and some commercial paper issued in
reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act") (other than variable amount master demand notes with
maturities of nine months or less), are subject to the limitation on illiquid
securities. In addition, interests in privately arranged loans acquired by the
State Intermediate Municipal Bond Funds and the State Municipal Bond Funds may
be subject to this limitation.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by a Fund's Board of Trustees or the Adviser, acting
under guidelines approved and monitored by the Fund's Board, that an adequate
trading market exists for that security.
INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of its
portfolio from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, E.G., an exchange of floating rate payments for fixed rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. The Adviser expects to enter into these
transactions on behalf of a Fund primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipated purchasing at a later
date rather than for speculative purposes. A Fund will not sell interest rate
caps or floors that it does not own.
LOWER-RATED DEBT SECURITIES: Lower rated, high-yielding securities are those
rated "Ba" or "B" by Moody's or "BB" or "B" by S&P which are commonly referred
to as "junk bonds." These bonds provide poor protection for payment of principal
and interest. Lower-quality bonds involve greater risk of default or price
changes due to changes in the issuer's creditworthiness than securities assigned
a higher quality rating. These securities are considered to have speculative
characteristics and indicate an aggressive approach to income investing. The
Funds intend to limit their investments in lower-quality debt securities to 35%
of assets.
The market for lower-rated securities may be thinner and less active than that
for higher quality securities, which can adversely affect the price at which
these securities can be sold. If market quotations are not available, these
lower-rated securities will be valued in
accor-
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dance with procedures established by the Funds' Board, including the use of
outside pricing services. Adverse publicity and changing investor perceptions
may affect the ability of outside pricing services used by a Fund to value its
portfolio securities, and a Fund's ability to dispose of these lower-rated
bonds.
The market prices of lower-rated securities may fluctuate more than higher-rated
securities and may decline significantly in periods of general economic
difficulty which may follow periods of rising interest rates. During an economic
downturn or a prolonged period of rising interest rates, the ability of issuers
of lower quality debt to service their payment obligations, meet projected
goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower-rated securities, the Adviser will
try to minimize the risks inherent in investing in lower-rated debt securities
by engaging in credit analysis, diversification, and attention to current
developments and trends affecting interest rates and economic conditions. The
Adviser will attempt to identify those issuers of high-yielding securities whose
financial condition are adequate to meet future obligations, have improved, or
are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated securities,
but they may not be attractive to as many buyers. Each Fund's policies regarding
lower-rated debt securities is not fundamental and may be changed at any time
without shareholder approval.
MONEY MARKET INSTRUMENTS: The term "money market instruments" refers to
instruments with remaining maturities of one year or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of Municipal Securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal Securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal Securities may include variable- or floating-rate instruments issued
by industrial development authorities and other governmental entities. While
there may not be an active secondary market with respect to a particular
instrument purchased by a Fund, a Fund may demand payment of the principal and
accrued interest on the instrument or may resell it to a third party as
specified in the instruments. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if the
issuer defaulted on its payment obligation or during periods the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by a
Fund will be determined by the Adviser to be of comparable quality at the time
of purchase to instruments rated "high quality" by any major rating service.
Where necessary to ensure that an instrument is of comparable "high quality," a
Fund will require that an issuer's obligation to pay the principal of the note
may be backed by an unconditional bank letter or line of credit, guarantee, or
commitment to lend.
Municipal Securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases."
Generally such loans are unrated, in which case they will be determined by the
Adviser to be of comparable quality at the time of purchase to rated instruments
that may be acquired by a Fund. Frequently, privately arranged loans have
variable interest rates and may be backed by a bank letter of credit. In other
cases, they may be unsecured or may be secured by assets not easily liquidated.
Moreover, such loans in most cases are not backed by the taxing authority of the
issuers and may have limited marketability or may be marketable only by virtue
of a provision requiring repayment following demand by the lender. Such loans
made by a Fund may have a demand provision permitting the Fund to require
payment within seven days. Participations in such loans, however, may not have
such a demand provision and may not be otherwise marketable. To the extent these
securities are illiquid, they will be subject to each Fund's limitation on
investments in illiquid securities. Recovery of an investment in any such loan
that is illiquid and payable on demand may depend on the ability of the
municipal borrower to meet an obligation for full repayment of principal and
payment of accrued interest within the demand period, normally seven days or
less (unless a Fund determines that a particular loan issue, unlike most such
loans, has a readily available market). As it deems appropriate, the Adviser
will establish
proce-
34
<PAGE>
dures to monitor the credit standing of each such municipal borrower, including
its ability to meet contractual payment obligations.
Municipal Securities may include units of participation in trusts holding pools
of tax-exempt leases. Municipal participation interests may be purchased from
financial institutions, and give the purchaser an undivided interest in one or
more underlying municipal security. To the extent that municipal participation
interests are considered to be "illiquid securities," such instruments are
subject to each Fund's limitation on the purchase of illiquid securities.
Municipal leases and participating interests therein which may take the form of
a lease or an installment sales contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities. Interest payments on qualifying leases are exempt from Federal
income taxes.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to municipal securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified Municipal Securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.
Although the Funds do not presently intend to do so on a regular basis, each may
invest more than 25% of its total assets in Municipal Securities the interest on
which is paid solely from revenues of similar projects if such investment is
deemed necessary or appropriate by the Adviser. To the extent that more than 25%
of a Fund's total assets are invested in Municipal Securities that are payable
from the revenues of similar projects, a Fund will be subject to the peculiar
risks presented by such projects to a greater extent than it would be if its
assets were not so concentrated.
Since each of the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds will invest primarily in securities issued by issuers
located in one state, each of these Funds is susceptible to changes in value due
to political and economic factors affecting that state's issuers. A comparable
municipal bond fund which is not concentrated in obligations issued by issuers
located in one state would be less susceptible to these risks. If any issuer of
securities held by one of these Funds is unable to meets its financial
obligations, that Fund's income, capital, and liquidity may be adversely
affected.
For the past forty years, the economy of the State of Florida has consisted
primarily of tourism, retirement and agriculture. More recently, military and
defense spending have fueled economic diversification as well as the aerospace
industry, laser optics research, computer manufacturing and international trade
and commerce. Currently, Moody's rates Florida's general obligation bonds "Aa,"
and S&P rates such bonds "AA."
The State of Georgia has a diversified economy, which has performed relatively
well in recent years. Important industries in the State include pulp and paper
products, agriculture and textiles. Currently, Moody's rates Georgia general
obligation bonds "Aaa" and S&P rates such bonds "AA+."
The State of Maryland's leading areas of employment are services (including
mining), wholesale and retail trade, government, and manufacturing (primarily
printing and publishing, food and kindred products, instruments and related
products, electronic equipment, industrial machinery, and transportation
equipment). Maryland has a higher than average number of people employed by the
Government. The Port of Baltimore is one of the larger international ports in
the United States and in the world. Currently, Moody's rates Maryland general
obligation bonds "Aaa" and S&P rates such bonds "AAA."
The State of North Carolina has an economic base consisting of a combination of
manufacturing, services, agriculture and tourism. During the period from 1980 to
1993, the per capita income in the State grew from $7,999 to $18,702, an
increase of 133.8%. During the same period the State's labor force increased
24.5%. Currently, Moody's rates the state of North Carolina's general obligation
bonds "Aaa" and S&P rates such bonds "AAA."
The State of South Carolina's economy has been dominated since the early 1920's
by the textile industry, with over one-third of the manufacturing workers
directly or indirectly related to the textile industry. The economic base of the
State is gradually becoming more diversified as the trade and service sectors
and durable goods manufacturing industries have developed. Currently, Moody's
rates South Carolina general obligation bonds "Aaa" and S&P rates such bonds
"AA+."
The State of Tennessee has an economic base consisting primarily of
manufacturing, services, agriculture and tourism. Currently, Moody's rates the
State of Tennessee's general obligation bonds "Aaa" and S&P rates such bonds
"AA+."
The State of Texas has long been identified with the oil and gas industry, but
the Texas economy recently has become more diversified. Oil and gas related
industries accounted for 27% of the state's total output of goods and services
in 1981, but currently account for only 12% of the state's economy. Servicing
sectors (which include transportation and public utilities; finance and
insurance; trade; services; and government) are the major sources of job growth
in Texas. Texas' location and transportation and accessibility have made it a
distribution center for the southwestern United States as well as
35
<PAGE>
an international center for finance and distribution. The high-technology
sector, growth of exports and manufacturing job growth are expected to
contribute to Texas' future growth. Currently Moody's rates Texas general
obligations bonds "Aa" and S&P rates such bonds "AA."
The Commonwealth of Virginia has a diversified economy with government,
manufacturing, high technology (both manufacturing and non-manufacturing)
industries, agriculture, mining, construction, services, and tourism all
represented. Virginia also has benefited from its port facilities, a large
number of federal government and military installations, and its proximity to
Washington, D.C. Currently Moody's rates Virginia general obligation bonds "Aaa"
and S&P rates such bonds "AAA."
There can be no assurance that the economic conditions on which the above
ratings for a specific state are based will continue or that particular bond
issues may not be adversely affected by changes in economic or political
conditions. More detailed information about matters relating to each of the
State Intermediate Municipal Bond Funds and State Municipal Bond Funds is
contained in the SAI.
OTHER INVESTMENT COMPANIES: A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indexes, non-U.S. interest rates and foreign currencies, that
have been approved by the CFTC for investment by U.S. investors, for the purpose
of hedging against changes in values of a Fund's securities or changes in the
prevailing levels of interest rates or currency exchange rates. The contracts
entail certain risks, including but not limited to the following: no assurance
that futures contracts transactions can be offset at favorable prices; possible
reduction of a Fund's total return due to the use of hedging; possible lack of
liquidity due to daily limits on price fluctuation; imperfect correlation
between the contracts and the securities or currencies being hedged; and
potential losses in excess of the amount invested in the futures contracts
themselves.
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
for which no common clearing facility exists and a trader may look only to the
broker for performance of the contract. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the
currencies in which trading is done on foreign exchanges, any profits that such
Fund might realize could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes.
U.S. GOVERNMENT OBLIGATIONS: U.S. Government obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. Obligations of U.S.
Government agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
E.G., Government National Mortgage Association certificates; in other cases
interest and principal are not guaranteed, E.G., obligations of the Federal Home
Loan Bank System and the Federal Farm Credit Bank. No assurance can be given
that the U.S. Government would provide financial support to government-sponsored
instrumentalities if it is not obligated to do so by law.
VARIABLE- AND FLOATING-RATE INSTRUMENTS: Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks and corporations
may carry variable or floating rates of interest. Such instruments bear interest
rates which are not fixed, but which vary with changes in specified market rates
or indices, such as a Federal Reserve composite index. A variable-rate demand
instrument is an obligation with a variable or floating interest rate and an
unconditional right of demand on the part of the holder to receive payment of
unpaid principal and accrued interest. An instrument with a demand period
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities takes
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
36
<PAGE>
Appendix B -- Description Of Ratings
The following summarizes the highest six ratings used by S&P for corporate and
municipal bonds. The first four ratings denote investment grade securities.
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher-rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher-rated categories.
BB, B -- Bonds rated BB and B are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB represents the lowest
degree of speculation and B a higher degree of speculation. While such
bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the highest six ratings used by Moody's for corporate
and municipal bonds. The first four ratings denote investment grade securities.
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa through B. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category. With regard to municipal bonds, those bonds
in the Aa, A and Baa groups which Moody's believes possess the strongest
investment attributes are designated by the symbols Aa1, A1 or Baa1,
respectively.
The following summarizes the highest four ratings used by D&P for bonds, each of
which denotes that the securities are investment grade:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be
37
<PAGE>
negligible, being only slightly more than for risk-free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
A -- Bonds that are rated A have protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
BBB -- Bonds that are rated BBB have below average protection factors but
still are considered sufficient for prudent investment. Considerable
variability in risk exists during economic cycles.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major categories.
The following summarizes the highest four ratings used by Fitch for bonds, each
of which denotes that the securities are investment grade:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A -- Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are Duff 1, Duff 2 and Duff 3.
D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the highest
rating category. Duff 1+ indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be minor.
Duff 1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. Duff 2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. Duff 3 indicates satisfactory liquidity and other protection factors
which qualify the issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
The following summarizes the three highest rating categories used by Fitch for
short-term obligations, each of which denotes securities that are investment
grade:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as
38
<PAGE>
having the strongest degree of assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
F-2 securities possess good credit quality. Issues carrying this rating
have a satisfactory degree of assurance for timely payment, but the margin
of safety is not as great as for issues assigned the F-1+ and F-1 ratings.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following is the four investment grade ratings used by BankWatch
for long-term debt:
AAA -- The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA -- The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
A -- The third highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with
higher ratings.
BBB -- The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however,
more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 -- The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
TBW-3 -- The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
The following summarizes the three highest long-term ratings used by IBCA:
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial.
39
<PAGE>
Adverse changes in business, economic or financial conditions may increase
investment risk albeit not very significantly.
A -- Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
The following summarizes the three highest short-term debt ratings used by IBCA:
A1+ -- Obligations supported by the highest capacity for timely repayment
and possessing a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
A2 -- Obligations supported by a good capacity for timely repayment.
40
<PAGE>
Prospectus
INVESTOR A SHARES
SEPTEMBER 30, 1995
AS SUPPLEMENTED ON
JANUARY 19, 1996
This Prospectus describes the NATIONS VALUE FUND,
NATIONS EQUITY INCOME FUND, NATIONS BALANCED ASSETS
FUND, NATIONS CAPITAL GROWTH FUND, NATIONS EMERGING
GROWTH FUND, NATIONS DISCIPLINED EQUITY FUND,
NATIONS INTERNATIONAL EQUITY FUND, NATIONS EMERGING
MARKETS FUND AND NATIONS PACIFIC GROWTH FUND (the
"Funds") of the Nations Fund Family ("Nations Fund"
or "Nations Fund Family"). This Prospectus describes
one class of shares of the Funds -- Investor A
Shares. The Nations Disciplined Equity Fund was
formerly called "Nations Special Equity Fund."
This Prospectus sets forth concisely the information
about the Funds that prospective purchasers of
Investor A Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust, Nations Fund, Inc. and Nations
Fund Portfolios, Inc. ("Nations Portfolios") is
contained in separate Statements of Additional
Information (the "SAIs"), which have been filed with
the Securities and Exchange Commission (the "SEC")
and are available upon request without charge by
writing or calling Nations Fund at its address or
telephone number shown below. The SAIs for Nations
Fund Trust, Nations Fund, Inc. and Nations
Portfolios, dated September 30, 1995, September 30,
1995 and July 1, 1995, respectively, are
incorporated by reference in their entirety into
this Prospectus. NationsBanc Advisors, Inc. ("NBAI")
is the investment adviser to the Funds. TradeStreet
Investment Associates, Inc. ("TradeStreet") is
sub-investment adviser to certain of the Funds and
Nations Gartmore Investment Management ("Nations
Gartmore") is sub-investment adviser to the other
Funds. As used herein the "Adviser" shall mean NBAI,
TradeStreet and/or Nations Gartmore as the context
may require.
SHARES OF NATIONS FUND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. ("NATIONSBANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
NATIONSBANK AND CERTAIN OF ITS AFFILIATES PROVIDE
CERTAIN OTHER SERVICES TO NATIONS FUND, FOR WHICH
THEY ARE COMPENSATED. STEPHENS INC., WHICH IS NOT
AFFILIATED WITH NATIONSBANK, IS THE SPONSOR AND
ADMINISTRATOR AND SERVES AS THE DISTRIBUTOR FOR
NATIONS FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
GROWTH AND INCOME FUNDS:
Nations Value Fund
Nations Equity Income Fund
Nations Balanced Assets Fund
GROWTH FUNDS:
Nations Capital Growth Fund
Nations Emerging Growth Fund
Nations Disciplined Equity
Fund
INTERNATIONAL FUNDS:
Nations International
Equity Fund
Nations Emerging Markets
Fund
Nations Pacific
Growth Fund
For purchase, redemption and
performance information
call:
1-800-321-7854
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
NATIONS
FUND
<PAGE>
About The Funds
Table Of Contents
Expenses Summary 3
Financial Highlights 4
Objectives 9
How Objectives Are Pursued 10
How Performance is Shown 17
How the Funds Are Managed 18
Organization and History 22
About Your Investment
How to Buy Shares 23
Shareholder Servicing and Distribution Plans 24
How to Redeem Shares 25
How to Exchange Shares 27
How the Funds Value Their Shares 27
How Dividends and Distributions are Made; Tax
Information 28
Appendix A -- Portfolio Securities 29
Appendix B -- Description of Ratings 35
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAIS
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
NATIONS FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY NATIONS FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds. The
following tables summarize shareholder transaction and operating expenses for
Investor A Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
INVESTOR A SHARES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Nations Nations
Nations Value Equity Balanced
Fund Income Fund Assets Fund
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price) None None None
Maximum Deferred Sales Charge (as a percentage of the
lower of the original purchase price or redemption
proceeds)1 None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .75% .70% .75%
Rule 12b-1 Fees (including shareholder servicing fees) .25% .25% .25%
Other Expenses .17% .25% .20%
Total Operating Expenses 1.17% 1.20% 1.20%
<CAPTION>
Nations Nations
Capital Emerging
Growth Fund Growth Fund
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price) None None
Maximum Deferred Sales Charge (as a percentage of the
lower of the original purchase price or redemption
proceeds)1 None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .75% .75%
Rule 12b-1 Fees (including shareholder servicing fees) .25% .25%
Other Expenses .17% .20%
Total Operating Expenses 1.17% 1.20%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Nations Nations Nations
Disciplined International Emerging
Equity Fund Equity Fund Markets Fund
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price) None None None
Maximum Deferred Sales Charge (as a percentage of the lower of the
original purchase price or redemption proceeds)1 None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .75% .90% 1.10%
Rule 12b-1 Fees (including shareholder servicing fees) .25% .25% .25%
Other Expenses .25% .20% .80%
Total Operating Expenses 1.25% 1.35% 2.15%
<CAPTION>
Nations
Pacific
Growth Fund
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (as a percentage of the lower of the
original purchase price or redemption proceeds)1 None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .90%
Rule 12b-1 Fees (including shareholder servicing fees) .25%
Other Expenses .80%
Total Operating Expenses 1.95%
</TABLE>
1 Investor A Shares that were purchased prior to January 1, 1996 remain subject
to the Deferred Sales Charge applicable at the time of purchase. See "How to
Redeem Shares -- Contingent Deferred Sales Charge."
3
<PAGE>
EXAMPLES:
You would pay the following expenses on a $1,000 investment in Investor A Shares
of the Funds assuming (1) a 5% annual return and (2) redemption at the end of
each time period.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Nations Nations
Nations Equity Balanced
Value Fund Income Fund Assets Fund
1 Year $ 12 $ 12 $ 12
3 Years $ 37 $ 38 $ 38
5 Years $ 64 $ 66 $ 66
10 Years $ 142 $ 145 $ 145
<CAPTION>
Nations
Nations Emerging Growth
Capital Growth Fund Fund
1 Year $ 12 $ 12
3 Years $ 37 $ 38
5 Years $ 64 $ 66
10 Years $ 142 $ 145
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Nations Nations Nations
Disciplined International Emerging Market
Equity Fund Equity Fund Fund
1 Year $ 13 $ 14 $ 22
3 Years $ 40 $ 43 $ 67
5 Years $ 69 $ 74 N/A
10 Years $ 151 $ 162 N/A
<CAPTION>
Nations
Pacific Growth Fund
1 Year $ 20
3 Years $ 61
5 Years N/A
10 Years N/A
</TABLE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor A Shares of the Funds will bear either directly or indirectly. Except
for the Nations Emerging Markets Fund and Nations Pacific Growth Fund, which
fees and expenses are based on estimates, the figures in the above tables are
based on amounts incurred during each Fund's most recent fiscal year and have
been adjusted as necessary to reflect current service provider fees. There is no
assurance that any fee waivers and reimbursements will continue beyond the
current fiscal year. If fee waivers and/or reimbursements are discontinued, the
amounts contained in the "Examples" above may increase. For more complete
descriptions of the Funds' operating expenses, see "How the Funds Are Managed."
For a more complete description of the Rule 12b-1 and shareholder servicing fees
payable by the Funds, see "Shareholder Servicing and Distribution Plans."
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Financial Highlights
The audited financial information on the following pages has been derived from
the financial statements of Nations Fund Trust and Nations Fund, Inc. Price
Waterhouse LLP is the independent accountant to Nations Fund Trust, Nations
Fund, Inc. and Nations Portfolios. The reports of Price Waterhouse LLP for the
most recent fiscal years of Nations Fund Trust and Nations Fund, Inc. accompany
the financial statements for such periods and are incorporated by reference in
the SAIs, which are available upon request. For more information see
"Organization and History." Shareholders of the Funds will receive unaudited
semi-annual reports describing the Funds' investment operations and annual
financial statements audited by the Funds' independent accountant.
4
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NATIONS VALUE FUND
<S> <C> <C> <C> <C> <C>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR
05/31/95 ENDED ENDED ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92 11/30/91
Operating performance:
Net asset value, beginning of period $ 12.98 $ 13.72 $ 12.45 $ 11.16 $ 9.71
Net investment income 0.13 0.20 0.22 0.26 0.34
Net realized and unrealized gain/(loss) on
investments 2.11 (0.20) 1.35 1.59 1.47
Net increase/(decrease) in net assets
resulting from investment operations 2.24 0.00 1.57 1.85 1.81
Distributions:
Dividends from net investment income (0.12) (0.20) (0.21) (0.27) (0.36)
Distributions from net realized capital
gains (0.67) (0.54) (0.09) (0.29) --
Total distributions (0.79) (0.74) (0.30) (0.56) (0.36)
Net asset value, end of period $ 14.43 $ 12.98 $ 13.72 $ 12.45 $ 11.16
Total return++ 18.50% (0.17)% 12.80% 16.96%+++ 18.79%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 40,061 $ 35,445 $ 32,607 $ 24,536 $ 13,514
Ratio of operating expenses to average net
assets 1.16%+ 1.18% 1.21% 1.06% 0.53%
Ratio of net investment income to average
net assets 1.92%+ 1.60% 1.73% 2.15% 3.33%
Portfolio turnover rate 36% 75% 64% 60% 51%
Ratio of operating expenses to average net
assets before fee waivers and/or expense
reimbursements 1.16%+ 1.18% 1.22% 1.15% 0.99%
Net investment income per share before fee
waivers and/or expense reimbursements $ 0.13 $ 0.20 $ 0.22 $ 0.25 $ 0.30
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/90*
Operating performance:
Net asset value, beginning of period $ 10.04
Net investment income 0.35
Net realized and unrealized gain/(loss) on
investments (0.36)
Net increase/(decrease) in net assets
resulting from investment operations (0.01)
Distributions:
Dividends from net investment income (0.32)
Distributions from net realized capital
gains --
Total distributions (0.32)
Net asset value, end of period $ 9.71
Total return++ (0.16)%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 7,020
Ratio of operating expenses to average net
assets 0.21%+
Ratio of net investment income to average
net assets 4.19%+
Portfolio turnover rate 24%
Ratio of operating expenses to average net
assets before fee waivers and/or expense
reimbursements 1.11% +
Net investment income per share before fee
waivers and/or expense reimbursements $ 0.26
</TABLE>
* The Nations Value Fund Investor A Shares commenced operations on December 6,
1989.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS EQUITY INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
INVESTOR A SHARES 05/31/95 05/31/94 05/31/93 05/31/92
Operating performance:
Net asset value, beginning of period $ 11.41 $ 12.02 $ 11.40 $ 10.19
Net investment income 0.40 0.37 0.34 0.29
Net realized and unrealized gain on investments 1.10 0.21 1.05 1.27
Net increase in net assets resulting from investment
operations 1.50 0.58 1.39 1.56
Distributions:
Dividends from net investment income (0.40) (0.38) (0.32) (0.28)
Distributions from net realized capital gains (0.73) (0.81) (0.45) (0.07)
Total distributions (1.13) (1.19) (0.77) (0.35)
Net asset value, end of period $ 11.78 $ 11.41 $ 12.02 $ 11.40
Total return++ 14.53% 4.74% 12.78% 15.59%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 35,538 $ 33,691 $ 32,760 $ 3,418
Ratio of operating expenses to average net assets 1.17% 1.19% 1.17% 1.35%
Ratio of net investment income to average net assets 3.50% 3.16% 3.12% 2.90%
Portfolio turnover rate 158% 116% 55% 84%
Ratio of operating expenses to average net assets without
waivers and reimbursements 1.18%+ 1.20% 1.29% 2.46%
Net investment income per share without waivers and
reimbursements $ 0.40 $ 0.37 $ 0.33 $ 0.18
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 05/31/91*
Operating performance:
Net asset value, beginning of period $ 10.04
Net investment income 0.05
Net realized and unrealized gain on investments 0.10
Net increase in net assets resulting from investment
operations 0.15
Distributions:
Dividends from net investment income --
Distributions from net realized capital gains --
Total distributions 0.00
Net asset value, end of period $ 10.19
Total return++ 1.49%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 497
Ratio of operating expenses to average net assets 1.37%+
Ratio of net investment income to average net assets 3.40%+
Portfolio turnover rate 9%
Ratio of operating expenses to average net assets without
waivers and reimbursements 15.09%+
Net investment income per share without waivers and
reimbursements $ (1.30)
</TABLE>
* The Nations Equity Income Fund Investor A Shares commenced operations on
April 16, 1991.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charge.
+++ Unaudited.
5
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS BALANCED ASSETS FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94 11/30/93
Operating performance:
Net asset value, beginning of period $ 10.42 $ 10.86 $ 10.24
Net investment income 0.15 0.22 0.29
Net realized and unrealized gain/(loss) on investments 1.14 (0.44) 0.62
Net increase/(decrease) in net assets resulting from investment
operations 1.29 (0.22) 0.91
Distributions:
Dividends from net investment income (0.13) (0.22) (0.29)
Distributions from net realized gains (0.02) -- --
Total distributions (0.15) (0.22) (0.29)
Net asset value, end of period $ 11.56 $ 10.42 $ 10.86
Total return++ 12.47% (2.02)% 8.93%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 5,006 $ 4,881 $ 5,191
Ratio of operating expenses to average net assets 1.24%+ 1.23% 1.15%
Ratio of net investment income to average net assets 2.86%+ 2.06% 2.57%
Portfolio turnover rate 101% 156% 50%
Ratio of operating expenses to average net assets before fee waivers 1.24%+ 1.24% 1.22%
Net investment income per share before fee waivers $ 0.15 $ 0.22 $ 0.28
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/92*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.01
Net realized and unrealized gain/(loss) on investments 0.23##
Net increase/(decrease) in net assets resulting from investment
operations 0.24
Distributions:
Dividends from net investment income --
Distributions from net realized gains --
Total distributions --
Net asset value, end of period $ 10.24
Total return++ 2.40%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 547
Ratio of operating expenses to average net assets 0.55%+
Ratio of net investment income to average net assets 3.60%+
Portfolio turnover rate 79%
Ratio of operating expenses to average net assets before fee waivers 1.30%+
Net investment income per share before fee waivers $ 0.01
</TABLE>
* The Nations Balanced Assets Fund Investor A Shares commenced operations on
October 2, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
## The amounts shown at this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and losses in
the portfolio securities for the period because of the timing of purchases
and withdrawals of shares in relation to the fluctuating market value of the
portfolio.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94 11/30/93
Operating performance:
Net asset value, beginning of period $ 11.21 $ 11.06 $ 10.67
Net investment income/(loss) 0.04 0.07 0.07
Net realized and unrealized gain on investments 1.38 0.14 0.41
Net increase in net assets resulting from investment
operations 1.42 0.21 0.48
Distributions:
Dividends from net investment income (0.04) (0.06) (0.08)
Distributions from net realized gains (0.26) (0.00)(a) (0.01)
Total distributions (0.30) (0.06) (0.09)
Net asset value, end of period $ 12.33 $ 11.21 $ 11.06
Total return++ 13.07% 1.93% 4.56%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 13,369 $ 11,038 $ 11,182
Ratio of operating expenses to average net assets 1.16%+ 1.15% 1.05%
Ratio of net investment income/(loss) to average net
assets 0.78%+ 0.60% 0.59%
Portfolio turnover rate 43% 56% 81%
Ratio of operating expenses to average net assets before
fee waivers 1.22%+ 1.16% 1.14%
Net investment income/(loss) per share before fee waivers $ 0.04 $ 0.07 $ 0.06
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/92*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss) 0.01
Net realized and unrealized gain on investments 0.66##
Net increase in net assets resulting from investment
operations 0.67
Distributions:
Dividends from net investment income --
Distributions from net realized gains --
Total distributions --
Net asset value, end of period $ 10.67
Total return++ 6.70%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,225
Ratio of operating expenses to average net assets 0.55%+
Ratio of net investment income/(loss) to average net
assets 1.08%+
Portfolio turnover rate 7%
Ratio of operating expenses to average net assets before
fee waivers 1.30%+
Net investment income/(loss) per share before fee waivers $ 0.00(a)
</TABLE>
* The Nations Capital Growth Fund Investor A Shares commenced operations on
October 2, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
## The amount shown at this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and losses in
the portfolio securities for the period because of the timing of purchases
and withdrawals of shares in relation to the fluctuating market value of the
portfolio.
(a) Value represents less than $0.01 per share.
6
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS EMERGING GROWTH FUND
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94#
Operating performance:
Net asset value, beginning of period $ 11.35 $ 10.85
Net investment income/(loss) 0.00(a) (0.06)
Net realized and unrealized gain on investments 0.96 0.70
Net increase in net assets resulting from investment operations 0.96 0.64
Distributions:
Distributions from net realized gains (0.40) (0.14)
Total distributions (0.40) (0.14)
Net asset value, end of period $ 11.91 $ 11.35
Total return++ 8.98% 5.90%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 4,212 $ 3,234
Ratio of operating expenses to average net assets 1.22%+ 1.26%
Ratio of net investment income/(loss) to average net assets (0.15)%+ (0.54)%
Portfolio turnover rate 69% 129%
Ratio of operating expenses to average net assets before fee waivers 1.23%+ 1.26%
Net investment income/(loss) per share before fee waivers 0.00(a) $ (0.06)
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/93*
Operating performance:
Net asset value, beginning of period $ 9.87
Net investment income/(loss) (0.03)
Net realized and unrealized gain on investments 1.02
Net increase in net assets resulting from investment operations 0.99
Distributions:
Distributions from net realized gains (0.01)
Total distributions (0.01)
Net asset value, end of period $ 10.85
Total return++ 9.99%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,095
Ratio of operating expenses to average net assets 1.05%+
Ratio of net investment income/(loss) to average net assets (0.40)%+
Portfolio turnover rate 159%
Ratio of operating expenses to average net assets before fee waivers 1.26%+
Net investment income/(loss) per share before fee waivers $ (0.04)
</TABLE>
* The Nations Emerging Growth Fund Investor A Shares commenced operations on
December 10, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
# Per share numbers have been calculated using the monthly average shares
method.
(a) Value represents less than $0.01 per share.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS DISCIPLINED EQUITY FUND
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS
ENDED PERIOD
05/31/95 ENDED
INVESTOR A SHARES (UNAUDITED)# 11/30/94*
Operating performance:
Net asset value, beginning of period $ 13.06 $ 13.30
Net investment income/(loss) 0.08 0.00(a)
Net realized and unrealized gain/(loss) on investments 1.35 (0.23)##
Net increase/(decrease) in net assets resulting from investment operations 1.43 (0.23)
Distributions:
Dividends from net investment income (0.01) (0.01)
Distributions from net realized gains -- --
Return of capital -- (0.00)(a)
Total distributions: (0.01) (0.01)
Net asset value, end of period $ 14.48 $ 13.06
Total return++ 10.95% (1.71)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 502 $ 252
Ratio of operating expenses to average net assets 1.04%+ 1.23%+
Ratio of net investment income/(loss) to average net assets 1.27%+ 0.02%+
Portfolio turnover rate 98% 177%
Ratio of operating expenses to average net assets before fee waivers 1.75%+ 1.66%+
Net investment income/(loss) per share before fee waivers $ 0.04 $ (0.07)
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 04/29/94*
Operating performance:
Net asset value, beginning of period $ 14.94
Net investment income/(loss) (0.04)
Net realized and unrealized gain/(loss) on investments 1.35
Net increase/(decrease) in net assets resulting from investment operations 1.31
Distributions:
Dividends from net investment income --
Distributions from net realized gains (2.95)
Return of capital --
Total distributions: (2.95)
Net asset value, end of period $ 13.30
Total return++ 8.31%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 165
Ratio of operating expenses to average net assets 1.30%+
Ratio of net investment income/(loss) to average net assets (0.62)%+
Portfolio turnover rate 475%
Ratio of operating expenses to average net assets before fee waivers 1.74%+
Net investment income/(loss) per share before fee waivers $ (0.07)
</TABLE>
* The period for the Nations Disciplined Equity Investor A Shares reflects
operations from April 30, 1994 through November 30, 1994. The financial
information for the fiscal periods through April 29, 1994 is based on the
financial information for The Capitol Mutual Funds Special Equity Portfolio
Class B Shares, which were reorganized into Investor A Shares of Nations
Disciplined Equity Fund (then named Nations Special Equity Fund) as of the
close of business on April 29, 1994. The Capitol Mutual Funds Special Equity
Portfolio Class B Shares commenced operations on July 26, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
# Per share numbers have been calculated using the monthly average shares
method.
## The amount shown at this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and losses in
the portfolio securities for the period because of the timing of purchases
and withdrawals of shares in relation to the fluctuating market value of the
portfolio.
(a) Value represents less than $0.01 per share.
7
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR YEAR
ENDED ENDED
INVESTOR A SHARES 05/31/95# 05/31/94#
Operating performance:
Net asset value, beginning of period $ 12.00 $ 10.56
Net investment income/(loss) 0.11 0.06
Net realized and unrealized gain/(loss) on investments (0.20) 1.44
Net increase/(decrease) in net assets resulting from investment operations (0.09) 1.50
Distributions:
Dividends from net investment income (0.02) (0.04)
Distributions from net realized capital gains (0.12) (0.02)
Distributions in excess of net realized capital gains (0.10) --
Total distributions (0.24) (0.06)
Net asset value, end of period $ 11.67 $ 12.00
Total return++ (0.69)% 14.00%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 4,877 $ 3,219
Ratio of operating expenses to average net assets 1.28% 1.42%
Ratio of net investment income/(loss) to average net assets 0.92% 0.50%
Portfolio turnover rate 92% 39%
Ratio of operating expenses to average net assets without waivers and reimbursements 1.29% 1.43%
Net investment income/(loss) per share without waivers and reimbursements $ 0.11 $ 0.05
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 05/31/93*#
Operating performance:
Net asset value, beginning of period $ 10.38
Net investment income/(loss) 0.07
Net realized and unrealized gain/(loss) on investments 0.21
Net increase/(decrease) in net assets resulting from investment operations 0.28
Distributions:
Dividends from net investment income (0.08)
Distributions from net realized capital gains (0.02)
Distributions in excess of net realized capital gains --
Total distributions (0.10)
Net asset value, end of period $ 10.56
Total return++ 2.91%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 839
Ratio of operating expenses to average net assets 1.55%+
Ratio of net investment income/(loss) to average net assets 0.78%+
Portfolio turnover rate 41%
Ratio of operating expenses to average net assets without waivers and reimbursements 1.62%+
Net investment income/(loss) per share without waivers and reimbursements $ 0.07
</TABLE>
* The Nations International Equity Fund Investor A Shares commenced operations
on June 3, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charge.
# Per share amounts have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed income method did not accord with the results of
operations.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NATIONS EMERGING MARKETS FUND
<TABLE>
<CAPTION>
<S> <C>
PERIOD
ENDED
INVESTOR A SHARES 09/30/95*#
Net asset value, beginning of period $ 10.00
Net investment income/(loss)## (0.01)
Net realized and unrealized gain/(loss) on investments (0.12)
Net increase/(decrease) in net assets resulting from investment operations (0.13)
Distributions:
Dividends from net investment income N/A
Total Distributions N/A
Net asset value, end of period $ 9.87
Total return++ (1.30)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 57
Ratio of operating expenses to average net assets 2.15%+
Ratio of net investment income/(loss) to average net assets (0.28)%
Portfolio turnover rate 10%
</TABLE>
* The Fund's Investor A Shares commenced operations on June 30, 1995.
** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period.
## For the Nations Emerging Markets Fund, the amount shown at this caption for
each share outstanding throughout the period may not accord with the change
in the aggregate gains and losses in the portfolio securities for the period
because of the timing of purchases and withdrawals of shares in relation to
the fluctuating market value of the portfolio.
8
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NATIONS PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
<S> <C>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 09/30/95*#
Net asset value, beginning of period $ 10.00
Net investment income/(loss)## (0.00)**
Net realized and unrealized gain/(loss) on investments (0.30)
Net increase/(decrease) in net assets resulting from investment operations (0.30)
Distributions:
Dividends from net investment income N/A
Total Distributions N/A
Net asset value, end of period $ 9.70
Total return++ (3.00)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $161
Ratio of operating expenses to average net assets 1.95%+
Ratio of net investment income/(loss) to average net assets (0.10)%+
Portfolio turnover rate 3%
</TABLE>
* The Fund's Investor A Shares commenced operations on June 30, 1995.
** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period.
## For the Nations Emerging Markets Fund, the amount shown at this caption for
each share outstanding throughout the period may not accord with the change
in the aggregate gains and losses in the portfolio securities for the period
because of the timing of purchases and withdrawals of shares in relation to
the fluctuating market value of the portfolio.
Objectives
GROWTH AND INCOME FUNDS:
NATIONS VALUE FUND: The Nations Value Fund's investment objective is to seek
long-term capital growth with income a secondary consideration. The Fund invests
under normal market conditions at least 65% of its total assets in common
stocks.
NATIONS EQUITY INCOME FUND: The Nations Equity Income Fund seeks to provide high
current income primarily through investments in equity securities (including
convertible securities) having a relatively high current yield. Secondarily,
equity securities will be selected which the Adviser believes have favorable
prospects for increasing dividend income and/or capital appreciation.
NATIONS BALANCED ASSETS FUND: The Nations Balanced Assets Fund's investment
objective is total investment return through a combination of growth of capital
and current income consistent with the preservation of capital. In seeking its
objective, the Fund will use a disciplined approach of allocating assets
primarily among three major asset groups: common stocks, fixed income securities
and cash equivalents.
GROWTH FUNDS:
NATIONS CAPITAL GROWTH FUND: The Nations Capital Growth Fund's investment
objective is to seek long-term capital appreciation by investing primarily in
common stocks issued by companies that, in the judgment of the Adviser, have
above-average potential for capital appreciation. Over time, total return is
likely to consist primarily of capital appreciation and secondarily of dividend
and interest income.
NATIONS EMERGING GROWTH FUND: The Nations Emerging Growth Fund's investment
objective is to seek capital appreciation by investing in equity securities of
high quality emerging growth companies that are expected to have earnings growth
rates superior to most publicly traded companies.
NATIONS DISCIPLINED EQUITY FUND: The Nations Disciplined Equity Fund's
investment objective is to seek long-term capital appreciation. The Fund seeks
to achieve its investment objective by investing primarily in the common stocks
of companies that are considered by the Adviser to have the potential for
significant increases in earnings per share.
INTERNATIONAL FUNDS:
NATIONS INTERNATIONAL EQUITY FUND: The Nations International Equity Fund's
investment objective is to seek long-term growth of capital primarily by
investing in marketable equity securities of established, non-United States
issuers.
NATIONS EMERGING MARKETS FUND: The Nations Emerging Markets Fund's investment
objective is to seek long-term capital growth. It seeks to achieve this
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objective by investing primarily in securities of companies that conduct their
principal business activities in emerging markets. The Fund invests primarily in
companies located in countries considered to have potential for rapid economic
growth and that have a relatively low gross national product per capita compared
to the world's major economies.
NATIONS PACIFIC GROWTH FUND: The Nations Pacific Growth Fund's investment
objective is to seek long-term capital growth, with income a secondary
consideration. It seeks to achieve this objective by investing primarily in
securities of issuers that conduct their principal business activities in the
Pacific Basin and the Far East (excluding Japan).
How Objectives Are Pursued
GROWTH AND INCOME FUNDS:
NATIONS VALUE FUND: The Fund invests in stocks drawn from a universe of
approximately 800 stocks monitored by the Adviser. The Adviser closely monitors
these companies, rating them for quality and projecting their future earnings
and dividends as well as other factors. To qualify for purchase, an issuer would
normally have a market capitalization of $300 million or more and have average
monthly trading volume of at least $10 million. These requirements are generally
considered by the Adviser to be adequate to support normal purchase and sale
activity without materially affecting prevailing market prices of the issuer's
shares. The Adviser also analyzes key financial ratios that measure the growth,
profitability and leverage of such issuers that it believes will help maintain a
portfolio of above-average quality.
Stocks are selected from this universe based on the Adviser's judgment of their
total return potential. The Adviser buys stocks that it believes are undervalued
relative to the overall stock market. The principal factor considered by the
Adviser in making these determinations is the ratio of a stock's price to
earnings relative to corresponding ratios of other stocks in the same industry
or economic sector. The Adviser believes that companies with lower
price/earnings ratios are more likely to provide better opportunities for
capital appreciation. This "value" approach generally produces a dividend yield
greater than the market average. The Adviser will attempt to temper risk by
broad diversification among economic sectors and industries. Through this
strategy, the Fund pursues above-average returns while seeking to avoid
above-average risks. No industry will represent 25% or more of the Fund's
portfolio at the time of purchase.
In addition to common stocks, the Fund also may invest in preferred stocks,
securities convertible into common stock, and other types of securities having
common stock characteristics (such as rights and warrants to purchase equity
securities). Although the Fund invests primarily in publicly-traded common
stocks of companies incorporated in the United States, the Fund may invest in
securities of foreign issuers. See "Appendix A -- Foreign Securities." The Fund
also may hold up to 20% of its total assets in obligations issued or guaranteed
as to payment of principal and interest by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Obligations"), and investment grade bonds
and other debt securities of domestic companies. Obligations with the lowest
investment grade rating (e.g. rated "BBB" by Standard & Poor's Corporation
("S&P") or "Baa" by Moody's Investors Service, Inc. ("Moody's")) have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations.
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. Unrated obligations may
be acquired by the Fund if they are determined by the Adviser to be of
comparable quality at the time of purchase to rated obligations that may be
acquired.
The Fund also may invest in various money market instruments. The Fund may
invest without limitation in such instruments pending investment, to meet
anticipated redemption requests, or as a temporary defensive measure if market
conditions warrant. For more information concerning these instruments and the
Fund's investment practices, see "Appendix A."
NATIONS EQUITY INCOME FUND: The investment program of the Fund is based on
several premises. First, the Adviser believes that, over time, dividend income
can account for a significant component of the total return from equity
investments. Over time, reinvested dividend income has accounted for
approximately one-half of the total return of the Standard & Poor's 500 Stock
Index ("S&P 500 Index"), a broad-based and widely used index of common stock
prices. Second, dividends are normally a more stable and predictable source of
return than capital appreciation. While the price of a company's stock generally
increases or decreases in response to short-term earnings and market
fluctuations, its dividends are generally less volatile. Finally, the Adviser
believes that stocks which distribute a high level of current income tend to
have less price volatility than those which pay below average dividends.
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The Fund's equity investments will generally be made in companies which share
some of the following characteristics:
(Bullet) above-average current dividend yields relative to the S&P 500 Index;
(Bullet) five years of stable or increasing dividends;
(Bullet) established operating histories; and
(Bullet) strong balance sheets and other favorable financial characteristics.
To achieve its objectives, the Fund, under normal circumstances, will invest at
least 65% of its assets in income-producing common stocks, including securities
convertible into or ultimately exchangeable for common stock (i.e., convertible
bonds or convertible preferred stock), whose prospects for dividend growth and
capital appreciation are considered favorable by the Adviser. The securities
held by the Fund generally will be listed on a national exchange or, if not so
listed, will usually have an established over-the-counter market.
In order to further enhance its income, the Fund also may invest its assets in
fixed income securities (corporate, government, and municipal bonds of various
maturities), preferred stocks and warrants. The Fund may invest in debt
securities that are considered investment grade (e.g. securities rated in one of
the top four investment categories by S&P or Moody's, or if not rated, are of
equivalent investment quality as determined by the Adviser). Obligations rated
in the lowest of the top four investment grade rating categories (e.g., rated
"BBB" by S&P) have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade debt
obligations. The Fund also may invest up to 5% of its assets in debt securities
that are rated below investment grade (e.g. rated "BB" by S&P), or if not rated,
are of equivalent investment quality as determined by the Adviser.
Non-investment-grade debt securities are sometimes referred to as "high yield
bonds" or "junk bonds," tend to have speculative characteristics, generally
involve more risk of principal and income than higher rated securities, and have
yields and market values that tend to fluctuate more than higher quality
securities. The Fund will invest in such high-yield debt securities only when
the Adviser believes that the issue presents minimal credit risk. For a
description of corporate debt ratings, see "Appendix B." Although the Fund
invests primarily in securities of U.S. issuers, the Fund may invest 10% or more
of its total assets in debt obligations of foreign issuers and stocks of foreign
corporations. The Fund will treat foreign securities as illiquid unless there is
an active and substantial secondary market for such securities.
The Fund may invest in various money market instruments. The Fund may invest
without limitation in such instruments pending investment, to meet anticipated
redemption requests, or as a temporary defensive measure if market conditions
warrant. For additional information concerning these instruments and the Fund's
investment practices, see "Appendix A."
NATIONS BALANCED ASSETS FUND: In pursuing the Fund's objective, the Adviser will
allocate the Fund's assets based upon its judgment of the relative valuation and
the expected returns of the three major asset groups in which the Fund
principally invests: common stocks, fixed income securities and cash
equivalents. In assessing relative value and expected returns, the Adviser will
evaluate current economic and financial market conditions (both domestically and
internationally), current interest rate trends, earnings and dividend prospects
for common stocks, and overall financial market stability. In general, the
Adviser believes that common stocks typically offer the best opportunity for
long-term capital appreciation, and that high quality companies with
above-average earnings growth and return on equity offer the best growth
prospects among common stocks.
The Fund invests in common and preferred stocks of U.S. corporations and of
foreign issuers, as well as securities convertible into common stocks, and other
types of securities having common stock characteristics (such as rights and
warrants to purchase equity securities) that meet the Adviser's stringent
criteria. The stocks are primarily those of seasoned, financially strong U.S.
companies with records of above-average earnings growth and above-average
capital growth potential. No industry will represent 25% or more of the Fund's
portfolio at the time of purchase.
The Fund also will invest in government, corporate and mortgage-backed
securities (see "Appendix A -- Asset-Backed Securities"). Most obligations
acquired by the Fund will be issued by companies or governmental entities
located within the United States. Debt obligations acquired by the Fund will be
rated investment grade at the time of purchase by S&P, Moody's, Duff & Phelps
Credit Rating Co. ("D&P"), Fitch Investors Service, Inc. ("Fitch"), IBCA Limited
or its affiliate IBCA Inc.
(collectively "IBCA"), or Thomson BankWatch, Inc. ("BankWatch") or, if unrated,
determined by the Adviser to be comparable in quality to instruments so rated.
Obligations with the lowest investment grade rating (e.g. rated "BBB" by S&P or
"Baa" by Moody's) have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade debt
obligations. See "Appendix B" for a description of these ratings designations.
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. Unrated obligations may
be
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acquired by the Fund if they are determined by the Adviser to be of comparable
quality at the time of purchase to rated obligations that may be acquired. Under
normal circumstances, at least 25% of the total value of the Fund's assets will
be invested in fixed income securities.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest 10% or more of its total assets in debt obligations of foreign issuers
and stocks of foreign corporations. See "Appendix A -- Foreign Securities."
The Fund also may invest in various money market instruments. The Fund may
invest without limitation in such instruments pending investment, to meet
anticipated redemption requests, or as a temporary defensive measure if market
conditions warrant. For more information concerning these instruments, see
"Appendix A."
GROWTH FUNDS:
NATIONS CAPITAL GROWTH FUND: The investment philosophy of the Fund is based on
the belief that companies with superior growth characteristics selling at
reasonable prices will, over time, outperform the market. Therefore, the Fund
will generally seek to invest in larger capitalization, high-quality companies
which possess above-average earnings growth potential.
The Fund's equity investments will generally be made in companies which share
some of the following characteristics:
(Bullet) above-average earnings growth relative to the S&P 500 Index;
(Bullet) established operating histories, strong balance sheets and favorable
financial characteristics; and
(Bullet) above-average return on equity relative to the S&P 500 Index.
In addition, the Fund's investment program enables it to invest in the following
companies that comprise the equity markets:
(Bullet) companies that generate or apply new technologies, new and improved
distribution techniques, or new services, such as those in the business
equipment, electronics, specialty merchandising and health service
industries;
(Bullet) companies that own or develop natural resources, such as energy
exploration companies;
(Bullet) companies that may benefit from changing consumer demands and
lifestyles, such as financial service organizations and
telecommunication companies;
(Bullet) foreign companies, including those in countries with more rapid
economic growth than the U.S.;
(Bullet) companies whose earnings growth is projected at a pace in excess of the
average company (I.E., growth companies); and
(Bullet) companies whose earnings are temporarily depressed and are currently
out of favor with most investors.
In seeking capital growth, the Fund looks for companies whose securities appear
to present a favorable relationship between market price and opportunity. These
may include securities of companies whose fundamentals or products may be of
only average promise. Market misconceptions, temporary bad news and other
factors may cause a security to be out of favor in the stock market and to trade
at a price below its potential value. These undervalued securities can provide
the opportunity for above-average market performance. Through intensive
research, visits to many companies each year, and efficient response to changing
market conditions, the Adviser seeks to make the most of the Fund's flexible
charter.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks. In addition to common stocks, the Fund also may invest
in preferred stocks, securities convertible into common stocks and other types
of securities having common stock characteristics (such as rights and warrants
to purchase equity securities). Although the Fund invests primarily in publicly
traded common stocks of companies incorporated in the United States, the Fund
may invest 10% or more of its total assets in securities of foreign issuers. See
"Appendix A -- Foreign Securities."
The Fund also may invest in various money market instruments. The Fund may
invest without limitation in such instruments pending investment, to meet
anticipated redemption requests, or as a temporary defensive measure if market
conditions warrant. For additional information concerning these instruments and
the Fund's investment practices, see "Appendix A."
NATIONS EMERGING GROWTH FUND: The Fund will invest in common stocks and
securities convertible into common stocks selected from a universe of emerging
growth companies monitored by the Adviser. Most of the companies will have
revenues between $50 million and $1.5 billion and a debt ratio of less than 50%
of capitalization. The universe focuses on companies with above-average earnings
growth rates and profit margins, yet the portfolio may include positions of
special situation companies whose growth is expected to accelerate. These
companies are believed to offer significant opportunities for capital
appreciation and the Adviser will attempt to identify these opportunities before
their potential is recognized by investors in general.
In selecting industries and companies for investment, the Adviser will consider
overall growth prospects, financial condition, competitive position, technology,
research and development, innovative products, marketing expertise,
productivity, labor costs, raw material costs and sources, profit margins,
return on investment, structural changes in local economies, capital resources,
the degree
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of governmental regulation or deregulation, management and other factors.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks. The Fund also may invest in various money market
instruments. The Fund may invest without limitation in such instruments pending
investment, to meet anticipated redemption requests, or as a temporary defensive
measure if market conditions warrant. For additional information concerning
these instruments and the Fund's investment practices, see "Appendix A."
The volatility of emerging growth stocks is higher than that of larger
companies. Many of these stocks trade over the counter and may not have
widespread interest among institutional investors. These securities may have
larger potential for gains but also carry more risk if unexpected company
developments adversely affect the stock prices. To help reduce risk, the Fund is
diversified and typically invests in 75 to 100 companies which represent a broad
range of industries and sectors, both in the United States and abroad.
NATIONS DISCIPLINED EQUITY FUND: The investment philosophy of the Fund is based
on the premise that companies with positive earnings trends also should
experience positive trends in their share price. Based on this philosophy, the
Fund invests primarily in the common stocks of companies that the Adviser
believes are likely to experience significant increases in earnings. By pursuing
this investment philosophy, the Fund seeks to provide investors with long-term
capital appreciation which exceeds that of the S&P 500 Index.
In selecting stocks for purchase by the Fund, the Adviser utilizes quantitative
analysis supported by fundamental research. This approach seeks to identify
companies that have experienced positive historical earnings trends, as
evidenced by earnings forecasts issued by investment banks, broker/dealers and
other investment professionals. The Adviser believes that companies experiencing
such earnings trends have the potential to generate significant increases in per
share earnings. The Adviser also believes that companies with increasing
earnings should experience positive trends in their stock price. Although the
Fund seeks to invest in companies with increasing earnings, the Fund's
investment objective focuses on long-term capital appreciation; income is not an
objective of the Fund.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks of domestic issuers. With respect to the remainder of
the Fund's assets, the Fund may invest in a broad range of equity and debt
instruments, including preferred stocks, securities (debt and preferred stock)
convertible into common stock, warrants and rights to purchase common stocks,
options, U.S. government and corporate debt securities and various money market
instruments. The Fund will invest primarily in medium- and large-sized companies
(I.E. companies with market capitalizations of $500 million or greater) that are
determined to have favorable price/earnings ratios. The Fund also may invest in
securities issued by companies with market capitalizations of less than $500
million. The volatility of small-capitalization stocks is typically greater than
that of larger companies. To help reduce risk, the Fund will invest in the
securities of companies representing a broad range of industries and economic
sectors.
The Fund's investments in debt securities, including convertible securities,
will be limited to securities rated investment grade (E.G. securities rated in
one of the top four investment categories by a nationally recognized statistical
rating organization or, if not rated, are of equivalent quality as determined by
the Adviser). Obligations rated in the lowest of the top four investment grade
rating categories have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade debt
obligations.
The Fund may invest in foreign securities. Investments in foreign securities
involve risks that are different in some respects from investments in securities
of U.S. issuers, such as the risk of fluctuations in the value of the currencies
in which they are denominated. See "Appendix A -- Foreign Securities." For
temporary defensive purposes if market conditions warrant, the Fund may invest
without limitation in preferred stocks, investment grade debt instruments and
money market instruments.
INTERNATIONAL FUNDS:
NATIONS INTERNATIONAL EQUITY FUND: The Fund intends to diversify investments
broadly among countries and normally to invest in securities representing at
least three different countries. The Fund may invest in countries located in the
Far East and Western Europe as well as Australia, Canada, and other areas
(including developing countries). Under unusual circumstances, however, the Fund
may invest substantially all of its assets in one or two countries.
In seeking to achieve its objective, the Fund will invest at least 65% of its
assets in common stocks of established non-United States companies that the
Adviser believes have potential for growth of capital. The Fund also may invest
up to 35% of its assets in any other type of security including: convertible
securities; preferred stocks; bonds, notes and other debt securities (including
Eurodollar securities); and obligations of domestic or foreign governments and
their political subdivisions.
The Fund also may invest in American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs"), American Depository Shares ("ADSs"), bonds,
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notes, other debt securities of foreign issuers, securities of foreign
investment funds or trusts and real estate investment trust securities. For
additional information concerning the Fund's investment practices, see "Appendix
A."
NATIONS EMERGING MARKETS FUND: In seeking to achieve its objective, the Fund
will invest under normal market conditions at least 65% of its total assets in
securities of companies that conduct their principal business activities in
emerging markets. A company will be considered to conduct its principal business
activities in a country, market or region if it derives a significant portion
(at least 50 percent) of its revenues or profits from goods produced or sold,
investments made, or services performed in such country, market or region or has
at least 50 percent of its assets situated in such country, market or region.
Equity securities of emerging market issuers may include common stocks,
preferred stocks (including convertible preferred stocks) and warrants; bonds,
notes and debentures convertible into common or preferred stock; equity
interests in foreign investment funds or trusts and real estate investment trust
securities. The Fund may invest in ADRs, Global Depositary Receipts ("GDRs"),
EDRs, and ADSs of such issuers.
The Fund also may invest in other types of instruments, including debt
obligations. Debt obligations acquired by the Fund will be rated investment
grade at the time of purchase by Moody's, S&P or, if unrated, determined by the
Adviser to be comparable in quality to instruments so rated. Obligations with
the lowest investment grade rating (e.g., rated "Baa" by Moody's or "BBB" by
S&P) have speculative characteristics, and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade debt
obligations. See "Appendix B" for a description of those ratings designations.
The Fund is a diversified fund that intends, under normal market conditions, to
invest in at least three different countries, although it may, from time to
time, invest all of its assets in a single country. If the Fund invests all or a
significant portion of its assets at any time in a single country, events
occurring in such country are more likely to affect the Fund's instruments. For
additional information concerning risk, see "Special Risk Considerations
Relevant to an Investment in the Nations International Equity Fund, Nations
Emerging Markets Fund and Nations Pacific Growth Fund," below. When allocating
investments among individual countries, the Adviser will consider various
criteria, such as the relative economic growth potential of the various
economies and securities markets, expected levels of inflation, government
policies influencing business conditions and the outlook for currency
relationships.
The Fund considers countries with emerging markets to include the following: (i)
countries with an emerging stock market as defined by the International Finance
Corporation; (ii) countries with low- to middle-income economies according to
the International Bank For Reconstruction and Development (more commonly
referred to as the World Bank); and (iii) countries listed in World Bank
publications as developing. The Adviser seeks to identify and invest in those
emerging markets that have a relatively low gross national product per capita,
compared to the world's major economies, and which exhibit potential for rapid
economic growth. The Adviser believes that investment in equity securities of
emerging market issuers offers significant potential for long-term capital
appreciation.
For defensive purposes, the Fund may temporarily invest substantially all of its
assets in U.S. financial markets or in U.S. dollar-denominated instruments. See
"Appendix A" below for additional information concerning the investment
practices of the Fund.
NATIONS PACIFIC GROWTH FUND: The Fund seeks to achieve its objective by
investing primarily in securities of issuers that conduct their principal
business activities in the regions known as the Pacific Basin and the Far East.
The Pacific Basin and the Far East include Australia, Hong Kong, Indonesia,
South Korea, Malaysia, New Zealand, Pakistan, the People's Republic of China,
the Philippines, Singapore, Sri Lanka, Taiwan and Thailand and may include other
markets that develop in the region. The Fund will not invest in securities of
issuers that conduct their principal business activities in Japan.
The Fund will focus on equity securities, but may also invest in debt
obligations. Such equity securities may include common stocks, preferred stocks
(including convertible preferred stocks) and warrants; bonds, notes and
debentures convertible into common or preferred stock; equity interests in
foreign investment funds or trusts and real estate investment trust securities.
Debt obligations acquired by the Fund will be rated investment grade at the time
of purchase by Moody's or S&P or, if unrated, determined by the Adviser to be
comparable in quality to instruments so rated. Obligations with the lowest
investment grade rating (e.g., rated "Baa" by Moody's or "BBB" by S&P) have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations. See
"Appendix B" for a description of these ratings designations.
In seeking to achieve its objective, the Fund will invest under normal market
conditions at least 65% of its total assets in securities of issuers that
conduct their principal business activities in countries of the Pacific Basin
and Far East, except for Japan. Although the Fund may not invest in securities
issued by companies that conduct their principal business activities in Japan,
the Fund
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may invest in securities that are listed on a Japanese exchange.
The Fund is a diversified fund that intends, under normal market conditions, to
invest in at least three different countries, although it may, from time to
time, invest all of its assets in a single country. If the Fund invests all or a
significant portion of its assets at any time in issuers that conduct their
principal business activities in a single country, events occurring in such
country are more likely to affect the Fund's investments. For additional
information concerning risk, see "Special Risk Considerations Relevant to an
Investment in the Nations International Equity Fund, Nations Emerging Markets
Fund and Nations Pacific Growth Fund," below. When allocating investments among
individual countries, the Adviser will consider various criteria, such as the
relative economic growth potential of the various economies and securities
markets, expected levels of inflation, government policies influencing business
conditions and the outlook for currency relationships. The Fund may invest in
ADRs, GDRs, EDRs and ADSs.
For defensive purposes, the Fund may temporarily invest substantially all of its
assets in U.S. financial markets or in U.S. dollar-denominated instruments. See
"Appendix A" below for additional information concerning the investment
practices of the Fund.
GENERAL: Each Fund may invest in certain specified derivative securities,
including: exchange-traded options; over-the-counter options executed with
primary dealers, including long calls and puts and covered calls to enhance
return; and U.S. and foreign exchange-traded financial futures approved by the
Commodity Futures Trading Commission ( the "CFTC") and options thereon for
market exposure risk management. The Nations Balanced Assets Fund also may
engage in dollar roll transactions. Each Fund may lend its portfolio securities
to qualified institutional investors. Each Fund also may invest in restricted,
private placement and other illiquid securities and securities issued by other
investment companies, consistent with the Fund's investment objective and
policies. Each Fund (except the Nations Balanced Assets Fund) may invest in real
estate investment trust securities.
SPECIAL RISK CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE NATIONS
INTERNATIONAL EQUITY FUND, NATIONS EMERGING MARKETS FUND AND NATIONS PACIFIC
GROWTH FUND: Investors should understand and consider carefully the special
risks involved in foreign investing. In addition, certain Funds present unique
risks that investors should be aware of.
Investors in the Nations International Equity Fund should be aware that the Fund
may, from time to time, invest up to 5% of its total assets in securities of
companies located in Eastern Europe. Economic and political reforms in this
region are still in their infancy. As a result, investment in such countries
would be highly speculative and could result in losses to the Fund and, thus, to
its shareholders.
Investors in the Nations Pacific Growth Fund should understand and consider
carefully the special risks involved in investing in the Pacific Basin and Far
East. Countries in the Pacific Basin and Far East are in various stages of
economic development, ranging from emerging markets to mature economies, but
each has unique risks. Most countries in this region are heavily dependent on
international trade, and some are especially vulnerable to recessions in other
countries. Many of these countries are also sensitive to world commodity prices.
Some countries that have experienced rapid growth may still have obsolete
financial systems, economic problems or archaic legal systems. In addition, many
of these nations are experiencing political and social uncertainties. For
example, the return of Hong Kong to Chinese dominion may have a profound effect
on both Hong Kong and China, and could affect the entire Pacific Basin and the
Far East.
The same is true, but even more so, for the emerging market countries in which
the Nations Emerging Markets Fund will invest. Although the Fund believes that
its investments present the possibility for significant growth over the
long-term, they also entail significant risks. Many investments in emerging
markets can be considered speculative, and their prices can be much more
volatile than in the more developed nations of the world. This difference
reflects the greater uncertainties of investing in less established markets and
economies.
The financial markets of emerging market countries are generally less well
capitalized and thus securities of issuers based in such countries may be less
liquid.
Moreover, for each of the Funds, investing in securities denominated in foreign
currencies and utilization of forward foreign currency exchange contracts and
other currency hedging techniques involve certain considerations comprising both
opportunities and risks not typically associated with investing in U.S.
dollar-denominated securities. Additionally, changes in the value of foreign
currencies can significantly affect a Fund's share price. General economic and
political factors in the various world markets also can impact a Fund's share
price.
The expenses to individual investors of investing directly in foreign securities
are very high relative to similar costs for investing in U.S. securities. While
the Funds offer a more efficient way for individual investors to participate in
foreign markets, their expenses, including custodial fees, are also higher than
the typical domestic equity mutual fund.
Risks unique to international investing include: (1) restrictions on foreign
investment and repatriation of capital; (2) fluctuations in currency exchange
rates;
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<PAGE>
(3) costs of converting foreign currency into U.S. dollars and U.S. dollars into
foreign currencies; (4) greater price volatility and less liquidity; (5)
settlement practices, including delays, which may differ from those customary in
United States markets; (6) exposure to political and economic risks, including
the risk of nationalization, expropriation of assets and war; (7) possible
imposition of foreign taxes and exchange control and currency restrictions; (8)
lack of uniform accounting, auditing and financial reporting standards; (9) less
governmental supervision of securities markets, brokers and issuers of
securities; (10) less financial information available to investors; and (11)
difficulty in enforcing legal rights outside the United States. These risks
often are heightened for investments in emerging or developing countries.
See "Appendix A" for additional discussion of the risks associated with an
investment in the Nations International Equity Fund, Nations Emerging Markets
Fund and Nations Pacific Growth Fund.
PORTFOLIO TURNOVER: Generally, the Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. While it is not possible to predict exactly annual portfolio
turnover rates, it is expected that under normal market conditions, annual
portfolio turnover rates will not exceed 75% for Nations Emerging Markets Fund
and Nations Pacific Growth Fund. For other Funds' portfolio turnover rate, see
"Financial Highlights." If a Fund's annual portfolio turnover rate exceeds 100%,
it may result in higher costs to the Fund, including brokerage commissions or
dealer markups and other transaction costs on the sale of securities and the
reinvestment in other securities. Portfolio turnover also can generate
short-term capital gains tax consequences.
RISK CONSIDERATIONS: Although the Adviser will seek to achieve the investment
objective of each Fund, there is no assurance that it will be able to do so. No
single Fund should be considered, by itself, to provide a complete investment
program for any investor. The net asset value of the shares of the Funds will
fluctuate based on market conditions. Therefore, investors should not rely upon
the Funds for short-term financial needs, nor are the Funds meant to provide a
vehicle for participating in short-term swings in the stock market. Investments
in a Fund are not insured against loss of principal.
Investments by a Fund in common stocks and other equity securities are subject
to stock market risks. The value of the stocks that the Fund holds, like the
broader stock market, may decline over short or even extended periods. The value
of a Fund's investments in debt securities will tend to decrease when interest
rates rise and increase when interest rates fall. In general, longer-term debt
instruments tend to fluctuate in value more than shorter-term debt instruments
in response to interest rate movements. In addition, debt securities that are
not backed by the United States Government are subject to credit risk, which is
the risk that the issuer may not be able to pay principal and/or interest when
due.
Certain of the Funds' investments constitute derivative securities, which are
securities whose value is derived, at least in part, from an underlying index or
reference rate. There are certain types of derivative securities that can, under
certain circumstances, significantly increase a purchaser's exposure to market
or other risks. The Funds' investment adviser, however, only purchases
derivative securities in circumstances where it believes such purchases are
consistent with the Fund's investment objective and do not unduly increase the
Fund's exposure to market or other risks. For additional risk information
regarding the Funds' investments in particular instruments, see "Appendix
A -- Portfolio Securities."
INVESTMENT LIMITATIONS: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAIs.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
tax-exempt securities issued by state or municipal governments and their
political subdivisions are not considered members of any industry.)
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
3. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, such Fund will not
hold more than 10% of the voting securities of any issuer.
The investment objective and policies of each Fund, unless otherwise specified,
may be changed without a vote of the Fund's shareholders. If the investment
objec-
16
<PAGE>
tive or policies of a Fund change, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current position and
needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus and the SAIs. Should a Fund determine that any such
commitment is no longer in the best interests of the Fund, it may consider
terminating sales of its shares in the states involved.
How Performance Is Shown
From time to time the Funds may advertise the total return and yield on a class
of shares. BOTH TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a
class of shares of the Funds may be calculated on an average annual total return
basis or an aggregate total return basis. Average annual total return refers to
the average annual compounded rates of return on a class of shares over one-,
five-, and ten-year periods or the life of the Fund (as stated in the
advertisement) that would equate an initial amount invested at the beginning of
a stated period to the ending redeemable value of the investment (reflecting the
deduction of any applicable contingent deferred sales charge ("CDSC")), assuming
the reinvestment of all dividend and capital gains distributions. Aggregate
total return reflects the total percentage change in the value of the investment
over the measuring period, again assuming the reinvestment of all dividends and
capital gains distributions. Total return may also be presented for other
periods or may not reflect a deduction of any applicable CDSC.
Set forth below is certain performance data for the Pacific Ex-Japan Composite
and the Emerging Markets Composite, reflecting the performance of private
accounts, including U.K. authorized unit trusts, managed by the Gartmore Group,
as defined below. The performance data for these accounts is deemed relevant
because the Pacific Ex-Japan Composite and the Emerging Markets Composite have
investment objectives, policies and restrictions that are substantially similar
to those of the Nations Pacific Growth Fund and Nations Emerging Markets Fund,
respectively. There is substantial continuity between the portfolio managers of
the Gartmore Group who were responsible for managing those accounts and the
portfolio managers of Nations Gartmore who are responsible for managing the
Nations Pacific Growth Fund and Nations Emerging Markets Fund, respectively.
THIS PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NOT NECESSARILY
INDICATIVE OF THE FUTURE PERFORMANCE OF NBAI, NATIONS GARTMORE OR THE FUNDS.
<TABLE>
<CAPTION>
<S> <C>
Average Annual Total
Return for the Periods
PACIFIC EX-JAPAN Indicated through
COMPOSITE March 31, 1995*
<CAPTION>
<S> <C>
One Year 4.90%
Three Year 24.50%
Five Year 15.70%
Since Inception on January 1, 1988 22.20%
</TABLE>
Annual Total Returns*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1988 1989 1990 1991 1992 1993 1994
10.70% 56.10% (1.50)% 20.30% 21.10% 106.90% (15.10)%
</TABLE>
* The average annual total returns and annual total returns are net of fees. The
fees for these accounts were 1% per annum until September 30, 1988, and 1.5%
per annum thereafter.
<TABLE>
<CAPTION>
<S> <C>
Average Annual Total
Return for the Periods
EMERGING MARKETS Indicated through
COMPOSITE March 31, 1995*
One Year (24.40)%
Since Inception on January 1, 1993 9.60%
</TABLE>
Annual Total Returns*
<TABLE>
<CAPTION>
<S> <C>
1993 1994
73.90% (20.20)%
</TABLE>
* The average annual total returns and annual total returns are net of fees. The
fees for these accounts were 1.5% per annum.
Set forth below is the average annual total return and the annual total return
for the Nations International Equity Fund for the periods ending March 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Average Annual Total
Return for the Periods
NATIONS INTERNATIONAL EQUITY Indicated through
FUND -- INVESTOR A SHARES March 31, 1995
One Year (1.46%)
Since Inception on June 3, 1992 4.39%
</TABLE>
17
<PAGE>
Annual Total Returns
<TABLE>
<CAPTION>
<S> <C>
1993 1994
26.90% 2.21%
</TABLE>
"Yield" is calculated by dividing the annualized net investment income per share
during a recent 30-day (or one month) period of a class of shares of a Fund by
the maximum public offering price per share on the last day of that period. The
yield on a class of shares does not reflect deduction of any applicable CDSC.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of the Funds' portfolio and the Funds'
operating expenses. Investment performance also often reflects the risks
associated with a Fund's investment objective and policies. These factors should
be considered when comparing the Funds' investment results to those of other
mutual funds and other investment vehicles. Since yields fluctuate, yield data
cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
In addition to Investor A Shares, the Funds offer Trust A, Trust B, Investor C
and Investor N Shares. Each class of shares may bear different sales charges,
shareholder servicing fees, loads and other expenses, which may cause the
performance of a class to differ from the performance of the other classes.
Total return and yield quotations will be computed separately for each class of
the Funds' shares. Any quotation of total return or yield not reflecting CDSCs
would be reduced if such sales charges were reflected. Any fees charged by a
selling agent and/or servicing agent directly to its customers' accounts in
connection with investments in the Funds will not be included in calculations of
total return or yield. Each Fund's annual report contains additional performance
information and is available upon request without charge from the Funds'
distributor or your selling agent.
How The Funds Are Managed
The business and affairs of Nations Fund Trust, Nations Fund, Inc. and Nations
Portfolios are managed under the direction of their Board of Trustees and Boards
of Directors, respectively. Nations Fund Trust's SAI contains the names of and
general background information concerning each Trustee of Nations Fund Trust.
Nations Fund, Inc.'s and Nations Portfolios' SAIs contain the names of and
general background information concerning each Director of Nations Fund, Inc.
and Nations Portfolios.
Nations Fund and the Adviser have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially comply in all
material respects with the recommendations set forth in the May 9, 1994 Report
of the Advisory Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds. NBAI is a wholly owned subsidiary of NationsBank, which in turn is a
wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation. NBAI has its principal
offices at One NationsBank Plaza, Charlotte, North Carolina 28255.
TradeStreet Investment Associates, Inc. with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as sub-investment
adviser to all of the Funds except for those Funds listed below, for which
Nations Gartmore serves as sub-investment adviser. TradeStreet is a wholly owned
subsidiary of NationsBank, which in turn is a wholly owned banking subsidiary of
NationsBank Corporation, a bank holding company organized as a North Carolina
corporation.
TradeStreet provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking.
Nations Gartmore Investment Management, with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as sub-investment
adviser to Nations International Equity Fund, Nations Emerging Markets Fund and
Nations Pacific Growth Fund pursuant to a sub-advisory agreement. Nations
Gartmore is a joint venture structured as a general partnership between NB
Partner Corp., a wholly owned subsidiary of NationsBank, and Gartmore U.S.
Limited, a wholly owned subsidiary of Gartmore plc, a UK company listed on the
London Stock Exchange which is the holding company for a leading UK-based
international fund management group of companies (the "Gartmore Group"). Banque
Indosuez S.A., a leading French bank, owns 75% of the equity of Gartmore plc.
The initial asset management company in the Gartmore Group was founded in 1969
and the Gartmore Group currently provides investment management and advisory
services to pension funds, unit trusts, offshore funds and investment funds. As
of December 31, 1994, the Gartmore Group had over $30 billion in assets under
management.
18
<PAGE>
Subject to the general supervision of Nations Fund Trust's Board of Trustees and
Nations Fund, Inc.'s and Nations Portfolios' Boards of Directors, and in
accordance with each Fund's investment policies, the Adviser formulates
guidelines and lists of approved investments for each Fund, makes decisions with
respect to and places orders for each Fund's purchases and sales of portfolio
securities and maintains records relating to such purchases and sales. The
Adviser is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions which are affiliated with the Adviser or
which have sold shares in the Funds, if the Adviser believes that the quality of
the transaction and the commission are comparable to what they would be with
other qualified brokerage firms. From time to time, to the extent consistent
with its investment objective, policies and restrictions, each Fund may invest
in securities of companies with which NationsBank or Banque Indosuez S.A. has a
lending relationship. For the services provided and expenses assumed pursuant to
various Advisory Agreements, NBAI is entitled to receive advisory fees, computed
daily and paid monthly, at the annual rates of: 0.75% of the average daily net
assets of each of Nations Capital Growth Fund, Nations Emerging Growth Fund,
Nations Disciplined Equity Fund, Nations Value Fund and Nations Balanced Assets
Fund; and 0.75% of the first $100 million of the Nations Equity Income Fund's
average daily net assets, plus 0.70% of the Fund's average daily net assets in
excess of $100 million and up to $250 million, plus 0.60% of the Fund's average
daily net assets in excess of $250 million; and 0.90% of each of Nations
International Equity Fund's and Nations Pacific Growth Fund's average daily net
assets; and 1.10% of Nations Emerging Markets Fund's average daily net assets.
For the services provided and the expenses assumed pursuant to sub-advisory
agreements, NBAI will pay TradeStreet sub-advisory fees, computed daily and paid
monthly, at the annual rates of: 0.25% of Nations Value Fund's, Nations Balanced
Assets Fund's, Nations Capital Growth Fund's, Nations Emerging Growth Fund's and
Nations Disciplined Equity Fund's average daily net assets; 0.20% of the Nations
Equity Income Fund's average daily net assets; 0.70% of the Nations
International Equity Fund's and the Nations Pacific Growth Fund's average daily
net assets; and 0.85% of the Nations Emerging Markets Fund's average daily net
assets.
For services provided and expenses assumed pursuant to a sub-advisory agreement,
Nations Gartmore is entitled to receive from NBAI sub-advisory fees, computed
daily and paid monthly, at the annual rate of 0.70% of Nations International
Equity Fund's average daily net assets; 0.85% of Nations Emerging Markets Fund's
average daily net assets and 0.70% of Pacific Growth Fund's average daily net
assets. Although the advisory fees for the Funds are higher than the advisory
fees paid by most other mutual funds, Nations Fund believes that the fees are
comparable to the advisory fees paid by many other funds with similar investment
objectives and policies.
From time to time, NBAI (and/or TradeStreet and/or Nations Gartmore) may waive
(either voluntarily or pursuant to applicable state limitations) advisory fees
payable by a Fund. For the fiscal year ended November 30, 1994, after waivers,
Nations Fund Trust paid NationsBank under a prior Advisory Agreement advisory
fees at the indicated rate of the following Funds' average daily net assets:
Nations Capital Growth Fund -- 0.75%; Nations Emerging Growth Fund -- 0.75%;
Nations Disciplined Equity Fund -- 0.05%; Nations Value Fund -- 0.74%; and
Nations Balanced Assets Fund -- 0.75%. For the fiscal year ended November 30,
1994, after waivers, Nations Disciplined Equity Fund paid its prior sub-adviser
fees at the rate of 0.21% of the Fund's average daily net assets. For the fiscal
year ended May 31, 1995, after waivers, Nations Fund, Inc. paid NationsBank
under a prior Advisory Agreement advisory fees at the rate of 0.40% the Nations
International Equity Fund's average daily net assets and 0.68% of the Nations
Equity Income Fund's average daily net assets. For the fiscal year ended May 31,
1995, after waivers, Nations International Equity Fund paid its prior
sub-adviser fees at the rate of 0.38% of the Fund's average daily net assets.
Philip Ehrmann is the principal portfolio manager of the Nations Emerging
Markets Fund and is the head of the Nations Gartmore Emerging Markets Team.
Prior to joining Nations Gartmore, Mr. Ehrmann was the Director of Emerging
Markets for Invesco in London. Mr. Ehrmann has over 15 years of investment
management experience.
Sharon M. Herrmann has been the principal portfolio manager for Nations Value
Fund since its inception in 1989. Ms. Herrmann is a Senior Vice President and
Director of the Value Equity Style Group and personally manages the core value
equity funds of NationsBank's trust investment division. Ms. Herrmann has over
20 years investment experience with NationsBank. Ms. Herrmann earned the
Chartered Financial Analyst designation in 1985 and is a member of the
Association for Investment Management and Research.
Philip J. Sanders, a member of the Value Equity Group, has been the principal
portfolio manager for the Nations Capital Growth Fund since May of 1995. Mr.
Sanders is also the Vice President and Fund Manager of the Nations Balanced
Target Maturity Fund. Mr. Sanders joined NationsBank in 1988 and prior to
joining NationsBank he was employed at Duke Power Company for six years where he
supervised and performed various types of detailed financial analysis. He holds
a B.A. in Economics from the University of Michigan and an M.B.A. from the
University of North Carolina in
Char-
19
<PAGE>
lotte. He is a Chartered Financial Analyst and a member of the Association for
Investment Management and Research.
Julie L. Hale is the Vice President and Manager of the Balanced Assets Group and
Co-Manager of the Equity Income Group and has been the principal portfolio
manager for the Nations Balanced Assets Fund since May of 1995. Ms. Hale joined
NationsBank in 1991 and was previously employed with National City Bank in Ohio
and the Mercantile Safe Deposit & Trust Company in Baltimore, Maryland. She
received a B.S. from Mount St. Mary's College and an M.B.A. from Kent State
University. She is a Chartered Financial Analyst and a member of the Association
for Investment Management and Research.
Edward E. Smiley is a Senior Vice President of NationsBank and has been the
principal portfolio manager for Nations Emerging Growth Fund since 1992. Mr.
Smiley received his B.B.A. in Management from Southern Methodist University in
1966 and is a Chartered Financial Analyst. After serving in investment positions
with Merrill Lynch and Dean Witter, Mr. Smiley joined Interfirst Investment
Management as a senior portfolio manager in 1980. Mr. Smiley manages
Emerging-Midcap Funds Style Group for NationsBank. Mr. Smiley also serves as one
of the officer members on the Growth Equity Style Group. Mr. Smiley is a member
of the Association for Investment Management and Research and the Dallas
Association of Investment Analysts. Mr. Smiley has over 25 years of investment
experience.
Jeff C. Moser, a Senior Vice President of NationsBank, has been the principal
portfolio manager for Nations Disciplined Equity Fund since 1995. He joined
NationsBank in 1983 and has been employed there as an equity analyst, account
portfolio manager and fund manager. Mr. Moser received a B.S. degree in
Mathematics from Wake Forest University where he graduated Phi Beta Kappa. He
also holds the Chartered Financial Analyst designation and is a member of the
Association for Investment Management and Research.
Seok Teoh is the principal portfolio manager of the Nations Pacific Growth Fund.
She has been associated with the Gartmore Group since 1990 as the London based
manager on its Far East desk. Prior to that, Ms. Teoh worked for Overseas Union
Bank Securities in Singapore where she was responsible for Singaporean and
Malaysian equity sales and then subsequently for Rothschild as a Fund Manager in
Singapore and later in Tokyo. Ms. Teoh, who is a native of Singapore, is fluent
in Mandarin and Cantonese and received an Economics degree from the University
of Durham in 1985.
Stephen Watson has been the principal portfolio manager of the Nations
International Equity Fund since February, 1995. He joined the Gartmore Group as
a Global Fund Manager in August 1993 and was recently appointed Head of the
International and Global Team. Prior to that, Mr. Watson was employed by James
Capel Fund Managers where he acted as a Director, Global Fund Manager and Client
Services Manager for various international clients. From 1980 to 1987 he was
associated with Capel-Cure Myers in their Portfolio Management Division and
prior to that he was with the investment division at Samuel Montagu. Mr. Watson
is currently a member of the Securities Institute.
Eric S. Williams, a Senior Vice President of NationsBank, has been the principal
portfolio manager for Nations Equity Income Fund since 1991. Mr. Williams is
Senior Portfolio Manager for NationsBank's investment management division's
Equity Income Style Group. He has a B.S. in Business Administration, SUMMA CUM
LAUDE, from East Carolina University and has an M.B.A. in Finance from Indiana
University. Mr. Williams has been with NationsBank's investment management
division since 1986. He is a member of the Association for Investment Management
and Research and is on the Advisory Board of Indiana University's Reese
Investment Fund.
Morrison & Foerster LLP, counsel to Nations Fund and special counsel to
NationsBank, has advised Nations Fund and NationsBank, that subsidiaries of
NationsBank may perform the services contemplated by the various Investment
Advisory Agreements, without violation of the Glass-Steagall Act or other
applicable banking laws or regulations. Such counsel has pointed out, however,
that there are no controlling judicial or administrative interpretations or
decisions and that future judicial or administrative interpretations of, or
decisions relating to, present federal or state statutes, including the
Glass-Steagall Act, and regulations relating to the permissible activities of
banks and their subsidiaries or affiliates, as well as future changes in federal
or state statutes, including the Glass-Steagall Act, and regulations and
judicial or administrative decisions or interpretations thereof, could prevent
such subsidiaries of NationsBank from continuing to perform, in whole or in
part, such services. If such subsidiaries of NationsBank were prohibited from
performing any of such services, it is expected that the Board of Trustees of
Nations Fund Trust and the Boards of Directors of Nations Fund, Inc. and Nations
Portfolios would recommend to each Fund's shareholders that they approve a new
advisory agreement with another entity or entities qualified to perform such
services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
Nations Fund pursuant to Administration Agreements. Pursuant to the terms of the
Administration Agreements, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing
20
<PAGE>
general oversight of other service providers, office space, utilities and
various legal and administrative services in connection with the satisfaction of
various regulatory requirements applicable to the Funds.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of
First Data Corporation, with principal offices at One Exchange Place, Boston,
Massachusetts 02109, serves as the co-administrator of Nations Fund pursuant to
Co-Administration Agreements. Under the Co-Administration Agreements, TSSG
provides various administrative and accounting services to the Funds including
performing the calculations necessary to determine the net asset value per share
and dividends of each class of the Funds, preparing tax returns and financial
statements and maintaining the portfolio records and certain of the general
accounting records for the Funds.
For the services rendered pursuant to the Administration and Co-Administration
Agreements, Stephens and TSSG are entitled to receive a combined fee at the
annual rate of up to 0.10% of each Fund's average daily net assets. For the
fiscal year ended November 30, 1994, after waivers, Nations Fund Trust paid its
administrators fees at the rate of 0.09% of the average daily net assets of
Nations Capital Growth Fund, Nations Emerging Growth Fund, Nations Disciplined
Equity Fund, Nations Value Fund and Nations Balanced Assets Fund. For the fiscal
year ended May 31, 1995, after waivers, Nations Fund, Inc. paid its
administrators fees at the rate of 0.09% of the Nations International Equity
Fund and the Nations Equity Income Fund's average daily net assets.
NationsBank serves as sub-administrator for Nations Fund pursuant to a
Sub-Administration Agreement. Pursuant to the terms of the Sub-Administration
Agreement, NationsBank assists Stephens in supervising, coordinating and
monitoring various aspects of the Funds' administrative operations. For
providing such services, NationsBank shall be entitled to receive a monthly fee
from Stephens based on an annual rate of .01% of the Funds' average daily net
assets.
Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker-dealer with principal
offices at 111 Center Street, Little Rock, Arkansas 72201. Nations Fund has
entered into distribution agreements with Stephens which provide that Stephens
has the exclusive right to distribute shares of the Funds. Stephens may pay
service fees or commissions to selling agents that assist customers in
purchasing Investor Shares of the Funds. See "Shareholder Servicing and
Distribution Plans."
Morgan Guaranty Trust Company ("Morgan Guaranty"), Avenue des Arts, 35 1040
Brussels, Belgium, serves as custodian for the assets of the Nations
International Equity Fund, Nations Emerging Markets Fund and Nations Pacific
Growth Fund.
NationsBank of Texas, N.A. ("NationsBank of Texas" and collectively with Morgan
Guaranty, the "Custodians") serves as custodian for the assets of each Fund
except Nations International Equity Fund, Nations Emerging Markets Fund and
Nations Pacific Growth Fund. NationsBank of Texas is located at 1401 Elm Street,
Dallas, Texas 75202, and is a wholly owned subsidiary of NationsBank
Corporation. In return for providing custodial services, NationsBank of Texas is
entitled to receive, in addition to out-of-pocket expenses, fees payable monthly
(i) at the rate of 1.25% of 1% of the average daily net assets of each Fund for
which it serves as custodian, (ii) $10.00 per repurchase collateral transaction
by such Funds, and (iii) $15.00 per purchase, sale and maturity transaction
involving such Funds.
TSSG serves as transfer agent (the "Transfer Agent") for the Funds' Investor A
Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
Price Waterhouse LLP serves as independent accountant to Nations Fund. Their
address is 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES: The accrued expenses of the Funds, as well as certain expenses
attributable to Investor A Shares, are deducted from accrued income before
dividends are declared. The Funds' expenses include, but are not limited to:
fees paid to the Adviser, NationsBank, Stephens and TSSG; interest; trustees'
and directors' fees; federal and state securities registration and qualification
fees; brokerage fees and commissions; cost of preparing and printing
prospectuses for regulatory purposes and for distribution to existing
shareholders; charges of the Custodians and Transfer Agent; certain insurance
premiums; outside auditing and legal expenses; costs of shareholder reports and
shareholder meetings, other expenses which are not expressly assumed by the
Adviser, NationsBank, Stephens or TSSG under their respective agreements with
Nations Fund; and any extraordinary expenses. Investor A Shares may bear certain
class specific retail transfer agency expenses and also bear certain additional
shareholder service and/or sales support costs. Any general expenses of Nations
Fund Trust, Nations Fund, Inc. and/or Nations Portfolios that are not readily
identifiable as belonging to a particular investment portfolio are allocated
among all portfolios in the proportion that the assets of a portfolio bears to
the assets of Nations Fund Trust, Nations Fund, Inc. and/or Nations Portfolios
or in such other manner as the relevant Board of Trustees or Board of Directors
deems appropriate.
21
<PAGE>
Organization And History
The Funds are members of the Nations Fund Family, which consists of Nations Fund
Trust, Nations Fund, Inc., Nations Portfolios and Nations Institutional Reserves
(formerly known as The Capitol Mutual Funds). The Nations Fund Family currently
has 44 distinct investment portfolios and total assets in excess of $16 billion.
NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. The Funds currently offer five classes of shares -- Trust
A Shares, Trust B Shares, Investor A Shares, Investor C Shares and Investor N
Shares. This Prospectus relates only to the Investor A Shares of Nations Capital
Growth Fund, Nations Emerging Growth Fund, Nations Disciplined Equity Fund,
Nations Value Fund and Nations Balanced Assets Fund of Nations Fund Trust. To
obtain additional information regarding the Funds' other classes of shares which
may be available to you, contact your Selling Agent (as defined below) or
Nations Fund at 1-800-321-7854.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund, and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See Nations Fund Trust's SAI for examples of when the
Investment Company Act of 1940 (the "1940 Act") requires voting by fund.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose or vote with respect to more than 25% of the outstanding shares of
Nations Fund Trust and therefore could be considered to be a controlling person
of Nations Fund Trust for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series of shares over
which NationsBank and its affiliates possessed or shared power to dispose or
vote as of a certain date, see Nations Fund Trust's SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
NATIONS FUND, INC.: Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no operations prior to December 15, 1986. As of the date of
this Prospectus, the authorized capital stock of Nations Fund, Inc. consists of
270,000,000,000 shares of common stock, par value of $.001 per share, which are
divided into series or funds each of which consists of separate classes of
shares. This Prospectus relates only to the Investor A Shares of Nations
International Equity Fund and Nations Equity Income Fund of Nations Fund, Inc.
To obtain additional information regarding the Fund's other classes of shares
which may be available to you, contact your Selling Agent (as defined below) or
Nations Fund at 1-800-321-7854.
Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such fund
or class. In the event of dissolution or liquidation, holders of each class will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of that portion of the assets allocated to that class held in the
respective fund of Nations Fund, Inc., less (b) the liabilities of Nations Fund,
Inc. attributable to the respective fund or class or allocated among the funds
or classes based on the respective liquidation value of each fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Fund, Inc.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s shares.
Nations Fund, Inc.'s shares, when issued, will be fully paid and
non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Fund, Inc. and therefore could be considered to be a controlling person
of Nations Fund, Inc. for purposes of the 1940 Act. For more detailed
information
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concerning the percentage of each class or series over which NationsBank and its
affiliates possessed or shared power to dispose or vote as of a certain date,
see Nations Fund, Inc.'s SAI. It is anticipated that Nations Fund, Inc. will not
hold annual shareholder meetings on a regular basis unless required by the 1940
Act or Maryland law.
NATIONS PORTFOLIOS: Nations Portfolios was incorporated in Maryland on January
23, 1995. As of the date of this Prospectus, the authorized capital stock of
Nations Portfolios consists of 150,000,000,000 shares of common stock, par value
of $.001 per share, which are divided into series or funds each of which
consists of separate classes of shares. This Prospectus relates only to the
Investor A Shares of Nations Emerging Markets Fund and Nations Pacific Growth
Fund of Nations Portfolios. To obtain additional information regarding the
Funds' other classes of shares which may be available to you, contact your
Selling Agent (as defined below) or Nations Fund at 1-800-321-7854.
Shares of a fund and class have equal rights with respect to voting, except that
the holders of shares of a fund or class will have the exclusive right to vote
on matters affecting only the rights of the holders of such fund or class. In
the event of dissolution or liquidation, holders of each class will receive pro
rata, subject to the rights of creditors, (a) the proceeds of the sale of that
portion of the assets allocated to that class held in the respective fund of
Nations Portfolios, less (b) the liabilities of Nations Portfolios attributable
to the respective fund or class allocated among the funds or classes based on
the respective liquidation value of each fund or class.
Shareholders of Nations Portfolios do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Portfolios. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Portfolios.
There are no preemptive rights applicable to any of Nations Portfolios' shares.
Nations Portfolios' shares, when issued, will be fully paid and non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Portfolios and, therefore, could be considered to be a controlling
person of Nations Portfolios for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see Nations Portfolios' SAI. It is anticipated that Nations
Portfolios will not hold annual shareholder meetings on a regular basis unless
required by the 1940 Act or Maryland law.
Because this Prospectus combines disclosure on three separate investment
companies, there is a possibility that one investment company could become
liable for a misstatement, inaccuracy or incomplete disclosure in this
Prospectus concerning the other investment company. Nations Fund Trust, Nations
Fund, Inc. and Nations Portfolios have entered into an indemnification agreement
that creates a right of indemnification from the investment company responsible
for any such misstatement, inaccuracy or incomplete disclosure that may appear
in this Prospectus.
About Your Investment
How To Buy Shares
Stephens has established various procedures for purchasing Investor A Shares in
order to accommodate different investors. Purchase orders for Investor A Shares
may be placed through banks, broker/dealers or other financial institutions
(including certain affiliates of NationsBank) that have entered into a
shareholder servicing agreement ("Servicing Agreement") with Nations Fund
("Servicing Agents") and a sales support agreement ("Sales Support Agreement")
with Stephens ("Selling Agents").
Customers may invest in Investor A Shares through a Nations Fund Personal
Investment Planner account, which is a managed agency/asset allocation account
established with NBAI, (an "Account"). Investments through an Account are
governed by the terms and conditions of the Account, which are set forth in the
Client Agreement and Disclosure Statement provided by NBAI, to each investor who
establishes an Account. Because of the nature of the Account, certain of the
features described in this prospectus are not available to investors purchasing
Investor A Shares through an Account. Potential investors through an Account
should refer to the Client Agreement and Disclosure Statement for more
information regarding the Account, including information regarding the fees and
expenses charged in connection with an Account.
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There is a minimum initial investment of $1,000, except that the minimum initial
investment is:
(Bullet) $500 for Individual Retirement Account ("IRA") investors;
(Bullet) $250 for non-working spousal IRAs; and
(Bullet) $100 for investors participating on a monthly basis in the Systematic
Investment Plan described below.
There is no minimum investment amount for investments by 401(k) plans,
simplified employee pension plans ("SEPs"), salary reduction-simplified employee
pension plans ("SAR-SEPs") or salary reduction-Individual Retirement Account
("SAR-IRAs"). However, the assets of such plans must reach an asset value of
$1,000 ($500 for SEPs, SAR-SEPs and SAR-IRAs) within one year of the account
open date. If the assets of such plans do not reach the minimum asset size
within one year, Nations Fund reserves the right to redeem the shares held by
such plans on 60 days' written notice. The minimum subsequent investment is
$100, except for investments pursuant to the Systematic Investment Plan
described below.
Investor A Shares are purchased at net asset value per share. Purchases may be
effected on days on which the New York Stock Exchange (the "Exchange") is open
for business (a "Business Day").
With respect to Investor A Shares, the Servicing Agents have entered into
Servicing Agreements with Nations Fund under which they will provide various
shareholder services to their customers ("Customers") who own Investor A Shares.
Servicing Agents and Selling Agents are sometimes referred to hereafter as
"Agents." From time to time the Agents, Stephens and Nations Fund may agree to
voluntarily reduce the maximum fees payable for sales support or shareholder
services.
Nations Fund reserves the right to reject any purchase order. The issuance of
Investor A Shares is recorded on the books of the Funds, and share certificates
are not issued unless expressly requested in writing. Certificates are not
issued for fractional shares.
EFFECTIVE TIME OF PURCHASES: Purchase orders for Investor A Shares of the Funds
which are received by Stephens or by the Transfer Agent before the close of
regular trading hours on the Exchange (currently 4:00 p.m., Eastern time) on any
Business Day are priced according to the net asset value determined on that day
but are not executed until 4:00 p.m., Eastern time, on the Business Day on which
immediately available funds in payment of the purchase price are received by the
Funds' Custodian. Such payment must be received not later than 4:00 p.m.,
Eastern time, by the third Business Day following receipt of the order. If funds
are not received by such date, the order will not be accepted and notice thereof
will be given to the Agent placing the order. Payment for orders which are not
received or accepted will be returned after prompt inquiry to the sending Agent.
The Agents are responsible for transmitting orders for purchases of Investor A
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Fund.
SYSTEMATIC INVESTMENT PLAN: Under the Funds' Systematic Investment Plan ("SIP")
a shareholder may automatically purchase Investor A Shares. On a bi-monthly,
monthly or quarterly basis, a shareholder may direct cash to be transferred
automatically from his/her checking or savings account at any bank to his/her
Fund account. Transfers will occur on or about the 15th and/or 30th day of the
applicable month. The systematic investment amount may be in any amount from $25
to $100,000. For more information concerning the SIP, contact your Agent.
TELEPHONIC TRANSACTIONS: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How to Redeem Shares" and "How to
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. You should be aware that by electing the telephone transaction
feature, you may be giving up a measure of security that you may have if you
were to authorize written requests only. You may bear the risk of any resulting
losses from a telephone transaction. Nations Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
and if Nations Fund and its service providers fail to employ such measures, they
may be liable for any losses due to unauthorized or fraudulent instructions.
Nations Fund requires a form of personal identification prior to acting upon
instructions received by telephone and provides written confirmation to
shareholders of each telephone share transaction. In addition, Nations Fund
reserves the right to record all telephone conversations.
Shareholder Servicing And Distribution Plans
The Funds' Shareholder Servicing and Distribution Plan (the "Investor A Plan"),
adopted pursuant to Rule 12b-1 under the 1940 Act, permits the Funds to
compensate (i) Servicing Agents and Selling Agents for services provided to
their Customers that own Investor A Shares and (ii) Stephens for
distribution-related expenses
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incurred in connection with Investor A Shares. Aggregate payments under the
Investor A Plan are calculated daily and paid monthly at a rate or rates set
from time to time by the Funds, provided that the annual rate may not exceed
0.25% of the average daily net asset value of the Investor A Shares of the
Funds.
The fees payable to Servicing Agents under the Investor A Plan are used
primarily to compensate or reimburse Servicing Agents for shareholder services
provided, and related expenses incurred, by such Servicing Agents. The
shareholder services provided by Servicing Agents may include: (i) aggregating
and processing purchase and redemption requests for Investor A Shares from
Customers and transmitting net purchase and redemption orders to Stephens or the
Transfer Agent; (ii) providing Customers with a service that invests the assets
of their accounts in Investor A Shares pursuant to specific or preauthorized
instructions; (iii) processing dividend and distribution payments from the Funds
on behalf of Customers; (iv) providing information periodically to Customers
showing their positions in Investor A Shares; (v) arranging for bank wires; and
(vi) providing general shareholder liaison services. The fees payable to Selling
Agents are used primarily to compensate or reimburse Selling Agents for
providing sales support assistance in connection with the sale of Investor A
Shares to Customers, which may include forwarding sales literature and
advertising provided by Nations Fund to Customers.
The fees under the Investor A Plan also may be used to reimburse Stephens for
distribution-related expenses actually incurred by Stephens, including, but not
limited to, expenses of organizing and conducting sales seminars, printing
prospectuses and statements of additional information (and supplements thereto)
and reports for other than existing shareholders, preparation and distribution
of advertising and sales literature and the costs of administering the Investor
A Plan.
Stephens may, from time to time, at its expense or as an expense for which it
may be reimbursed under the Investor A Plan, pay a bonus or other consideration
or incentive to Agents who sell a minimum dollar amount of shares of the Funds
during a specified period of time. Stephens also may, from time to time, pay
additional consideration to Agents not to exceed 1.00% of the offering price per
share on all sales of Investor A Shares as an expense of Stephens or for which
Stephens may be reimbursed under the Investor A Plan or upon receipt of a CDSC.
Any such additional consideration or incentive program may be terminated at any
time by Stephens.
In addition, Stephens has established a non-cash compensation program pursuant
to which broker/dealers or financial institutions that sell shares of the Funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise. This non-cash compensation program may be
amended or terminated at any time by Stephens.
Nations Fund and Stephens may suspend or reduce payments under the Investor A
Plan at any time, and payments are subject to the continuation of the Investor A
Plan described above and the terms of the Servicing Agreements and Sales Support
Agreements. See the SAIs for more details on the Investor A Plan.
Nations Fund understands that Agents may charge fees to their Customers who are
the owners of Investor A Shares for various services provided in connection with
a Customer's account. These fees would be in addition to any amounts received by
a Selling Agent under its Sales Support Agreement with Stephens or by a
Servicing Agent under its Servicing Agreement with Nations Fund. The Sales
Support Agreements and Servicing Agreements require Agents to disclose to their
Customers any compensation payable to the Agent by Stephens or Nations Fund and
any other compensation payable by the Customers for various services provided in
connection with their accounts. Customers should read this Prospectus in light
of the terms governing their accounts with their Agents.
How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders are
effected at the net asset value per share next determined after receipt of the
order by Stephens or by the Transfer Agent, less any applicable CDSC. The Agents
are responsible for transmitting redemption orders to Stephens or to the
Transfer Agent and for crediting their Customer's account with the redemption
proceeds on a timely basis. No charge for wiring redemption payments is imposed
by Nations Fund. Except for any CDSC which may be applicable upon redemption of
Investor A Shares, as described below, there is no redemption charge.
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens or by the Transfer Agent.
However, redemption proceeds for shares purchased by check may not be remitted
until at least 15 days after the date of purchase to ensure that the check has
cleared; a certified check, however, is deemed to be cleared immediately.
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Nations Fund may redeem a shareholder's Investor A Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of an Agent
pursuant to arrangements between the Agent and its Customers. Nations Fund also
may redeem shares of the Funds involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
Prior to effecting a redemption of Investor A Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to Nations Fund have previously been
made. Nations Fund may require any additional information reasonably necessary
to evidence that a redemption has been duly authorized.
CONTINGENT DEFERRED SALES CHARGE: Subject to certain waivers specified below,
Investor A Shares of the Funds that were purchased prior to January 1, 1996 in
amounts of $1 million or more or through the Nations Fund Personal Investment
Planner will be subject to a CDSC equal to 1.00% of the lesser of the net asset
value or the purchase price of the shares being redeemed if such shares are
redeemed within one year of purchase, declining to 0.50% in the second year
after purchase and eliminated thereafter. No CDSC is imposed on increases in net
asset value above the initial purchase price, including shares acquired by
reinvestment of distributions.
Solely for purposes of determining the period of time that has elapsed from the
purchase of any Investor A Shares, all purchases are deemed to have been made on
the trade date of the transaction. In determining whether a CDSC is applicable
to a redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares held for the longest period of time or shares
acquired pursuant to reinvestment of dividends or distributions. The charge will
not be applied to dollar amounts representing an increase in the net asset value
since the time of purchase.
The CDSC will be waived on redemptions of Investor A Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as amended
(the "Code")) of a shareholder (including a registered joint owner), (ii) in
connection with the following retirement plan distributions: (a) by qualified
plans, (except in cases of plan level terminations); (b) distributions from an
IRA following attainment of age 59 1/2; (c) a tax-free return of an excess
contribution to an IRA, and (d) distributions from a qualified retirement plan
that are not subject to the 10% additional Federal withdrawal tax pursuant to
Section 72(t)(2) of the Code, (iii) effected pursuant to Nations Fund's right to
liquidate a shareholder's account if the aggregate net asset value of the
Investor A Shares held in the account is less than the minimum account size,
(iv) in connection with the combination of Nations Fund with any other
registered investment company by merger, acquisition of assets or by any other
transaction, and (v) effected pursuant to the Automatic Withdrawal Plan
discussed below, provided that such redemptions do not exceed, on an annual
basis, 12% of the net asset value of the Investor A Shares in the account.
Shareholders are responsible for providing evidence sufficient to establish that
they are eligible for any waiver of the CDSC.
Within 120 days after a redemption of Investor A Shares of a Fund, a shareholder
may reinvest any portion of the proceeds of such redemption in Investor A Shares
of the same Fund. The amount which may be so reinvested is limited to an amount
up to, but not exceeding, the redemption proceeds (or to the nearest full share
if fractional shares are not purchased). A shareholder exercising this privilege
would receive a pro rata credit for any CDSC paid in connection with the prior
redemption. A shareholder may not exercise this privilege with the proceeds of a
redemption of shares previously purchased through the reinstatement privilege.
In order to exercise this privilege, a written order for the purchase of
Investor A Shares must be received by the Transfer Agent or by Stephens within
120 days after the redemption.
AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of the Funds if the value of the
Investor A Shares in his/her accounts within the Nations Fund Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Investor A Shares redeemed under the AWP will not be subject to a CDSC,
provided that the shares so redeemed do not exceed, on an annual basis, 12% of
the net asset value of the Investor A Shares in the account. Otherwise, any
applicable CDSC will be imposed on shares redeemed under the AWP. Shareholders
who elect to establish an AWP may receive a monthly, quarterly or annual check
or automatic transfer to a checking or savings account in a stated amount of not
less than $25 on or about the 10th or 25th day of the applicable month of
withdrawal. Investor A Shares will be redeemed (net of any applicable CDSC) as
necessary to meet withdrawal payments. Withdrawals will reduce principal and may
eventually deplete the shareholder's account. If a shareholder desires to
establish an AWP after opening an account, a signature guarantee will be
required. An AWP may be terminated by a shareholder on 30 days' written notice
to his/her Agent or by Nations Fund at any time.
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How To Exchange Shares
The exchange feature enables a shareholder of Investor A Shares of a Nations
Fund non-money market fund (including the Funds) to acquire shares of the same
class that are offered by any other fund of Nations Fund when the shareholder
believes that a shift between funds is an appropriate investment decision. A
qualifying exchange is based on the next calculated net asset value per share of
each fund after the exchange order is received.
No CDSC will be imposed in connection with an exchange of Investor A Shares that
meets the requirements discussed in this section. If Investor A Shares of a Fund
are exchanged for shares of the same class of another fund, any CDSC applicable
to the original shares purchased will be applied upon the redemption of the
acquired shares. The holding period of such Investor A Shares (for purposes of
determining whether a CDSC is applicable upon redemption) will be computed from
the time of the initial purchase of the Investor A Shares of the Fund.
AUTOMATIC EXCHANGE FEATURE: Under the Funds' Automatic Exchange Feature ("AEF")
a shareholder may automatically exchange at least $25 on a monthly or quarterly
basis. Shareholder may direct proceeds to be exchanged from one Nations Fund to
another as allowed by the applicable exchange rules within the prospectus.
Exchanges will occur on or about the 15th and/or 30th day of the applicable
month. The shareholder must have an existing position in both Funds in order to
establish the AEF. This feature may be established by directing a request to the
Transfer Agent by telephone or in writing. For additional information, please
contact your selling agent.
GENERAL: The Funds and each of the other funds of Nations Fund may limit the
number of times this exchange feature may be exercised by a shareholder within a
specified period of time. Also, the exchange feature may be terminated or
revised at any time by Nations Fund upon such notice as may be required by
applicable regulatory agencies (presently 60 days for termination or material
revision), absent unusual circumstances.
The current prospectus for each fund of Nations Fund describes its investment
objective and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for Federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.
The Investor A Shares exchanged must have a current value of at least $1,000
(except for exchange through the AEF). Nations Fund reserves the right to reject
any exchange request. Only shares that may legally be sold in the state of the
investor's residence may be acquired in an exchange. Only shares of a class that
is accepting investments generally may be acquired in an exchange. An investor
may telephone an exchange request by calling his/her Agent which is responsible
for transmitting such request to Stephens or to the Transfer Agent.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. In such event, shares may be exchanged by mailing the
request directly to the Agent through which the original shares were purchased.
An investor should consult his/her Agent or Stephens for further information
regarding exchanges.
How The Funds Value Their Shares
The Funds calculate the net asset value of a share of each class by dividing the
total value of its assets, less liabilities, by the number of shares in the
class outstanding. Shares are valued as of the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on each Business Day. Currently,
the days on which the Exchange is closed (other than weekends) are: New Year's
Day, Presidents' Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Portfolio securities for which
market quotations are readily available are valued at market value. Short-term
investments that will mature in 60 days or less are valued at amortized cost,
which approximates market value. All other securities and assets are valued at
their fair value following procedures approved by the Trustees or Directors.
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How Dividends And Distributions Are Made;
Tax Information
DIVIDENDS AND DISTRIBUTIONS: The Funds distribute any net investment income each
calendar quarter and any net realized capital gains (including net short-term
capital gains) at least annually. Distributions from capital gains are made
after applying any available capital loss carryovers. Investor A Shares of the
Funds are eligible to receive dividends when declared, provided, however, that
the purchase order for such shares is received at least one day prior to the
dividend declaration and such shares continue to be eligible for dividends
through and including the day before the redemption order is executed.
Distributions paid by the Funds with respect to one class of shares may be
greater or less than those paid with respect to another class of shares due to
the different expenses of the different classes.
The net asset value of Investor A Shares will be reduced by the amount of any
dividend or distribution. Certain Agents may provide for the reinvestment of
dividends in the form of additional Investor A Shares of the same class in the
same Fund. Dividends and distributions are paid in cash within five Business
Days of the end of the quarter to which the dividend relates. Dividends and
distributions payable to a shareholder are paid in cash within five Business
Days after a shareholder's complete redemption of his/her Investor A Shares.
TAX INFORMATION: Each Fund intends to qualify as a "regulated investment
company" under the Code. Such qualification relieves the Fund of liability for
Federal income taxes on amounts distributed in accordance with the Code.
Each Fund intends to distribute substantially all of its investment company
taxable income and net tax-exempt income each taxable year. Distributions by a
Fund of its net investment income (including net foreign currency gains) and the
excess, if any, of its net short-term capital gain over its net long-term
capital loss are taxable as ordinary income to shareholders who are not
currently exempt from Federal income taxes, whether such income is received in
cash or reinvested in additional shares. (Federal income taxes for distributions
to an IRA are generally deferred under the Code.)
Corporate investors in the Funds (except Nations International Equity Fund,
Nations Emerging Markets Fund and Nations Pacific Growth Fund) may be entitled
to the dividends-received deduction on all or a portion of such Funds'
dividends. Corporate shareholders of the Nations International Equity, Nations
Emerging Markets and Nations Pacific Growth Funds may be eligible for the
dividends-received deduction on the dividends (excluding the net capital gains
dividends) paid by these Funds to the extent that a Fund's income is derived
from dividends (which, if received directly, would qualify for such deduction)
received from domestic corporations. In order to qualify for the
dividends-received deduction, a corporate shareholder must hold the fund shares
paying the dividends upon which the deduction is based for at least 46 days.
Substantially all of the Funds' net realized long-term capital gains will be
distributed at least annually. The Funds will generally have no tax liability
with respect to such gains, and the distributions will be taxable to
shareholders who are not exempt from Federal income taxes as long-term capital
gains, regardless of how long the shareholders have held the Funds' shares and
whether such gains are received in cash or reinvested in additional shares.
Each year, shareholders will be notified as to the amount and Federal tax status
of all dividends and capital gains paid during the prior year. Such dividends
and capital gains may be subject to state and local taxes.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by the Funds on December 31 of such year
in the event such dividends are actually paid during January of the following
year.
Federal law requires Nations Fund to withhold 31% from any dividends (other than
exempt-interest dividends) paid by Nations Fund and/or redemptions (including
exchange redemptions) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply, or
if the Internal Revenue Service has notified Nations Fund that the Taxpayer
Identification Number listed on a shareholder account is incorrect according to
its records, or that the shareholder is subject to backup withholding. Amounts
withheld are applied to the shareholder's Federal tax liability, and a refund
may be obtained from the Internal Revenue Service if withholding results in
overpayment of taxes. Federal law also requires the Funds to withhold 30% or the
applicable tax treaty rate from dividends paid to certain nonresident alien,
non-U.S. partnership and non-U.S. corporation shareholder accounts.
Portions of each of Nations International Equity Fund, Nations Emerging Markets
Fund and Nations Pacific Growth Fund's investment income may be subject to
foreign income taxes withheld at their source. Tax conventions between certain
countries and the United States
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may reduce or eliminate such taxes. Generally, more than 50% of the value of the
total assets of each of those Funds will consist of securities of foreign
issuers, and therefore each of those Funds may elect to "pass through" to its
shareholders these foreign taxes, if any. In such event each shareholder will be
required to include his or her pro rata portion thereof in his or her gross
income, but will be able to deduct or (subject to various limitations) claim a
foreign tax credit against U.S. income taxes for such amount.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important Federal tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisers with respect to their specific tax
situations as well as with respect to state and local taxes. Further tax
information is contained in the SAIs.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAIs contain more
information concerning such investments.
ASSET BACKED SECURITIES: Asset Backed Securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset Backed
Securities consist of both mortgage and non-mortgage backed securities.
Interests in pools of these assets differ from other forms of debt securities,
which normally provide for periodic payment of interest in fixed amounts with
principal paid at maturity or specified call dates. Instead, Asset Backed
Securities provide periodic payments which generally consist of both interest
and principal payments.
Mortgage backed securities represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself.
Mortgage backed securities include mortgage pass-through securities,
collateralized mortgage obligations ("CMOs"), parallel pay CMOs, planned
amortization class CMOs ("PAC Bonds") and stripped mortgage-backed securities
("SMBS"), including interest-only and principal-only SMBS. SMBS may be more
volatile than other debt securities. For additional information concerning
mortgage backed securities, see the related SAI.
Non-mortgage asset backed securities include interests in pools of receivables,
such as motor vehicle installment purchase obligations and credit card
receivables. Such securities are generally issued as pass-through certificates,
which represent undivided fractional ownership interests in the underlying pools
of assets. Such securities also may be debt instruments, which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. The Funds will limit their investments
in bank obligations so they do not exceed 25% of each Fund's total assets at the
time of purchase.
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Funds' total assets must be repaid prior to the purchase of
portfolio securities. The Funds are parties to a Line of Credit Agreement with
Mellon Bank, N.A. Advances under the agreement are taken primarily for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities.
Reverse repurchase agreements and dollar roll transactions may be considered to
be borrowings. When a Fund invests in a reverse repurchase agreement, it sells a
portfolio security to another party, such as a bank or broker-
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dealer, in return for cash, and agrees to buy the security back at a future date
and price. Reverse repurchase agreements may be used to provide cash to satisfy
unusually heavy redemption requests without having to sell portfolio securities,
or for other temporary or emergency purposes. Generally, the effect of such a
transaction is that the Funds can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while they will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Funds of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Funds are obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Funds' use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Funds'
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The Fund
only enters into reverse repurchase agreements (and repurchase agreements) with
counterparties that are deemed by the Adviser to be credit worthy. Reverse
repurchase agreements are speculative techniques involving leverage, and are
subject to asset coverage described above.
Dollar roll transactions consist of the sale by a Fund of mortgage-backed or
other asset-backed securities, together with a commitment to purchase similar,
but not identical, securities at a future date, at the same price. In addition,
a Fund is paid a fee as consideration for entering into the commitment to
purchase. If the broker/dealer to whom a Fund sells the security becomes
insolvent, the Fund's right to purchase or repurchase the security may be
restricted; the value of the security may change adversely over the term of the
dollar roll; the security that the Fund is required to repurchase may be worth
less than the security that the Fund originally held, and the return earned by
the Fund with the proceeds of a dollar roll may not exceed transaction costs.
COMMERCIAL INSTRUMENTS: Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or foreign
corporations and foreign commercial banks. Investments by a Fund in commercial
paper will consist of issues rated in a manner consistent with such Fund's
investment policies and objectives. In addition, a Fund may acquire unrated
commercial paper and corporate bonds that are determined by the Adviser at the
time of purchase to be of comparable quality to rated instruments that may be
acquired by a Fund. Commercial instruments include variable rate master demand
notes, which are unsecured instruments that permit the indebtedness thereunder
to vary and provide for periodic adjustments in the interest rate, and variable-
and floating-rate instruments.
CONVERTIBLE SECURITIES, PREFERRED STOCK, AND WARRANTS: Certain of the Funds may
invest in debt securities convertible into or exchangeable for equity
securities, preferred stocks or warrants. Preferred stocks are securities that
represent an ownership interest in a corporation providing the owner with claims
on a company's earnings and assets before common stock owners, but after bond or
other debt security owners. Warrants are options to buy a stated number of
shares of common stock at a specified price any time during the life of the
warrants.
FIXED INCOME INVESTING: The performance of the fixed-income debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. A Fund's share price
and yield depend, in part, on the maturity and quality of its debt instruments.
FOREIGN CURRENCY TRANSACTIONS: To the extent provided under "How Objections Are
Pursued," the Funds may enter into foreign currency exchange transactions to
convert foreign currencies to and from the United States Dollar. A Fund either
enters into these transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or uses forward contracts to
purchase or sell foreign currencies. A forward foreign currency exchange
contract is an obligation by a Fund to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the
contract.
Foreign currency hedging transactions are an attempt to protect a Fund against
changes in foreign currency exchange rates between the trade and settlement
dates of specific securities transactions or changes in foreign currency
exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain
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that might be realized should the value of the hedged currency increase. Neither
spot transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of a Fund's portfolio securities or in foreign
exchange rates, or prevent loss if the prices of these securities should
decline.
The Nations International Equity Fund, the Nations Emerging Markets Fund and/or
the Nations Pacific Growth Fund will generally enter into forward currency
exchange contracts only under two circumstances: (i) when the Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, to "lock" in the U.S. dollar price of the security; and (ii) when the
Adviser believes that the currency of a particular foreign country may
experience a substantial movement against another currency. Under certain
circumstances, the Fund may commit a substantial portion of its portfolio to the
execution of these contracts. The Adviser will consider the effects such a
commitment would have on the investment program of the Fund and the flexibility
of the Fund to purchase additional securities. Although forward contracts will
be used primarily to protect the Fund from adverse currency movements, they also
involve the risk that anticipated currency movements will not be accurately
predicted. The Nations International Equity Fund will generally not enter into a
forward contract with a term of greater than one year.
FOREIGN SECURITIES: Foreign securities include obligations of foreign
corporations and banks as well as obligations of foreign governments and their
political subdivisions (which will be limited to direct government obligations
and government-guaranteed securities). Such investments may subject a Fund to
special investment risks, including future political and economic developments,
the possible imposition of withholding taxes on interest income, possible
seizure or nationalization of foreign deposits, the possible establishment of
exchange controls, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. In addition, foreign issuers in general may be subject to different
accounting, auditing, reporting, and record keeping standards than those
applicable to domestic companies, and securities of foreign issuers may be less
liquid and their prices more volatile than those of comparable domestic issuers.
Investments in foreign securities may present additional risks, whether made
directly or indirectly, including the political or economic instability of the
issuer or the country of issue and the difficulty of predicting international
trade patterns. In addition, there may be less publicly available information
about a foreign company than about a U.S. company. Further, foreign stock
markets are generally not as developed or efficient as those in the U.S., and in
most foreign markets volume and liquidity are less than in the U.S. Fixed
commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign stock exchanges, brokers, and companies
than in the U.S. With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS: To the extent provided under
"How Objectives Are Pursued" the Funds may attempt to reduce the overall level
of investment risk of particular securities and attempt to protect a Fund
against adverse market movements by investing in futures, options and other
derivative instruments. These include the purchase and writing of options on
securities (including index options) and options on foreign currencies, and
investing in futures contracts for the purchase or sale of instruments based on
financial indices, including interest rate indices or indices of U.S. or foreign
government, equity or fixed income securities ("futures contracts"), options on
futures contracts, forward contracts and swaps and swap-related products such as
interest rate swaps, currency swaps, caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable position.
Additional risks inherent in the use of futures, options, forward contracts and
swaps include: imperfect correlation between the price of futures, options and
forward contracts and movements in the prices of the securities or currencies
being hedged; the possible absence of a liquid secondary market for any
particular instrument at any time; and the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. A Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks, is
contained in the SAIs.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Funds will not knowingly
invest more than 15% of the value of their respective net assets in securities
that are illiquid or such lower percentage as may be required by the states in
which the appropriate Fund sells its shares. Repurchase agreements and time
deposits that do not provide for payment to a Fund within seven days after
notice, guaranteed investment
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contracts and some commercial paper issued in reliance upon the exemption in
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act") (other
than variable amount master demand notes with maturities of nine months or
less), are subject to the limitation on illiquid securities.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by a Fund's Board of Trustees or Board of Directors or
the Adviser, acting under guidelines approved and monitored by the Fund's Board,
after considering trading activity, availability of reliable price information
and other relevant information, that an adequate trading market exists for that
security. To the extent that, for a period of time, qualified institutional
buyers cease purchasing such restricted securities pursuant to Rule 144A, the
level of illiquidity of a Fund holding such securities may increase during such
period.
INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of its
portfolio from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, E.G., an exchange of floating rate payments for fixed rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. The Adviser expects to enter into these
transactions on behalf of a Fund primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipated purchasing at a later
date rather than for speculative purposes. A Fund will not sell interest rate
caps or floors that it does not own.
LOWER-RATED DEBT SECURITIES: Lower-rated, high-yielding securities are those
rated "Ba" or "B" by Moody's or "BB" or "B" by S&P which are commonly referred
to as "junk bonds." These bonds provide poor protection for payment of principal
and interest. Lower-quality bonds involve greater risk of default or price
changes due to changes in the issuer's creditworthiness than securities assigned
a higher quality rating. These securities are considered to have speculative
characteristics and indicate an aggressive approach to income investing. The
Funds intend to limit their investments in lower-quality debt securities to 35%
of assets.
The market for lower-rated securities may be thinner and less active than that
for higher quality securities, which can adversely affect the price at which
these securities can be sold. If market quotations are not available, these
lower-rated securities will be valued in accordance with procedures established
by the Funds' Board, including the use of outside pricing services. Adverse
publicity and changing investor perceptions may affect the ability of outside
pricing services used by a Fund to value its portfolio securities, and a Fund's
ability to dispose of these lower-rated bonds.
The market prices of lower-rated securities may fluctuate more than higher-rated
securities and may decline significantly in periods of general economic
difficulty which may follow periods of rising interest rates. During an economic
downturn or a prolonged period of rising interest rates, the ability of issuers
of lower quality debt to service their payment obligations, meet projected
goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower-rated securities, the Adviser will
try to minimize the risks inherent in investing in lower-rated debt securities
by engaging in credit analysis, diversification, and attention to current
developments and trends affecting interest rates and economic conditions. The
Adviser will attempt to identify those issuers of high-yielding securities whose
financial condition are adequate to meet future obligations, have improved, or
are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated securities,
but they may not be attractive to as many buyers. Each Fund's policies regarding
lower-rated debt securities is not fundamental and may be changed at any time
without shareholder approval.
MONEY MARKET INSTRUMENTS: The term "money market instruments" refers to
instruments with remaining maturities of one year or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith,
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credit, and taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a particular facility
or class of facilities or, in some cases, from the proceeds of a special excise
tax or other specific revenue source such as the user of the facility being
financed. Private activity bonds held by a Fund are in most cases revenue
securities and are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of private activity bonds is usually directly
related to the credit standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable- or floating-rate instruments issued
by industrial development authorities and other governmental entities. While
there may not be an active secondary market with respect to a particular
instrument purchased by a Fund, a Fund may demand payment of the principal and
accrued interest on the instrument or may resell it to a third party as
specified in the instruments. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if the
issuer defaulted on its payment obligation or during periods the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by a
Fund will be determined by the Adviser to be of comparable quality at the time
of purchase to instruments rated "high quality" by any major rating service.
Where necessary to ensure that an instrument is of comparable "high quality," a
Fund will require that an issuer's obligation to pay the principal of the note
may be backed by an unconditional bank letter or line of credit, guarantee, or
commitment to lend.
Municipal securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases," and
units of participation in trusts holding pools of tax-exempt leases. Such loans
in most cases are not backed by the taxing authority of the issuers and may have
limited marketability or may be marketable only by virtue of a provision
requiring repayment following demand by the lender. Such loans made by a Fund
may have a demand provision permitting the Fund to require payment within seven
days. Participations in such loans, however, may not have such a demand
provision and may not be otherwise marketable. To the extent these securities
are illiquid, they will be subject to each Fund's limitation on investments in
illiquid securities. As it deems appropriate, the Adviser will establish
procedures to monitor the credit standing of each such municipal borrower,
including its ability to meet contractual payment obligations.
Municipal participation interests may be purchased from financial institutions,
and give the purchaser an undivided interest in one or more underlying municipal
security. To the extent that municipal participation interests are considered to
be "illiquid securities," such instruments are subject to each Fund's limitation
on the purchase of illiquid securities.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to Municipal Securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified Municipal Securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.
Although the Funds do not presently intend to do so on a regular basis, a Fund
may invest more than 25% of its total assets in Municipal Securities the
interest on which is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by the Adviser. To the extent that
more than 25% of a Fund's total assets are invested in Municipal Securities that
are payable from the revenues of similar projects, a Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if its assets were not so concentrated.
OTHER INVESTMENT COMPANIES: A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
REAL ESTATE INVESTMENT TRUSTS: A real estate investment trust ("REIT") is a
managed portfolio of real estate investments which may include office buildings,
apartment complexes, hotels and shopping malls. An Equity REIT holds equity
positions in real estate, and it seeks to provide its shareholders with income
from the leasing of its properties, and with capital gains from any sales of
properties. A Mortgage REIT specializes in lending money to developers of
properties, and passes any interest income it may earn to its shareholders.
REITs may be affected by changes in the value of the underlying property owned
or financed by the REIT, while Mortgage REITs also may be affected by the
quality of credit
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extended. Both Equity and Mortgage REITs are dependent upon management skill and
may not be diversified. REITs also may be subject to heavy cash flow dependency,
defaults by borrowers, self-liquidation, and the possibility of failing to
qualify for tax-free pass-through of income under the Code.
REPURCHASE AGREEMENTS: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker-dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
idle cash. A risk associated with repurchase agreements is the failure of the
seller to repurchase the securities as agreed, which may cause a Fund to suffer
a loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the limit
stated above. A Fund may enter into joint repurchase agreements jointly with
other investment portfolios of Nations Fund and Nations Institutional Reserves.
SECURITIES LENDING: To increase return on portfolio securities, certain of the
Funds may lend their portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. There is a risk of delay in receiving
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Adviser to be credit worthy and
when, in their judgment, the income to be earned from the loan justifies the
attendant risks. The aggregate of all outstanding loans of a Fund may not exceed
30% of the value of its total assets.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indexes, non-U.S. interest rates and foreign currencies, that
have been approved by the CFTC for investment by U.S. investors, for the purpose
of hedging against changes in values of a Fund's securities or changes in the
prevailing levels of interest rates or currency exchange rates. The contracts
entail certain risks, including but not limited to the following: no assurance
that futures contracts transactions can be offset at favorable prices; possible
reduction of a Fund's total return due to the use of hedging; possible lack of
liquidity due to daily limits on price fluctuation; imperfect correlation
between the contracts and the securities or currencies being hedged; and
potential losses in excess of the amount invested in the futures contracts
themselves.
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
for which no common clearing facility exists and a trader may look only to the
broker for performance of the contract. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the
currencies in which trading is done on foreign exchanges, any profits that such
Fund might realize could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes.
U.S. GOVERNMENT OBLIGATIONS: U.S. Government obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. Obligations of U.S.
Government agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
E.G., Government National Mortgage Association certificates; in other cases
interest and principal are not guaranteed, E.G., obligations of the Federal Home
Loan Bank System and the Federal Farm Credit Bank. No assurance can be given
that the U.S. Government would provide financial support to government-sponsored
instrumentalities if it is not obligated to do so by law.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities takes
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
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Appendix B -- Description of Ratings
The following summarizes the highest six ratings used by S&P for corporate and
municipal bonds. The first four ratings denote investment grade securities.
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher-rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher-rated categories.
BB, B -- Bonds rated BB and B are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB represents the lowest
degree of speculation and B a higher degree of speculation. While such
bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the highest six ratings used by Moody's for corporate
and municipal bonds. The first four ratings denote investment grade securities.
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa through B. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category. With regard to municipal bonds, those bonds
in the Aa, A and Baa groups which Moody's believes possess the strongest
investment attributes are designated by the symbols Aa1, A1 or Baa1,
respectively.
The following summarizes the highest four ratings used by D&P for bonds, each of
which denotes that the securities are investment grade:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be
35
<PAGE>
negligible, being only slightly more than for risk-free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
A -- Bonds that are rated A have protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
BBB -- Bonds that are rated BBB have below average protection factors but
still are considered sufficient for prudent investment. Considerable
variability in risk exists during economic cycles.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major categories.
The following summarizes the highest four ratings used by Fitch for bonds, each
of which denotes that the securities are investment grade:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A -- Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are Duff 1, Duff 2 and Duff 3.
D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the highest
rating category. Duff 1+ indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be minor.
Duff 1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. Duff 2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. Duff 3 indicates satisfactory liquidity and other protection factors
which qualify the issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
The following summarizes the three highest rating categories used by Fitch for
short-term obligations, each of which denotes securities that are investment
grade:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as
36
<PAGE>
having the strongest degree of assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
F-2 securities possess good credit quality. Issues carrying this rating
have a satisfactory degree of assurance for timely payment, but the margin
of safety is not as great as for issues assigned the F-1+ and F-1 ratings.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following is the four investment grade ratings used by BankWatch
for long-term debt:
AAA -- The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA -- The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
A -- The third highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with
higher ratings.
BBB -- The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however,
more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 -- The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
TBW-3 -- The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
The following summarizes the three highest long-term ratings used by IBCA:
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial.
37
<PAGE>
Adverse changes in business, economic or financial conditions may increase
investment risk albeit not very significantly.
A -- Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
The following summarizes the three highest short-term debt ratings used by IBCA:
A1+ -- Obligations supported by the highest capacity for timely repayment
and possessing a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
A2 -- Obligations supported by a good capacity for timely repayment.
38
<PAGE>
Prospectus
INVESTOR A SHARES
SEPTEMBER 30, 1995
AS SUPPLEMENTED ON
JANUARY 19, 1996
This Prospectus describes the NATIONS SHORT-TERM
INCOME FUND, NATIONS SHORT-INTERMEDIATE GOVERNMENT
FUND, NATIONS GOVERNMENT SECURITIES FUND, NATIONS
STRATEGIC FIXED INCOME FUND, NATIONS DIVERSIFIED
INCOME FUND AND NATIONS GLOBAL GOVERNMENT INCOME
FUND (the "Funds") of the Nations Fund Family
("Nations Fund" or "Nations Fund Family"). This
Prospectus describes one class of shares of the
Funds -- Investor A Shares.
This Prospectus sets forth concisely the information
about the Funds that prospective purchasers of
Investor A Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust, Nations Fund, Inc. and Nations
Fund Portfolios, Inc. ("Nations Portfolios") is
contained in separate Statements of Additional
Information (the "SAIs"), which have been filed with
the Securities and Exchange Commission (the "SEC")
and are available upon request without charge by
writing or calling Nations Fund at its address or
telephone number shown below. The SAIs for Nations
Fund Trust, Nations Fund, Inc. and Nations
Portfolios, dated September 30, 1995, September 30,
1995 and July 1, 1995, respectively, are
incorporated by reference in their entirety into
this Prospectus. NationsBanc Advisors, Inc. ("NBAI")
is the investment adviser to the Funds. TradeStreet
Investment Associates, Inc. ("TradeStreet") is
sub-investment adviser to certain of the Funds and
Nations Gartmore Investment Management ("Nations
Gartmore") is sub-investment adviser to the Nations
Global Government Income Fund. As used herein the
"Adviser" shall mean NBAI, TradeStreet and/or
Nations Gartmore as the context may require.
SHARES OF NATIONS FUND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. ("NATIONSBANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
NATIONSBANK AND CERTAIN OF ITS AFFILIATES PROVIDE
CERTAIN OTHER SERVICES TO NATIONS FUND, FOR WHICH
THEY ARE COMPENSATED. STEPHENS INC., WHICH IS NOT
AFFILIATED WITH NATIONSBANK, IS THE SPONSOR AND
ADMINISTRATOR AND SERVES AS THE DISTRIBUTOR FOR
NATIONS FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Nations Short-Term Income
Fund
Nations Short-Intermediate
Government Fund
Nations Government
Securities Fund
Nations Strategic Fixed
Income Fund
Nations Diversified Income
Fund
Nations Global Government
Income Fund
For purchase, redemption and
performance information
call:
1-800-321-7854
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
(Nations Fund Logo)
<PAGE>
Table Of Contents
About The Funds
Expenses Summary 3
Financial Highlights 4
Objectives 8
How Objectives Are Pursued 8
How Performance is Shown 13
How the Funds are Managed 14
Organization and History 17
About Your Investment
How to Buy Shares 19
Shareholder Servicing and Distribution Plans 20
How to Redeem Shares 21
How to Exchange Shares 22
How the Funds Value Their Shares 23
How Dividends and Distributions are Made; Tax
Information 23
Appendix A -- Portfolio Securities 24
Appendix B -- Description of Ratings 32
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAIS
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
NATIONS FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY NATIONS FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds. The
following tables summarize shareholder transaction and operating expenses for
Investor A Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in Investor A Shares of the
indicated Fund over specified periods.
INVESTOR A SHARES
<TABLE>
<CAPTION>
Nations Short-
Nations Short-Term Intermediate Nations Government Nations Strategic
SHAREHOLDER TRANSACTION EXPENSES Income Fund Government Fund Securities Fund Fixed Income Fund
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None None None None
Maximum Deferred Sales Charge (as a
percentage of the lower of the original
purchase price or redemption proceeds)1 None None None None
</TABLE>
<TABLE>
<CAPTION>
Nations Global
Nations Diversified Government Income
SHAREHOLDER TRANSACTION EXPENSES Income Fund Fund
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None None
Maximum Deferred Sales Charge (as a
percentage of the lower of the original
purchase price or redemption proceeds)1 None None
</TABLE>
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of average
net assets)
<TABLE>
<CAPTION>
Nations Short-
Nations Short-Term Intermediate Nations Government Nations Strategic
Income Fund Government Fund Securities Fund Fixed Income Fund
<S> <C> <C> <C> <C>
Management Fees2 .30% .40% .50% .50%
Rule 12b-1 Fees (including shareholder
servicing fees)2 .20%3 .20% .25% .20%
Other Expenses .22% .18% .39% .16%
Total Operating Expenses2 .72% .78% 1.05% .86%
</TABLE>
<TABLE>
<CAPTION>
Nations Global
Nations Diversified Government Income
Income Fund Fund
<S> <C> <C>
Management Fees2 .50% .70%
Rule 12b-1 Fees (including shareholder
servicing fees)2 .25% .25%
Other Expenses .32% .60%
Total Operating Expenses2 1.07% 1.55%
</TABLE>
1 Investor A Shares that were purchased prior to January 1, 1996 remain subject
to the Deferred Sales Charge applicable at the time of purchase. See "How to
Redeem Shares -- Contingent Deferred Sales Charge."
2 After any waivers and reimbursements.
3 Shareholder servicing fees for Nations Short-Term Income Fund are paid
pursuant to a separate Shareholder Servicing Plan. See "Shareholder Servicing
and Distribution Plans."
EXAMPLES:
You would pay the following expenses on a $1,000 investment in Investor A Shares
of the indicated Fund, assuming (1) a 5% annual return and (2) redemption at the
end of each time period.
<TABLE>
<CAPTION>
Nations Short-
Nations Short-Term Intermediate Nations Government Nations Strategic
Income Fund Government Fund Securities Fund Fixed Income Fund
<S> <C> <C> <C> <C>
1 Year $ 7 $ 8 $ 11 $ 9
3 Years $ 23 $ 25 $ 33 $ 27
5 Years $ 40 $ 43 $ 58 $ 48
10 Years $ 89 $ 97 $ 128 $ 106
</TABLE>
<TABLE>
<CAPTION>
Nations Global
Nations Diversified Government Income
Income Fund Fund
<S> <C> <C>
1 Year $ 11 $ 11
3 Years $ 34 $ 49
5 Years $ 59 N/A
10 Years $ 131 N/A
</TABLE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor A Shares of the Funds will bear either directly or indirectly. Except
for the Nations Global Government Income Fund which fees and expenses are based
on estimates, certain figures contained in the above tables are based on amounts
incurred during each Fund's most recent fiscal year and have been adjusted as
necessary to reflect current service provider fees. There is no assurance that
any fee waivers and reimbursements will continue beyond the current fiscal year.
If fees waivers and/or reimbursements are discontinued, the amounts contained in
the "Examples" above may increase. For more complete descriptions of the Funds'
operating
3
<PAGE>
expenses, see "How the Funds Are Managed." For a more complete description of
the Rule 12b-1 and shareholder servicing fees payable by the Funds, see
"Shareholder Servicing and Distribution Plans."
Absent fee waivers and reimbursements, "Management Fees," "Rule 12b-1 Fees" and
"Total Operating Expenses" for Investor A Shares of the indicated Fund would
have been as follows: Nations Short-Term Income Fund -- .60%, .50% and 1.32%,
respectively; Nations Short-Intermediate Government Fund -- .60%, .25% and
1.03%, respectively; Nations Government Securities Fund -- .64%, .25% and 1.19%,
respectively; Nations Strategic Fixed Income Fund -- .60%, .25% and 1.01%,
respectively; Nations Diversified Income Fund -- .60%, .25% and 1.17%,
respectively; and Nations Global Government Income Fund -- .70%, .25% and 1.55%,
respectively.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Financial Highlights
The audited financial information on the following pages has been derived from
the financial statements of Nations Fund Trust and Nations Fund, Inc. Price
Waterhouse LLP is the independent accountant to Nations Fund Trust, Nations
Fund, Inc. and Nations Portfolios. The reports of Price Waterhouse LLP for the
most recent fiscal years of Nations Fund Trust and Nations Fund, Inc. accompany
the financial statements for such periods and are incorporated by reference in
the SAIs, which are available upon request. For more information see
"Organization and History." Shareholders of a Fund will receive unaudited
semi-annual reports describing the Fund's investment operations and financial
statements audited by the Funds' independent accountant.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SHORT-TERM INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR A SHARES (UNAUDITED)# 11/30/94# 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period 9.48 $ 10.01 $ 9.75
Net investment income 0.30 0.48 0.51
Net realized and unrealized gain/(loss) on investments 0.28 (0.51) 0.26
Net increase/(decrease) in net assets resulting from investment
operations 0.58 (0.03) 0.77
Distributions:
Dividends from net investment income (0.30) (0.46) (0.51)
Distributions in excess of net investment income -- (0.02) --
Distributions from capital -- (0.02) --
Total distributions (0.30) (0.50) (0.51)
Net asset value, end of period $ 9.76 $ 9.48 $ 10.01
Total return++ 6.17% (0.33)% 8.03%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,510 $ 2,490 $ 11,205
Ratio of operating expenses to average net assets 0.71%+ 0.71% 0.57%
Ratio of net investment income to average net assets 6.15%+ 5.02% 5.07%
Portfolio turnover rate 145% 293% 121%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.06%+ 1.03% 0.99%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.28 $ 0.45 $ 0.48
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.08
Net realized and unrealized gain/(loss) on investments (0.26)
Net increase/(decrease) in net assets resulting from investment
operations (0.18)
Distributions:
Dividends from net investment income (0.07)
Distributions in excess of net investment income --
Distributions from capital --
Total distributions (0.07)
Net asset value, end of period $ 9.75
Total return++ (1.81)%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 254
Ratio of operating expenses to average net assets 0.45%+
Ratio of net investment income to average net assets 5.39%+
Portfolio turnover rate 45%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.05%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.07
</TABLE>
* The Nations Short-Term Income Fund Investor A Shares commenced operations on
October 2, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed method did not accord with the results of operations.
4
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR YEAR YEAR
05/31/95 ENDED ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94 11/30/93 11/30/92
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 3.93 $ 4.28 $ 4.16 $ 4.17
Net investment income 0.12 0.22 0.22 0.27
Net realized and unrealized gain/(loss) on
investments 0.16 (0.33) 0.14 (0.01)
Net increase/(decrease) in net assets
resulting from investment operations 0.28 (0.11) 0.36 0.26
Distributions:
Dividends from net investment income (0.12) (0.22) (0.22) (0.27)
Distributions in excess of net investment
income -- (0.00)# -- --
Distributions from net realized capital gains -- (0.02) (0.02) --
Total distributions (0.12) (0.24) (0.24) (0.27)
Net asset value, end of period $ 4.09 $ 3.93 $ 4.28 $ 4.16
Total return++ 7.14% (2.41)% 8.85% 6.61%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 64,634 $ 77,128 $ 173,449 $ 188,624
Ratio of operating expenses to average net
assets 0.78%+ 0.77% 0.70% 0.48%
Ratio of net investment income to average net
assets 5.87%+ 5.58% 5.25% 6.34%
Portfolio turnover rate 130% 133% 92% 25%
Ratio of operating expenses to average net
assets before fee waivers and/or expense
reimbursements 0.99%+ 0.98% 0.94% 0.88%
Net investment income per share before fee
waivers and/or expense reimbursements $ 0.11 $ 0.21 $ 0.21 $ 0.25
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/91*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 4.00##
Net investment income 0.10
Net realized and unrealized gain/(loss) on
investments 0.17
Net increase/(decrease) in net assets
resulting from investment operations 0.27
Distributions:
Dividends from net investment income (0.10)
Distributions in excess of net investment
income --
Distributions from net realized capital gains --
Total distributions (0.10)
Net asset value, end of period $ 4.17
Total return++ 6.81% +++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 55,874
Ratio of operating expenses to average net
assets 0.08%+
Ratio of net investment income to average net
assets 7.21%+
Portfolio turnover rate 11%
Ratio of operating expenses to average net
assets before fee waivers and/or expense
reimbursements 0.82%+
Net investment income per share before fee
waivers and/or expense reimbursements $ 0.00
</TABLE>
* The Nations Short-Intermediate Government Fund Investor A Shares commenced
operations on August 5, 1991.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
# Value represents less than $0.01 per share.
## The Nations Short-Intermediate Government Fund's net asset value upon
commencement of operations was $2.00 per share. Effective September 25, 1991,
the net asset value doubled as a result of the reclassification of each
outstanding share into half as many shares (reverse split).
5
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
INVESTOR A SHARES 05/31/95# 05/31/94 05/31/93# 05/31/92
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.80 $ 10.46 $ 10.36 $ 10.05
Net investment income 0.61 0.62 0.66 0.71
Net realized and unrealized gain/(loss) on
investments 0.06 (0.61) 0.16 0.38
Net increase/(decrease) in net assets
resulting from investment operations 0.67 0.01 0.82 1.09
Distributions:
Dividends from net investment income (0.57) (0.56) (0.68) (0.75)
Dividends in excess of net investment income -- (0.02) -- --
Distributions in excess of net realized
capital gains -- (0.05) (0.04) (0.03)
Distributions from capital (0.04) (0.04) -- --
Total distributions (0.61) (0.67) (0.72) (0.78)
Net asset value, end of period $ 9.86 $ 9.80 $ 10.46 $ 10.36
Total return++ 7.29% (0.11)% 8.18% 11.18%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (000's) $ 10,928 $ 14,044 $ 15,354 $ 3,326
Ratio of operating expenses to average net
assets 1.01% 0.90% 1.00% 1.31%
Ratio of net investment income to average net
assets 6.44% 5.91% 6.52% 6.90%
Portfolio turnover rate 413% 56% 103% 130%
Ratio of operating expenses to average net
assets without waivers and reimbursements 1.19% 1.11% 1.15% 1.97%
Net investment income per share without
waivers and reimbursements $ 0.59 $ 0.59 $ 0.55 $ 0.07
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 05/31/91*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.01
Net investment income 0.09
Net realized and unrealized gain/(loss) on
investments 0.02
Net increase/(decrease) in net assets
resulting from investment operations 0.11
Distributions:
Dividends from net investment income (0.07)
Dividends in excess of net investment income --
Distributions in excess of net realized
capital gains --
Distributions from capital --
Total distributions (0.07)
Net asset value, end of period $ 10.05
Total return++ 1.07%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (000's) $ 661
Ratio of operating expenses to average net
assets 1.35%+
Ratio of net investment income to average net
assets 7.22%+
Portfolio turnover rate 5%
Ratio of operating expenses to average net
assets without waivers and reimbursements 1.94%+++
Net investment income per share without
waivers and reimbursements $ 0.08+++
</TABLE>
* The Nations Government Securities Fund Investor A Shares commenced
operations on April 17, 1991.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charge.
+++ Unaudited.
# Per share amounts have been calculated using the average shares method,
which more appropriately presents the per share data for the period since
the use of the undistributed income method did not acccord with the results
of operations.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS STRATEGIC FIXED INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.32 $ 10.55 $ 9.94
Net investment income 0.29 0.51 0.54
Net realized and unrealized gain/(loss) on investments 0.70 (0.89) 0.62
Net increase/(decrease) in net assets resulting from investment
operations 0.99 (0.38) 1.16
Distributions:
Dividends from net investment income (0.29) (0.49) (0.54)
Distributions in excess of net investment income -- (0.02) --
Distributions from net realized capital gains -- (0.34) (0.01)
Total distributions (0.29) (0.85) (0.55)
Net asset value, end of period $ 10.02 $ 9.32 $ 10.55
Total return++ 10.74% (3.76)% 11.88%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,472 $ 967 $ 1,138
Ratio of operating expenses to average net assets 0.88%+ 0.86% 0.76%
Ratio of net investment income to average net assets 5.98%+ 5.25% 5.25%
Portfolio turnover rate 155% 307% 161%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 0.99%+ 0.94% 0.92%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.28 $ 0.50 $ 0.53
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.99
Net investment income 0.01
Net realized and unrealized gain/(loss) on investments (0.06)
Net increase/(decrease) in net assets resulting from investment
operations (0.05)
Distributions:
Dividends from net investment income --
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions --
Net asset value, end of period $ 9.94
Total return++ (0.49)%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 113
Ratio of operating expenses to average net assets 0.40%+
Ratio of net investment income to average net assets 6.00%+
Portfolio turnover rate 12%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.00%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.01
</TABLE>
* The Nations Strategic Fixed Income Fund Investor A Shares commenced
operations on November 19, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
6
<PAGE>
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR A SHARES (UNAUDITED) 11/30/94# 11/30/93#
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.67 $ 10.88 $ 9.96
Net investment income 0.36 0.72 0.76
Net realized and unrealized gain/(loss) on investments 0.86 (1.06) 0.92
Net increase/(decrease) in net assets resulting from investment
operations 1.22 (0.34) 1.68
Distributions:
Dividends from net investment income (0.36) (0.72) (0.76)
Distributions in excess of net investment income -- (0.00)## --
Distributions from net realized capital gains -- (0.15) --
Total distributions (0.36) (0.87) (0.76)
Net asset value, end of period $ 10.53 $ 9.67 $ 10.88
Total return++ 12.92% (3.26)% 17.32%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 12,633 $ 10,819 $ 13,291
Ratio of operating expenses to average net assets 1.02%+ 0.96% 0.70%
Ratio of net investment income to average net assets 7.28%+ 7.09% 6.87%
Portfolio turnover rate 67% 144% 86%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.18%+ 1.17% 1.10%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.35 $ 0.70 $ 0.70
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.02
Net investment income 0.01
Net realized and unrealized gain/(loss) on investments (0.06)
Net increase/(decrease) in net assets resulting from investment
operations (0.05)
Distributions:
Dividends from net investment income (0.01)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.01)
Net asset value, end of period $ 9.96
Total return++ (0.49)%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 18
Ratio of operating expenses to average net assets 0.40%+
Ratio of net investment income to average net assets 7.61%+
Portfolio turnover rate 46%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.00%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.01
</TABLE>
* The Nations Diversified Income Fund Investor A Shares commenced operations
on November 25, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed method did not accord with the results of operations.
## Value represents less than $0.01 per share.
FOR AN INVESTOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NATIONS GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR A SHARES 09/30/95*
<S> <C>
Operating Performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss)## 0.12
Net realized and unrealized gain/(loss) on investments 0.04
Net increase/(decrease) in net assets resulting from investment operations 0.16
Distributions:
Dividends from net investment income (0.12)
Total Distributions (0.12)
Net asset value, end of period $ 10.04
Total return++ 1.63%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 23
Ratio of operating expenses to average net assets 1.55%+
Ratio of net investment income/(loss) to average net assets 5.36%+
Portfolio turnover rate 104%
</TABLE>
* The Fund's Investor A Shares commenced operations on June 30, 1995.
** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
## For the Nations Emerging Markets Fund, the amount shown at this caption for
each share outstanding throughout the period may not accord with the change
in the aggregate gains and losses in the portfolio securities for the period
because of the timing of purchases and withdrawals of shares in relation to
the fluctuating market value of the portfolio.
7
<PAGE>
Objectives
NATIONS SHORT-TERM INCOME FUND: The Nations Short-Term Income Fund's investment
objective is to seek as high a level of current income as is consistent with
prudent investment risk. The Fund invests primarily in investment grade
corporate bonds and mortgage-backed bonds. Under normal market conditions, it is
expected that the Fund will have an average dollar-weighted maturity of three
years or less. The Fund's investment program attempts to maintain a higher level
of income than normally provided by money market instruments, and more price
stability than investments in intermediate- and long-term bonds. However, the
value of the Fund's portfolio generally will vary inversely with changes in
prevailing interest rates.
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND: The Nations Short-Intermediate
Government Fund's investment objective is to seek as high a level of current
income as is consistent with prudent investment risk. The Fund invests
essentially all of its assets in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and in repurchase agreements
relating to such obligations. Under normal market conditions, the Fund is
expected to have an average dollar-weighted maturity between two and seven
years.
NATIONS GOVERNMENT SECURITIES FUND: The Nations Government Securities Fund's
investment objective is to provide current income and preservation of capital.
The Fund seeks to achieve its objective by investing primarily in obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
NATIONS STRATEGIC FIXED INCOME FUND: The Nations Strategic Fixed Income Fund's
investment objective is to maximize total investment return through the active
management of fixed income securities. The Fund invests primarily in investment
grade fixed income securities. The Fund may under normal market conditions
invest in long-term, intermediate-term and short-term securities and has not
placed any limitations on the duration of the portfolio.
NATIONS DIVERSIFIED INCOME FUND: The Nations Diversified Income Fund's
investment objective is to seek as high a level of current income as is
consistent with prudent investment risk. The Fund invests primarily in a
diversified portfolio of government and corporate fixed income securities.
NATIONS GLOBAL GOVERNMENT INCOME FUND: The Nations Global Government Income
Fund's investment objective is to seek current income. Although the Fund
emphasizes income when selecting investments, the potential for growth of
capital also is considered. It seeks to achieve this objective by investing
primarily in debt securities issued by governments, banks and supranational
entities located throughout the world.
How Objectives Are Pursued
NATIONS SHORT-TERM INCOME FUND: In pursuing its investment objective, the
Nations Short-Term Income Fund may invest in a broad range of debt obligations
such as U.S. Government obligations; corporate debt obligations, including
bonds, notes and debentures rated investment grade by one of the following six
nationally recognized statistical rating organizations, Duff & Phelps Credit
Rating Co. ("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard & Poor's
Corporation ("S&P"), Moody's Investors Service, Inc. ("Moody's"), IBCA Limited
or its affiliate, IBCA Inc. (collectively, "IBCA") or Thomson BankWatch, Inc.
("BankWatch") (collectively, "NRSROs"), or, if not so rated, determined by the
Adviser to be of comparable quality to instruments so rated; dollar-denominated
debt obligations of foreign issuers, including foreign corporations and foreign
governments (see "Appendix A -- Foreign Securities"); and mortgage-related
securities of governmental issuers, including the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"), or of private issuers,
including mortgage pass-through certificates, collateralized mortgage
obligations or "CMOs", real estate investment trust securities or
mortgage-backed bonds; other asset-backed securities rated by one of the six
NRSROs, or, if not so rated, determined by the Adviser to be of comparable
quality to instruments so rated. (For more information concerning Asset Backed
Securities, including Mortgage-Backed Securities, see "Appendix A -- Asset
Backed Securities.")
The Fund will invest, under normal market conditions, at least 65% of the total
value of its assets in investment grade corporate bonds and mortgage-backed
bonds. Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. Debt obligations
acquired by the Fund generally will be rated investment grade at the time of
purchase by D&P, Fitch, S&P, Moody's, IBCA or BankWatch, or, if unrated,
determined by the Adviser to be comparable in quality to instruments so rated.
Obligations rated in the lowest of the top four investment grade rating
categories (e.g. rated "BBB" by S&P or "Baa" by Moody's) have speculative
characteristics, and changes in economic conditions or other circumstances
8
<PAGE>
are more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt obligations. Subsequent to its
purchase by the Fund, an issue of securities may cease to be rated or its rating
may be reduced below the minimum rating required for purchase by the Fund. The
Adviser will consider such an event in determining whether the Fund should
continue to hold the obligation. See "Appendix B" below for a description of
these rating designations.
The Fund also may hold or invest in short-term U.S. Government obligations,
"high quality" money market instruments (I.E., those within the two highest
rating categories or unrated instruments determined by the Adviser to be of
comparable quality), repurchase agreements and cash. Such obligations may
include those issued by foreign banks and foreign branches of U.S. banks. These
investments may be in such proportions as, in the Adviser's opinion, prevailing
market or economic conditions warrant.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest 10% or more of its assets in securities of foreign issuers. See "Appendix
A" below for additional information concerning the investment practices of this
Fund.
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND: The Nations Short-Intermediate
Government Fund invests substantially all of its assets in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities ("U.S.
Government Obligations") and repurchase agreements relating to such obligations.
U.S. Government Obligations have historically involved little risk of loss of
principal if held to maturity. However, due to fluctuations in interest rates,
the market value of such securities may vary during the period a shareholder
owns shares of the Fund. The value of the Fund's portfolio generally will vary
inversely with changes in prevailing interest rates.
Certain government securities that have variable or floating interest rates or
demand or put features may be deemed to have remaining maturities shorter than
their nominal maturities for purposes of determining the average weighted
maturity of the Fund. See "Investment Objectives and Policies" in the Fund's
SAI. See "Appendix A" below for additional information concerning the investment
practices of this Fund.
NATIONS GOVERNMENT SECURITIES FUND: Under normal circumstances, substantially
all, and in any event, at least 65% of the Fund's assets, will be invested in
U.S. Government Obligations. U.S. Government Obligations include Treasury
obligations, which differ only in their interest rates, maturities and times of
issuance. U.S. Government Obligations also include obligations issued or
guaranteed by U.S. Government agencies, authorities or instrumentalities, some
of which are backed by the full faith and credit of the U.S. Treasury, such as
direct pass-through certificates of the Government National Mortgage Association
("GNMA"); some of which are supported by the right of the issuer to borrow from
the U.S. Government, such as obligations of Federal Home Loan Banks; and some of
which are backed only by the credit of the issuer itself, such as obligations of
the Federal National Mortgage Association ("FNMA"). For a more detailed
description of the investment practices of this Fund, see "Appendix A -- U.S.
Government Obligations" and "Asset Backed Securities."
Although changes in the value of securities subsequent to their acquisition are
reflected in the net asset value of the Fund's shares, such changes will not
affect the income received by the Fund from such securities. However, since
available yields vary over time, no specific level of income can ever be
assured. The dividends paid by the Fund will increase or decrease in relation to
the income received by the Fund from its investments, which will in any case be
reduced by the Fund's expenses before being distributed to the Fund's
shareholders. The value of the Fund's portfolio generally will vary inversely
with changes in prevailing interest rates.
The Fund also may hold or invest in short-term U.S. Government obligations,
"high quality" money market instruments (I.E., those within the two highest
rating categories or unrated instruments deemed by the Adviser to be of
comparable quality), repurchase agreements and cash. Such obligations may
include those issued by foreign banks and foreign branches of U.S. banks. These
investments may be in such proportion as, in the Adviser's opinion, existing
circumstances warrant.
NATIONS STRATEGIC FIXED INCOME FUND: In pursuing its investment objective, the
Nations Strategic Fixed Income Fund may invest in corporate convertible and
non-convertible debt obligations, including bonds, notes and debentures rated
investment grade at the time of purchase by one of the six NRSROs, or if not so
rated, determined by the Adviser to be of comparable quality to instruments so
rated; U.S. Government obligations; dollar-denominated debt obligations of
foreign issuers, including foreign corporations and foreign governments (see
"Appendix A -- Foreign Securities"); mortgage-backed securities of governmental
issuers, including GNMA, FNMA and FHLMC, or of private issuers, including
mortgage pass-through certificates, CMOs, real estate investment trust
securities or mortgage-backed bonds; other asset-backed securities rated by one
of the six NRSROs, or if not so rated, determined by the Adviser to be of
comparable quality. (For more information concerning Asset Backed Securities,
including Mortgage-Backed Securities, see "Appendix A -- Asset Backed
Securities.") Pursuant to its investment objective, the Fund also may invest in
dividend-paying preferred and common stock.
9
<PAGE>
Under normal market conditions, the Fund will invest at least 65% of the total
value of its assets in government, corporate and mortgage-backed securities.
Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. Debt obligations
acquired by the Fund will be rated investment grade at the time of purchase by
D&P, Fitch, S&P, Moody's, IBCA or BankWatch, or, if unrated, determined by the
Adviser to be comparable in quality. Obligations rated in the lowest of the top
four investment grade rating categories (e.g. rated "BBB" by S&P or "Baa" by
Moody's) have speculative characteristics, and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade debt
obligations. Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum rating required
for purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. See "Appendix B" below
for a description of these rating designations.
The Fund also may hold or invest in short-term U.S. Government obligations,
"high quality" money market instruments (i.e., those within the two highest
rating categories or unrated instruments determined by the Adviser to be of
comparable quality), repurchase agreements and cash. Such obligations may
include those issued by foreign banks and foreign branches of U.S. banks. These
investments may be in such proportions as, in the Adviser's opinion, existing
circumstances warrant.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest 10% or more of its total assets in securities of foreign issuers. See
"Appendix A -- Foreign Securities." See "Appendix A" below for additional
information concerning the investment practices of this Fund.
NATIONS DIVERSIFIED INCOME FUND: In pursuing its investment objective, the
Nations Diversified Income Fund may invest in a broad range of corporate
convertible and non-convertible debt obligations such as fixed and variable rate
bonds; obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; dollar-denominated and non-dollar-denominated debt
obligations of foreign issuers, including foreign corporations and foreign
governments (see "Appendix A -- Foreign Securities"); mortgage-backed securities
of governmental issuers, including GNMA, FNMA and FHLMC, or of private issuers,
including mortgage pass-through certificates, CMOs, real estate investment trust
securities or mortgage-backed bonds; other asset-backed securities rated by one
of the six NRSROs, or if not so rated, determined by the Adviser to be of
comparable quality. (For more information concerning Asset Backed Securities,
including Mortgage-Backed Securities, see "Appendix A -- Asset Backed
Securities.") In pursuing its investment objective, the Fund also may invest in
dividend-paying convertible and non-convertible preferred and common stocks.
Under normal market conditions, the Fund will invest at least 65% of the total
value of its assets in fixed income securities, such as government, government
agency and corporate bonds. Most obligations acquired by the Fund will be issued
by companies or governmental entities located within the United States. Not less
than 65% of the debt obligations acquired by the Fund will be rated investment
grade at the time of purchase by D&P, Fitch, S&P, Moody's, IBCA or BankWatch,
or, if unrated, determined by the Adviser to be comparable in quality to
instruments so rated. Obligations rated in the lowest of the top four investment
grade rating categories (e.g. rated "BBB" by S&P or "Baa" by Moody's) have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations.
Up to 35% of the total value of the Fund's assets may be invested in
lower-quality fixed income securities rated "B" or better by Moody's or S&P, or
if not so rated, determined by the Adviser to be of comparable quality.
Securities which are rated "B" generally lack characteristics of the desirable
investment, and assurance of interest and principal payment over any long period
of time may be limited. Non-investment-grade debt securities are sometimes
referred to as "high yield bonds" or "junk bonds," tend to have speculative
characteristics, generally involve more risk of principal and income than higher
rated securities, and have yields and market values that tend to fluctuate more
than higher quality securities. See "Appendix A -- Lower-Rated Debt Securities."
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. See "Appendix B" below
for a description of these rating designations.
The Fund may hold or invest in short-term U.S. Government obligations, "high
quality" money market instruments (i.e., those within the two highest rating
categories or unrated instruments deemed by the Adviser to be of comparable
quality), repurchase agreements and cash. Such obligations may include those
issued by foreign banks and foreign branches of U.S. banks. These investments
may be in such proportions as, in the Adviser's opinion, existing circumstances
warrant.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest 10% or more of its total assets in securities of foreign issuers. The
value of the
10
<PAGE>
Fund's portfolio generally will vary inversely with changes in prevailing
interest rates. See "Appendix A" below for additional information concerning the
investment practices of this Fund.
NATIONS GLOBAL GOVERNMENT INCOME FUND: In seeking to achieve its investment
objective, the Fund will invest under normal market conditions at least 65% of
its total assets in debt securities issued or guaranteed by U.S. or foreign
governments (including states, provinces and municipalities) or their agencies,
instrumentalities or subdivisions ("Government Securities"). Except for
temporary defensive purposes, the Fund will concentrate its investments in
foreign Government Securities. Concentration in this context means the
investment of more than 25% of the Fund's total assets in such securities. The
Fund may invest in the debt securities of any type of issuer, including
corporations, banks and supranational entities.
The Fund, under normal market conditions, will invest in at least three
different countries. These countries may include the U.S., the countries of
Western Europe, Japan, Australia, New Zealand and Canada. If the Fund invests a
significant portion of its assets at any time in a single country, events
occurring in such country are more likely to affect the Fund's investments. For
additional information concerning risk, see "Special Risk Considerations
Relevant to an Investment in the Nations Global Government Income Fund" below.
Because the Fund intends to invest a large portion of its assets in foreign
Government Securities, the Fund is a "non-diversified" investment company for
purposes of the Investment Company Act of 1940 (the "1940 Act"). The Fund may
invest in securities of issuers located in any region or country and that are
denominated in any currency.
The Fund is managed in accordance with an overall global investment strategy
which means that Fund investments are allocated among securities denominated in
U.S. dollars and the currencies of a number of foreign countries. The Fund's
exposure to various count-
ries and currencies will vary in accordance with the Adviser's assessment of the
relative yield and appreciation of such securities. Fundamental economic
strength, credit quality and interest rate trends are the principal factors
considered by the Adviser in determining whether to increase or decrease the
emphasis placed upon a particular country or particular type of security within
the Fund's investment portfolio.
Under normal market conditions, the Fund intends to invest primarily in
securities rated "A" or better at the time of purchase by Moody's or S&P and
unrated securities that, at the time of purchase will be determined to be of
comparable quality by the Adviser. The Fund also may invest in securities rated
"Baa" by Moody's or "BBB" by S&P, but does not as a general matter, intend to
invest more than 10% of its total assets in such securities. Subsequent to its
purchase by the Fund, an issue of securities may cease to be rated or its rating
may be reduced below the minimum rating required for purchase by the Fund. The
Adviser will consider such event in determining whether the Fund should continue
to hold the obligation. In no event will the Fund hold more than 5% of its total
net assets in securities rated below investment grade. See "Appendix B" below
for a description of these rating designations. The Adviser expects that the
Fund's average dollar-weighted maturity will not be greater than fifteen years
under normal market conditions.
Supranational entities are international organizations jointly operated by
multiple sovereign governments including, for example, the World Bank, the
European Coal and Steel Community, the Asian Development Bank, the European
Investment Bank and the Inter-American Development Bank. Supranational entities
generally have no taxing authority and are dependent upon their members for the
funds necessary to pay principal and interest on their debt obligations.
For defensive purposes, the Fund may temporarily invest substantially all of its
assets in U.S. financial markets or in U.S. dollar-denominated instruments. See
"Appendix A" below for additional information concerning the investment
practices of the Fund.
SPECIAL RISK CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE NATIONS GLOBAL
GOVERNMENT INCOME FUND: Investors should understand and consider carefully the
special risks involved in foreign investing. In addition, the Nations Global
Government Income Fund presents unique risks that investors should be aware of.
The Nations Global Government Income Fund's yield and share price will change
based on changes in domestic or foreign interest rates and in an issuer's
creditworthiness. In general, bond prices rise when interest rates fall, and
vice versa.
Moreover, investing in securities denominated in foreign currencies and
utilization of forward foreign currency exchange contracts and other currency
hedging techniques involve certain considerations comprising both opportunities
and risks not typically associated with investing in U.S. dollar-denominated
securities. Additionally, changes in the value of foreign currencies can
significantly affect a Fund's share price. General economic and political
factors in the various world markets also can impact a Fund's share price.
The expenses to individual investors of investing directly in foreign securities
are very high relative to similar costs for investing in U.S. securities. While
the Fund offers a more efficient way for individual investors to participate in
foreign markets, its expenses, including
11
<PAGE>
custodial fees, are also higher than the typical domestic equity mutual fund.
Risks unique to international investing include: (1) restrictions on foreign
investment and repatriation of capital; (2) fluctuations in currency exchange
rates; (3) costs of converting foreign currency into U.S. dollars and U.S.
dollars into foreign currencies; (4) greater price volatility and less
liquidity; (5) settlement practices, including delays, which may differ from
those customary in United States markets; (6) exposure to political and economic
risks, including the risk of nationalization, expropriation of assets and war;
(7) possible imposition of foreign taxes and exchange control and currency
restrictions; (8) lack of uniform accounting, auditing and financial reporting
standards; (9) less governmental supervision of securities markets, brokers and
issuers of securities; (10) less financial information available to investors;
and (11) difficulty in enforcing legal rights outside the United States. These
risks often are heightened for investments in emerging or developing countries.
See "Appendix A" for additional discussion of the risks associated with an
investment in the Nations Global Government Income Fund.
GENERAL: The Nations Short-Intermediate Government Fund, Nations Government
Securities Fund, Nations Short-Term Income Fund, Nations Diversified Income Fund
and Nations Strategic Fixed Income Fund may invest in certain specified
derivative securities, including: interest rate swaps, caps and floors for
hedging purposes; exchange-traded options; over-the-counter options executed
with primary dealers, including long calls and puts and covered calls to enhance
return; and U.S. and foreign exchange-traded financial futures and options
thereon approved by the Commodity Futures Trading Commission ("CFTC") for market
exposure risk-management. Each of those Funds may lend its portfolio securities
to qualified institutional investors and may invest in restricted, private
placement and other illiquid securities. Each of those Funds may engage in
reverse repurchase agreements and dollar roll transactions. The National Global
Government Income Fund may invest in money market instruments, forward foreign
currency exchange contracts, futures and options and other instruments.
Additionally, each Fund may purchase securities issued by other investment
companies, consistent with the Fund's investment objective and policies.
PORTFOLIO TURNOVER: Generally, the Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. While it is not possible to predict exactly annual portfolio
turnover rates, it is expected that under normal market conditions, annual
portfolio turnover rates will not exceed 175% for Nations Global Government
Income Fund. If a Fund's annual portfolio turnover rate exceeds 100%, it may
result in higher brokerage costs and possible tax consequences for the Fund and
its shareholders. For the other Funds' portfolio turnover rates, see "Financial
Highlights."
RISK CONSIDERATIONS: Although the Adviser will seek to achieve the investment
objective of each Fund, there is no assurance that it will be able to do so. No
single Fund should be considered, by itself, to provide a complete investment
program for any investor. Investments in a Fund are not insured against loss of
principal.
Investments by a Fund in common stocks and other equity securities are subject
to stock market risks. The value of the stocks that the Fund holds, like the
broader stock market, may decline over short or even extended periods.
The value of a Fund's investments in debt securities will tend to decrease when
interest rates rise and increase when interest rates fall. In general,
longer-term debt instruments tend to fluctuate in value more than shorter-term
debt instruments in response to interest rate movements. In addition, debt
securities that are not backed by the United States Government are subject to
credit risk, which is the risk that the issuer may not be able to pay principal
and/or interest when due.
Certain of the Funds' investments constitute derivative securities, which are
securities whose value is derived, at least in part, from an underlying index or
reference rate. There are certain types of derivative securities that can, under
certain circumstances, significantly increase a purchaser's exposure to market
or other risks. The Funds' investment adviser, however, only purchases
derivative securities in circumstances where it believes such purchases are
consistent with the Fund's investment objective and do not unduly increase the
Fund's exposure to market or other risks. For additional risk information
regarding the Funds' investments in particular instruments, see "Appendix
A -- Portfolio Securities."
INVESTMENT LIMITATIONS: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAIs.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry, provided that this limitation does not apply (a) with respect to
the Nations Global Government Income Fund, to investments in foreign Government
12
<PAGE>
Securities; and (b) to investments in obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities.
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
3. Each Fund (other than Nations Global Government Income Fund) may not:
Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, such Fund will not
hold more than 10% of the voting securities of any issuer.
The Nations Global Government Income Fund may not:
Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 25% of the value of such Fund's total
assets would be invested in the securities of one issuer, and with respect to
50% of such Fund's total assets, more than 5% of its assets would be invested in
the securities of one issuer.
The investment objective and policies of each Fund, unless otherwise specified,
may be changed without a vote of the Fund's shareholders. If the investment
objective or policies of a Fund change, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current position
and needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus and the SAIs. Should a Fund determine that any such
commitment is no longer in the best interests of the Fund, it may consider
terminating sales of its shares in the states involved.
How Performance Is Shown
From time to time a Fund may advertise the total return and yield on a class of
shares. BOTH TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND
ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a class
of shares may be calculated on an average annual total return basis or an
aggregate total return basis. The "total return" of a class of shares refers to
the average annual compounded rates of return over one-, five-, and ten-year
periods or the life of the Fund (as stated in the advertisement) that would
equate an initial amount invested at the beginning of a stated period to the
ending redeemable value of the investment (reflecting the deduction of any
applicable contingent deferred sales charge ("CDSC")), assuming the reinvestment
of all dividend and capital gains distributions. Aggregate total return reflects
the total percentage change in the value of the investment over the measuring
period, again assuming the reinvestment of all dividends and capital gains
distributions. Total return may also be presented for other periods or may not
reflect a deduction of the CDSC.
Set forth below is certain performance data for the Global Government Bond
Ex-U.K. Composite, reflecting the performance of private accounts, including
U.K. authorized unit trusts, managed by the Gartmore Group, as defined below.
The performance data for these accounts is deemed relevant because the Global
Government Bond Ex-U.K. Composite has investment objectives, policies and
restrictions that are substantially similar to those of the Nations Global
Government Income Fund. There is substantial continuity between the portfolio
managers of the Gartmore Group who were responsible for managing those accounts
and the portfolio managers of Nations Gartmore who are responsible for managing
the Nations Global Government Income Fund. THIS PERFORMANCE DATA REPRESENTS PAST
PERFORMANCE AND IS NOT NECESSARILY INDICATIVE OF THE FUTURE PERFORMANCE OF NBAI,
NATIONS GARTMORE OR THE FUNDS.
<TABLE>
<CAPTION>
Average Annual Total
Return for the Periods
GLOBAL GOVERNMENT BOND Indicated through
EX-U.K. COMPOSITE* March 31, 1995
<S> <C>
One Year 7.90%
Three Year 9.40%
Since Inception on September 1, 1990 11.40%
</TABLE>
Annual Total Returns**
<TABLE>
<CAPTION>
1991 1992 1993 1994
<S> <C> <C> <C>
19.30% 3.30% 13.50% (2.40%)
</TABLE>
* The accounts of the Global Government Bond Ex-U.K. Composite do not invest in
securities of U.K. issuers, which are permissible investments for the Nations
Global Government Income Fund. However, inclusion of such securities, to the
extent of their representation in the J.P. Morgan Global Government
13
<PAGE>
Bond Index, would not have materially affected their total returns.
** The average annual total returns and annual total returns are net of fees.
The fees on these accounts varied by contractual agreement and have been
assumed to be 1.5% per annum.
"Yield" is calculated by dividing the annualized net investment income per share
during a recent 30-day (or one month) period of a class of shares of a Fund by
the maximum public offering price per share on the last day of that period. The
yield on a class of shares does not reflect deduction of any applicable CDSC.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a Fund's portfolio and a Fund's operating
expenses. Investment performance also often reflects the risks associated with
such Fund's investment objective and policies. These factors should be
considered when comparing a Fund's investment results to those of other mutual
funds and other investment vehicles. Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in a Fund with bank deposits,
savings accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time.
In addition to Investor A Shares, the Funds offer Trust A, Trust B, Investor C
and Investor N Shares. Each class of shares may bear different sales charges,
shareholder servicing fees, loads and other expenses, which may cause the
performance of a class to differ from the performance of the other classes.
Total return and yield quotations will be computed separately for each class of
the Funds' shares. Any quotation of total return or yield not reflecting CDSCs
would be reduced if such sales charges were reflected. Any fees charged by a
selling agent and/or servicing agent directly to its customers' accounts in
connection with investments in a Fund will not be included in calculations of
yield and total return or yield. Each Fund's annual report contains additional
performance information and is available upon request without charge from the
Funds' distributor or your selling agent.
How The Funds Are Managed
The business and affairs of Nations Fund Trust, Nations Fund, Inc., and Nations
Portfolios are managed under the direction of its Board of Trustees and Boards
of Directors, respectively. The SAI for Nations Fund Trust contains the names of
and general background information concerning the Trustees of Nations Fund
Trust. The SAIs for Nations Fund, Inc. and Nations Portfolios contain the names
of and general background information concerning the respective Directors of
Nations Fund, Inc. and Nations Portfolios.
Nations Fund and the Adviser have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially comply in all
material respects with the recommendations set forth in the May 9, 1994 Report
of the Advisory Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds. NBAI is a wholly owned subsidiary of NationsBank, which in turn is a
wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation. NBAI has its principal
offices at One NationsBank Plaza, Charlotte, North Carolina 28255.
TradeStreet Investment Associates, Inc., with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as sub-investment
adviser to all of the Funds except for the Nations Global Government Income
Fund, for which Nations Gartmore serves as sub-investment adviser. TradeStreet
is a wholly owned subsidiary of NationsBank, which in turn is a wholly owned
banking subsidiary of NationsBank Corporation, a bank holding company organized
as a North Carolina corporation.
TradeStreet provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking.
Nations Gartmore Investment Management, with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as sub-investment
adviser to the Nations Global Government Income Fund pursuant to a sub-advisory
agreement. Nations Gartmore is a joint venture structured as a general
partnership between NB Partner Corp., a wholly owned subsidiary of NationsBank,
and Gartmore U.S. Limited, a wholly owned subsidiary of Gartmore plc, a UK
company listed on the London Stock Exchange which is the holding company for a
leading UK based international fund management group of companies (the "Gartmore
Group"). Banque Indosuez S.A., a leading French bank, owns 75% of the equity of
Gartmore plc. The initial asset management company in the Gartmore Group was
founded in 1969 and the Gartmore Group currently provides investment management
and advisory services to pension funds, unit trusts, offshore funds and invest-
14
<PAGE>
ment funds. As of December 31, 1994 the Gartmore Group had over $30 billion in
assets under management.
Subject to the general supervision of Nations Fund Trust's Board of Trustees and
Nations Fund, Inc. and Nations Portfolios' Boards of Directors, and in
accordance with the Funds' investment policies, the Adviser formulates
guidelines and lists of approved investments for each Fund, makes decisions with
respect to and places orders for each Fund's purchases and sales of portfolio
securities and maintains records relating to such purchases and sales. The
Adviser is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions which are affiliated with the Adviser or
which have sold shares in a Fund, if the Adviser believes that the quality of
the transaction and the commission are comparable to what they would be with
other qualified brokerage firms. From time to time, to the extent consistent
with its investment objective, policies and restrictions, each Fund may invest
in securities of companies with which NationsBank or Banque Indosuez S.A. has a
lending relationship. For the services provided and expenses assumed pursuant to
an Investment Advisory Agreement, NBAI is entitled to receive advisory fees,
computed daily and paid monthly, at the annual rate of 0.60% of the average
daily net assets of each of Nations Short-Term Income Fund, Nations Diversified
Income Fund, Nations Strategic Fixed Income Fund, and Nations Short-Intermediate
Government Fund; and 0.65% of the first $100 million of the Nations Government
Securities Fund's average daily net assets, plus 0.55% of the Fund's average
daily net assets in excess of $100 million and up to $250 million, plus 0.50% of
the Fund's average daily net assets in excess of $250 million; and 0.70% of the
average daily net assets of Nations Global Government Income Fund.
For the services provided and the expenses assumed pursuant to sub-advisory
agreements, NBAI will pay TradeStreet sub-advisory fees, computed daily and paid
monthly, at the annual rates of 0.15% of Nations Short-Term Income Fund's,
Nations Short-Intermediate Fund's, Nations Government Securities Fund's, Nations
Strategic Fixed Income Fund's and Nations Diversified Income Fund's average
daily net assets.
For services provided and expenses assumed pursuant to a sub-advisory agreement,
NBAI will pay Nations Gartmore sub-advisory fees, computed daily and paid
monthly, at the annual rate of 0.54% of Nations Global Government Income Fund's
average daily net assets.
Although the advisory fees for the Nations Global Government Income Fund are
higher than the advisory fees paid by most other mutual funds, Nations
Portfolios believes that the fees are comparable to the advisory fees paid by
many other funds with similar investment objectives and policies. From time to
time, NBAI and/or TradeStreet and/or Nations Gartmore may waive (either
voluntarily or pursuant to applicable state limitations) advisory fees payable
by a Fund. For the fiscal year ended November 30, 1994, after waivers, Nations
Fund Trust paid NationsBank, under a prior Advisory Agreement, advisory fees at
the indicated rate of the Funds' average daily net assets: Nations Short-Term
Income Fund -- 0.29%; Nations Diversified Income Fund -- 0.40%; Nations
Strategic Fixed Income Fund -- 0.52%; Nations Short-Intermediate Government
Fund -- 0.40%. For the fiscal year ended May 31, 1995, after waivers, Nations
Fund, Inc. paid NationsBank, under a prior Advisory Agreement, fees at the rate
of 0.46% of Nations Government Securities Fund's average daily net assets.
David M. Hetherington is Senior Vice President, Director of Fixed Income
Management and a member of the Investment Policy Committee. Mr. Hetherington has
been the principal portfolio manager of the Nations Short-Term Income Fund since
1995. Mr. Hetherington has over 16 years of investment experience including
security analysis and portfolio management. Mr. Hetherington received a B.A.
from Duke University and holds the Chartered Financial Analyst designation.
Mark S. Ahnrud is a Vice President and Fixed Income Portfolio Manager at
NationsBank. He has been the principal portfolio manager for Nations Diversified
Income Fund since 1992. Mr. Ahnrud is a member of the Fixed Income Team and has
eight years of investment experience. Mr. Ahnrud received a B.S. from Babson
College and an M.B.A. from Duke University. Mr. Ahnrud holds the Chartered
Financial Analyst designation.
Gregory H. Cobb is a Vice President and Fixed Income Portfolio Manager at
NationsBank and has been principal portfolio manager for Nations Strategic Fixed
Income Fund since 1995. Mr. Cobb, who joined NationsBank in 1993, is a member of
the Fixed Income Group and has over 7 years of portfolio management experience.
Mr. Cobb received a B.A. from the University of North Carolina-Chapel Hill.
John Swaim joined NationsBank in 1986 and has been the principal portfolio
manager for Nations Short-Intermediate Government Fund and Nations Government
Securities Fund since 1995. Mr. Swaim is a member of the Fixed Income Team and
has over eight years of investment experience. Mr. Swaim previously served as
derivative products manager for the NationsBank Texas Corporate Investment
Division portfolio. Mr. Swaim received his B.S. from the University of North
Texas and holds an M.B.A. from the University of Texas, Arlington.
15
<PAGE>
Mark Rimmer is the principal portfolio manager of the Nations Global Government
Income Fund and has been an International Fixed Income Manager with the Gartmore
Group since 1990. He joined Gulf International Bank in 1986 on the trading desk,
and subsequently joined their Investment Management Group in 1988, managing
multi-currency funds for institutional clients in the Gulf region. Prior to that
he was associated with Sumitomo Finance International as a senior trader. Mr.
Rimmer graduated from Cambridge University in 1984 with an honors degree in
Economics. Mr. Rimmer also is a member of the Institute of Investment Management
and Research.
Morrison & Foerster LLP, counsel to Nations Fund and special counsel to
NationsBank, has advised Nations Fund and NationsBank that subsidiaries of
NationsBank may perform the services contemplated by the Investment Advisory
Agreement without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. Such counsel has pointed out, however, that there
are no controlling judicial or administrative interpretations or decisions and
that future judicial or administrative interpretations of, or decisions relating
to, present federal or state statutes, including the Glass-Steagall Act, and
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as future changes in such statutes,
regulations and judicial or administrative decisions or interpretations, could
prevent such subsidiaries of NationsBank from continuing to perform, in whole or
in part, such services. If such subsidiaries of NationsBank were prohibited from
performing any such services, it is expected that the Trustees of Nations Fund
Trust and the Boards of Directors of Nations Fund, Inc. and Nations Portfolios
would recommend to the Funds' shareholders that they approve a new advisory
agreement with another entity or entities qualified to perform such services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
Nations Fund pursuant to an Administration Agreement. Pursuant to the terms of
the Administration Agreement, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of
First Data Corporation, with principal offices at One Exchange Place, Boston,
Massachusetts 02109, serves as the co-administrator of the Funds pursuant to a
Co-Administration Agreement. Under the terms of the Co-Administration Agreement,
TSSG provides various administrative and accounting services to the Funds,
including performing the calculations necessary to determine net asset values
and dividends, preparing tax returns and financial statements, maintaining the
portfolio records and certain general accounting records for the Funds.
For the services rendered pursuant to the Administration and Co-Administration
Agreements, Stephens and TSSG are entitled to receive a combined fee at the
annual rate of up to 0.10% of each Fund's average daily net assets. For the
fiscal year ended November 30, 1994, after waivers, Nations Fund Trust paid its
administrators fees at the rate of 0.09% of the average daily net assets of
Nations Short-Term Income Fund, Nations Diversified Income Fund, Nations
Strategic Fixed Income Fund and Nations Short-Intermediate Government Fund. For
the fiscal year ended May 31, 1995, after waivers, Nations Fund, Inc. paid its
administrators fees at the rate of 0.09% of the Nations Government Securities
Fund's average daily net assets.
NationsBank serves as sub-administrator for Nations Fund pursuant to a
Sub-Administration Agreement. Pursuant to the terms of the Sub-Administration
Agreement, NationsBank assists Stephens in supervising, coordinating and
monitoring various aspects of the Funds' administrative operations. For
providing such services, NationsBank shall be entitled to receive a monthly fee
from Stephens based on an annual rate of .01% of the Funds' average daily net
assets.
Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker-dealer with principal
offices at 111 Center Street, Little Rock, Arkansas 72201. Nations Fund Trust
has entered into a distribution agreement with Stephens which provides that
Stephens has the exclusive right to distribute shares of the Funds. Stephens may
pay service fees or commissions to selling agents that assist customers in
purchasing Investor A Shares. See "Shareholder Servicing and Distribution
Plans."
Morgan Guaranty Trust Company ("Morgan Guaranty"), Avenue des Arts, 35 1040
Brussels, Belgium, serves as custodian for the assets of the Nations Global
Government Income Fund.
NationsBank of Texas, N.A., ("NationsBank of Texas", and, collectively with
Morgan Guaranty, the "Custodians"), serves as the Funds' (other than Nations
Global Government Income Fund's) custodian. NationsBank of Texas is located at
1401 Elm Street, Dallas, Texas 75202 and is a wholly owned subsidiary of
NationsBank Corporation. In return for providing custodial services, NationsBank
of Texas is entitled to receive, in addition to out-of-pocket expenses, fees
payable monthly (i) at the rate of 1.25% of 1% of the average daily net assets
of each Fund, (ii) $10.00 per repurchase collateral transaction by the Funds,
and (iii) $15.00 per purchase, sale and maturity transaction involving the
Funds.
16
<PAGE>
TSSG serves as transfer agent (the "Transfer Agent") for the Funds' Investor A
Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
Price Waterhouse LLP serves as independent accountant to Nations Fund. Their
address is 160 Federal Street, Boston, Massachuetts 02110.
EXPENSES: The accrued expenses of each Fund, as well as certain expenses
attributable to Investor A Shares, are deducted from accrued income before
dividends are declared. Each Fund's expenses include, but are not limited to:
fees paid to the Adviser, NationsBank, Stephens and TSSG; interest; trustees'
and directors' fees; federal and state securities registration and qualification
fees; brokerage fees and commissions; costs of preparing and printing
prospectuses for regulatory purposes and for distribution to existing
shareholders; charges of the Custodian and Transfer Agent; certain insurance
premiums; outside auditing and legal expenses; costs of shareholder reports and
shareholder meetings; other expenses which are not expressly assumed by the
Adviser, NationsBank, Stephens or TSSG under their respective agreements with
Nations Fund; and any extraordinary expenses. Investor A Shares may bear certain
class specific retail transfer agency expenses and also bear certain additional
shareholder service and sales support costs. Any general expenses of Nations
Fund Trust, Nations Fund, Inc., and/or Nations Portfolios that are not readily
identifiable as belonging to a particular investment portfolio are allocated
among all portfolios in the proportion that the assets of a portfolio bear to
the assets of Nations Fund Trust, Nations Fund, Inc., and/or Nations Portfolios
or in such other manner as the Board of Trustees or Boards of Directors deems
appropriate.
Organization And History
The Funds are members of the Nations Fund Family, which consists of Nations Fund
Trust, Nations Fund, Inc., Nations Portfolios and Nations Institutional Reserves
(formerly known as The Capitol Mutual Funds). The Nations Fund Family currently
has 44 distinct investment portfolios and total assets in excess of $16 billion.
NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. The Funds currently offer five classes of
shares -- Investor A, Investor B, Investor C, Trust A and Trust B Shares. This
Prospectus relates only to the Investor A Shares of Nations Short-Term Income
Fund, Nations Diversified Income Fund, Nations Strategic Fixed Income Fund and
Nations Short-Intermediate Government Fund of Nations Fund Trust. To obtain
additional information regarding the Funds' other classes of shares which may be
available to you, contact your Selling Agent (as defined below) or Nations Fund
at 1-800-321-7854.
Each share is without par value, represents an equal proportionate interest in
the related fund with other shares of the same class, and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
such fund as are declared in the discretion of Nations Fund Trust's Board of
Trustees. Nations Fund Trust's Declaration of Trust authorizes the Board of
Trustees to classify or reclassify any class of shares into one or more series
of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund, and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See the related SAI for examples of when the 1940 Act
requires voting by fund.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose or vote with respect to more than 25% of the outstanding shares of
Nations Fund Trust and therefore could be considered to be a controlling person
of Nations Fund Trust for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series of shares over
which NationsBank and its affiliates possessed or shared power to dispose or
vote as of a certain date, see Nations Fund Trust's related SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
NATIONS FUND, INC.: Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no operations prior to December 15, 1986. As of the date of
this Prospectus, the authorized capital stock of Nations Fund, Inc. consists of
270,000,000,000 shares of common stock, par value of $.001 per share, which are
divided into series or funds each of which consists of separate classes of
shares. This Prospectus relates only to the Investor A Shares of Nations
Government Securities Fund of Nations Fund, Inc. To obtain additional infor-
17
<PAGE>
mation regarding the Fund's other classes of shares which may be available to
you, contact your Selling Agent (as defined below) or Nations Fund at 1-800-321-
7854.
Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such fund
or class. In the event of dissolution or liquidation, holders of each class will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of that portion of the assets allocated to that class held in the
respective fund of Nations Fund, Inc., less (b) the liabilities of Nations Fund,
Inc. attributable to the respective fund or class or allocated among the funds
or classes based on the respective liquidation value of each fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Fund, Inc.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s shares.
Nations Fund, Inc.'s shares, when issued, will be fully paid and
non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Fund, Inc. and therefore could be considered to be a controlling person
of Nations Fund, Inc. for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see Nations Fund, Inc.'s SAI. It is anticipated that Nations
Fund, Inc. will not hold annual shareholder meetings on a regular basis unless
required by the 1940 Act or Maryland law.
NATIONS PORTFOLIOS: Nations Portfolios was incorporated in Maryland on January
23, 1995. As of the date of this Prospectus, the authorized capital stock of
Nations Portfolios consists of 150,000,000,000 shares of common stock, par value
of $.001 per share, which are divided into series or funds each of which
consists of separate classes of shares. This Prospectus relates only to the
Investor A Shares of the Nations Global Government Income Fund of Nations
Portfolios. To obtain additional information regarding the Fund's other classes
of shares which may be available to you, contact your Selling Agent (as defined
below) or Nations Fund at 1-800-321-7854.
Shares of a fund and class have equal rights with respect to voting, except that
the holders of shares of a fund or class will have the exclusive right to vote
on matters affecting only the rights of the holders of such fund or class. In
the event of dissolution or liquidation, holders of each class will receive pro
rata, subject to the rights of creditors, (a) the proceeds of the sale of that
portion of the assets allocated to that class held in the respective fund of
Nations Portfolios, less (b) the liabilities of Nations Portfolios attributable
to the respective fund or class or allocated among the funds or classes based on
the respective liquidation value of each fund or class.
Shareholders of Nations Portfolios do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Portfolios. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Portfolios.
There are no preemptive rights applicable to any of Nations Portfolios' shares.
Nations Portfolios' shares, when issued, will be fully paid and non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Portfolios and, therefore, would be considered to be a controlling
person of Nations Portfolios for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see Nations Portfolios' SAI. It is anticipated that Nations
Portfolios will not hold annual shareholder meetings on a regular basis unless
required by the 1940 Act or Maryland law.
Because this Prospectus combines disclosure on three separate investment
companies, there is a possibility that one investment company could become
liable for a misstatement, inaccuracy or incomplete disclosure in this
Prospectus concerning the other investment company. Nations Fund Trust, Nations
Fund, Inc. and Nations Portfolios have entered into an indemnification agreement
that creates a right of indemnification from the investment company responsible
for any such misstatement, inaccuracy or incomplete disclosure that may appear
in this Prospectus.
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About Your Investment
How To Buy Shares
Stephens has established various procedures for purchasing Investor A Shares in
order to accommodate different investors. Purchase orders for Investor A Shares
may be placed through banks, broker/dealers or other financial institutions
(including certain affiliates of NationsBank) that have entered into a
shareholder servicing agreement ("Servicing Agreement") with Nations Fund
("Servicing Agents") and a sales support agreement ("Sales Support Agreement")
with Stephens ("Selling Agents").
Customers may invest in Investor A Shares through a Nations Fund Personal
Investment Planner account, which is a managed agency/asset allocation account
established with NBAI (an "Account"). Investments through an Account are
governed by the terms and conditions of the Account, which are set forth in the
Client Agreement and Disclosure Statement provided by NBAI to each investor who
establishes an Account. Because of the nature of the Account, certain of the
features described in this Prospectus are not available to investors purchasing
Investor A Shares through an Account. Potential investors through an Account
should refer to the Client Agreement and Disclosure Statement for more
information regarding the Account, including information regarding the fees and
expenses charged in connection with an Account.
There is a minimum initial investment of $1,000, except that the minimum initial
investment is:
(Bullet) $500 for Individual Retirement Account ("IRA") investors;
(Bullet) $250 for non-working spousal IRAs; and
(Bullet) $100 for investors participating on a monthly basis in the Systematic
Investment Plan described below.
There is no minimum investment amount for investments by 401(k) plans,
simplified employee pension plans ("SEPs"), salary reduction-simplified employee
pension plans ("SAR-SEPs") or salary reduction-Individual Retirement Accounts
("SAR-IRAs"). However, the assets of such plans must reach an asset value of
$1,000 ($500 for SEPs, SAR-SEPs and SAR-IRAs) within one year of the account
open date. If the assets of such plans do not reach the minimum asset size
within one year, Nations Fund reserves the right to redeem the shares held by
such plans on 60 days' written notice. The minimum subsequent investment is
$100, except for investments pursuant to the Systematic Investment Plan
described below.
Investor A Shares are purchased at net asset value per share. Purchases may be
effected on days on which the New York Stock Exchange (the "Exchange") is open
for business (a "Business Day").
With respect to Investor A Shares, the Servicing Agents have entered into
Servicing Agreements with Nations Fund under which they will provide various
shareholder services to their customers ("Customers") who own Investor A Shares.
Servicing Agents and Selling Agents are sometimes referred to hereafter as
"Agents." From time to time the Agents, Stephens and Nations Fund may agree to
voluntarily reduce the maximum fees payable for sales support or shareholder
services.
Nations Fund reserves the right to reject any purchase order. The issuance of
Investor A Shares is recorded on the books of the Funds, and share certificates
are not issued unless expressly requested in writing. Certificates are not
issued for fractional shares.
EFFECTIVE TIME OF PURCHASES: Purchase orders for Investor A Shares of the Funds
which are received by Stephens or by the Transfer Agent before the close of
regular trading hours on the Exchange (currently 4:00 p.m., Eastern time) on any
Business Day are priced according to the net asset value determined on that day
but are not executed until 4:00 p.m., Eastern time, on the Business Day on which
immediately available funds in payment of the purchase price are received by the
Funds' Custodian. Such payment must be received not later than 4:00 p.m.,
Eastern time, by the third Business Day following receipt of the order. If funds
are not received by such date, the order will not be accepted and notice thereof
will be given to the Agent placing the order. Payment for orders which are not
received or accepted will be returned after prompt inquiry to the sending Agent.
The Agents are responsible for transmitting orders for purchases of Investor A
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Fund.
SYSTEMATIC INVESTMENT PLAN: Under the Funds' Systematic Investment Plan ("SIP")
a shareholder may automatically purchase Investor A Shares. On a bi-monthly,
monthly or quarterly basis, a shareholder may direct cash to be transferred
automatically from his/her checking or savings account at any bank to his/her
Fund account. Transfers will occur on or about the 15th and/or 30th day of the
applicable month. The systematic invest-
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ment amount may be in any amount from $25 to $100,000. For more information
concerning the SIP, contact your Agent.
TELEPHONIC TRANSACTIONS: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How to Redeem Shares" and "How to
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. You should be aware that by electing the telephone transaction
feature, you may be giving up a measure of security that you may have if you
were to authorize written requests only. You may bear the risk of any resulting
losses from a telephone transaction. Nations Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
and if Nations Fund and its service providers fail to employ such measures, they
may be liable for any losses due to unauthorized or fraudulent instructions.
Nations Fund requires a form of personal identification prior to acting upon
instructions received by telephone and provides written confirmation to
shareholders of each telephone share transaction. In addition, Nations Fund
reserves the right to record all telephone conversations.
Shareholder Servicing And Distribution Plans
The Funds' Shareholder Servicing and Distribution Plan (the "Investor A Plan"),
adopted pursuant to Rule 12b-1 under the 1940 Act, permits each Fund to
compensate (i) Servicing Agents and Selling Agents for services provided to
their Customers that own Investor A Shares and (ii) Stephens for
distribution-related expenses incurred in connection with Investor A Shares.
Nations Short-Term Income Fund, however, may not pay for shareholder servicing
activities under the Investor A Plan. Aggregate payments under the Funds'
Investor A Plan are calculated daily and paid monthly at a rate or rates set
from time to time by each Fund, provided that the annual rate may not exceed
0.25% of the average daily net asset value of the Investor A Shares of the Fund.
The fees payable to Servicing Agents under the Investor A Plan are used
primarily to compensate or reimburse Servicing Agents for shareholder services
provided, and related expenses incurred, by such Servicing Agents. The
shareholder services provided by Servicing Agents may include: (i) aggregating
and processing purchase and redemption requests for Investor A Shares from
Customers and transmitting net purchase and redemption orders to Stephens or the
Transfer Agent; (ii) providing Customers with a service that invests the assets
of their accounts in Investor A Shares pursuant to specific or preauthorized
instructions; (iii) processing dividend and distribution payments from a Fund on
behalf of Customers; (iv) providing information periodically to Customers
showing their positions in Investor A Shares; (v) arranging for bank wires; and
(vi) providing general shareholder liaison services. The fees payable to Selling
Agents are used primarily to compensate Selling Agents for providing sales
support assistance in connection with the sale of Investor A Shares to
Customers, which may include forwarding sales literature and advertising
provided by Nations Fund to Customers.
The fees under the Investor A Plan also may be used to reimburse Stephens for
distribution-related expenses actually incurred by Stephens, including, but not
limited to, expenses of organizing and conducting sales seminars, printing
prospectuses and statements of additional information (and supplements thereto)
and reports for other than existing shareholders, preparation and distribution
of advertising and sales literature and the costs of administering the Investor
A Plan.
Stephens may, from time to time, at its expense or as an expense for which if
may be reimbursed under the Investor A Plan, pay a bonus or other consideration
or incentive to Agents who sell a minimum dollar amount of shares of the Funds
during a specified period of time. Stephens also may, from time to time, pay
additional consideration to Agents not to exceed 1.00% of the offering price per
share on all sales of Investor A Shares as an expense of Stephens or for which
Stephens may be reimbursed under the Investor A Plan or upon receipt of a CDSC.
Any such additional consideration or incentive program may be terminated at any
time by Stephens.
In addition, Stephens has established a non-cash compensation program, pursuant
to which broker/dealers or financial institutions that sell shares of the Funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise. This non-cash compensation program may be
amended or terminated at any time by Stephens.
Nations Fund and Stephens may suspend or reduce payments under the Investor A
Plan at any time, and payments are subject to the continuation of the Investor A
Plan described above and the terms of the Servicing Agreements and Sales Support
Agreements. See the SAI for more details on the Investor A Plan.
In addition, the Trustees have approved a Shareholder Servicing Plan ("Servicing
Plan") for the Investor A Shares of Nations Short-Term Income Fund. The
Servicing Plan permits Nations Short-Term Income Fund to compensate Servicing
Agents for services provided to
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their Customers that own Investor A Shares. Payments under the Servicing Plan
are calculated daily and paid monthly at a rate or rates set from time to time
by Nations Short-Term Income Fund, provided that the annual rate may not exceed
0.25% of the average daily net asset value of the Fund's Investor A Shares. The
fees payable to Servicing Agents under the Servicing Plan are used primarily to
compensate or reimburse Servicing Agents for shareholder services provided, and
related expenses incurred, by such Servicing Agents. The shareholder services
provided by Servicing Agents may include, but are not limited to, those
discussed above with respect to the Investor A Plan.
Nations Fund may suspend or reduce payments under the Servicing Plan at any
time, and payments are subject to the continuation of the Servicing Plan
described above and the terms of the Servicing Agreements. See the SAI for more
details on the Servicing Plan.
Nations Fund understands that Agents may charge fees to their Customers who are
the owners of Investor Shares for various services provided in connection with a
Customer's account. These fees would be in addition to any amounts received by a
Selling Agent under its Sales Support Agreement with Stephens or by a Servicing
Agent under its Servicing Agreement with Nations Fund. The Sales Support
Agreements and Servicing Agreements require Agents to disclose to their
Customers any compensation payable to the Agent by Stephens or Nations Fund and
any other compensation payable by the Customers for various services provided in
connection with their accounts. Customers should read this Prospectus in light
of the terms governing their accounts with their Agents.
How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders are
effected at the net asset value per share next determined after receipt of the
order by Stephens or by the Transfer Agent, less any applicable CDSC. The Agents
are responsible for transmitting redemption orders to Stephens or to the
Transfer Agent and for crediting their Customer's account with the redemption
proceeds on a timely basis. No charge for wiring redemption payments is imposed
by Nations Fund. Except for any CDSC which may be applicable upon redemption of
Investor A Shares, as described below, there is no redemption charge.
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens or by the Transfer Agent.
However, redemption proceeds for shares purchased by check may not be remitted
until at least 15 days after the date of purchase to ensure that the check has
cleared; a certified check, however, is deemed to be cleared immediately.
Nations Fund may redeem a shareholder's Investor A Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of an Agent
pursuant to arrangements between the Agent and its Customers. Nations Fund also
may redeem shares of a Fund involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
Prior to effecting a redemption of Investor Shares represented by certificates,
the Transfer Agent must have received such certificates at its principal office.
All such certificates must be endorsed by the redeeming shareholder or
accompanied by a signed stock power, in each instance with the signature
guaranteed by a commercial bank or a member of a major stock exchange, unless
other arrangements satisfactory to Nations Fund have previously been made.
Nations Fund may require any additional information reasonably necessary to
evidence that a redemption has been duly authorized.
CONTINGENT DEFERRED SALES CHARGE: Subject to certain waivers specified below,
Investor A Shares of the Funds that were purchased prior to January 1, 1996 in
amounts of $1 million or more or through the Nations Personal Investment Planner
will be subject to a CDSC equal to 1.00% of the lesser of the net asset value or
the purchase price of the shares being redeemed if such shares are redeemed
within one year of purchase, declining to 0.50% in the second year after
purchase and eliminated thereafter. No CDSC is imposed on increases in net asset
value above the initial purchase price, including shares acquired by
reinvestment of distributions.
Solely for purposes of determining the period of time that has elapsed from the
purchase of any Investor A Shares, all purchases are deemed to have been made on
the trade date of the transaction. In determining whether a CDSC is applicable
to a redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares held for the longest period of time or shares
acquired pursuant to reinvestment of dividends or distributions. The charge will
not be applied to dollar amounts representing an increase in the net asset value
since the time of purchase.
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The CDSC will be waived on redemptions of Investor A Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as amended
(the "Code")) of a shareholder (including a registered joint owner), (ii) in
connection with the following retirement plan distributions: (a) by qualified
retirement plans, (except in cases of plan level terminations); (b)
distributions from an IRA following attainment of age 59 1/2; (c) a tax-free
return of an excess contribution to an IRA, and (d) distributions from a
qualified retirement plan that are not subject to the 10% additional Federal
withdrawal tax pursuant to Section 72(t)(2) of the Code, (iii) effected pursuant
to Nations Fund's right to liquidate a shareholder's account if the aggregate
net asset value of the Investor A Shares held in the account is less than the
minimum account size, (iv) in connection with the combination of Nations Fund
with any other registered investment company by merger, acquisition of assets or
by any other transaction, and (v) effected pursuant to the Automatic Withdrawal
Plan discussed below, provided that such redemptions do not exceed, on an annual
basis, 12% of the net asset value of the Investor A Shares in the account.
Shareholders are responsible for providing evidence sufficient to establish that
they are eligible for any waiver of the CDSC.
Within 120 days after a redemption of Investor A Shares of a Fund, a shareholder
may reinvest any portion of the proceeds of such redemption in Investor A Shares
of the same Fund. The amount which may be so reinvested is limited to an amount
up to, but not exceeding, the redemption proceeds (or to the nearest full share
if fractional shares are not purchased). A shareholder exercising this privilege
would receive a pro rata credit for any CDSC paid in connection with the prior
redemption. A shareholder may not exercise this privilege with the proceeds of a
redemption of shares previously purchased through the reinstatement privilege.
In order to exercise this privilege, a written order for the purchase of
Investor A Shares must be received by the Transfer Agent or by Stephens within
120 days after the redemption.
AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of a Fund if the value of the
Investor A Shares in his/her accounts within the Nations Fund Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Investor A Shares redeemed under the AWP will not be subject to a CDSC,
provided that the shares so redeemed do not exceed, on an annual basis, 12% of
the net asset value of the Investor A Shares in the account. Otherwise, any
applicable CDSC will be imposed on shares redeemed under the AWP. Shareholders
who elect to establish an AWP may receive a monthly, quarterly or annual check
or automatic transfer or to a checking or savings account in a stated amount of
not less than $25 on or about the 10th or 25th day of the applicable month of
withdrawal. Investor A Shares will be redeemed (net of any applicable CDSC) as
necessary to meet withdrawal payments. Withdrawals will reduce principal and may
eventually deplete the shareholder's account. If a shareholder desires to
establish an AWP after opening an account, a signature guarantee will be
required. An AWP may be terminated by a shareholder on 30 days' written notice
to his/her Selling or Servicing Agent or by Nations Fund at any time.
How To Exchange Shares
SHARES ACQUIRED DIRECTLY: Except as described below, the exchange feature
enables a shareholder of Investor A Shares of a Nations Fund non-money market
fund (including the Funds) to acquire shares of the same class that are offered
by any other fund of Nations Fund when the shareholder believes that a shift
between funds is an appropriate investment decision. A qualifying exchange is
based on the next calculated net asset value per share of each fund after the
exchange order is received.
No CDSC will be imposed in connection with an exchange of Investor A Shares that
meets the requirements discussed in this section. If Investor A Shares of the
Funds are exchanged for shares of the same class of another fund, any CDSC
applicable to the original shares purchased will be applied upon the redemption
of the acquired shares. The holding period of such Investor A Shares (for
purposes of determining whether a CDSC is applicable upon redemption) will be
computed from the time of the initial purchase of the Investor A Shares of the
Funds.
INVESTOR A SHARES OF NATIONS SHORT-TERM INCOME FUND ACQUIRED IN EXCHANGE FOR
INVESTOR N SHARES: Investor A Shares of the Nations Short-Term Income Fund
acquired directly or indirectly in exchange for Investor N Shares of another
non-money market fund may be re-exchanged only for Investor N Shares of another
fund, Investor C Shares of a money market fund of Nations Fund or Investor A
Shares of Nations Short-Term Municipal Income Fund.
If a shareholder acquires Investor A Shares of Nations Short-Term Income Fund in
exchange for Investor N Shares of another non-money market fund, Investor C
Shares of a money market fund or Investor A Shares of Nations Short-Term
Municipal Income Fund, the acquired shares (and any Investor A or Investor C
Shares acquired through the exchange of such shares) will remain subject to the
CDSC schedule applicable to the Investor N Shares of the non-money market fund
last exchanged. A redemption of shares acquired through an exchange of Investor
N Shares will, in all events, be
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subject to the highest CDSC schedule applicable to any shares that were
exchanged within 30 days prior to the redemption.
Additionally, the holding period (for the purpose of determining the applicable
rate of the CDSC) does not accrue while the shares owned are Investor A Shares
of Nations Short-Term Income Fund or Nations Short-Term Municipal Income Fund or
Investor C Shares of a money market fund. As a result, the CDSC that is
ultimately charged upon redemption is based upon the total period of time the
shareholder holds Investor N Shares of any fund that charges a CDSC.
AUTOMATIC EXCHANGE FEATURE: Under the Funds' Automatic Exchange Feature ("AEF")
a shareholder may automatically exchange at least $25 on a monthly or quarterly
basis. Shareholder may direct proceeds to be exchanged from one Nations Fund to
another as allowed by the applicable exchange rules within the prospectus.
Exchanges will occur on or about the 15th and/or 30th day of the applicable
month. The shareholder must have an existing position in both Funds in order to
establish the AEF. This feature may be established by directing a request to the
Transfer Agent by telephone or in writing. For additional information, please
contact your selling agent.
GENERAL: The Funds and each of the other funds of Nations Fund may limit the
number of times this exchange feature may be exercised by a shareholder within a
specified period of time. Also, the exchange feature may be terminated or
revised at any time by Nations Fund upon such notice as may be required by
applicable regulatory agencies (presently 60 days for termination or material
revision), absent unusual circumstances.
The current prospectus for each fund of Nations Fund describes its investment
objective and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for Federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.
The Investor A Shares exchanged must have a current value of at least $1,000
(except for exchanges through the AEF). Nations Fund reserves the right to
reject any exchange request. Only shares that may legally be sold in the state
of the investor's residence may be acquired in an exchange. Only shares of a
class that is accepting investments generally may be acquired in an exchange. An
investor may telephone an exchange request by calling his/her Selling or
Servicing Agent which is responsible for transmitting such request to Stephens
or to the Transfer Agent.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. In such event, shares may be exchanged by mailing the
request directly to the Selling or Servicing Agent through which the original
shares were purchased. An investor should consult his/her Selling or Servicing
Agent or Stephens for further information regarding exchanges.
How The Funds Value Their Shares
The Funds calculate the net asset value of a share of each class by dividing the
total value of its assets, less liabilities, by the number of shares in the
class outstanding. Shares are valued as of the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on each Business Day. Currently,
the days on which the Exchange is closed (other than weekends) are: New Year's
Day, Presidents' Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Portfolio securities for which
market quotations are readily available are valued at market value. Short-term
investments that will mature in 60 days or less are valued at amortized cost,
which approximates market value. All other securities and assets are valued at
their fair value following procedures approved by the Trustees or Directors.
How Dividends And Distributions Are Made;
Tax Information
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income are declared
daily and paid monthly by the Funds. The Funds' net realized capital gains
(including net short-term capital gains) are distributed at least annually.
Distributions from capital gains are made after applying any available capital
loss carryovers. Distributions paid by the Funds with respect to one class of
shares may be greater or less than those paid with
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respect to another class of shares due to the different expenses of the
different classes.
The net asset value of Investor A Shares will be reduced by the amount of any
dividend or distribution. Certain Selling and Servicing Agents may provide for
the reinvestment of dividends in the form of additional Investor A Shares of the
same class in the same Fund. Dividends and distributions are paid in cash within
five Business Days of the end of the month or quarter to which the dividend
relates. Dividends and distributions payable to a shareholder are paid in cash
within five Business Days after a shareholder's complete redemption of his/her
Investor A Shares.
TAX INFORMATION: Each Fund intends to qualify as a "regulated investment
company" under the Code. Such qualification relieves a Fund of liability for
Federal income taxes on amounts distributed in accordance with the Code.
The Funds intend to distribute substantially all of their investment company
taxable income and net tax-exempt income each taxable year. Distributions by a
Fund of its net investment income (including net foreign currency gains) and the
excess, if any, of its net short-term capital gain over its net long-term
capital loss are taxable as ordinary income to shareholders who are not
currently exempt from Federal income taxes, whether such income is received in
cash or reinvested in additional shares. (Federal income taxes for distributions
to an IRA are generally deferred under the Code.) Corporate investors may be
entitled to the dividends-received deduction on a portion of the dividends from
those Funds investing in the stock of domestic corporations.
Substantially all of the Funds' net realized long-term capital gains will be
distributed at least annually. The Funds will generally have no tax liability
with respect to such gains, and the distributions will be taxable to
shareholders who are not exempt from Federal income taxes as long-term capital
gains, regardless of how long the shareholders have held the Funds' shares and
whether such gains are received in cash or reinvested in additional shares.
Each year, shareholders will be notified as to the amount and Federal tax status
of all dividends and capital gains paid during the prior year. Such dividends
and capital gains may be subject to state and local taxes.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by the Funds on December 31 of such year
in the event such dividends are actually paid during January of the following
year.
Federal law requires Nations Fund to withhold 31% from any dividends (other than
exempt-interest dividends) paid by Nations Fund and/or redemptions (including
exchange redemptions) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply, or
if the Internal Revenue Service has notified Nations Fund that the Taxpayer
Identification Number listed on a shareholder account is incorrect according to
its records, or that the shareholder is subject to backup withholding. Amounts
withheld are applied to the shareholder's Federal tax liability, and a refund
may be obtained from the Internal Revenue Service if withholding results in
overpayment of taxes. Federal law also requires the Funds to withhold 30% or the
applicable tax treaty rate from dividends paid to certain nonresident alien,
non-U.S. partnership and non-U.S. corporation shareholder accounts.
Portions of the Nations Global Government Income Fund's investment income may be
subject to foreign income taxes withheld at their source. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. Generally, more than 50% of the value of the total assets of the Nations
Global Government Income Fund will consist of securities of foreign issuers, and
therefore the Fund may elect to "pass through" to its shareholders these foreign
taxes, if any. In such event each shareholder will be required to include his or
her pro rata portion thereof in his or her gross income, but will be able to
deduct or (subject to various limitations) claim a foreign tax credit against
U.S. income taxes for such amount.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important Federal tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisers with respect to their specific tax
situations as well as with respect to state and local taxes. Further tax
information is contained in the SAI.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAI contains more
information concerning such investments.
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ASSET BACKED SECURITIES: Asset Backed Securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset Backed
Securities consist of both mortgage and non-mortgage backed securities.
Interests in pools of these assets differ from other forms of debt securities,
which normally provide for periodic payment of interest in fixed amounts with
principal paid at maturity or specified call dates. Instead, Asset Backed
Securities provide periodic payments which generally consist of both interest
and principal payments.
The life of an Asset Backed Security varies depending upon rate of the
prepayment of the underlying debt instruments. The rate of such prepayments will
be primarily a function of current market interest rates, although other
economic and demographic factors may be involved. For example, falling interest
rates generally result in an increase in the rate of prepayments of mortgage
loans while rising interest rates generally decrease the rate of prepayments. An
acceleration in prepayments in response to sharply falling interest rates will
shorten the security's average maturity and limit the potential appreciation in
the security's value relative to a conventional debt security. Consequently,
Asset Backed Securities are not as effective in locking in high, long-term
yields. Conversely, in periods of sharply rising rates, prepayments are
generally slow, increasing the security's average life and its potential for
price depreciation.
MORTGAGE BACKED SECURITIES represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself.
Mortgage pass-through securities may represent participation interests in pools
of residential mortgage loans originated by U.S. governmental or private lenders
and guaranteed, to the extent provided in such securities, by the U.S.
Government or one of its agencies, authorities or instrumentalities. Such
securities, which are ownership interests in the underlying mortgage loans,
differ from conventional debt securities, which provide for periodic payment of
interest in fixed amounts (usually semi-annually) and principal payments at
maturity or on specified call dates. Mortgage pass-through securities provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans.
The guaranteed mortgage pass-through securities in which a Fund may invest may
include those issued or guaranteed by GNMA, by FNMA and FHLMC. Such Certificates
are mortgage-backed securities which represent a partial ownership interest in a
pool of mortgage loans issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations. Such mortgage loans may have fixed or
adjustable rates of interest. Each mortgage loan included in the pool is either
insured by the Federal Housing Administration ("FHA") or guaranteed by the
Veterans Administration ("VA").
The average life of a GNMA Certificate is likely to be substantially less than
the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return on the greater part of principal invested far in advance of
the maturity of the mortgages in the pool. Foreclosures impose no risk to
principal investment because of the GNMA guarantee.
As the prepayment rates of individual mortgage pools will vary widely, it is not
possible to accurately predict the average life of a particular issue of GNMA
Certificates. However, statistics published by the FHA indicate that the average
life of a single-family dwelling mortgage with a 25- to 30-year maturity, the
type of mortgage which backs most GNMA Certificates, is approximately 12 years.
It is therefore customary practice to treat GNMA Certificates as 30-year
mortgage-backed securities which prepay fully in the twelfth year.
As a consequence of the fees paid to GNMA and the issuer of GNMA Certificates,
the coupon rate of interest of GNMA Certificates is lower than the interest paid
on the VA-guaranteed or FHA-insured mortgages underlying the Certificates.
The yield which will be earned on GNMA Certificates may vary from their coupon
rates for the following reasons: (i) Certificates may be issued at a premium or
discount, rather than at par; (ii) Certificates may trade in the secondary
market at a premium or discount after issuance; (iii) interest is earned and
compounded monthly which has the effect of raising the effective yield earned on
the Certificates; and (iv) the actual yield of each Certificate is affected by
the prepayment of mortgages included in the mortgage pool underlying the
Certificates and the rate at which principal so prepaid is reinvested. In
addition, prepayment of mortgages included in the mortgage pool underlying a
GNMA Certificate purchased at a premium may result in a loss to the Fund.
Due to the large numbers of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors, GNMA
Certificates are highly liquid instruments.
Mortgage backed securities issued by private issuers, whether or not such
obligations are subject to guarantees by the private issuer, may entail greater
risk than obligations directly or indirectly guaranteed by the U.S. Government.
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Collateralized mortgage obligations or "CMOs," are debt obligations
collateralized by mortgage loans or mortgage pass-through securities (collateral
collectively hereinafter referred to as "Mortgage Assets"). Multi-class pass-
through securities are interests in a trust composed of Mortgage Assets and all
references herein to CMOs will include multi-class pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the funds to pay debt service on the CMOs
or make scheduled distribution on the multi-class pass-through securities.
Moreover, principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of the premium if any has been paid.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semiannual basis.
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. Planned Amortization Class CMOs ("PAC
Bonds") generally require payments of a specified amount of principal on each
payment date. PAC Bonds are always parallel pay CMOs with the required principal
payment on such securities having the highest priority after interest has been
paid to all classes.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage
securities. A Fund will only invest in SMBS that are obligations backed by the
full faith and credit of the U.S. Government. SMBS are usually structured with
two classes that receive different proportions of the interest and principal
distributions from a pool of mortgage assets. A Fund will only invest in SMBS
whose mortgage assets are U.S. Government obligations.
A common type of SMBS will be structured so that one class receives some of the
interest and most of the principal from the mortgage assets, while the other
class receives most of the interest and the remainder of the principal. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, a Fund may fail to fully recoup its initial investment in these
securities. The market value of any class which consists primarily or entirely
of principal payments generally is unusually volatile in response to changes in
interest rates. Because SMBS were only recently introduced, established trading
markets for these securities have not yet been developed.
The average life of mortgage backed securities varies with the maturities of the
underlying mortgage instruments, which have maximum maturities of 40 years. The
average life is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities as the result of mortgage
prepayments, mortgage refinancings, or foreclosures. The rate of mortgage
prepayments, and hence the average life of the certificates, will be a function
of the level of interest rates, general economic conditions, the location and
age of the mortgage and other social and demographic conditions. Such
prepayments are passed through to the registered holder with the regular monthly
payments of principal and interest and have the effect of reducing future
payments. Estimated average life will be determined by the Adviser and used for
the purpose of determining the average weighted maturity of the Funds. For
additional information concerning mortgage backed securities, see the related
SAI.
NON-MORTGAGE ASSET BACKED SECURITIES include interests in pools of receivables,
such as motor vehicle installment purchase obligations and credit card
receivables. Such securities are generally issued as pass- through certificates,
which represent undivided fractional ownership interests in the underlying pools
of assets. Such securities also may be debt instruments, which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt.
Non-mortgage backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities. In addition, such securities generally will have
remaining estimated lives at the time of purchase of five years or less.
The purchase of non-mortgage backed securities raises considerations peculiar to
the financing of the instruments underlying such securities. For example, most
organizations that issue Asset Backed Securities relating to motor vehicle
installment purchase obligations perfect their interests in their respective
obligations only by filing a financing statement and by having the servicer of
the obligations, which is usually the originator, take custody thereof. In such
circumstances, if the servicer were to sell the same obligations to another
party, in violation of its duty not to do so, there is a risk that such party
could acquire an interest in the obligations superior to that of the holders of
the Asset Backed Securities. Also, although most such obligations grant a
security interest in the motor vehicle being financed, in most states the
security interest in a motor vehicle must be noted on the certificate of title
to perfect such security interest against competing claims of other parties. Due
to the larger number of vehicles involved, however, the certificate of title to
each vehicle financed, pursuant to the obligations underlying the Asset Backed
Securities, usually is not amended to reflect the assignment of the seller's
security interest for the benefit of the holders of
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the Asset Backed Securities. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on those securities. In addition, various state and Federal laws give
the motor vehicle owner the right to assert against the holder of the owner's
obligation certain defenses such owner would have against the seller of the
motor vehicle. The assertion of such defenses could reduce payments on the
related Asset Backed Securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and Federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances owed on the credit card,
thereby reducing the amounts paid on such receivables. In addition, unlike most
other Asset Backed Securities, credit card receivables are unsecured obligations
of the card holder.
The development of non-mortgage backed securities is at an early stage compared
to mortgage backed securities. While the market for Asset Backed Securities is
becoming increasingly liquid, the market for mortgage backed securities issued
by certain private organizations and non-mortgage backed securities is not as
well developed. As stated above, each Fund intends to limit its purchases of
mortgage backed securities issued by certain private organizations and
non-mortgage backed securities to securities that are readily marketable at the
time of purchase.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. Each Fund will limit its investments in
bank obligations so they do not exceed 25% of its total assets at the time of
purchase.
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risk, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Fund's total assets must be repaid prior to the purchase of
portfolio securities. The Funds are parties to a Line of Credit Agreement with
Mellon Bank, N.A. Advances under the agreement are taken primarily for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities.
Reverse repurchase agreements and dollar roll transactions may be considered to
be borrowings. When a Fund invests in a reverse repurchase agreement, it sells a
portfolio security to another party, such as a bank or broker-dealer, in return
for cash, and agrees to buy the security back at a future date and price.
Reverse repurchase agreements may be used to provide cash to satisfy unusually
heavy redemption requests without having to sell portfolio securities, or for
other temporary or emergency purposes. Generally, the effect of such a
transaction is that the Funds can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while they will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Funds of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Funds are obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Funds' use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Funds'
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The Fund
only enters into reverse repurchase agreements (and repurchase agreements) with
counterparties that are deemed by the Adviser to be credit worthy. Reverse
repurchase agreements are speculative techniques involving leverage, and are
subject to asset coverage requirements if the Funds do not establish and
maintain a segregated account (as described above). Under the requirements of
the 1940 Act, the Funds are
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required to maintain an asset coverage (including the proceeds of the
borrowings) of at least 300% of all borrowings. Depending on market conditions,
the Fund's asset coverage and other factors at the time of a reverse repurchase,
the Funds may not establish a segregated account when the Adviser believes it is
not in the best interests of the Funds to do so. In this case, such reverse
repurchase agreements will be considered borrowings subject to the asset
coverage described above.
Dollar roll transactions consist of the sale by a Fund of mortgage-backed or
other asset-backed securities, together with a commitment to purchase similar,
but not identical, securities at a future date, at the same price. In addition,
a Fund is paid a fee as consideration for entering into the commitment to
purchase. If the broker/dealer to whom a Fund sells the security becomes
insolvent, the Fund's right to purchase or repurchase the security may be
restricted; the value of the security may change adversely over the term of the
dollar roll; the security that the Fund is required to repurchase may be worth
less than the security that the Fund originally held, and the return earned by
the Fund with the proceeds of a dollar roll may not exceed transaction costs.
COMMERCIAL INSTRUMENTS: Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or foreign
corporations and foreign commercial banks.
Investments by a Fund in commercial paper will consist of issues rated in a
manner consistent with such Fund's investment policies and objectives. In
addition, a Fund may acquire unrated commercial paper and corporate bonds that
are determined by the Adviser at the time of purchase to be of comparable
quality to rated instruments that may be acquired by a Fund. Commercial
instruments include variable-rate master demand notes, which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate, and variable- and floating-rate
instruments.
CONVERTIBLE SECURITIES, PREFERRED STOCK, AND WARRANTS: Certain of the Funds may
invest in debt securities convertible into or exchangeable for equity
securities, preferred stocks or warrants. Preferred stocks are securities that
represent an ownership interest in a corporation providing the owner with claims
on a company's earnings and assets before common stock owners, but after bond or
other debt security owners. Warrants are options to buy a stated number of
shares of common stock at a specified price any time during the life of the
warrants.
FIXED INCOME INVESTING: The performance of the fixed-income debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. A Fund's share price
and yield depend, in part, on the maturity and quality of its debt instruments.
FOREIGN CURRENCY TRANSACTIONS: Certain of the Funds may enter into foreign
currency exchange transactions to convert foreign currencies to and from the
United States Dollar. A Fund either enters into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or uses forward contracts to purchase or sell foreign currencies. A
forward foreign currency exchange contract is an obligation by a Fund to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract.
Foreign currency hedging transactions are an attempt to protect a Fund against
changes in foreign currency exchange rates between the trade and settlement
dates of specific securities transactions or changes in foreign currency
exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. Neither spot transactions nor forward
foreign currency exchange contracts eliminate fluctuations in the prices of a
Fund's portfolio securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.
A Fund will generally enter into forward currency exchange contracts only under
two circumstances: (i) when such Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, to "lock" in the U.S.
dollar price of the security; and (ii) when the Adviser believes that the
currency of a particular foreign country may experience a substantial movement
against another currency. Under certain circumstances, a Fund may commit a
substantial portion of its portfolio to the execution of these contracts. The
Adviser will consider the effects such a commitment would have on the investment
program of such Fund and the flexibility of such Fund to purchase additional
securities. Although forward contracts will be used primarily to protect a Fund
from adverse currency movements, they also involve the risk that anticipated
currency movements will not be accurately predicted. The Funds will generally
not enter into a forward contract with a term of greater than one year.
FOREIGN SECURITIES: Foreign securities include obligations of foreign
corporations and banks as well as obligations of foreign governments and their
political subdivisions (which will be limited to direct government obligations
and government-guaranteed securities). Such investments may subject a Fund to
special investment risks, including future political and economic
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developments, the possible imposition of withholding taxes on interest income,
possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such obligations. In addition, foreign issuers in general may be
subject to different accounting, auditing, reporting, and record keeping
standards than those applicable to domestic companies, and securities of foreign
issuers may be less liquid and their prices more volatile than those of
comparable domestic issuers.
Investments in foreign securities may present additional risks, whether made
directly or indirectly, including the political or economic instability of the
issuer or the country of issue and the difficulty of predicting international
trade patterns. In addition, there may be less publicly available information
about a foreign company than about a U.S. company. Further, foreign stock
markets are generally not as developed or efficient as those in the U.S., and in
most foreign markets volume and liquidity are less than in the U.S. Fixed
commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign stock exchanges, brokers, and companies
than in the U.S. With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS: Certain of the Funds may
attempt to reduce the overall level of investment risk of particular securities
and attempt to protect a Fund against adverse market movements by investing in
futures, options and other derivative instruments. These include the purchase
and writing of options on securities (including index options) and options on
foreign currencies, and investing in futures contracts for the purchase or sale
of instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign government, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and swaps
and swap-related products such as interest rate swaps, currency swaps, caps,
collars and floors.
The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable position.
Additional risks inherent in the use of futures, options, forward contracts and
swaps include: imperfect correlation between the price of futures, options and
forward contracts and movements in the prices of the securities or currencies
being hedged; the possible absence of a liquid secondary market for any
particular instrument at any time; and the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. A Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks, is
contained in the SAI.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Funds will not knowingly
invest more than 15% of the value of their respective net assets in securities
that are illiquid or such lower percentage as may be required by the states in
which the appropriate Fund sells its shares. Repurchase agreements and time
deposits that do not provide for payment to a Fund within seven days after
notice, guaranteed investment contracts and some commercial paper issued in
reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act") (other than variable amount master demand notes with
maturities of nine months or less), are subject to the limitation on illiquid
securities.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by a Fund's Board of Trustees or Board of Directors or
the Adviser, acting under guidelines approved and monitored by such Fund's
Board, after considering trading activity, availability of reliable price
information and other relevant information, that an adequate trading market
exists for that security. To the extent that, for a period of time, qualified
institutional buyers cease purchasing such restricted securities pursuant to
Rule 144A, the level of illiquidity of a Fund holding such securities may
increase during such period.
INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of its
portfolio from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, E.G., an exchange of floating rate payments for fixed rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A
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Fund will segregate, on a daily basis, cash or liquid high quality debt
securities with a value at least equal to the Fund's net obligations, if any,
under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. The Adviser expects to enter into these
transactions on behalf of a Fund primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipated purchasing at a later
date rather than for speculative purposes. A Fund will not sell interest rate
caps or floors that it does not own.
LOWER-RATED DEBT SECURITIES: Lower-rated, high-yielding securities are those
rated "Ba" or "B" by Moody's or "BB" or "B" by S&P which are commonly referred
to as "junk bonds." These bonds provide poor protection for payment of principal
and interest. Lower-quality bonds involve greater risk of default or price
changes due to changes in the issuer's creditworthiness than securities assigned
a higher quality rating. These securities are considered to have speculative
characteristics and indicate an aggressive approach to income investing. The
Funds intend to limit their investments in lower-quality debt securities to 35%
of assets.
The market for lower-rated securities may be thinner and less active than that
for higher quality securities, which can adversely affect the price at which
these securities can be sold. If market quotations are not available, these
lower-rated securities will be valued in accordance with procedures established
by the Funds' Board, including the use of outside pricing services. Adverse
publicity and changing investor perceptions may affect the ability of outside
pricing services used by a Fund to value its portfolio securities, and a Fund's
ability to dispose of these lower-rated bonds.
The market prices of lower-rated securities may fluctuate more than higher-rated
securities and may decline significantly in periods of general economic
difficulty which may follow periods of rising interest rates. During an economic
downturn or a prolonged period of rising interest rates, the ability of issuers
of lower quality debt to service their payment obligations, meet projected
goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower-rated securities, the Adviser will
try to minimize the risks inherent in investing in lower-rated debt securities
by engaging in credit analysis, diversification, and attention to current
developments and trends affecting interest rates and economic conditions. The
Adviser will attempt to identify those issuers of high-yielding securities whose
financial condition are adequate to meet future obligations, have improved, or
are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated securities,
but they may not be attractive to as many buyers. Each Fund's policies regarding
lower-rated debt securities is not fundamental and may be changed at any time
without shareholder approval.
MONEY MARKET INSTRUMENTS: The term "money market instruments" refers to
instruments with remaining maturities of one year or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable- or floating-rate instruments issued
by industrial development authorities and other governmental entities. While
there may not be an active secondary market with respect to a particular
instrument purchased by a Fund, a Fund may demand payment of the principal and
accrued interest on the instrument or may resell it to a third party as
specified in the instruments. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if the
issuer defaulted on its payment obligation or during periods the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss. Some of these instruments may be unrated, but unrated
instruments purchased by a Fund will be determined by the Adviser to be of
comparable quality at the time of purchase to instruments rated "high quality"
by any major rating service. Where necessary to ensure
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that an instrument is of comparable "high quality," a Fund will require that an
issuer's obligation to pay the principal of the note may be backed by an
unconditional bank letter or line of credit, guarantee, or commitment to lend.
Municipal securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases," and
units of participation in trusts holding pools of tax exempt leases. Such loans
in most cases are not backed by the taxing authority of the issuers and may have
limited marketability or may be marketable only by virtue of a provision
requiring repayment following demand by the lender. Such loans made by a Fund
may have a demand provision permitting the Fund to require payment within seven
days. Participations in such loans, however, may not have such a demand
provision and may not be otherwise marketable. To the extent these securities
are illiquid, they will be subject to each Fund's limitation on investments in
illiquid securities. As it deems appropriate, the Adviser will establish
procedures to monitor the credit standing of each such municipal borrower,
including its ability to meet contractual payment obligations.
Municipal participation interests may be purchased from financial institutions,
and give the purchaser an undivided interest in one or more underlying municipal
security. To the extent that municipal participation interests are considered to
be "illiquid securities," such instruments are subject to each Fund's limitation
on the purchase of illiquid securities.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to municipal securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified Municipal Securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.
Although the Funds do not presently intend to do so on a regular basis, each may
invest more than 25% of its total assets in municipal securities the interest on
which is paid solely from revenues of similar projects if such investment is
deemed necessary or appropriate by the Adviser. To the extent that more than 25%
of a Fund's total assets are invested in Municipal Securities that are payable
from the revenues of similar projects, a Fund will be subject to the peculiar
risks presented by such projects to a greater extent than it would be if its
assets were not so concentrated.
OTHER INVESTMENT COMPANIES: A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
REPURCHASE AGREEMENTS: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker-dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
idle cash. A risk associated with repurchase agreements is the failure of the
seller to repurchase the securities as agreed, which may cause a Fund to suffer
a loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the limit
stated above. A Fund may enter into joint repurchase agreements jointly with
other investment portfolios of Nations Fund and Nations Institutional Reserves.
SECURITIES LENDING: To increase return on portfolio securities, certain of the
Funds may lend their portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. There is a risk of delay in receiving
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Adviser to be credit worthy and
when, in their judgment, the income to be earned from the loan justifies the
attendant risks. The aggregate of all outstanding loans of a Fund may not exceed
30% of the value of its total assets.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indexes, non-U.S. interest rates and foreign currencies, that
have been approved by the CFTC for investment by U.S. investors, for the purpose
of hedging against changes in values of a Fund's securities or changes in the
prevailing levels of interest rates or currency exchange rates. The contracts
entail certain risks, including but not limited to the following: no assurance
that futures contracts transactions can be offset at favorable prices; possible
reduction of a Fund's total return due to the use of hedging; possible lack of
liquidity due to daily limits on price fluctuation; imperfect correlation
between the contracts and the securities or currencies being hedged; and
potential losses in excess of the amount invested in the futures contracts
themselves.
31
<PAGE>
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
for which no common clearing facility exists and a trader may look only to the
broker for performance of the contract. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the
currencies in which trading is done on foreign exchanges, any profits that such
Fund might realize could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes.
U.S. GOVERNMENT OBLIGATIONS: U.S. Government obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. Obligations of U.S.
Government agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
E.G., GNMA certificates; in other cases interest and principal are not
guaranteed, E.G., obligations of the Federal Home Loan Bank System and the
Federal Farm Credit Bank. No assurance can be given that the U.S. Government
would provide financial support to government-sponsored instrumentalities if it
is not obligated to do so by law.
VARIABLE- AND FLOATING-RATE INSTRUMENTS: Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks and corporations
may carry variable or floating rates of interest. Such instruments bear interest
rates which are not fixed, but which vary with changes in specified market rates
or indices, such as a Federal Reserve composite index. A variable-rate demand
instrument is an obligation with a variable or floating interest rate and an
unconditional right of demand on the part of the holder to receive payment of
unpaid principal and accrued interest. An instrument with a demand period
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities takes
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
Appendix B -- Description Of Ratings
The following summarizes the highest six ratings used by S&P for corporate and
municipal bonds. The first four ratings denote investment grade securities.
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher-rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher-rated categories.
BB, B -- Bonds rated BB and B are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB represents the lowest
degree of speculation and B a higher degree of speculation. While such
bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the highest six ratings used by Moody's for corporate
and municipal bonds. The first four ratings denote investment grade securities.
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective ele-
32
<PAGE>
ments are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa through B. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category. With regard to municipal bonds, those bonds
in the Aa, A and Baa groups which Moody's believes possess the strongest
investment attributes are designated by the symbols Aa1, A1 or Baa1,
respectively.
The following summarizes the highest four ratings used by D&P for bonds, each of
which denotes that the securities are investment grade:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
A -- Bonds that are rated A have protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
BBB -- Bonds that are rated BBB have below average protection factors but
still are considered sufficient for prudent investment. Considerable
variability in risk exists during economic cycles.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major categories.
The following summarizes the highest four ratings used by Fitch for bonds, each
of which denotes that the securities are investment grade:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A -- Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong pro-
33
<PAGE>
tection from established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are Duff 1, Duff 2 and Duff 3.
D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the highest
rating category. Duff 1+ indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be minor.
Duff 1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. Duff 2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. Duff 3 indicates satisfactory liquidity and other protection factors
which qualify the issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
The following summarizes the three highest rating categories used by Fitch for
short-term obligations, each of which denotes securities that are investment
grade:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
F-2 securities possess good credit quality. Issues carrying this rating
have a satisfactory degree of assurance for timely payment, but the margin
of safety is not as great as for issues assigned the F-1+ and F-1 ratings.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following is the four investment grade ratings used by BankWatch
for long-term debt:
AAA -- The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA -- The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
A -- The third highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with
higher ratings.
BBB -- The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however,
more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
34
<PAGE>
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 -- The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
TBW-3 -- The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
The following summarizes the three highest long-term ratings used by IBCA:
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk albeit not very significantly.
A -- Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
The following summarizes the three highest short-term debt ratings used by IBCA:
A1+ -- Obligations supported by the highest capacity for timely repayment
and possessing a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
A2 -- Obligations supported by a good capacity for timely repayment.
35
<PAGE>
Prospectus
INVESTOR C SHARES
SEPTEMBER 30, 1995
AS SUPPLEMENTED ON
JANUARY 19, 1996
This Prospectus describes the nineteen investment
portfolios listed in the column to the right (each a
"Fund" and collectively the "Tax-Exempt Funds") of
Nations Fund Trust, a managed investment company
which is part of the Nations Fund Family ("Nations
Fund" or "Nations Fund Family"). This Prospectus
describes one class of shares of the Tax-Exempt
Funds -- Investor C Shares.
This Prospectus sets forth concisely the information
about the Funds that prospective purchasers of
Investor C Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust is contained in a separate
Statement of Additional Information (the "SAI"),
which has been filed with the Securities and
Exchange Commission (the "SEC") and is available
upon request without charge by writing or calling
Nations Fund at its address or telephone number
shown below. The SAI bears the same date as this
Prospectus and is incorporated by reference in its
entirety into this Prospectus. NationsBanc Advisors,
Inc. ("NBAI") is the investment adviser to the
Funds. TradeStreet Investment Associates, Inc.
("TradeStreet") is sub-investment adviser to the
Funds. As used herein the "Adviser" shall mean NBAI
and/or TradeStreet as the context may require.
SHARES OF NATIONS FUND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. ("NATIONSBANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
NATIONSBANK AND CERTAIN OF ITS AFFILIATES PROVIDE
CERTAIN OTHER SERVICES TO NATIONS FUND, FOR WHICH
THEY ARE COMPENSATED. STEPHENS INC., WHICH IS NOT
AFFILIATED WITH NATIONSBANK, IS THE SPONSOR AND
ADMINISTRATOR AND SERVES AS THE DISTRIBUTOR FOR
NATIONS FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
TAX-EXEMPT FUNDS
For purchase, redemption and
performance information
call:
1-800-321-7854
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
(Nations Fund Logo)
Nations Short-Term Municipal Income Fund
Nations Intermediate Municipal Bond Fund
Nations Municipal Income Fund
Nations Florida Intermediate
Municipal Bond Fund
Nations Florida Municipal Bond Fund
Nations Georgia Intermediate
Municipal Bond Fund
Nations Georgia Municipal Bond Fund
Nations Maryland Intermediate
Municipal Bond Fund
Nations Maryland Municipal
Bond Fund
Nations North Carolina Intermediate Municipal Bond Fund
Nations North Carolina Municipal Bond Fund
Nations South Carolina Intermediate Municipal Bond Fund
Nations South Carolina Municipal Bond Fund
Nations Tennessee Intermediate Municipal Bond Fund
Nations Tennessee Municipal
Bond Fund
Nations Texas Intermediate
Municipal Bond Fund
Nations Texas Municipal Bond Fund
Nations Virginia Intermediate
Municipal Bond Fund
Nations Virginia Municipal
Bond Fund
MUNIPROC
<PAGE>
Table Of Contents
About The Funds
Expenses Summary 3
Financial Highlights 7
Objectives 17
How Objectives are Pursued 18
How Performance is Shown 20
How the Funds are Managed 21
Organization and History 24
About Your
Investment
How to Buy Shares 24
Shareholder Servicing and Distribution Plans 25
How to Redeem Shares 26
How to Exchange Shares 28
How the Funds Value their Shares 29
How Dividends and Distributions are Made; Tax
Information 29
Appendix A -- Portfolio Securities 30
Appendix B -- Description of Ratings 35
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAI
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
NATIONS FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY NATIONS FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Expenses Summary
Expenses are one of several factors to consider when investing in a Fund. The
following tables summarize shareholder transaction and operating expenses for
the Investor C Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in Investor C Shares of a Fund
over specified periods.
INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations Nations Nations Florida
SHAREHOLDER Short-Term Intermediate Intermediate Nations Florida
TRANSACTION Municipal Income Municipal Bond Nations Municipal Municipal Bond Municipal Bond
EXPENSES Fund Fund Income Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Sales Load Imposed on
Purchases None None None None None
Deferred Sales Charge (as a
percentage of the lower
of the original purchase
price or redemption
proceeds)1 .50% .50% .50% .50% .50%
ANNUAL FUND
OPERATING EXPENSES
(as a percentage of
average net assets)
Management Fees2 .30% .30% .40% .30% .40%
Rule 12b-1 Fees2 .10% .25% .25% .25% .25%
Shareholder Servicing Fees2 .25% .25% .25% .25% .25%
Other Expenses .25% .25% .25% .25% .25%
Total Operating Expenses2 .90% 1.05% 1.15% 1.05% 1.15%
</TABLE>
<TABLE>
<CAPTION>
Nations Georgia
SHAREHOLDER Intermediate Nations Georgia
TRANSACTION Municipal Bond Municipal Bond
EXPENSES Fund Fund
<S> <C> <C>
Sales Load Imposed on
Purchases None None
Deferred Sales Charge (as a
percentage of the lower
of the original purchase
price or redemption
proceeds)1 .50% .50%
ANNUAL FUND
OPERATING EXPENSES
(as a percentage of
average net assets)
Management Fees2 .30% .40%
Rule 12b-1 Fees2 .25% .25%
Shareholder Servicing Fees2 .25% .25%
Other Expenses .25% .25%
Total Operating Expenses2 1.05% 1.15%
</TABLE>
1 A Deferred Sales Charge is imposed only with respect to Investor C Shares
redeemed within one year of purchase. Investor C Shares purchased prior to
January 1, 1996 will continue to be subject to the 1.00% Deferred Sales
Charge.
2 After any waivers and reimbursements.
3
<PAGE>
<TABLE>
<CAPTION>
Nations
Nations Maryland North Carolina Nations
Intermediate Nations Maryland Intermediate North Carolina
SHAREHOLDER TRANSACTION Municipal Bond Municipal Bond Municipal Bond Municipal Bond
EXPENSES Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Deferred Sales Charge (as a percentage of
the lower of the original purchase price
or redemption proceeds)1 .50% .50% .50% .50%
ANNUAL FUND
OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees2 .30% .40% .30% .40%
Rule 12b-1 Fees2 .25% .25% .25% .25%
Shareholder Servicing Fees2 .25% .25% .25% .25%
Other Expenses .25% .25% .30% .25%
Total Operating Expenses2 1.05% 1.15% 1.10% 1.15%
</TABLE>
<TABLE>
<CAPTION>
Nations
South Carolina Nations
Intermediate South Carolina
SHAREHOLDER TRANSACTION Municipal Bond Municipal Bond
EXPENSES Fund Fund
<S> <C> <C>
Sales Load Imposed on Purchases None None
Deferred Sales Charge (as a percentage of
the lower of the original purchase price
or redemption proceeds)1 .50% .50%
ANNUAL FUND
OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees2 .30% .40%
Rule 12b-1 Fees2 .25% .25%
Shareholder Servicing Fees2 .25% .25%
Other Expenses .24% .25%
Total Operating Expenses2 1.04% 1.15%
</TABLE>
1 A Deferred Sales Charge is imposed only with respect to Investor C Shares
redeemed within one year of purchase. Investor C Shares purchased prior to
January 1, 1996 will continue to be subject to the 1.00% Deferred Sales
Charge.
2 After any waivers and reimbursements.
INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations
Nations Tennessee Texas
Intermediate Nations Tennessee Intermediate Nations
SHAREHOLDER TRANSACTION Municipal Bond Municipal Bond Municipal Bond Texas Municipal
EXPENSES Fund Fund Fund Bond Fund
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Deferred Sales Charge (as a percentage of
the lower of the original purchase price
or redemption proceeds)1 .50% .50% .50% .50%
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of average net assets)
Management Fees2 .30% .40% .30% .40%
Rule 12b-1 Fees2 .25% .25% .25% .25%
Shareholder Servicing Fees2 .25% .25% .25% .25%
Other Expenses .30% .25% .30% .25%
Total Operating
Expenses2 1.10% 1.15% 1.10% 1.15%
</TABLE>
<TABLE>
<CAPTION>
Nations Virginia
Intermediate Nations Virginia
SHAREHOLDER TRANSACTION Municipal Bond Municipal Bond
EXPENSES Fund Fund
<S> <C> <C>
Sales Load Imposed on Purchases None None
Deferred Sales Charge (as a percentage of
the lower of the original purchase price
or redemption proceeds)1 .50% .50%
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of average net assets)
Management Fees2 .40% .40%
Rule 12b-1 Fees2 .25% .25%
Shareholder Servicing Fees2 .25% .25%
Other Expenses .25% .25%
Total Operating
Expenses2 1.15% 1.15%
</TABLE>
1 A Deferred Sales Charge is imposed only with respect to Investor C Shares
redeemed within one year of purchase. Investor C Shares purchased prior to
January 1, 1996 will continue to be subject to the 1.00% Deferred Sales
Charge.
2 After any waivers and reimbursements.
4
<PAGE>
EXAMPLES: You would pay the following expenses on a $1,000 investment in
Investor C Shares of the indicated Fund, assuming (1) a 5% annual return and (2)
redemption at the end of each time period.
INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations Short-Term Nations Nations Florida
Municipal Income Intermediate Nations Municipal Intermediate Nations Florida
Fund Municipal Bond Fund Income Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C> <C> <C>
1 Year $ 14 $ 16 $ 17 $ 16 $ 17
3 Years $ 29 $ 33 $ 37 $ 33 $ 37
5 Years $ 50 $ 58 $ 63 $ 58 $ 63
10 Years $ 111 $ 128 $ 140 $ 128 $ 140
</TABLE>
[CAPTION]
<TABLE>
Nations Nations
North Carolina Nations South Carolina Nations
Nations Maryland Intermediate North Carolina Intermediate South Carolina
Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C> <C> <C>
1 Year $ 17 $ 16 $ 17 $ 16 $ 17
3 Years $ 37 $ 33 $ 37 $ 33 $ 37
5 Years $ 63 $ 58 $ 63 $ 58 $ 63
10 Years $ 140 $ 128 $ 140 $ 128 $ 140
</TABLE>
<TABLE>
<CAPTION>
Nations Nations Virginia
Texas Municipal Intermediate Nations Virginia
Bond Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C>
1 Year $ 17 $ 17 $ 17
3 Years $ 37 $ 37 $ 37
5 Years $ 63 $ 63 $ 63
10 Years $ 140 $ 140 $ 140
</TABLE>
<TABLE>
<CAPTION>
Nations Georgia Nations Maryland
Intermediate Nations Georgia Intermediate
Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C>
1 Year $ 16 $ 17 $ 16
3 Years $ 33 $ 37 $ 33
5 Years $ 58 $ 63 $ 58
10 Years $ 128 $ 140 $ 128
</TABLE>
<TABLE>
<CAPTION>
Nations
Nations Tennessee Texas
Intermediate Nations Tennessee Intermediate
Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C>
1 Year $ 16 $ 17 $ 16
3 Years $ 33 $ 37 $ 35
5 Years $ 58 $ 63 $ 61
10 Years $ 128 $ 140 $ 134
</TABLE>
5
<PAGE>
You would pay the following expenses on a $1,000 investment in Investor C Shares
of the indicated Fund, assuming a 5% annual return but no redemption.
<TABLE>
<CAPTION>
Nations Short-Term Nations Nations Florida
Municipal Income Intermediate Nations Municipal Intermediate Nations Florida
Fund Municipal Bond Fund Income Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C> <C> <C>
1 Year $ 9 $ 11 $ 12 $ 11 $ 12
3 Years $ 29 $ 33 $ 37 $ 33 $ 37
5 Years $ 50 $ 58 $ 63 $ 58 63
10 Years $ 111 $ 128 $ 140 $ 128 $ 140
</TABLE>
<TABLE>
<CAPTION>
Nations North Nations
Carolina Nations North South Carolina Nations
Nations Maryland Intermediate Carolina Municipal Intermediate South Carolina
Municipal Bond Fund Municipal Bond Fund Bond Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C> <C> <C>
1 Year $ 12 $ 11 $ 12 $ 11 $ 12
3 Years $ 37 $ 35 $ 37 $ 33 $ 37
5 Years $ 63 $ 61 $ 63 $ 57 $ 63
10 Years $ 140 $ 134 $ 140 $ 127 $ 140
</TABLE>
<TABLE>
<CAPTION>
Nations Nations Virginia
Texas Municipal Intermediate Nations Virginia
Bond Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C>
1 Year $ 12 $ 12 $ 12
3 Years $ 37 $ 37 $ 37
5 Years $ 63 $ 63 $ 63
10 Years $ 140 $ 140 $ 140
</TABLE>
<TABLE>
<CAPTION>
Nations Georgia Nations Maryland
Intermediate Nations Georgia Intermediate
Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C>
1 Year $ 11 $ 12 $ 11
3 Years $ 33 $ 37 $ 33
5 Years $ 58 $ 63 $ 58
10 Years $ 128 $ 140 $ 128
</TABLE>
<TABLE>
<CAPTION>
Nations Tennessee Nations
Intermediate Nations Tennessee Texas Intermediate
Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund
<S> <C> <C> <C>
1 Year $ 11 $ 12 $ 11
3 Years $ 35 $ 37 $ 35
5 Years $ 61 $ 63 $ 61
10 Years $ 134 $ 140 $ 134
</TABLE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor C Shares of the Funds will bear either directly or indirectly. The
"Other Expenses" figures in the above tables for Investor C Shares of the
following Funds are based on estimated amounts for the Fund's current fiscal
year and reflect anticipated fee waivers and reimbursements: Nations Florida
Intermediate Municipal Bond Fund, Nations Florida Municipal Bond Fund, Nations
Georgia Municipal Bond Fund, Nations Maryland Municipal Bond Fund, Nations North
Carolina Intermediate Municipal Bond Fund, Nations North Carolina Municipal Bond
Fund, Nations South Carolina Municipal Bond Fund, Nations Tennessee Intermediate
Municipal Bond Fund, Nations Tennessee Municipal Bond Fund, Nations Texas
Intermediate Municipal Bond Fund, Nations Texas Municipal Bond Fund and Nations
Virginia Municipal Bond Fund. The figures for the other Funds reflect amounts
incurred during the Fund's most recent fiscal year and have been adjusted as
necessary to reflect current service provider fees. There is no assurance that
any fee waivers and reimbursements will continue beyond the current fiscal year.
If fee waivers and/or reimbursements are discontinued, the amounts contained in
the "Examples" above may increase. Long-term shareholders in a Fund could pay
more in sales charges than the economic equivalent of the maximum front-end
sales charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. For more complete descriptions of the
Funds' operating expenses, see "How the Funds are Managed." For a more complete
description of the Rule 12b-1 and shareholder servicing fees payable by the
Funds, see "Shareholder Servicing and Distribution Plans."
6
<PAGE>
Absent fee waivers and reimbursements, "Management Fees," "Rule 12b-1 Fees,"
"Shareholder Servicing Fees" and "Total Operating Expenses" for Investor C
Shares of the Funds would have been as follows: Nations Municipal Income
Fund -- .60%, .75%, .25% and 1.85%, respectively; Nations Short-Term Municipal
Income Fund, Nations Intermediate Municipal Bond Fund, Nations Florida
Intermediate Municipal Bond Fund, Nations Georgia Intermediate Municipal Bond
Fund, Nations Maryland Intermediate Municipal Bond Fund and Nations Virginia
Intermediate Municipal Bond Fund -- .50%, .75%, .25% and 1.75%, respectively;
Nations South Carolina Intermediate Municipal Bond Fund -- .50%, .75%, .25% and
1.74%, respectively; Nations North Carolina Intermediate Municipal Bond Fund,
Nations Tennessee Intermediate Municipal Bond Fund and Nations Texas
Intermediate Municipal Bond Fund -- .50%, .75%, .25% and 1.80%, respectively;
and Nations Florida Municipal Bond Fund, Nations Georgia Municipal Bond Fund,
Nations Maryland Municipal Bond Fund, Nations North Carolina Municipal Bond
Fund, Nations South Carolina Municipal Bond Fund, Nations Tennessee Municipal
Bond Fund, Nations Texas Municipal Bond Fund and Nations Virginia Municipal Bond
Fund -- .60%, .75%, .25% and 1.85%, respectively.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Financial Highlights
The following audited financial information has been derived from the financial
statements of Nations Fund Trust. Price Waterhouse LLP, is the independent
accountant to Nations Fund Trust. The reports of Price Waterhouse LLP for
Nations Fund Trust's most recent fiscal year accompany the financial statements
for such period and are incorporated by reference in the SAI, which is available
upon request. Shareholders of a Fund will receive unaudited semi-annual reports
describing the Fund's investment operations and annual financial statements
audited by the Funds' independent accountant.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SHORT-TERM MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTORS C SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.69
Net investment income 0.25
Net realized and unrealized gain/(loss) on investments 0.26
Net increase in net assets resulting from investment operations 0.51
Distributions:
Dividends from net investment income (0.25)
Distributions from net realized capital gains --
Total distributions (0.25)
Net asset value, end of period $ 9.95
Total return++ 4.95%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,218
Ratio of operating expenses to average net assets 0.66%+
Ratio of net investment income to average net assets 4.25%+
Portfolio turnover rate 33%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.22%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.22
<CAPTION>
PERIOD
ENDED
INVESTORS C SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.84
Net investment income 0.19
Net realized and unrealized gain/(loss) on investments (0.15)
Net increase in net assets resulting from investment operations 0.04
Distributions:
Dividends from net investment income (0.19)
Distributions from net realized capital gains (0.00)#
Total distributions (0.19)
Net asset value, end of period $ 9.69
Total return++ 0.45%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 323
Ratio of operating expenses to average net assets 0.59%+
Ratio of net investment income to average net assets 3.58%+
Portfolio turnover rate 57%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.05%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.18
</TABLE>
* The Nations Short-Term Municipal Income Fund's Investor C Shares commenced
operations on May 19, 1994.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
7
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTOR C SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.24
Net investment income 0.22
Net realized and unrealized gain/(loss) on investments 0.74
Net increase/(decrease) in net assets resulting from investment operations 0.96
Distributions:
Dividends from net investment income (0.22)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.22)
Net asset value, end of period $ 9.98
Total return++ 10.45%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 12
Ratio of operating expenses to average net assets 0.91%+
Ratio of net investment income to average net assets 4.53%+
Portfolio turnover rate 20%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.29%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.20
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.35
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.11)
Net increase/(decrease) in net assets resulting from investment operations (0.08)
Distributions:
Dividends from net investment income (0.03)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.03)
Net asset value, end of period $ 9.24
Total return++ (0.52)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 0.85%+
Ratio of net investment income to average net assets 4.09%+
Portfolio turnover rate 51%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.38%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.02
</TABLE>
* The Nations Intermediate Municipal Bond Fund's Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.64 $ 11.33 $ 10.65
Net investment income 0.26 0.49 0.50
Net realized and unrealized gain/(loss) on investments 1.14 (1.44) 0.72
Net increase/(decrease) in net assets resulting from
investment operations 1.40 (0.95) 1.22
Distributions:
Dividends from net investment income (0.26) (0.49) (0.50)
Distributions in excess of net investment income -- (0.00)# --
Distributions from net realized capital gains -- (0.25) (0.04)
Total distributions (0.26) (0.74) (0.54)
Net asset value, end of period $ 10.78 $ 9.64 $ 11.33
Total return++ 14.66% (8.86)% 11.69%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,669 $ 3,064 $ 6,331
Ratio of operating expenses to average net assets 1.36%+ 1.36% 1.27%
Ratio of operating expenses to average net assets
including interest expense -- 1.37% --
Ratio of net investment income to average net assets 5.06%+ 4.67% 4.49%
Portfolio turnover rate 24% 63% 48%
Ratio of operating expenses to average net assets before
fee waivers and/or expense reimbursements 1.65%+ 1.65% 1.59%
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.24 $ 0.46 $ 0.46
</TABLE>
<TABLE>
<CAPTION>
YEAR
ENDED
INVESTOR C SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.48
Net investment income 0.21
Net realized and unrealized gain/(loss) on investments 0.17
Net increase/(decrease) in net assets resulting from
investment operations 0.38
Distributions:
Dividends from net investment income (0.21)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.21)
Net asset value, end of period $ 10.65
Total return++ 3.63%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3,744
Ratio of operating expenses to average net assets 1.21%+
Ratio of operating expenses to average net assets
including interest expense --
Ratio of net investment income to average net assets 4.36%+
Portfolio turnover rate 19%
Ratio of operating expenses to average net assets before
fee waivers and/or expense reimbursements 1.61%+
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.19
</TABLE>
* The Nations Municipal Income Fund's Investor C Shares commenced operations
on June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
8
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.61 $ 10.50
Net investment income 0.22 0.39
Net realized and unrealized gain/(loss) on investments 0.82 (0.88)
Net increase/(decrease) in net assets resulting from investment operations 1.04 (0.49)
Distributions:
Dividends from net investment income (0.22) (0.39)
Distributions in excess of net investment income -- (0.00)#
Distributions from net realized gains -- (0.01)
Total distributions (0.22) (0.40)
Net asset value, end of period $ 10.43 $ 9.61
Total return++ 10.87% (4.81)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 268 $ 614
Ratio of operating expenses to average net assets 1.05%+ 1.13%
Ratio of operating expenses to average net assets including interest expense 1.06%+ --
Ratio of net investment income to average net assets 4.31% 3.86%
Portfolio turnover rate 17% 34%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.27% 1.34%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.21 $ 0.37
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.98
Net investment income 0.35
Net realized and unrealized gain/(loss) on investments 0.52
Net increase/(decrease) in net assets resulting from investment operations 0.87
Distributions:
Dividends from net investment income (0.35)
Distributions in excess of net investment income --
Distributions from net realized gains --
Total distributions (0.35)
Net asset value, end of period $ 10.50
Total return++ 8.80%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 684
Ratio of operating expenses to average net assets 1.19%+
Ratio of operating expenses to average net assets including interest expense --
Ratio of net investment income to average net assets 3.53%+
Portfolio turnover rate 15%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.55%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.31
</TABLE>
* The Nations Florida Intermediate Municipal Bond Fund Investor C Shares
commenced operations on December 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS FLORIDA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTOR C SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.40
Net investment income 0.22
Net realized and unrealized gain/(loss) on investments 1.11
Net increase/(decrease) in net assets resulting from investment operations 1.33
Dividends from net investment income (0.22)
Net asset value, end of period $ 9.51
Total return++ 16.04%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 33
Ratio of operating expenses to average net assets 1.08%+
Ratio of net investment income to average net assets 4.92%+
Portfolio turnover rate 9%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.70%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.19
PERIOD
ENDED
INVESTOR C SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.47
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.07)
Net increase/(decrease) in net assets resulting from investment operations (0.04)
Dividends from net investment income (0.03)
Net asset value, end of period $ 8.40
Total return++ (0.43)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 0.96%+
Ratio of net investment income to average net assets 4.80%+
Portfolio turnover rate 46%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.66%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.03
</TABLE>
* The Nations Florida Municipal Bond Fund's Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
9
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94 11/30/93
<CAPTION>
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.82 $ 10.82 $ 10.29
Net investment income 0.22 0.43 0.42
Net realized and unrealized gain/(loss) on investments 0.78 (0.98) 0.56
Net increase/(decrease) in net assets resulting from
investment operations 1.00 (0.55) 0.98
Distributions:
Dividends from net investment income (0.22) (0.43) (0.42)
Distributions in excess of net investment income -- (0.00)# --
Distributions from net realized capital gains -- (0.02) (0.03)
Total distributions (0.22) (0.45) (0.45)
Net asset value, end of period $ 10.60 $ 9.82 $ 10.82
Total return++ 10.30% (5.25)% 9.61%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,731 $ 2,397 $ 2,990
Ratio of operating expenses to average net assets 1.05%+ 1.12% 1.21%
Ratio of operating expenses to average net assets including
interest expense -- 1.13% --
Ratio of net investment income to average net assets 4.35%+ 4.16% 3.82%
Portfolio turnover rate 13% 22% 6%
Ratio of operating expenses to average net assets before fee
waivers and/or expense reimbursements 1.25%+ 1.33% 1.52%
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.21 $ 0.41 $ 0.39
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.11
Net investment income 0.20
Net realized and unrealized gain/(loss) on investments 0.18
Net increase/(decrease) in net assets resulting from
investment operations 0.38
Distributions:
Dividends from net investment income (0.20)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.20)
Net asset value, end of period $ 10.29
Total return++ 3.82%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 992
Ratio of operating expenses to average net assets 0.91%+
Ratio of operating expenses to average net assets including
interest expense --
Ratio of net investment income to average net assets 4.21%+
Portfolio turnover rate 12%
Ratio of operating expenses to average net assets before fee
waivers and/or expense reimbursements 1.72%+
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.16
</TABLE>
* The Nations Georgia Intermediate Municipal Bond Fund Investor C Shares
commenced operations on June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GEORGIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTOR C SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.38
Net investment income 0.22
Net realized and unrealized gain/(loss) on investments 1.09
Net increase/(decrease) in net assets resulting from investment operations 1.31
Dividends from net investment income (0.22)
Net asset value, end of period $ 9.47
Total return++ 15.83%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 66
Ratio of operating expenses to average net assets 1.09%+
Ratio of net investment income to average net assets 4.93%+
Portfolio turnover rate 17%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.74%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.19
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.45
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.07)
Net increase/(decrease) in net assets resulting from investment operations (0.04)
Dividends from net investment income (0.03)
Net asset value, end of period $ 8.38
Total return++ (0.44)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 0.96%+
Ratio of net investment income to average net assets 4.85%+
Portfolio turnover rate 35%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.79%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.02
</TABLE>
* The Nations Georgia Municipal Bond Fund's Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
10
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.00 $ 11.09 $ 10.72
Net investment income 0.23 0.44 0.40
Net realized and unrealized gain/(loss) on investments 0.79 (0.99) 0.44
Net increase/(decrease) in net assets resulting from
investment operations 1.02 (0.55) 0.84
Distributions:
Dividends from net investment income (0.23) (0.44) (0.40)
Distributions from net realized capital gains (0.03) (0.10) (0.07)
Distributions in excess of net realized capital gains -- (0.00)# --
Total distributions (0.26) (0.54) (0.47)
Net asset value, end of period $ 10.76 $ 10.00 $ 11.09
Total return++ 10.30% (5.20)% 8.30%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,629 $ 2,570 $ 4,424
Ratio of operating expenses to average net assets 1.05%+ 1.11% 1.24%
Ratio of net investment income to average net assets 4.39%+ 4.15% 3.98%
Portfolio turnover rate 7% 22% 26%
Ratio of operating expenses to average net assets before
fee waivers and/or expense reimbursements 1.27%+ 1.31% 1.48%
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.22 $ 0.42 $ 0.38
</TABLE>
<TABLE>
<CAPTION>
PERIOD
INVESTOR C SHARES ENDED 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.58
Net investment income 0.19
Net realized and unrealized gain/(loss) on investments 0.14
Net increase/(decrease) in net assets resulting from
investment operations 0.33
Distributions:
Dividends from net investment income (0.19)
Distributions from net realized capital gains --
Distributions in excess of net realized capital gains --
Total distributions (0.19)
Net asset value, end of period $ 10.72
Total return++ 3.13%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,796
Ratio of operating expenses to average net assets 1.16%+
Ratio of net investment income to average net assets 3.88%+
Portfolio turnover rate 38%
Ratio of operating expenses to average net assets before
fee waivers and/or expense reimbursements 1.44%+
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.18
</TABLE>
* The Nations Maryland Intermediate Municipal Bond Fund Investor C Shares
commenced operations on June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS MARYLAND MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTOR C SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.37
Net investment income 0.21
Net realized and unrealized gain/(loss) on investments 1.02
Net increase/(decrease) in net assets resulting from investment operations 1.23
Dividends from net investment income (0.21)
Net asset value, end of period $ 9.39
Total return++ 14.87%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 1.09%+
Ratio of net investment income to average net assets 4.68%+
Portfolio turnover rate 5%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.77%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.18
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.44
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.07)
Net increase/(decrease) in net assets resulting from investment operations (0.04)
Dividends from net investment income (0.03)
Net asset value, end of period $ 8.37
Total return++ (0.45)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 0.96%+
Ratio of net investment income to average net assets 4.73%+
Portfolio turnover rate 39%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 2.05%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.02
</TABLE>
* The Nations Maryland Municipal Bond Fund's Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
11
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.53 $ 10.46
Net investment income 0.20 0.38
Net realized and unrealized gain/(loss) on investments 0.81 (0.88)
Net increase/(decrease) in net assets resulting from investment operations 1.01 (0.50)
Distributions:
Dividends from net investment income (0.20) (0.38)
Distributions from net realized capital gains (0.01) (0.05)
Total distributions (0.21) (0.43)
Net asset value, end of period $ 10.33 $ 9.53
Total return++ 10.71% (4.89)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,598 $ 1,486
Ratio of operating expenses to average net assets 1.06%+ 1.13%
Ratio of net investment income to average net assets 4.07%+ 3.80%
Portfolio turnover rate 36% 37%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.32%+ 1.40%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.19 $ 0.36
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.99
Net investment income 0.35
Net realized and unrealized gain/(loss) on investments 0.47
Net increase/(decrease) in net assets resulting from investment operations 0.82
Distributions:
Dividends from net investment income (0.35)
Distributions from net realized capital gains --
Total distributions (0.35)
Net asset value, end of period $ 10.46
Total return++ 8.26%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,592
Ratio of operating expenses to average net assets 1.17%+
Ratio of net investment income to average net assets 3.48%+
Portfolio turnover rate 29%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements 1.60%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.30
</TABLE>
* The Nations North Carolina Intermediate Municipal Bond Fund Investor C Shares
commenced operations on December 16, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTOR C SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.36
Net investment income 0.23
Net realized and unrealized gain/(loss) on investments 1.11
Net increase/(decrease) in net assets resulting from investment operations 1.34
Dividends from net investment income (0.23)
Net asset value, end of period $ 9.47
Total return++ 16.07%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 26
Ratio of operating expenses to average net assets 1.06%+
Ratio of net investment income to average net assets 4.90%+
Portfolio turnover rate 20%
Ratio of operating expenses to average net assets before fee waivers and/or expense reimbursements 1.68%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.20
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.45
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.09)
Net increase/(decrease) in net assets resulting from investment operations (0.06)
Dividends from net investment income (0.03)
Net asset value, end of period $ 8.36
Total return++ (0.67)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 0.96%+
Ratio of net investment income to average net assets 4.78%+
Portfolio turnover rate 29%
Ratio of operating expenses to average net assets before fee waivers and/or expense reimbursements 1.67%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.03
</TABLE>
* The Nations North Carolina Municipal Bond Fund's Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
12
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.76 $ 10.61 $ 10.18
Net investment income 0.23 0.44 0.42
Net realized and unrealized gain/(loss) on investments 0.74 (0.84) 0.43
Net increase/(decrease) in net assets resulting from
investment operations 0.97 (0.40) 0.85
Distributions:
Dividends from net investment income (0.23) (0.44) (0.42)
Distributions in excess of net investment income -- (0.00)# --
Distributions from net realized capital gains -- (0.01) --
Total distributions (0.23) (0.45) (0.42)
Net asset value, end of period $ 10.50 $ 9.76 $ 10.61
Total return++ 10.02% (3.94)% 8.51%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 5,921 $ 6,167 $ 8,499
Ratio of operating expenses to average net assets 1.05%+ 1.12% 1.20%
Ratio of operating expenses to average net assets
including interest expense 1.06%+ -- --
Ratio of net investment income to average net assets 4.53%+ 4.24% 3.93%
Portfolio turnover rate 6% 30% 11%
Ratio of operating expenses to average net assets before
fee waivers and/or expense reimbursements 1.26%+ 1.33% 1.50%
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.22 $ 0.42 $ 0.39
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.05
Net investment income 0.20
Net realized and unrealized gain/(loss) on investments 0.13
Net increase/(decrease) in net assets resulting from
investment operations 0.33
Distributions:
Dividends from net investment income (0.20)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.20)
Net asset value, end of period $ 10.18
Total return++ 3.27%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 4,436
Ratio of operating expenses to average net assets 0.88%+
Ratio of operating expenses to average net assets
including interest expense --
Ratio of net investment income to average net assets 4.10%+
Portfolio turnover rate 7%
Ratio of operating expenses to average net assets before
fee waivers and/or expense reimbursements 1.48%+
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.17
</TABLE>
* The Nations South Carolina Intermediate Municipal Bond Fund Investor C
Shares commenced operations on June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charge.
+++ Unaudited.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SOUTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTOR C SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.65
Net investment income 0.23
Net realized and unrealized gain/(loss) on investments 1.08
Net increase/(decrease) in net assets resulting from investment operations 1.31
Dividends from net investment income (0.23)
Net asset value, end of period $ 9.73
Total return++ 15.27%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 1.09%+
Ratio of net investment income to average net assets 4.93%+
Portfolio turnover rate 5%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.74%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.20
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.73
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.08)
Net increase/(decrease) in net assets resulting from investment operations (0.05)
Dividends from net investment income (0.03)
Net asset value, end of period $ 8.65
Total return++ (0.52)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 0.96%+
Ratio of net investment income to average net assets 4.73%+
Portfolio turnover rate 14%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.87%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.03
</TABLE>
* The Nations South Carolina Municipal Bond Fund's Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
13
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTOR C SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.30
Net investment income 0.21
Net realized and unrealized gain/(loss) on investments 0.72
Net increase/(decrease) in net assets resulting from investment operations 0.93
Distributions:
Dividends from net investment income (0.21)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.21)
Net asset value, end of period $ 10.02
Total return++ 10.05%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 1.06%+
Ratio of operating expenses to average net assets including interest expense --
Ratio of net investment income to average net assets 4.30%+
Portfolio turnover rate 17%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.37%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.20
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.38
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.08)
Net increase/(decrease) in net assets resulting from investment operations (0.05)
Distributions:
Dividends from net investment income (0.03)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.03)
Net asset value, end of period $ 9.30
Total return++ (0.53)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 1.02%+
Ratio of operating expenses to average net assets including interest expense 1.03%+
Ratio of net investment income to average net assets 4.06%+
Portfolio turnover rate 41%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.39%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.02
</TABLE>
* The Nations Tennessee Intermediate Municipal Bond Fund's Investor C Shares
commenced operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TENNESSEE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTOR C SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.58
Net investment income 0.23
Net realized and unrealized gain/(loss) on investments 1.05
Net increase/(decrease) in net assets resulting from investment operations 1.28
Dividends from net investment income (0.23)
Net asset value, end of period $ 9.63
Total return++ 15.04%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 61
Ratio of operating expenses to average net assets 1.09%+
Ratio of net investment income to average net assets 4.97%+
Portfolio turnover rate 30%
Ratio of operating expenses to average net assets before fee waivers and/or expense reimbursements 1.85%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.20
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.62
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.04)
Net increase/(decrease) in net assets resulting from investment operations (0.01)
Dividends from net investment income (0.03)
Net asset value, end of period $ 8.58
Total return++ (0.07)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 0.96%+
Ratio of net investment income to average net assets 4.81%+
Portfolio turnover rate 38%
Ratio of operating expenses to average net assets before fee waivers and/or expense reimbursements 1.95%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.02
</TABLE>
* The Nations Tennessee Municipal Bond Fund's Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
14
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTOR C SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.53
Net investment income 0.21
Net realized and unrealized gain/(loss) on investments 0.65
Net increase/(decrease) in net assets resulting from investment operations 0.86
Distributions:
Dividends from net investment income (0.21)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.21)
Net asset value, end of period $ 10.18
Total return++ 9.09%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 549
Ratio of operating expenses to average net assets 1.06%+
Ratio of net investment income to average net assets 4.22%+
Portfolio turnover rate 38%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.30%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.20
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.55
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.02)
Net increase/(decrease) in net assets resulting from investment operations 0.01
Distributions:
Dividends from net investment income (0.03)
Distributions in excess of net investment income (0.00)#
Distributions from net realized capital gains --
Total distributions (0.03)
Net asset value, end of period $ 9.53
Total return++ 0.08%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 1.05%+
Ratio of net investment income to average net assets 3.90%+
Portfolio turnover rate 61%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.28%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.02
</TABLE>
* The Nations Texas Intermediate Municipal Bond Fund's Investor C Shares
commenced operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TEXAS MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTOR C SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.39
Net investment income 0.22
Net realized and unrealized gain/(loss) on investments 1.05
Net increase/(decrease) in net assets resulting from investment operations 1.27
Dividends from net investment income (0.22)
Net asset value, end of period $ 9.44
Total return++ 15.33%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 1.09%+
Ratio of net investment income to average net assets 4.98%+
Portfolio turnover rate 35%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.74%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.19
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.46
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.07)
Net increase/(decrease) in net assets resulting from investment operations (0.04)
Dividends from net investment income (0.03)
Net asset value, end of period $ 8.39
Total return++ (0.43)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 0.97%+
Ratio of net investment income to average net assets 4.77%+
Portfolio turnover rate 107%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.81%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.02
</TABLE>
* The Nations Texas Municipal Bond Fund's Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
15
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.94 $ 10.99 $ 10.59
Net investment income 0.23 0.44 0.44
Net realized and unrealized gain/(loss) on investments 0.73 (0.96) 0.42
Net increase/(decrease) in net assets resulting from
investment operations 0.96 (0.52) 0.86
Distributions:
Dividends from net investment income (0.23) (0.44) (0.44)
Distributions from net realized capital gains -- (0.09) (0.02)
Distributions in excess of net realized capital gains -- (0.00)# --
Total distributions (0.23) (0.53) (0.46)
Net asset value, end of period $ 10.67 $ 9.94 $ 10.99
Total return++ 9.76% (4.90)% 8.25%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 7,714 $ 8,372 $ 11,176
Ratio of operating expenses to average net assets 1.12%+ 1.19% 1.32%
Ratio of net investment income to average net assets 4.44%+ 4.18% 4.05%
Portfolio turnover rate 10% 14% 26%
Ratio of operating expenses to average net assets before
fee waivers and/or expense reimbursement 1.32%+ 1.31% 1.44%
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.22 $ 0.43 $ 0.43
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.44
Net investment income 0.19
Net realized and unrealized gain/(loss) on investments 0.15
Net increase/(decrease) in net assets resulting from
investment operations 0.34
Distributions:
Dividends from net investment income (0.19)
Distributions from net realized capital gains --
Distributions in excess of net realized capital gains --
Total distributions (0.19)
Net asset value, end of period $ 10.59
Total return++ 3.36%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 4,769
Ratio of operating expenses to average net assets 1.28%+
Ratio of net investment income to average net assets 3.99%+
Portfolio turnover rate 13%
Ratio of operating expenses to average net assets before
fee waivers and/or expense reimbursement 2.80%+
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.12
</TABLE>
* The Nations Virginia Intermediate Municipal Bond Fund Investor C Shares
commenced operations on June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS VIRGINIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
05/31/95
INVESTOR C SHARES (UNAUDITED)
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.29
Net investment income 0.22
Net realized and unrealized gain/(loss) on investments 1.07
Net increase/(decrease) in net assets resulting from investment operations 1.29
Dividends from net investment income (0.22)
Net asset value, end of period $ 9.36
Total return++ 15.74%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 1.09%+
Ratio of net investment income to average net assets 4.96%+
Portfolio turnover rate 0%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.73%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.20
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/94*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 8.38
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments (0.09)
Net increase/(decrease) in net assets resulting from investment operations (0.06)
Dividends from net investment income (0.03)
Net asset value, end of period $ 8.29
Total return++ (0.67)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2
Ratio of operating expenses to average net assets 0.96%+
Ratio of net investment income to average net assets 4.77%+
Portfolio turnover rate 61%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements 1.74%+
Net investment income per share before fee waivers and/or expense reimbursements $ 0.03
</TABLE>
* The Nations Virginia Municipal Bond Fund Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
16
<PAGE>
Objectives
NATIONS SHORT-TERM MUNICIPAL INCOME FUND, NATIONS INTERMEDIATE MUNICIPAL BOND
FUND AND NATIONS MUNICIPAL INCOME FUND: The investment objective of Nations
Short-Term Municipal Income Fund and Nations Municipal Income Fund is to seek a
high level of current interest income that is exempt from Federal income taxes.
Such Funds invest primarily in investment grade obligations issued by or on
behalf of states, territories, and possessions of the United States, the
District of Columbia, and their political subdivisions, agencies,
instrumentalities, and authorities, the interest on which, in the opinion of
counsel to the issuer or bond counsel, is exempt from Federal income taxes
("Municipal Securities").
The Nations Intermediate Municipal Bond Fund's investment objective is to seek
higher than money market yields by investing primarily in intermediate-term,
investment grade Municipal Securities which make interest payments that are
exempt from Federal income taxes.
During normal market conditions, at least 80% of the total assets of Nations
Intermediate Municipal Bond Fund and Nations Municipal Income Fund will be
invested in Municipal Securities with remaining maturities of 40 years or less.
The average dollar weighted effective maturity of the Nations Municipal Income
Fund will be at least five years, except during temporary defensive periods.
During normal market conditions, the average dollar weighted maturity of Nations
Short-Term Municipal Income Fund will be three years or less. The average dollar
weighted effective maturity of Nations Intermediate Municipal Bond Fund will be
between three and ten years, except during temporary defensive periods.
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND, NATIONS GEORGIA INTERMEDIATE
MUNICIPAL BOND FUND, NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND, NATIONS
NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND, NATIONS SOUTH CAROLINA
INTERMEDIATE MUNICIPAL BOND FUND, NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND
FUND, NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND AND NATIONS VIRGINIA
INTERMEDIATE MUNICIPAL BOND FUND, SOMETIMES COLLECTIVELY REFERRED TO AS THE
"STATE INTERMEDIATE MUNICIPAL BOND FUNDS," AND NATIONS FLORIDA MUNICIPAL BOND
FUND, NATIONS GEORGIA MUNICIPAL BOND FUND, NATIONS MARYLAND MUNICIPAL BOND FUND,
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND, NATIONS SOUTH CAROLINA MUNICIPAL
BOND FUND, NATIONS TENNESSEE MUNICIPAL BOND FUND, NATIONS TEXAS MUNICIPAL BOND
FUND AND NATIONS VIRGINIA MUNICIPAL BOND FUND, SOMETIMES COLLECTIVELY REFERRED
TO AS THE "STATE MUNICIPAL BOND FUNDS": As described below, each of these Funds
seeks to provide investors with as high a level of income exempt from Federal
income taxes as is consistent with prudent investing, while seeking preservation
of shareholders' capital. Each Fund also seeks to provide a maximum level of
income which is exempt from the personal income taxes, if any, for resident
shareholders of the Fund's respective state.
The Nations Florida Intermediate Municipal Bond Fund's and Nations Florida
Municipal Bond Fund's investment objective is to seek a high level of current
interest income exempt from Federal income taxes and the Florida state
intangibles tax, consistent with the relative stability of principal. The
Nations Georgia Intermediate Municipal Bond Fund's and Nations Georgia Municipal
Bond Fund's investment objective is to seek a high level of current interest
income exempt from Federal and Georgia state income taxes and state intangibles
taxes, consistent with relative stability of principal. The Nations Maryland
Intermediate Municipal Bond Fund's and Nations Maryland Municipal Bond Fund's
investment objective is to seek a high level of current interest income exempt
from both Federal and Maryland state income taxes, consistent with relative
stability of principal. The Nations North Carolina Intermediate Municipal Bond
Fund's and Nations North Carolina Municipal Bond Fund's investment objective is
to seek a high level of current interest income exempt from Federal and North
Carolina state income taxes and state intangibles taxes, consistent with the
relative stability of principal. The Nations South Carolina Intermediate
Municipal Bond Fund's and Nations South Carolina Municipal Bond Fund's
investment objective is to seek a high level of current interest income exempt
from both Federal and South Carolina state income taxes, consistent with
relative stability of principal. The Nations Tennessee Intermediate Municipal
Bond Fund's and Nations Tennessee Municipal Bond Fund's investment objective is
to seek a high level of current interest income exempt from both Federal and
Tennessee state income taxes, consistent with relative stability of principal.
The Nations Texas Intermediate Municipal Bond Fund's and Nations Texas Municipal
Bond Fund's investment objective is to seek a high level of current interest
income exempt from Federal income taxes, consistent with the relative stability
of principal. The Nations Virginia Intermediate Municipal Bond Fund's and
Nations Virginia Municipal Bond Fund's investment objective is to seek a high
level of current interest income exempt from both Federal and Virginia state
income taxes, consistent with relative stability of principal.
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Each of the above State Intermediate Municipal Bond Funds and State Municipal
Bond Funds operates as a non-diversified fund (except to the extent
diversification is required for Federal income tax purposes). For these tax
purposes, with respect to 50% of the value of its assets, each Fund invests no
more than 5% of such assets in securities of a single issuer (except the U.S.
Government or its agencies or instrumentalities). Each Fund may not invest more
than 25% of its assets in the securities of a single issuer. The average dollar
weighted effective maturity of each of the State Intermediate Municipal Bond
Funds will be between three and ten years, except during temporary defensive
periods. The average dollar weighted effective maturity of the State Municipal
Bond Funds will be at least five years, except during temporary defensive
periods. The value of the Funds' portfolios can be expected to vary inversely
with changes in prevailing interest rates.
How Objectives Are Pursued
NATIONS SHORT-TERM MUNICIPAL INCOME FUND, NATIONS INTERMEDIATE MUNICIPAL BOND
FUND AND NATIONS MUNICIPAL INCOME FUND: Under normal market conditions, the
Nations Short-Term Municipal Income Fund, Nations Intermediate Municipal Bond
Fund and Nations Municipal Income Fund will invest at least 65% of the total
value of their assets in Municipal Securities which will be rated investment
grade at the time of purchase by at least one of the following rating agencies:
Standard & Poor's Corporation ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Duff & Phelps Credit Rating Co. ("D&P"), Fitch Investors Service,
Inc. ("Fitch"), IBCA Limited or its affiliate IBCA Inc. (collectively "IBCA"),
or Thomson BankWatch, Inc. ("BankWatch") or, if unrated, determined by the
Adviser to be of comparable quality at the time of purchase to rated obligations
that may be acquired by a Fund. Obligations rated in the lowest of the top four
investment grade rating categories (e.g. rated "BBB" by S&P or "Baa" by Moody's)
have speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations.
Subsequent to its purchase by a Fund, an issue of Municipal Securities may cease
to be rated, or its rating may be reduced below the minimum rating required for
purchase by a Fund. The Adviser will consider such an event in determining
whether a Fund should continue to hold the obligation. See "Appendix B" for a
description of these rating designations.
Up to 35% of the assets of Nations Short-Term Municipal Income Fund, Nations
Intermediate Municipal Bond Fund and Nations Municipal Income Fund may be
invested in lower-quality Municipal Securities rated "B" or better by Moody's or
S&P, or if not so rated, determined by the Adviser to be of comparable quality.
Securities which are rated "B" generally lack characteristics of the desirable
investment, and assurance of interest and principal payment over any long period
of time may be small. Non-investment-grade debt securities are sometimes
referred to as "high yield bonds" or "junk bonds," tend to have speculative
characteristics, generally involve more risk of principal and income than higher
rated securities, and have yields and market values that tend to fluctuate more
than higher quality securities. See "Appendix A -- Lower-Rated Debt Securities."
During temporary defensive periods, the Funds may invest in short-term taxable
obligations in such proportions as, in the opinion of the Adviser, prevailing
market or economic conditions warrant. Taxable obligations that may be acquired
by a Fund include short-term U.S. Government obligations, repurchase agreements,
and short-term debt securities. Under normal market conditions, each Fund's
investments in taxable obligations and private activity bonds (see "Appendix
A -- Municipal Securities"), the interest on which may be treated as a specific
tax preference item under the Federal alternative minimum tax, will not exceed
20% of its total assets at the time of purchase. The Funds may hold uninvested
cash reserves pending investment or during defensive periods. The value of a
Fund's portfolio generally will vary inversely with changes in prevailing
interest rates. For additional information concerning the Funds' investment
practices, see "Appendix A."
STATE INTERMEDIATE MUNICIPAL BOND FUNDS AND STATE MUNICIPAL BOND FUNDS: Under
normal market conditions, at least 65% of the total value of the assets of the
State Intermediate Municipal Bond Funds and the State Municipal Bond Funds will
be invested in municipal bonds, and substantially all of each Fund's assets will
be invested in debt instruments, issued by or on behalf of the pertinent state
and its political subdivisions, agencies, instrumentalities and authorities.
Dividends paid by each of these Funds which are derived from interest
attributable to tax-exempt obligations of the pertinent state and that state's
political subdivisions, agencies, instrumentalities and authorities, as well as
certain other governmental issuers such as Puerto Rico, will be exempt from
regular Federal income taxes and (with the exception of Texas and Florida) the
income tax of the pertinent state. Texas and Florida do not impose a state
income tax; however, Florida, Georgia and North Carolina do impose a state
intangibles tax. Dividends derived from interest on obligations of other
governmental issuers will be exempt from regular Federal income taxes, but
generally will be subject to state income tax (with the exception of Texas and
Florida). (See "How Dividends and Distributions are Made; Tax Information.")
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During normal market conditions and as a matter of fundamental investment
policy, each of these Funds will invest at least 80% of its total net assets in
obligations the interest on which will be exempt from regular Federal income
taxes and (with the exception of Texas and Florida) the income tax of the
pertinent state.
Municipal Securities acquired by the Funds will be rated investment grade at the
time of purchase by D&P, Fitch, S&P, Moody's, IBCA or BankWatch or, if unrated,
determined by the Adviser to be of comparable quality at the time of purchase to
rated obligations that may be acquired by the Funds. Obligations rated in the
lowest of the top four investment grade rating categories (e.g. rated "BBB" by
S&P or "Baa" by Moody's) have speculative characteristics, and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade debt obligations. Subsequent to its purchase by a Fund, an issue of
Municipal Securities may cease to be rated, or its rating may be reduced below
the minimum rating required for purchase by a Fund. The Adviser will consider
such an event in determining whether a Fund should continue to hold the
obligation. See "Appendix B" below for a description of these rating
designations.
The Funds also may invest in Municipal Securities with stated maturities of less
than one year, which are determined to present minimal credit risks and which at
the time of purchase are considered to be of high quality, issued by or on
behalf of states, territories, and possessions of the United States, the
District of Columbia, and their political subdivisions, agencies,
instrumentalities, and authorities, and the interest on which, in the opinion of
counsel to the issuer or bond counsel, is exempt from regular Federal income
taxes.
During temporary defensive periods, the Funds may invest in short-term taxable
obligations in such proportions as, in the opinion of the Adviser, prevailing
market or economic conditions warrant. Taxable obligations that may be acquired
by the Funds include short-term U.S. Government obligations; repurchase
agreements; options; and futures contracts. Under normal market conditions, each
Fund's investments in taxable obligations and private activity bonds (see
"Appendix A -- Municipal Securities"), the interest on which may be treated as a
specific tax preference item under the Federal alternative minimum tax, will not
exceed 20% of its total assets at the time of purchase. The Funds also may hold
uninvested cash reserves pending investment or during defensive periods. For
additional information concerning the Funds' investment practices, see "Appendix
A."
GENERAL: Each Fund may invest in certain specified derivative securities,
including: interest rate swaps, caps and floors for hedging purposes;
exchange-traded options; over-the-counter options executed with primary dealers,
including long calls and puts and covered calls to enhance return; and U.S. and
foreign exchange-traded financial futures and options thereon approved by the
Commodity Futures Trading Commission ("CFTC") for market exposure
risk-management. Each Fund also may lend its portfolio securities to qualified
institutional investors and may invest in restricted, private placement and
other illiquid securities. Additionally, each Fund may purchase securities
issued by other investment companies, consistent with the Fund's investment
objective and policies.
PORTFOLIO TURNOVER: Generally, the Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. If a Fund's annual portfolio turnover rate exceeds 100%, it may
result in higher brokerage costs and possible tax consequences for the Fund and
its shareholders. For the Funds' portfolio turnover rates, see "Financial
Highlights."
RISK CONSIDERATIONS: Although the Adviser will seek to achieve the investment
objective of each Fund, there is no assurance that it will be able to do so. No
single Fund should be considered, by itself, to provide a complete investment
program for any investor. Investments in a Fund are not insured against loss of
principal.
The value of a Fund's investments in debt securities will tend to decrease when
interest rates rise and increase when interest rates fall. In general,
longer-term debt instruments tend to fluctuate in value more than shorter-term
debt instruments in response to interest rate movements. In addition, debt
securities that are not backed by the United States Government are subject to
credit risk, which is the risk that the issuer may not be able to pay principal
and/or interest when due. Since each of the State Intermediate Municipal Bond
Funds and State Municipal Bond Funds invests primarily in securities issued by
entities located in a single state, such Funds are more susceptible to changes
in value due to political or economic changes affecting that state or its
subdivisions.
Certain of the Funds' investments constitute derivative securities, which are
securities whose value is derived, at least in part, from an underlying index or
reference rate. There are certain types of derivative securities that can, under
certain circumstances, significantly increase a purchaser's exposure to market
or other risks. The Funds' investment adviser, however, only purchases
derivative securities in circumstances where it believes such purchases are
consistent with the Fund's investment objective and do not unduly increase the
Fund's exposure to market or other risks. For additional risk information
regarding the Funds' investments in particular instruments, see "Appendix
A -- Portfolio Securities."
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INVESTMENT LIMITATIONS: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAI.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
tax-exempt securities issued by state or municipal governments and their
political subdivisions are not considered members of any industry.)
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
Nations Short-Term Municipal Income Fund, Nations Intermediate Municipal Bond
Fund and Nations Municipal Income Fund may not:
Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's
total assets would be invested in the securities of such issuer, except
that up to 25% of the value of the Fund's total assets may be invested
without regard to these limitations and with respect to 75% of such Fund's
assets, such Fund will not hold more than 10% of the voting securities of
any issuer.
The State Intermediate Municipal Bond Funds and the State Municipal Bond Funds
may not:
Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 25% of the value of a Fund's
total assets would be invested in the securities of one issuer, and with
respect to 50% of such Fund's total assets, more than 5% of its assets
would be invested in the securities of one issuer.
As a matter of fundamental policy, except during defensive periods, the State
Intermediate Municipal Bond Funds and the State Municipal Bond Funds will invest
at least 80% of their respective total net assets in Municipal Securities the
interest on which is exempt from Federal income taxes and the pertinent state's
income taxes (with the exception of Texas and Florida). Similarly, as a matter
of fundamental policy, except during defensive periods, the Nations Short-Term
Municipal Income Fund, Nations Intermediate Municipal Bond Fund and Nations
Municipal Income Fund will invest at least 80% of their respective total net
assets in Municipal Securities the interest on which is exempt from Federal
income taxes. For purposes of these fundamental policies, private activity bonds
are included in the term "Municipal Securities" only if the interest paid
thereon is exempt from Federal income taxes and not treated as a specific tax
preference item under the Federal alternative minimum tax.
The investment objective and policies of each Fund, unless otherwise specified,
may be changed without a vote of the Fund's shareholders. If the investment
objective or policies of a Fund change, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current position
and needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus and the SAI. Should a Fund determine that any such
commitment is no longer in the best interests of the Fund, it may consider
terminating sales of its shares in the states involved.
How Performance Is Shown
From time to time a Fund may advertise the total return, yield and
tax-equivalent yield on a class of shares. TOTAL RETURN, YIELD AND
TAX-EQUIVALENT YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a class of shares
of a Fund may be calculated on an average annual total return basis or an
aggregate total return basis. Average annual total return refers to the average
annual compounded rates of return on a class of shares over one-, five-, and
ten-year periods or the life of a Fund (as stated in the advertisement) that
would equate an initial amount invested at the beginning of a stated period to
the ending redeemable value of the investment (reflecting the deduction of any
applicable contingent deferred sales charge ("CDSC")), assuming the reinvestment
of all dividend and capital gains distributions. Aggregate total return reflects
the total percentage change in the value of the investment over the measuring
period, again assuming the reinvestment of all dividends and capital gain
distributions. Total
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return may also be presented for other periods or may not reflect a deduction of
the CDSC.
"Yield" is calculated by dividing the annualized net investment income per share
during a recent 30-day (or one month) period of a class of shares of a Fund by
the maximum public offering price per share on the last day of that period. The
yield on a class of shares does not reflect deduction of any applicable CDSC.
The "tax-equivalent yield" of a class of shares of a Fund also may be quoted
from time to time, which shows the level of taxable yield needed to produce an
after-tax equivalent to the particular class's tax-free yield. This is done by
increasing such class's yield (calculated as above) by the amount necessary to
reflect the payment of Federal income tax at a stated tax rate.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of the Fund's portfolio and the Fund's
operating expenses. Investment performance also often reflects the risks
associated with a Fund's investment objective and policies. These factors should
be considered when comparing a Fund's investment results to those of other
mutual funds and other investment vehicles. Since yields fluctuate, yield data
cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
In addition to Investor C Shares, the Funds offer Trust A, Trust B, Investor A
and Investor N Shares. Each Class of shares may bear different sales charges,
shareholder servicing fees, loads and other expenses, which may cause the
performance of a class to differ from the performance of the other classes.
Total return and yield quotations will be computed separately for each class of
the Funds' shares. Any quotation of total return or yield not reflecting CDSCs
would be reduced if such charges were reflected. Any fees charged by a selling
agent and/or servicing agent directly to its customers' accounts in connection
with investments in the Funds will not be included in calculations of total
return or yield. The Funds' annual report contains additional performance
information and is available upon request without charge from the Funds'
distributor or your selling agent.
How The Funds Are Managed
The business and affairs of Nations Fund Trust are managed under the direction
of its Trustees. The SAI contains the names of and general background
information concerning the Trustees of Nations Fund Trust.
Nations Fund and the Adviser have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially comply in all
material respects with the recommendations set forth in the May 9, 1994 Report
of the Advisory Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds. NBAI is a wholly owned subsidiary of NationsBank, which in turn is a
wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation. NBAI has its principal
offices at One NationsBank Plaza, Charlotte, North Carolina 28255.
TradeStreet Investment Associates, Inc. with principal offices at One
NationsBank Plaza Charlotte, North Carolina 28255, serves as sub-investment
adviser to the Funds. TradeStreet is a wholly owned subsidiary of NationsBank,
which in turn is a wholly owned banking subsidiary of NationsBank Corporation, a
bank holding company organized as a North Carolina corporation.
TradeStreet provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking.
Subject to the general supervision of the Trustees of Nations Fund Trust, and in
accordance with each Fund's investment policies, the Adviser formulates
guidelines and lists of approved investments for each Fund, makes decisions with
respect to and places orders for each Fund's purchases and sales of portfolio
securities and maintains records relating to such purchases and sales. The
Adviser is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions which are affiliated with the Adviser or
which have sold shares in the Funds, if the Adviser believes that the quality of
the transaction and the commission are comparable to what they would be with
other qualified brokerage firms. From time to time, to the extent consistent
with their investment objectives, policies and restrictions, the Funds may
invest in securities of companies with which NationsBank has a lending
relationship. For the services provided and expenses assumed pursuant to an
Investment Advisory Agreement, NBAI is entitled to receive advisory fees,
computed daily and paid monthly, at the annual rates of: 0.50% of the average
daily net assets of each of Nations Short-Term Municipal Income Fund, Nations
Intermedi-
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ate Municipal Bond Fund and the State Intermediate Municipal Bond Funds; and
0.60% of the average daily net assets of each of Nations Municipal Income Fund
and the State Municipal Bond Funds.
For the services provided and the expenses assumed pursuant to a sub-advisory
agreement, NBAI will pay TradeStreet sub-advisory fees, computed daily and paid
monthly, at the annual rates of 0.07% of average daily net assets of each Fund.
From time to time, NBAI and/or TradeStreet may waive (either voluntarily or
pursuant to applicable state limitations) advisory fees payable by a Fund. For
the fiscal year ended November 30, 1994, after waivers, Nations Fund Trust paid
NationsBank under a prior Advisory Agreement advisory fees at the indicated rate
of the Funds' average daily net assets: Nations Short-Term Municipal Income
Fund -- 0.10%; Nations Intermediate Municipal Bond Fund -- 0%; Nations Municipal
Income Fund -- 0.32%; Nations Florida Intermediate Municipal Bond Fund -- 0.30%;
Nations Florida Municipal Bond Fund -- 0%; Nations Georgia Intermediate
Municipal Bond Fund -- 0.30%; Nations Georgia Municipal Bond Fund -- 0%; Nations
Maryland Intermediate Municipal Bond Fund -- 0.30%; Nations Maryland Municipal
Bond Fund -- 0%; Nations North Carolina Intermediate Municipal Bond
Fund -- 0.24%; Nations North Carolina Municipal Bond Fund -- 0%; Nations South
Carolina Intermediate Municipal Bond Fund -- 0.30%; Nations South Carolina
Municipal Bond Fund -- 0%; Nations Tennessee Intermediate Municipal Bond
Fund -- 0.15%; Nations Tennessee Municipal Bond Fund -- 0%; Nations Texas
Intermediate Municipal Bond Fund -- 0.28%; Nations Texas Municipal Bond
Fund -- 0%; Nations Virginia Intermediate Municipal Bond Fund -- 0.38%; and
Nations Virginia Municipal Bond Fund -- 0%.
Michele M. Poirier is responsible for the management of Nations Municipal Income
Fund, Nations Florida Intermediate Municipal Bond Fund, Nations Florida
Municipal Bond Fund, Nations Georgia Intermediate Municipal Bond Fund, Nations
Georgia Municipal Bond Fund, Nations South Carolina Intermediate Municipal Bond
Fund and Nations South Carolina Municipal Bond Fund. Ms. Poirier is a Vice
President and Fixed Income Portfolio Manager and is responsible for over $1
billion in tax-exempt assets. She joined NationsBank in 1990 and is the
principal portfolio manager for 9 municipal bond mutual funds and 6 municipal
bond common trust funds. Ms. Poirier has over 20 years of investment experience
from positions previously held in management, sales and trading at Financial
Service Corporation, Bankers Trust Company and The Robinson-Humphrey Company,
respectively. She earned a B.B.A. in marketing from Georgia State University.
Mathew M. Kiselak, a Vice President and Fixed Income Portfolio Manager
responsible for over $ 600 million in assets is responsible for the management
of Nations Short-Term Municipal Income Fund, Nations North Carolina Intermediate
Municipal Bond Fund, Nations North Carolina Municipal Bond Fund, Nations
Tennessee Intermediate Municipal Bond Fund, Nations Tennessee Municipal Bond
Fund and Nations Texas Intermediate Municipal Bond Fund and Nations Texas
Municipal Bond Fund. Mr. Kiselak joined NationsBank in 1992 and has over seven
years of investment experience. Prior to joining NationsBank, Mr. Kiselak was a
tax-exempt portfolio manager and bank credit analyst for Reich & Tang Inc. He
received his B.A. in economics from Pace University.
John C. Kohl, a Senior Vice President and Fixed Income Portfolio Manager, has
been the principal portfolio manager of Nations Intermediate Municipal Bond
Fund, Nations Maryland Intermediate Municipal Bond Fund, Nations Maryland
Municipal Bond Fund, Nations Virginia Intermediate Municipal Bond Fund and
Nations Virginia Municipal Bond Fund since August 1994. Mr. Kohl, who has over
15 years of investment experience, joined NationsBank in 1994 and currently is
responsible for managing over $1 billion in tax-exempt assets. Prior to joining
NationsBank, Mr. Kohl was chief investment officer for a life insurance company,
fixed-income group manager for the personal trust group of a large midwestern
bank, and an asset-liability management consultant. Mr. Kohl received a joint
B.A. in Economics and North American Studies from McGill University in Montreal
and has continued his studies at The American University and the J.L. Kellogg
Graduate School of Management.
Morrison & Foerster LLP, counsel to Nations Fund and special counsel to
NationsBank, has advised Nations Fund and NationsBank that subsidiaries of
NationsBank may perform the services contemplated by the Investment Advisory
Agreement without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. Such counsel has pointed out, however, that there
are no controlling judicial or administrative interpretations or decisions and
that future judicial or administrative interpretations of, or decisions relating
to, present federal or state statutes, including the Glass-Steagall Act, and
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as future changes in such statutes,
regulations and judicial or administrative decisions or interpretations, could
prevent such subsidiaries of NationsBank from continuing to perform, in whole or
in part, such services. If such subsidiaries of NationsBank were prohibited from
performing any such services, it is expected that the Trustees of Nations Fund
Trust would recommend to the Funds' shareholders that they approve a new
advisory agreement with another entity or entities qualified to perform such
services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock,
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Arkansas 72201, serves as the administrator of the Funds pursuant to an
Administration Agreement. Pursuant to the terms of the Administration Agreement,
Stephens provides various administrative and corporate secretarial services to
the Funds, including providing general oversight of other service providers,
office space, utilities and various legal and administrative services in
connection with the satisfaction of various regulatory requirements applicable
to the Funds.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of
First Data Corporation, with principal offices at One Exchange Place, Boston,
Massachusetts 02109, serves as the co-administrator of the Funds pursuant to a
Co-Administration Agreement. Under the Co-Administration Agreement, TSSG
provides various administrative and accounting services to the Funds, including
performing calculations necessary to determine net asset values and dividends,
preparing tax returns and financial statements and maintaining the portfolio
records and certain general accounting records for the Funds. For the services
rendered pursuant to the Administration and Co-Administration Agreements,
Stephens and TSSG are entitled to receive a combined fee at the annual rate of
up to 0.10% of each Fund's average daily net assets. For the fiscal year ended
November 30, 1994, after waivers, Nations Fund Trust paid its administrators
fees at the indicated rate of the Funds' average daily net assets: Nations
Intermediate Municipal Bond Fund, Nations Municipal Income Fund, Nations Florida
Intermediate Municipal Bond Fund, Nations Georgia Intermediate Municipal Bond
Fund, Nations Maryland Intermediate Municipal Bond Fund, Nations North Carolina
Intermediate Municipal Bond Fund, Nations South Carolina Intermediate Municipal
Bond Fund, Nations Tennessee Intermediate Municipal Bond Fund, Nations Texas
Intermediate Municipal Bond Fund and Nations Virginia Intermediate Municipal
Bond Fund -- 0.09%. Nations Short-Term Municipal Income Fund, Nations North
Carolina Municipal Bond Fund, Nations Tennessee Municipal Bond Fund and Nations
Texas Municipal Bond Fund -- 0.06%; Nations Florida Municipal Bond
Fund -- 0.07%; and Nations Georgia Municipal Bond Fund, Nations Maryland
Municipal Bond Fund, Nations South Carolina Municipal Bond Fund and Nations
Virginia Municipal Bond Fund -- 0.05%.
NationsBank serves as sub-administrator for Nations Fund pursuant to a
Sub-Administration Agreement. Pursuant to the terms of the Sub-Administration
Agreement, NationsBank assists Stephens in supervising, coordinating and
monitoring various aspects of the Funds' administrative operations. For
providing such services, NationsBank shall be entitled to receive a monthly fee
from Stephens based on an annual rate of .01% of the Funds' average daily net
assets.
Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker-dealer with principal
offices at 111 Center Street, Little Rock, Arkansas 72201. Nations Fund has
entered into a distribution agreement with Stephens which provides that Stephens
has the exclusive right to distribute shares of the Funds. Stephens may pay
service fees or commissions to selling agents that assist customers in
purchasing Investor C Shares of the Funds. See "Shareholder Servicing and
Distribution Plans."
NationsBank of Texas, N.A. (the "Custodian") serves as custodian for the assets
of each Fund. The Custodian is located at 1401 Elm Street, Dallas, Texas 75202
and is a wholly owned subsidiary of NationsBank Corporation. In return for
providing custodial services, the Custodian is entitled to receive, in addition
to out-of-pocket expenses, fees payable monthly (i) at the rate of 1.25% of 1%
of the average daily net assets of each Fund, (ii) $10.00 per repurchase
collateral transaction by the Funds, and (iii) $15.00 per purchase, sale and
maturity transaction involving the Funds.
TSSG serves as transfer agent (the "Transfer Agent") for the Funds' Investor C
Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
Price Waterhouse LLP serves as independent accountant to Nations Fund. Their
address is 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES: The accrued expenses of each Fund, as well as certain expenses
attributable to Investor C Shares, are deducted from accrued income before
dividends are declared. Each Fund's expenses include, but are not limited to:
fees paid to the Adviser, NationsBank, Stephens and TSSG; interest; trustees'
fees and federal and state securities registration and qualification fees;
brokerage fees and commissions; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings; other
expenses which are not expressly assumed by the Adviser, NationsBank, Stephens
or TSSG under their respective agreements with Nations Fund; and any
extraordinary expenses. Investor C Shares may bear certain class specific retail
transfer agency expenses and also bear certain additional shareholder service
and/or sales support costs. Any general expenses of Nations Fund Trust that are
not readily identifiable as belonging to a particular investment portfolio are
allocated among all portfolios in the proportion that the assets of a portfolio
bear to the assets of Nations Fund Trust or in such other manner as the Board of
Trustees deems appropriate.
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Organization And History
The Funds are members of the Nations Fund Family, which consists of Nations Fund
Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc. and Nations
Institutional Reserves (formerly known as The Capitol Mutual Funds). The Nations
Fund Family currently has 44 distinct investment portfolios and total assets in
excess of $16 billion. Nations Fund Trust was organized as a Massachusetts
business trust on May 6, 1985. The Funds currently offer five classes of
shares -- Trust A Shares, Trust B Shares, Investor A Shares, Investor C Shares
and Investor N Shares. This Prospectus relates only to the Investor C Shares of
Nations Municipal Income Fund, Nations Short-Term Municipal Income Fund, Nations
Intermediate Municipal Bond Fund, Nations Florida Intermediate Municipal Bond
Fund, Nations Florida Municipal Bond Fund, Nations Georgia Intermediate
Municipal Bond Fund, Nations Georgia Municipal Bond Fund, Nations Maryland
Intermediate Municipal Bond Fund, Nations Maryland Municipal Bond Fund, Nations
North Carolina Intermediate Municipal Bond Fund, Nations North Carolina
Municipal Bond Fund, Nations South Carolina Intermediate Municipal Bond Fund,
Nations South Carolina Municipal Bond Fund, Nations Tennessee Intermediate
Municipal Bond Fund, Nations Tennessee Municipal Bond Fund, Nations Texas
Intermediate Municipal Bond Fund, Nations Texas Municipal Bond Fund, Nations
Virginia Intermediate Municipal Bond Fund and Nations Virginia Municipal Bond
Fund. To obtain additional information regarding the Funds' other classes of
shares which may be available to you, contact your Selling Agent (as defined
below) or Nations Fund at 1-800-321-7854
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class of shares. See the SAI for examples of instances where
the Investment Company Act of 1940 (the "1940 Act") requires voting by fund.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose or vote with respect to more than 25% of the outstanding shares of
Nations Fund Trust and therefore could be considered to be a controlling person
of Nations Fund Trust for purposes of the 1940 Act. In addition, as of August
31, 1995, the following persons owned of record 25% or more of Investor C Shares
of the Funds and therefore could be considered controlling persons of such class
for purposes of the 1940 Act: Nations Short-Term Municipal Income Fund, Carl W.
Cheek; Nations Intermediate Municipal Bond Fund, Charles W. Doolin; Nations
Florida Intermediate Municipal Bond Fund, Bertram C. Ellison & Joline M. Ellison
and Louise D. Lee; Nations Florida Municipal Bond Fund, John Trueman Jr. &
Lenora H. Trueman; Nations Georgia Municipal Bond Fund, F. Wayne Weaver and
Edith T. McWaters; Nations Tennessee Municipal Bond Fund, Frank W. Condurelis &
Jane E. Condurelis and Robert D. Nash & Sharon A. Nash and Nations Texas
Intermediate Municipal Bond Fund, Orsinger Investments LTD. For more detailed
information concerning the percentage of each class or series of shares over
which NationsBank and its affiliates possessed or shared power to dispose or
vote as of a certain date, see the SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
About Your Investment
How To Buy Shares
Stephens has established various procedures for purchasing Investor C Shares in
order to accommodate different investors. Purchase orders for Investor C Shares
may be placed through banks, broker/dealers or other financial institutions
(including certain affiliates
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of NationsBank) that have entered into a Sales Support Agreement with Stephens
("Selling Agents").
There is a minimum initial investment of $1,000. The minimum subsequent
investment is $100, except for investments pursuant to the Systematic Investment
Plan described below.
Investor C Shares may be purchased at net asset value per share. Purchases may
be effected on days on which the New York Stock Exchange (the "Exchange") is
open for business (a "Business Day").
With respect to Investor C Shares, the Selling Agents have entered into Sales
Support Agreements with Stephens whereby they will provide various sales support
services to their customers ("Customers") who own Investor C Shares. In
addition, banks, broker/dealers or other financial institutions (including
certain affiliates of NationsBank) that have entered into Servicing Agreements
with Nations Fund ("Servicing Agents") will provide various shareholder services
for their Customers who own Investor C Shares. Servicing Agents and Selling
Agents are sometimes referred to hereafter as "Agents." From time to time the
Agents, Stephens and Nations Fund may agree to voluntarily reduce the maximum
fees payable for sales support or shareholder services.
Nations Fund reserves the right to reject any purchase order. The issuance of
Investor C Shares is recorded on the books of the Funds and share certificates
are not issued unless expressly requested in writing. Certificates are not
issued for fractional shares.
EFFECTIVE TIME OF PURCHASES: Purchase orders for Investor C Shares of the Funds
which are received by Stephens or by the Transfer Agent before the close of
regular trading hours on the Exchange (currently 4:00 p.m., Eastern time) on any
Business Day are priced according to the net asset value determined on that day
but are not executed until 4:00 p.m., Eastern time, on the Business Day on which
immediately available funds in payment of the purchase price are received by the
Funds' Custodian. Such payment must be received not later than 4:00 p.m.,
Eastern time, by the third Business Day following receipt of the order. If funds
are not received by such date, the order will not be accepted and notice thereof
will be given to the Agent placing the order. Payment for orders which are not
received or accepted will be returned after prompt inquiry to the sending Agent.
The Agents are responsible for transmitting orders for purchases of Investor C
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Fund.
SYSTEMATIC INVESTMENT PLAN: Under the Funds' Systematic Investment Plan ("SIP")
a shareholder may automatically purchase Investor C Shares. On a bi-monthly,
monthly or quarterly basis, shareholders may direct cash to be transferred
automatically from their checking or savings account at any bank to their Fund
account. Transfers will occur on or about the 15th and/or 30th day of the
applicable month. The systematic investment amount may be in any amount from $25
to $100,000. For more information concerning the SIP, contact your Agent.
TELEPHONIC TRANSACTIONS: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How to Redeem Shares" and "How to
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. You should be aware that by electing the telephone transaction
feature, you may be giving up a measure of security that you may have if you
were to authorize written requests only. You may bear the risk of any resulting
losses from a telephone transaction. Nations Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
and if Nations Fund and its service providers fail to employ such measures, they
may be liable for any losses due to unauthorized or fraudulent instructions.
Nations Fund requires a form of personal identification prior to acting upon
instructions received by telephone and provides written confirmation to
shareholders of each telephone share transaction. In addition, Nations Fund
reserves the right to record all telephone conversations.
Shareholder Servicing And Distribution Plans
Pursuant to Rule 12b-1 under the 1940 Act, the Trustees have approved a
Distribution Plan with respect to Investor C Shares of the Funds. Pursuant to
the Distribution Plan, each Fund may compensate or reimburse Stephens for any
activities or expenses primarily intended to result in the sale of the Fund's
Investor C Shares. Payments under the Distribution Plan will be calculated daily
and paid monthly at a rate or rates set from time to time by the Trustees
provided that the annual rate may not exceed 0.75% of the average daily net
asset value of each Fund's Investor C Shares.
The fees payable under the Distribution Plan are used (i) to compensate Selling
Agents for providing sales support assistance relating to Investor C Shares,
(ii) to pay for promotional activities intended to result in the sale of
Investor C Shares such as the preparation, printing and distribution of
prospectuses to other than current
share-
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holders, and (iii) to compensate Selling Agents for providing sales support
services with respect to their Customers who are, from time to time, beneficial
and record holders of Investor C Shares. Currently, substantially all fees paid
pursuant to the Distribution Plan are paid to compensate Selling Agents for
providing the services described in (i) and (iii) above, with any remaining
amounts being used by Stephens to partially defray other expenses incurred by
Stephens in distributing Investor C Shares. Fees received by Stephens pursuant
to the Distribution Plan will not be used to pay any interest expenses, carrying
charges or other financing costs (except to the extent permitted by the SEC) and
will not be used to pay any general and administrative expenses of Stephens.
Nations Fund and Stephens may suspend or reduce payments under the Distribution
Plan at any time, and payments are subject to the continuation of the
Distribution Plan described above and the terms of the Sales Support Agreement
between Selling Agents and Stephens. See the SAI for more details on the
Distribution Plan.
The Trustees also have approved a shareholder servicing plan (the "Investor C
Servicing Plan") for each Fund which permits the Funds to compensate Servicing
Agents for services provided to their Customers that own Investor C Shares.
Payments under the Investor C Servicing Plan are calculated daily and paid
monthly at a rate or rates set from time to time by each Fund, provided that the
annual rate may not exceed 0.25% of the average daily net asset value of the
Fund's Investor C Shares.
The fees payable under the Investor C Servicing Plan are used primarily to
compensate or reimburse Servicing Agents for shareholder services provided, and
related expenses incurred, by such Servicing Agents. The shareholder services
provided by Servicing Agents may include: (i) aggregating and processing
purchase and redemption requests for Investor C Shares from Customers and
transmitting net purchase and redemption orders to Stephens or the Transfer
Agent; (ii) providing Customers with a service that invests the assets of their
accounts in Investor C Shares pursuant to specific or preauthorized
instructions; (iii) processing dividend and distribution payments from a Fund on
behalf of Customers; (iv) providing information periodically to Customers
showing their positions in Investor C Shares; (v) arranging for bank wires; and
(vi) providing general shareholder liaison services.
Nations Fund may suspend or reduce payments under the Investor C Servicing Plan
at any time, and payments are subject to the continuation of the Investor C
Servicing Plan described above and the terms of the Servicing Agreements. See
the SAI for more details on the Investor C Servicing Plan.
Nations Fund understands that Agents may charge fees to their Customers who are
the owners of the Funds' Investor Shares in connection with a Customer's
account. These fees would be in addition to any amounts received by a Selling
Agent under its Sales Support Agreement with Stephens or by a Servicing Agent
under its Servicing Agreement with Nations Fund. The Sales Support Agreements
and Servicing Agreements require Agents to disclose to their Customers any
compensation payable to the Agent by Stephens or Nations Fund and any other
compensation payable by the Customers for various services provided in
connection with their accounts. Customers should read this Prospectus in light
of the terms governing their accounts with their Agents.
Stephens may, from time to time, at its expense or as an expense for which it
may be reimbursed under the Distribution Plan, pay a bonus or other
consideration or incentive to Agents who sell a minimum dollar amount of shares
of a Fund during a specified period of time. Stephens also may, from time to
time, pay additional consideration to dealers not to exceed 0.75% of the
offering price per share on all sales of Investor C Shares as an expense of
Stephens or for which Stephens may be reimbursed under the Distribution Plan or
upon receipt of a CDSC. Any such additional consideration or incentive program
may be terminated at any time by Stephens.
In addition, Stephens has established a non-cash compensation program pursuant
to which broker/dealers or financial institutions that sell shares of the Funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise. This non-cash compensation program may be
amended or terminated at any time by Stephens.
How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders are
effected at the net asset value per share next determined after receipt of the
order by Stephens or by the Transfer Agent, less any applicable CDSC. The Agents
are responsible for transmitting redemption orders to Stephens or to the
Transfer Agent and for crediting their Customer's account with the redemption
proceeds on a timely basis. No charge for wiring redemption payments is imposed
by Nations Fund. Except for any CDSC which may be
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applicable upon redemption of Investor C Shares, as described below, there is no
redemption charge.
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens or by the Transfer Agent.
However, redemption proceeds for shares purchased by check may not be remitted
until at least 15 days after the date of purchase to ensure that the check has
cleared; a certified check, however, is deemed to be cleared immediately.
Nations Fund may redeem a shareholder's Investor C Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of an Agent
pursuant to arrangements between the Agent and its Customers. Nations Fund also
may redeem shares of a Fund involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
Prior to effecting a redemption of Investor C Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to Nations Fund have previously been
made. Nations Fund may require any additional information reasonably necessary
to evidence that a redemption has been duly authorized.
CONTINGENT DEFERRED SALES CHARGE: Subject to certain waivers, Investor C Shares
of each Fund that are redeemed within one year of the date of purchase will be
subject to a CDSC equal to 0.50% of the lesser of the net asset value or the
purchase price of the shares being redeemed. Investor C Shares purchased prior
to January 1, 1996 remain subject to the 1.00% CDSC (except Nations Short-Term
Municipal Income Fund). No CDSC is imposed on increases in net asset value above
the initial purchase price, including shares acquired by reinvestment of
distributions.
Solely for purposes of determining the period of time that has elapsed from the
purchase of any Investor C Shares, all purchases are deemed to have been made on
the trade date of the transaction. In determining whether a CDSC is applicable
to a redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares held for the longest period of time or shares
acquired pursuant to reinvestment of dividends or distributions. The charge will
not be applied to dollar amounts representing an increase in the net asset value
since the time of purchase.
The CDSC will be waived on redemptions of Investor C Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as amended
(the "Code")) of a shareholder (including a registered joint owner), (ii)
effected pursuant to Nations Fund's right to liquidate a shareholder's account
if the aggregate net asset value of the Investor Shares held in the account is
less than the minimum account size, (iii) in connection with the combination of
Nations Fund with any other registered investment company by merger, acquisition
of assets or by any other transaction, and (iv) effected pursuant to the
Automatic Withdrawal Plan discussed below, provided that such redemptions do not
exceed, on an annual basis, 12% of the net asset value of the Investor C Shares
in the account. Shareholders are responsible for providing evidence sufficient
to establish that they are eligible for any waiver of the CDSC. Nations Fund may
terminate any waiver of the CDSC by providing notice in the Prospectus, but any
such termination would affect only shares purchased after such termination.
Within 120 days after a redemption of Investor C Shares of a Fund, a shareholder
may reinvest any portion of the proceeds of such redemption in Investor C Shares
of the same Fund. The amount which may be so reinvested is limited to an amount
up to, but not exceeding, the redemption proceeds (or to the nearest full share
if fractional shares are not purchased). A shareholder exercising this privilege
would receive a pro rata credit for any CDSC paid in connection with the prior
redemption. A shareholder may not exercise this privilege with the proceeds of a
redemption of shares previously purchased through the reinstatement privilege.
In order to exercise this privilege, a written order for the purchase of
Investor C Shares must be received by the Transfer Agent or by Stephens within
120 days after the redemption.
AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by an existing shareholder of the Funds if the value of the Investor
C Shares in his/her accounts within the Nations Fund Family (valued at the net
asset value at the time of the establishment of the AWP) equals $10,000 or more.
Investor C Shares redeemed under the AWP will not be subject to a CDSC, provided
that the shares so redeemed do not exceed, on an annual basis, 12% of the net
asset value of the Investor C Shares in the account. Otherwise, any applicable
CDSC will be imposed on shares redeemed under the AWP. Shareholders who elect to
establish an AWP may receive a monthly, quarterly or annual check or automatic
transfer to a checking or savings account in a stated amount of not less than
$25 on or about the 10th or 25th day of the applicable month of withdrawal.
Investor C Shares will be redeemed (net of any applicable CDSC) as necessary to
meet withdrawal payments. Withdrawals will reduce principal and may eventually
deplete the shareholder's account. If a shareholder desires to establish an AWP
after opening an account, a signature guarantee will be required. AWPs may be
terminated by shareholders on 30 days' written notice to their Agent or by
Nations Fund at any time.
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How To Exchange Shares
SHARES PURCHASED DIRECTLY: The exchange feature enables a shareholder of
Investor C Shares of a Nations Fund non-money market fund (including the Funds)
to acquire shares of the same class that are offered by another non-money market
fund of Nations Fund or Investor D Shares of a money market fund of Nations Fund
when the shareholder believes that a shift between funds is an appropriate
investment decision. A qualifying exchange is based on the next calculated net
asset value per share of each fund after the exchange order is received.
No CDSC will be imposed in connection with an exchange of Investor C Shares that
meets the requirements discussed in this section. If a shareholder acquires
Investor C Shares of a non-money market fund through an exchange, the CDSC
applicable to the original shares purchased (except for Nations Short-Term
Income Fund and Nations Short-Term Municipal Income Fund Shares purchased prior
to January 1, 1996, which will be subject to the CDSC schedule applicable to the
acquired Fund) will be applied to any redemption of the acquired shares.
Additionally, if a shareholder acquires Investor D Shares of a money market fund
or Investor C Shares of Nations Short-Term Income Fund or Nations Short-Term
Municipal Income Fund with Shares of another Fund purchased prior to January 1,
1996, the CDSC schedule applicable to the exchanged Investor C Shares will be
applied on any redemption of the acquired shares. Notwithstanding the foregoing,
if a shareholder redeems shares acquired through an exchange, the shareholder
will be subject to the highest CDSC schedule applicable to any shares that were
exchanged within 30 days prior to the redemption.
Additionally, when an investor exchanges Investor C Shares of the Funds (except
Nations Short-Term Municipal Income Fund) for shares of the same class of
another non-money market fund, or Investor D shares of a money market fund
offered by Nations Fund the remaining period of time (if any) that the CDSC is
in effect will be computed from the time of the initial purchase of the
previously held shares. If an investor exchanges Investor C Shares of Nations
Short-Term Municipal Income Fund purchased prior to January 1, 1996 for Investor
C Shares of another non-money market fund that are subject to a CDSC, the
remaining period of time that the CDSC applicable to the acquired shares is in
effect will be computed from the time of the exchange.
AUTOMATIC EXCHANGE FEATURE: Under the Funds' Automatic Exchange Feature ("AEF"),
a shareholder may automatically exchange at least $25 on a monthly or quarterly
basis. Shareholder may direct proceeds to be exchanged from one Nations Fund to
another as allowed by the applicable exchange rules within the prospectus.
Exchanges will occur on or about the 15th and/or 30th day of the applicable
month. The shareholder must have an existing position in both Funds in order to
establish the AEF. This feature may be established by directing a request to the
Transfer Agent by telephone or in writing. For additional information, please
contact your selling agent.
GENERAL: The Funds and each of the other funds of Nations Fund may limit the
number of times this exchange feature may be exercised by a shareholder within a
specified period of time. Also, the exchange feature may be terminated or
revised at any time by Nations Fund upon such notice as may be required by
applicable regulatory agencies (presently 60 days for termination or material
revision), absent unusual circumstances.
The current prospectus for each fund of Nations Fund describes its investment
objective and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for Federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.
The Investor C Shares exchanged must have a current value of at least $1,000
(except for exchanges through the AEF). Nations Fund reserves the right to
reject any exchange request. Only shares that may legally be sold in the state
of the investor's residence may be acquired in an exchange. Only shares of a
class that is accepting investments generally may be acquired in an exchange. An
investor may telephone an exchange request by calling his/her Agent which is
responsible for transmitting such request to Stephens or to the Transfer Agent.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. In such event, shares may be exchanged by mailing the
request directly to the Agent through which the original shares were purchased.
An investor should consult his/her Agent or Stephens for further information
regarding exchanges.
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How The Funds Value Their Shares
The Funds calculate the net asset value of a share of each class by dividing the
total value of its assets, less liabilities, by the number of shares in the
class outstanding. Shares are valued as of the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on each Business Day. Currently,
the days on which the Exchange is closed (other than weekends) are: New Year's
Day, Presidents' Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Portfolio securities for which
market quotations are readily available are valued at market value. Short-term
investments that will mature in 60 days or less are valued at amortized cost,
which approximates market value. All other securities and assets are valued at
their fair value following procedures approved by the Trustees.
How Dividends And Distributions Are Made;
Tax Information
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income are declared
daily and paid monthly by the Funds. Each Fund's net realized capital gains
(including net short-term capital gains) are distributed at least annually.
Distributions from capital gains are made after applying any available capital
loss carryovers. Distributions paid by the Funds with respect to one class of
shares may be greater or less than those paid with respect to another class of
shares due to the different expenses of the different classes.
The net asset value of Investor C Shares will be reduced by the amount of any
dividend or distribution. Certain Selling or Servicing Agents may provide for
the reinvestment of dividends in the form of additional Investor C Shares of the
same class of the same Fund. Dividends and distributions are paid in cash within
five Business Days of the end of the month or quarter to which the dividend
relates. Dividends and distributions payable to a shareholder are paid in cash
within five Business Days after a shareholder's complete redemption of his/her
Investor Shares.
TAX INFORMATION: Each Fund intends to qualify as a "regulated investment
company" under the Code. Such qualification relieves a Fund of liability for
Federal income taxes on amounts distributed in accordance with the Code.
As regulated investment companies, the Funds are permitted to pass through to
their shareholders tax-exempt income ("exempt-interest dividends") subject to
certain requirements which the Funds intend to satisfy. Distributions from
taxable income will be taxable as ordinary income to shareholders whether such
income is received in cash or reinvested in additional shares. The policy of the
Funds is to pay to their shareholders an amount equal to at least 90% of their
exempt-interest income and their investment company taxable income. Exempt-
interest dividends may be treated by shareholders as items of interest
excludable from their Federal gross income under Section 103(a) of the Code
unless under the circumstances applicable to the particular shareholder the
exclusion would be disallowed. (See the SAI under "Additional Information
Concerning Taxes.") Distributions from the Funds will not qualify for the
dividends received deduction for corporate shareholders. Distributions of net
investment income by Nations Municipal Income Fund, Nations Short-Term Municipal
Income Fund and Nations Intermediate Municipal Bond Fund may be taxable to
investors even though a substantial portion of such distributions may be derived
from interest on tax-exempt obligations which, if realized directly, would be
exempt from such income taxes.
Substantially all of a Fund's net realized long-term capital gains will be
distributed at least annually. The Funds will generally have no tax liability
with respect to such gains, and the distributions will be taxable to
shareholders as long-term capital gains, regardless of how long the shareholders
have held the Fund's shares and whether such gains are received in cash or
reinvested in additional shares.
Each year, shareholders will be notified as to the amount and federal tax status
of all dividends and capital gains paid during the prior year. Such dividends
and capital gains may be subject to state and local taxes, as discussed more
fully below and in the SAI.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by a Fund on December 31 of such year in
the event such dividends are actually paid during January of the following year.
Federal law requires Nations Fund to withhold 31% from any dividends (other than
exempt-interest dividends) paid by Nations Fund and/or redemptions (including
exchange redemptions) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not
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apply, or if the Internal Revenue Service has notified Nations Fund that the
Taxpayer Identification Number listed on a shareholder account is incorrect
according to its records, or that the shareholder is subject to backup
withholding. Amounts withheld are applied to the shareholder's Federal tax
liability, and a refund may be obtained from the Internal Revenue Service if
withholding results in overpayment of taxes. Federal law also requires the Funds
to withhold 30% or the applicable tax treaty rate from dividends paid to certain
nonresident alien, non-U.S. partnership and non-U.S. corporation shareholder
accounts.
If any of the Funds should hold certain private activity bonds issued after
August 7, 1986, shareholders must include, as an item of tax preference, the
portion of dividends paid by the Fund that is attributable to interest on such
bonds in their Federal alternative minimum taxable income for purposes of
determining liability (if any) for the 28% alternative minimum tax applicable to
individuals and the 20% alternative minimum tax and the environmental tax
applicable to corporations. Corporate shareholders must also take all
exempt-interest dividends into account in determining certain adjustments for
Federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed at the rate of 0.12% on the excess of
the corporation's modified Federal alternative minimum taxable income over
$2,000,000. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.
With respect to the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds, it is anticipated that exempt-interest dividends derived
from tax-exempt interest paid on municipal obligations of the pertinent state
and that state's political subdivisions, agencies, instrumentalities, and
authorities, and certain other issuers, including Puerto Rico and Guam, will be
exempt from state income tax with respect to those states which impose a state
income tax. Florida and Texas do not impose income taxes, but Florida, Georgia
and North Carolina impose a tax upon tangible personal property which may apply
to shares of the Funds held by residents of those states. Florida has issued a
Technical Assistance Advisement indicating that shares of the Nations Florida
Intermediate Municipal Bond Fund and the Nations Florida Municipal Bond Fund
will not be subject to Florida's intangibles tax, subject to certain
requirements which these two Funds intend to satisfy. See the SAI for further
details about state tax treatment relevant to shareholders of the Funds.
In addition to annual disclosures as to Federal tax consequences of dividends
and distributions, shareholders of the State Intermediate Municipal Bond Funds
and the State Municipal Bond Funds will also be advised as to the state tax
consequences of dividends and distributions made each year.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning.
Accordingly, potential investors should consult their tax advisers with specific
reference to their own tax situations. Further tax information is contained in
the SAI.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAI contains more
information concerning such investments.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. Each Fund will limit its investments in
bank obligations so they do not exceed 25% of each Fund's total assets at the
time of purchase.
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Funds' total assets must be repaid prior to
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the purchase of portfolio securities. The Funds are parties to a Line of Credit
Agreement with Mellon Bank, N.A. Advances under the agreement are taken
primarily for temporary or emergency purposes, including the meeting of
redemption requests that otherwise might require the untimely disposition of
securities.
Reverse repurchase agreements and dollar roll transactions may be considered to
be borrowings. When a Fund invests in a reverse repurchase agreement, it sells a
portfolio security to another party, such as a bank or broker-dealer, in return
for cash, and agrees to buy the security back at a future date and price.
Reverse repurchase agreements may be used to provide cash to satisfy unusually
heavy redemption requests without having to sell portfolio securities, or for
other temporary or emergency purposes.
FIXED INCOME INVESTING: The performance of the fixed-income debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. A Fund's share price
and yield depend, in part, on the maturity and quality of its debt instruments.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS: Certain of the Funds may
attempt to reduce the overall level of investment risk of particular securities
and attempt to protect a Fund against adverse market movements by investing in
futures, options and other derivative instruments. These include the purchase
and writing of options on securities (including index options) and options on
foreign currencies, and investing in futures contracts for the purchase or sale
of instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign government, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and swaps
and swap-related products such as interest rate swaps, currency swaps, caps,
collars and floors.
The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable position.
Additional risks inherent in the use of futures, options, forward contracts and
swaps include: imperfect correlation between the price of futures, options and
forward contracts and movements in the prices of the securities or currencies
being hedged; the possible absence of a liquid secondary market for any
particular instrument at any time; and the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. A Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks, is
contained in the SAI.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Funds will not knowingly
invest more than 15% of the value of their respective net assets in securities
that are illiquid or such lower percentage as may be required by the states in
which the appropriate Fund sells its shares. Repurchase agreements and time
deposits that do not provide for payment to a Fund within seven days after
notice, guaranteed investment contracts and some commercial paper issued in
reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act") (other than variable amount master demand notes with
maturities of nine months or less), are subject to the limitation on illiquid
securities. In addition, interests in privately arranged loans acquired by the
State Intermediate Municipal Bond Funds and the State Municipal Bond Funds may
be subject to this limitation.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by a Fund's Board of Trustees or the Adviser, acting
under guidelines approved and monitored by the Fund's Board, that an adequate
trading market exists for that security.
INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of its
portfolio from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, E.G., an exchange of floating rate payments for fixed rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. The Adviser expects to enter into these
transactions on behalf of a Fund primarily to
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preserve a return or spread on a particular investment or portion of its
portfolio or to protect against any increase in the price of securities the Fund
anticipated purchasing at a later date rather than for speculative purposes. A
Fund will not sell interest rate caps or floors that it does not own.
LOWER-RATED DEBT SECURITIES: Lower-rated, high-yielding securities are those
rated Ba or B by Moody's or BB or B by S&P which are commonly referred to as
"junk bonds." These bonds provide poor protection for payment of principal and
interest. Lower-quality bonds involve greater risk of default or price changes
due to changes in the issuer's creditworthiness than securities assigned a
higher quality rating. These securities are considered to have speculative
characteristics and indicate an aggressive approach to income investing. The
Funds intend to limit their investments in lower-quality debt securities to 35%
of assets.
The market for lower-rated securities may be thinner and less active than that
for higher quality securities, which can adversely affect the price at which
these securities can be sold. If market quotations are not available, these
lower-rated securities will be valued in accordance with procedures established
by the Funds' Board, including the use of outside pricing services. Adverse
publicity and changing investor perceptions may affect the ability of outside
pricing services used by a Fund to value its portfolio securities, and a Fund's
ability to dispose of these lower-rated bonds.
The market prices of lower-rated securities may fluctuate more than higher-rated
securities and may decline significantly in periods of general economic
difficulty which may follow periods of rising interest rates. During an economic
downturn or a prolonged period of rising interest rates, the ability of issuers
of lower quality debt to service their payment obligations, meet projected
goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower-rated securities, the Adviser will
try to minimize the risks inherent in investing in lower-rated debt securities
by engaging in credit analysis, diversification, and attention to current
developments and trends affecting interest rates and economic conditions. The
Adviser will attempt to identify those issuers of high-yielding securities whose
financial condition are adequate to meet future obligations, have improved, or
are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated securities,
but they may not be attractive to as many buyers. Each Fund's policies regarding
lower-rated debt securities is not fundamental and may be changed at any time
without shareholder approval.
MONEY MARKET INSTRUMENTS: The term "money market instruments" refers to
instruments with remaining maturities of one year or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable- or floating-rate instruments issued
by industrial development authorities and other governmental entities. While
there may not be an active secondary market with respect to a particular
instrument purchased by a Fund, a Fund may demand payment of the principal and
accrued interest on the instrument or may resell it to a third party as
specified in the instruments. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if the
issuer defaulted on its payment obligation or during periods the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by a
Fund will be determined by NationsBank to be of comparable quality at the time
of purchase to instruments rated "high quality" by any major rating service.
Where necessary to ensure that an instrument is of comparable "high quality," a
Fund will require that an issuer's obligation to pay the principal of the note
may be backed by an unconditional bank letter or line of credit, guarantee, or
commitment to lend.
Municipal securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases."
Generally such loans are unrated, in which case they will be determined by the
Adviser to be of comparable quality at
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the time of purchase to rated instruments that may be acquired by a Fund.
Frequently, privately arranged loans have variable interest rates and may be
backed by a bank letter of credit. In other cases, they may be unsecured or may
be secured by assets not easily liquidated. Moreover, such loans in most cases
are not backed by the taxing authority of the issuers and may have limited
marketability or may be marketable only by virtue of a provision requiring
repayment following demand by the lender. Such loans made by a Fund may have a
demand provision permitting the Fund to require payment within seven days.
Participations in such loans, however, may not have such a demand provision and
may not be otherwise marketable. To the extent these securities are illiquid,
they will be subject to each Fund's limitation on investments in illiquid
securities. Recovery of an investment in any such loan that is illiquid and
payable on demand may depend on the ability of the municipal borrower to meet an
obligation for full repayment of principal and payment of accrued interest
within the demand period, normally seven days or less (unless a Fund determines
that a particular loan issue, unlike most such loans, has a readily available
market). As it deems appropriate, the Adviser will establish procedures to
monitor the credit standing of each such municipal borrower, including its
ability to meet contractual payment obligations.
Municipal securities may include units of participation in trusts holding pools
of tax-exempt leases. Municipal participation interests may be purchased from
financial institutions, and give the purchaser an undivided interest in one or
more underlying municipal security. To the extent that municipal participation
interests are considered to be "illiquid securities," such instruments are
subject to each Fund's limitation on the purchase of illiquid securities.
Municipal leases and participating interests therein which may take the form of
a lease or an installment sales contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities. Interest payments on qualifying leases are exempt from Federal
income taxes.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to Municipal Securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified Municipal Securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.
Although the Funds do not presently intend to do so on a regular basis, each may
invest more than 25% of its total assets in Municipal Securities the interest on
which is paid solely from revenues of similar projects if such investment is
deemed necessary or appropriate by the Adviser. To the extent that more than 25%
of a Fund's total assets are invested in Municipal Securities that are payable
from the revenues of similar projects, a Fund will be subject to the peculiar
risks presented by such projects to a greater extent than it would be if its
assets were not so concentrated.
Since each of the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds will invest primarily in securities issued by issuers
located in one state, each of these Funds is susceptible to changes in value due
to political and economic factors affecting that state's issuers. A comparable
municipal bond fund which is not concentrated in obligations issued by issuers
located in one state would be less susceptible to these risks. If any issuer of
securities held by one of these Funds is unable to meets its financial
obligations, that Fund's income, capital, and liquidity may be adversely
affected.
For the past forty years, the economy of the State of Florida has consisted
primarily of tourism, retirement and agriculture. More recently, military and
defense spending have fueled economic diversification as well as the aerospace
industry, laser optics research, computer manufacturing and international trade
and commerce. Currently, Moody's rates Florida's general obligation bonds "Aa,"
and S&P rates such bonds "AA."
The State of Georgia has a diversified economy, which has performed relatively
well in recent years. Important industries in the State include pulp and paper
products, agriculture and textiles. Currently, Moody's rates Georgia general
obligation bonds "Aaa" and S&P rates such bonds "AA+."
The State of Maryland's leading areas of employment are services (including
mining), wholesale and retail trade, government, and manufacturing (primarily
printing and publishing, food and kindred products, instruments and related
products, electronic equipment, industrial machinery, and transportation
equipment). Maryland has a higher than average number of people employed by the
Government. The Port of Baltimore is one of the larger international ports in
the United States and in the world. Currently, Moody's rates Maryland general
obligation bonds "Aaa" and S&P rates such bonds "AAA."
The State of North Carolina has an economic base consisting of a combination of
manufacturing, services, agriculture and tourism. During the period from 1980 to
1993, the per capita income in the State grew from $7,999 to $18,702, an
increase of 133.8%. During the same period the State's labor force increased
24.5%. Currently, Moody's rates the state of North Carolina's general obligation
bonds "Aaa" and S&P rates such bonds "AAA."
The State of South Carolina's economy has been dominated since the early 1920's
by the textile industry, with
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over one-third of the manufacturing workers directly or indirectly related to
the textile industry. The economic base of the State is gradually becoming more
diversified as the trade and service sectors and durable goods manufacturing
industries have developed. Currently, Moody's rates South Carolina general
obligation bonds "Aaa" and S&P rates such bonds "AA+."
The State of Tennessee has an economic base consisting primarily of
manufacturing, services, agriculture and tourism. Currently, Moody's rates the
State of Tennessee's general obligation bonds "Aaa" and S&P rates such bonds
"AA+."
The State of Texas has long been identified with the oil and gas industry, but
the Texas economy recently has become more diversified. Oil and gas related
industries accounted for 27% of the state's total output of goods and services
in 1981, but currently account for only 12% of the state's economy. Servicing
sectors (which include transportation and public utilities; finance and
insurance; trade; services; and government) are the major sources of job growth
in Texas. Texas' location and transportation and accessibility have made it a
distribution center for the southwestern United States as well as an
international center for finance and distribution. The high-technology sector,
growth of exports and manufacturing job growth are expected to contribute to
Texas' future growth. Currently Moody's rates Texas general obligations bonds
"Aa" and S&P rates such bonds "AA."
The Commonwealth of Virginia has a diversified economy with government,
manufacturing, high technology (both manufacturing and non-manufacturing)
industries, agriculture, mining, construction, services, and tourism all
represented. Virginia also has benefited from its port facilities, a large
number of federal government and military installations, and its proximity to
Washington, D.C. Currently Moody's rates Virginia general obligation bonds "Aaa"
and S&P rates such bonds "AAA."
There can be no assurance that the economic conditions on which the above
ratings for a specific state are based will continue or that particular bond
issues may not be adversely affected by changes in economic or political
conditions. More detailed information about matters relating to each of the
State Intermediate Municipal Bond Funds and State Municipal Bond Funds is
contained in the SAI.
OTHER INVESTMENT COMPANIES: A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indexes, non-U.S. interest rates and foreign currencies, that
have been approved by the CFTC for investment by U.S. investors, for the purpose
of hedging against changes in values of a Fund's securities or changes in the
prevailing levels of interest rates or currency exchange rates. The contracts
entail certain risks, including but not limited to the following: no assurance
that futures contracts transactions can be offset at favorable prices; possible
reduction of a Fund's total return due to the use of hedging; possible lack of
liquidity due to daily limits on price fluctuation; imperfect correlation
between the contracts and the securities or currencies being hedged; and
potential losses in excess of the amount invested in the futures contracts
themselves.
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
for which no common clearing facility exists and a trader may look only to the
broker for performance of the contract. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the
currencies in which trading is done on foreign exchanges, any profits that such
Fund might realize could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes.
U.S. GOVERNMENT OBLIGATIONS: U.S. Government obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. Obligations of U.S.
Government agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
E.G., Government National Mortgage Association certificates; in other cases
interest and principal are not guaranteed, E.G., obligations of the Federal Home
Loan Bank System and the Federal Farm Credit Bank. No assurance can be given
that the U.S. Government would provide financial support to government-sponsored
instrumentalities if it is not obligated to do so by law.
VARIABLE- AND FLOATING-RATE INSTRUMENTS: Certain instruments issued, guaranteed
or sponsored by the U.S.
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Government or its agencies, state and local government issuers, and certain debt
instruments issued by domestic banks and corporations may carry variable or
floating rates of interest. Such instruments bear interest rates which are not
fixed, but which vary with changes in specified market rates or indices, such as
a Federal Reserve composite index. A variable-rate demand instrument is an
obligation with a variable or floating interest rate and an unconditional right
of demand on the part of the holder to receive payment of unpaid principal and
accrued interest. An instrument with a demand period exceeding seven days may be
considered illiquid if there is no secondary market for such security.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities takes
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
Appendix B -- Description Of Ratings
The following summarizes the highest six ratings used by S&P for corporate and
municipal bonds. The first four ratings denote investment grade securities.
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher-rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher-rated categories.
BB, B -- Bonds rated BB and B are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB represents the lowest
degree of speculation and B a higher degree of speculation. While such
bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the highest six ratings used by Moody's for corporate
and municipal bonds. The first four ratings denote investment grade securities.
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
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Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa through B. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category. With regard to municipal bonds, those bonds
in the Aa, A and Baa groups which Moody's believes possess the strongest
investment attributes are designated by the symbols Aa1, A1 or Baa1,
respectively.
The following summarizes the highest four ratings used by D&P for bonds, each of
which denotes that the securities are investment grade:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
A -- Bonds that are rated A have protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
BBB -- Bonds that are rated BBB have below average protection factors but
still are considered sufficient for prudent investment. Considerable
variability in risk exists during economic cycles.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major categories.
The following summarizes the highest four ratings used by Fitch for bonds, each
of which denotes that the securities are investment grade:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A -- Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
36
<PAGE>
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are Duff 1, Duff 2 and Duff 3.
D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the highest
rating category. Duff 1+ indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be minor.
Duff 1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. Duff 2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. Duff 3 indicates satisfactory liquidity and other protection factors
which qualify the issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
The following summarizes the three highest rating categories used by Fitch for
short-term obligations, each of which denotes securities that are investment
grade:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
F-2 securities possess good credit quality. Issues carrying this rating
have a satisfactory degree of assurance for timely payment, but the margin
of safety is not as great as for issues assigned the F-1+ and F-1 ratings.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following is the four investment grade ratings used by BankWatch
for long-term debt:
AAA -- The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA -- The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
A -- The third highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with
higher ratings.
BBB -- The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however,
more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 -- The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
37
<PAGE>
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
TBW-3 -- The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
The following summarizes the three highest long-term ratings used by IBCA:
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk albeit not very significantly.
A -- Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
The following summarizes the three highest short-term debt ratings used by IBCA:
A1+ -- Obligations supported by the highest capacity for timely repayment
and possessing a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
A2 -- Obligations supported by a good capacity for timely repayment.
38
<PAGE>
Prospectus
INVESTOR C SHARES
SEPTEMBER 30, 1995
AS SUPPLEMENTED ON
JANUARY 19, 1996
This Prospectus describes the NATIONS VALUE FUND,
NATIONS EQUITY INCOME FUND, NATIONS BALANCED ASSETS
FUND, NATIONS CAPITAL GROWTH FUND, NATIONS EMERGING
GROWTH FUND, NATIONS DISCIPLINED EQUITY FUND,
NATIONS INTERNATIONAL EQUITY FUND, NATIONS EMERGING
MARKETS FUND AND NATIONS PACIFIC GROWTH FUND (the
"Funds") of the Nations Fund Family ("Nations Fund"
or "Nations Fund Family"). This Prospectus describes
one class of shares of the Funds -- Investor C
Shares. The Nations Disciplined Equity Fund was
formerly called "Nations Special Equity Fund."
This Prospectus sets forth concisely the information
about the Funds that prospective purchasers of
Investor C Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust, Nations Fund, Inc. and Nations
Fund Portfolios, Inc. ("Nations Portfolios") is
contained in separate Statements of Additional
Information (the "SAIs"), which have been filed with
the Securities and Exchange Commission (the "SEC")
and are available upon request without charge by
writing or calling Nations Fund at its address or
telephone number shown below. The SAIs for Nations
Fund Trust, Nations Fund, Inc. and Nations
Portfolios, dated September 30, 1995, September 30,
1995 and July 1, 1995, respectively, are
incorporated by reference in their entirety into
this Prospectus. NationsBanc Advisors, Inc. ("NBAI")
is the investment adviser to the Funds. TradeStreet
Investment Associates, Inc. ("TradeStreet") is
sub-investment adviser to certain of the Funds and
Nations Gartmore Investment Management ("Nations
Gartmore") is sub-investment adviser to the other
Funds. As used herein the "Adviser" shall mean NBAI,
TradeStreet and/or Nations Gartmore as the context
may require.
SHARES OF NATIONS FUND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. ("NATIONSBANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
NATIONSBANK AND CERTAIN OF ITS AFFILIATES PROVIDE
CERTAIN OTHER SERVICES TO NATIONS FUND, FOR WHICH
THEY ARE COMPENSATED. STEPHENS INC., WHICH IS NOT
AFFILIATED WITH NATIONSBANK, IS THE SPONSOR AND
ADMINISTRATOR AND SERVES AS THE DISTRIBUTOR FOR
NATIONS FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
GROWTH AND INCOME FUNDS:
Nations Value Fund
Nations Equity Income Fund
Nations Balanced Assets Fund
GROWTH FUNDS:
Nations Capital Growth Fund
Nations Emerging Growth Fund
Nations Disciplined Equity
Fund
INTERNATIONAL FUNDS:
Nations International
Equity Fund
Nations Emerging Markets
Fund
Nations Pacific
Growth Fund
For purchase, redemption and
performance information
call:
1-800-321-7854
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
(Nations Fund Logo)
<PAGE>
Table Of Contents
About The Funds
Expenses Summary 3
Financial Highlights 5
Objectives 10
How Objectives Are Pursued 10
How Performance is Shown 17
How the Funds Are Managed 19
Organization and History 22
About Your Investment
How to Buy Shares 24
Shareholder Servicing and Distribution Plans 25
How to Redeem Shares 26
How to Exchange Shares 27
How the Funds Value Their Shares 28
How Dividends and Distributions are Made; Tax
Information 28
Appendix A -- Portfolio Securities 30
Appendix B -- Description of Ratings 35
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAIS
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
NATIONS FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY NATIONS FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds. The
following tables summarize shareholder transaction and operating expenses for
Investor C Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations Nations
Nations Equity Balanced
Value Fund Income Fund Assets Fund
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None None None
Deferred Sales Charge (as a percentage of the lower of
the original purchase price or redemption proceeds)1 .50% .50% .50%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .75% .70% .75%
Rule 12b-1 Fees .25% .25% .25%
Shareholder Servicing Fees .25% .25% .25%
Other Expenses .17% .25% .20%
Total Operating Expenses 1.42% 1.45% 1.45%
</TABLE>
<TABLE>
<CAPTION>
Nations
Capital Nations Emerging
Growth Fund Growth Fund
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None None
Deferred Sales Charge (as a percentage of the lower of
the original purchase price or redemption proceeds)1 .50% .50%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .75% .75%
Rule 12b-1 Fees .25% .25%
Shareholder Servicing Fees .25% .25%
Other Expenses .17% .20%
Total Operating Expenses 1.42% 1.45%
</TABLE>
<TABLE>
<CAPTION>
Nations Nations
Disciplined International Nations Emerging
Equity Fund Equity Fund Markets Fund
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None None None
Deferred Sales Charge (as a percentage of the lower of the original
purchase price or redemption proceeds)1 .50% .50% .50%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .75% .90% 1.10%
Rule 12b-1 Fees .25% .25% .25%
Shareholder Servicing Fees .25% .25% .25%
Other Expenses .25% .20% .80%
Total Operating Expenses 1.50% 1.60% 2.40%
</TABLE>
<TABLE>
<CAPTION>
Nations Pacific
Growth Fund
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None
Deferred Sales Charge (as a percentage of the lower of the original
purchase price or redemption proceeds)1 .50%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .90%
Rule 12b-1 Fees .25%
Shareholder Servicing Fees .25%
Other Expenses .80%
Total Operating Expenses 2.20%
</TABLE>
1 A Deferred Sales Charge is imposed only with respect to Investor C Shares
redeemed within one year of the date of purchase. Investor C Shares purchased
prior to January 1, 1996 will continue to be subject to the 1.00% Deferred
Sales Charge.
3
<PAGE>
EXAMPLES:
You would pay the following expenses on a $1,000 investment in Investor C Shares
of the Funds assuming (1) a 5% annual return and (2) redemption at the end of
each time period.
<TABLE>
<CAPTION>
Nations Nations
Nations Equity Balanced
Value Fund Income Fund Assets Fund
<S> <C> <C> <C>
1 Year $ 19 $ 20 $ 20
3 Years $ 45 $ 46 $ 46
5 Years $ 78 $ 79 $ 79
10 Years $ 170 $ 174 $ 174
</TABLE>
<TABLE>
<CAPTION>
Nations
Nations Emerging Growth
Capital Growth Fund Fund
<S> <C> <C>
1 Year $ 19 $ 20
3 Years $ 45 $ 46
5 Years $ 78 $ 79
10 Years $ 170 $ 174
</TABLE>
<TABLE>
<CAPTION>
Nations Nations Nations
Disciplined International Emerging Market
Equity Fund Equity Fund Funds
<S> <C> <C> <C>
1 Year $ 20 $ 21 $ 29
3 Years $ 46 $ 50 $ 70
5 Years N/A $ 87 N/A
10 Years N/A $ 190 N/A
</TABLE>
<TABLE>
<CAPTION>
Nations
Pacific Growth Fund
<S> <C>
1 Year $ 27
3 Years $ 69
5 Years N/A
10 Years N/A
</TABLE>
You would pay the following expenses on a $1,000 investment in Investor C Shares
of the Funds, assuming a 5% annual return but no redemption.
<TABLE>
<CAPTION>
Nations Nations
Nations Equity Balanced
Value Fund Income Fund Assets Fund
<S> <C> <C> <C>
1 Year $ 14 $ 15 $ 15
3 Years $ 45 $ 46 $ 46
5 Years $ 78 $ 79 $ 79
10 Years $ 170 $ 174 $ 174
</TABLE>
<TABLE>
<CAPTION>
Nations
Nations Emerging Growth
Capital Growth Fund Fund
<S> <C> <C>
1 Year $ 14 $ 15
3 Years $ 45 $ 46
5 Years $ 78 $ 79
10 Years $ 170 $ 174
</TABLE>
<TABLE>
<CAPTION>
Nations Nations Nations
Disciplined Equity International Emerging Market
Fund Equity Fund Funds
<S> <C> <C> <C>
1 Year $ 15 $ 16 $ 24
3 Years $ 47 $ 50 $ 75
5 Years N/A $ 87 N/A
10 Years N/A $ 190 N/A
</TABLE>
<TABLE>
<CAPTION>
Nations
Pacific Growth Fund
<S> <C>
1 Year $ 22
3 Years $ 69
5 Years N/A
10 Years N/A
</TABLE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor C Shares of the Funds will bear either directly or indirectly. Except
for the Nations Emerging Markets Fund and Nations Pacific Growth Fund, which
fees and expenses are based on estimates, the figures in the above tables are
based on amounts incurred during each Fund's most recent fiscal year and have
been adjusted as necessary to reflect current service provider fees. In
particular, the figures reflect a waiver effective January 1, 1996, of each
Fund's Rule 12b-1 fees to 0.25% of each Fund's average daily net assets. Absent
such waiver, each Fund's Total Operating Expenses would be 0.50% greater than
the amount shown. There is no assurance that any fee waivers and reimbursements
will continue beyond the current fiscal year. If fee waivers and/or
reimbursements are discontinued, the amounts contained in the "Examples" above
may increase. Long-term shareholders in the Funds could pay more in sales
charges than the economic equivalent of the maximum front-end sales charges
applicable to mutual funds sold by members of the National Association of
Securities Dealers, Inc. For more complete descriptions of the Funds' operating
expenses, see "How the Funds Are Managed." For a more complete description of
the Rule 12b-1 and shareholder servicing fees payable by the Funds, see
"Shareholder Servicing and Distribution Plans."
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE>
Financial Highlights
The audited financial information on the following pages has been derived from
the financial statements of Nations Fund Trust and Nations Fund, Inc. Price
Waterhouse LLP is the independent accountant to Nations Fund Trust, Nations
Fund, Inc. and Nations Portfolios. The reports of Price Waterhouse LLP for the
most recent fiscal years of Nations Fund Trust and Nations Fund, Inc. accompany
the financial statements for such periods and are incorporated by reference in
the SAIs, which are available upon request. For more information see
"Organization and History." Shareholders of the Funds will receive unaudited
semi-annual reports describing the Funds' investment operations and annual
financial statements audited by the Funds' independent accountant.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NATIONS VALUE FUND
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 12.90 $ 13.64 $ 12.41
Net investment income 0.08 0.12 0.13
Net realized and unrealized gain/(loss) on investments 2.10 (0.22) 1.32
Net increase/(decrease) in net assets resulting from investment
operations 2.18 (0.10) 1.45
Distributions:
Dividends from net investment income (0.08) (0.10) (0.13)
Distributions from net realized capital gains (0.67) (0.54) (0.09)
Total distributions (0.75) (0.64) (0.22)
Net asset value, end of period $ 14.33 $ 12.90 $ 13.64
Total return++ 18.03% (0.92)% 11.85%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3,571 $ 2,983 $ 2,997
Ratio of operating expenses to average net assets 1.91%+ 1.93% 1.96%
Ratio of net investment income to average net assets 1.17%+ 0.85% 0.98%
Portfolio turnover rate 36% 75% 64%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.91%+ 1.93% 1.97%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.08 $ 0.12 $ 0.13
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 11.63
Net investment income 0.07
Net realized and unrealized gain/(loss) on investments 0.78
Net increase/(decrease) in net assets resulting from investment
operations 0.85
Distributions:
Dividends from net investment income (0.07)
Distributions from net realized capital gains --
Total distributions (0.07)
Net asset value, end of period $ 12.41
Total return++ 7.33%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,286
Ratio of operating expenses to average net assets 1.98%+
Ratio of net investment income to average net assets 1.22%+
Portfolio turnover rate 60%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.98%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.07
</TABLE>
* The Nations Value Fund Investor C Shares commenced operations on June 17,
1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
5
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS EQUITY INCOME FUND
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
INVESTOR C SHARES 05/31/95 05/31/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.47 $ 12.04
Net investment income 0.32 0.28
Net realized and unrealized gain on investments 1.08 0.21
Net increase in net assets resulting from investment operations 1.40 0.49
Distributions:
Dividends from net investment income (0.31) (0.25)
Distributions from net realized capital gains (0.73) (0.81)
Total distributions (1.04) (1.06)
Net asset value, end of period $ 11.83 $ 11.47
Total return++ 13.49% 3.96%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 4,278 $ 4,221
Ratio of operating expenses to average net assets 1.92% 1.94%
Ratio of net investment income to average net assets 2.75% 2.41%
Portfolio turnover rate 158% 116%
Ratio of operating expenses to average net assets without waivers and reimbursements 1.93% 1.95%
Net investment income per share without waivers and reimbursements $ 0.32 $ 0.28
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 05/31/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 11.13
Net investment income 0.32
Net realized and unrealized gain on investments 1.32
Net increase in net assets resulting from investment operations 1.64
Distributions:
Dividends from net investment income (0.28)
Distributions from net realized capital gains (0.45)
Total distributions (0.73)
Net asset value, end of period $ 12.04
Total return++ 15.31%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 4,377
Ratio of operating expenses to average net assets 1.92%+
Ratio of net investment income to average net assets 2.37%+
Portfolio turnover rate 55%
Ratio of operating expenses to average net assets without waivers and reimbursements 2.04%+
Net investment income per share without waivers and reimbursements $ 0.31
</TABLE>
* The Nations Equity Income Fund Investor C Shares commenced operations on
June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charge.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS BALANCED ASSETS FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.38 $ 10.82 $ 10.23
Net investment income 0.11 0.14 0.23
Net realized and unrealized gain/(loss) on investments 1.13 (0.43) 0.59
Net increase/(decrease) in net assets resulting from investment
operations 1.24 (0.29) 0.82
Distributions:
Dividends from net investment income (0.08) (0.15) (0.23)
Distributions from net realized gains (0.02) -- --
Total distributions (0.10) (0.15) (0.23)
Net asset value, end of period $ 11.52 $ 10.38 $ 10.82
Total return++ 11.93% (2.72)% 8.06%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 798 $ 951 $ 1,196
Ratio of operating expenses to average net assets 1.99%+ 1.98% 1.90%
Ratio of net investment income to average net assets 2.11%+ 1.31% 1.82%
Portfolio turnover rate 101% 156% 50%
Ratio of operating expenses to average net assets before fee waivers 1.99%+ 1.99% 1.97%
Net investment income per share before fee waivers $ 0.11 $ 0.14 $ 0.22
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.01
Net realized and unrealized gain/(loss) on investments 0.22##
Net increase/(decrease) in net assets resulting from investment
operations 0.23
Distributions:
Dividends from net investment income --
Distributions from net realized gains --
Total distributions --
Net asset value, end of period $ 10.23
Total return++ 2.30%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 156
Ratio of operating expenses to average net assets 1.30%+
Ratio of net investment income to average net assets 2.85%+
Portfolio turnover rate 79%
Ratio of operating expenses to average net assets before fee waivers 2.05%+
Net investment income per share before fee waivers $ 0.01
</TABLE>
* The Nations Balanced Assets Fund Investor C Shares commenced operations on
October 2, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
## The amount shown at this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and losses in
the portfolio securities for the period because of the timing of purchases
and withdrawals of shares in relation to the fluctuating market value of the
portfolio.
6
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.14 $ 11.01 $ 10.67
Net investment income/(loss) 0.01 (0.02) (0.00)(a)
Net realized and unrealized gain on investments 1.35 0.15 0.38
Net increase in net assets resulting from investment
operations 1.36 0.13 0.38
Distributions:
Dividends from net investment income -- -- (0.03)
Distributions from net realized gains (0.26) (0.00)(a) (0.01)
Total distributions (0.26) (0.00)(a) (0.04)
Net asset value, end of period $ 12.24 $ 11.14 $ 11.01
Total return++ 12.59% 1.22% 3.61%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,921 $ 2,394 $ 2,919
Ratio of operating expenses to average net assets 1.91%+ 1.90% 1.80%
Ratio of net investment income/(loss) to average net assets 0.03%+ (0.15)% (0.16)%
Portfolio turnover rate 43% 56% 81%
Ratio of operating expenses to average net assets before fee
waivers 1.97%+ 1.91% 1.89%
Net investment income/(loss) per share before fee waivers $ (0.01) $ (0.02) $ 0.00(a)
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss) (0.00)(a)
Net realized and unrealized gain on investments 0.67##
Net increase in net assets resulting from investment
operations 0.67
Distributions:
Dividends from net investment income --
Distributions from net realized gains --
Total distributions 0.00(a)
Net asset value, end of period $ 10.67
Total return++ 6.70%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 406
Ratio of operating expenses to average net assets 1.30%+
Ratio of net investment income/(loss) to average net assets 0.33%+
Portfolio turnover rate 7%
Ratio of operating expenses to average net assets before fee
waivers 2.05%+
Net investment income/(loss) per share before fee waivers $ 0.00(a)
</TABLE>
* The Nations Capital Growth Fund Investor C Shares commenced operations on
October 2, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
## The amount shown at this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and losses in
the portfolio securities for the period because of the timing of purchases
and withdrawals of shares in relation to the fluctuating market value of the
portfolio.
(a) Value represents less than $0.01 per share.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS EMERGING GROWTH FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94#
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.20 $ 10.78
Net investment income/(loss) (0.03) (0.14)
Net realized and unrealized gain on investments 0.93 0.70
Net increase in net assets resulting from investment operations 0.90 0.56
Distributions:
Distributions from net realized gains (0.40) (0.14)
Total distributions (0.40) (0.14)
Net asset value, end of period $ 11.70 $ 11.20
Total return++ 8.54% 5.19%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 649 $ 542
Ratio of operating expenses to average net assets 1.97%+ 2.01%
Ratio of net investment income/(loss) to average net assets (0.90)%+ (1.29)%
Portfolio turnover rate 69% 129%
Ratio of operating expenses to average net assets before fee waivers 1.98%+ 2.01%
Net investment income/(loss) per share before fee waivers $ (0.03) $ (0.14)
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/93*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.89
Net investment income/(loss) (0.09)
Net realized and unrealized gain on investments 0.98
Net increase in net assets resulting from investment operations 0.89
Distributions:
Distributions from net realized gains --
Total distributions --
Net asset value, end of period $ 10.78
Total return++ 9.00%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 469
Ratio of operating expenses to average net assets 1.80%+
Ratio of net investment income/(loss) to average net assets (1.15)%+
Portfolio turnover rate 159%
Ratio of operating expenses to average net assets before fee waivers 2.01%+
Net investment income/(loss) per share before fee waivers $ (0.11)
</TABLE>
* The Nations Emerging Growth Fund Investor C Shares commenced operations on
December 18, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
# Per share numbers have been calculated using the monthly average shares
method.
7
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS DISCIPLINED EQUITY FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
05/31/95
INVESTOR C SHARES (UNAUDITED)*#
<S> <C>
Operating performance:
Net asset value, beginning of period $ 14.08
Net investment income/(loss) 0.01
Net realized and unrealized gain/(loss) on investments 0.35
Net increase/(decrease) in net assets resulting from investment operations 0.36
Distributions:
Dividends from net investment income --
Distributions from net realized gains --
Return of capital --
Total distributions --
Net asset value, end of period $ 14.44
Total return++ 2.56%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $7
Ratio of operating expenses to average net assets 0.94%+
Ratio of net investment income/(loss) to average net assets 1.37%+
Portfolio turnover rate 98%
Ratio of operating expenses to average net assets before fee waivers 1.65%+
Net investment income/(loss) per share before fee waivers $ 0.01
</TABLE>
* The Nations Disciplined Equity Fund Investor C Shares commenced operations on
May 10, 1995.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
# Per share numbers have been calculated using the monthly average shares
method.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
INVESTOR C SHARES 05/31/95# 05/31/94#
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.86 $ 10.49
Net investment income/(loss) 0.02 (0.03)
Net realized and unrealized gain/(loss) on investments (0.21) 1.43
Net increase/(decrease) in net assets resulting from investment operations (0.19) 1.40
Distributions:
Dividends from net investment income -- (0.01)
Distributions from net realized capital gains (0.12) (0.02)
Distributions in excess of net realized capital gains (0.10) --
Total distributions (0.22) (0.03)
Net asset value, end of period $ 11.45 $ 11.86
Total return++ (1.56)% 13.21%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 495 $ 339
Ratio of operating expenses to average net assets 2.03% 2.17%
Ratio of net investment income/(loss) to average net assets 0.17% (0.25)%
Portfolio turnover rate 92% 39%
Ratio of operating expenses to average net assets without waivers and reimbursements 2.04% 2.18%
Net investment income/(loss) per share without waivers and reimbursements $ 0.02 $ (0.03)
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 05/31/93*#
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.10
Net investment income/(loss) 0.00**
Net realized and unrealized gain/(loss) on investments 0.48
Net increase/(decrease) in net assets resulting from investment operations 0.48
Distributions:
Dividends from net investment income (0.07)
Distributions from net realized capital gains (0.02)
Distributions in excess of net realized capital gains --
Total distributions (0.09)
Net asset value, end of period $ 10.49
Total return++ 4.97%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 200
Ratio of operating expenses to average net assets 2.30%+
Ratio of net investment income/(loss) to average net assets 0.03%+
Portfolio turnover rate 41%
Ratio of operating expenses to average net assets without waivers and reimbursements 2.32%+
Net investment income/(loss) per share without waivers and reimbursements $ 0.00**
</TABLE>
* The Nations International Equity Fund Investor C Shares commenced operations
on June 17, 1992.
** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charge.
# Per share amounts have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed income method did not accord with the results of
operations.
8
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT THE PERIOD
NATIONS EMERGING MARKETS FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 09/30/95*#
<S> <C>
For a Share Outstanding Thoughout the Period:
Net asset value, beginning of period $ 10.00
Net investment income/(loss)## (0.02)
Net realized and unrealized gain/(loss) on investments (0.13)
Net increase/(decrease) in net assets resulting from investment operations (0.15)
Distributions:
Dividends from net investment income N/A
Total Distributions N/A
Net asset value, end of period $ 9.85
Total return++ (1.50)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000') $ 10
Ratio of operating expenses to average net assets 2.90%+
Ratio of net investment income/(loss) to average net assets (1.03)%+
Portfolio turnover rate 10%
</TABLE>
* The Fund's Investor C Shares commenced operations on June 30, 1995.
** Amount represents less than $0.01 per share.
+ Annualized.
++ Total Return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period.
## For the Nations Emerging Markets Fund, the amount shown at this caption for
each share outstanding throughout the period may not accord with the change
in the aggregate gains and losses in the portfolio securities for the period
because of the timing of purchases and withdrawals of shares in relation to
the fluctuating market value of the portfolio.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT THE PERIOD
NATIONS PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 09/30/95*#
<S> <C>
For a Share Outstanding Throughout the Period:
Net asset value, beginning of period $ 10.00
Net investment income/(loss)## (0.02)
Net realized and unrealized gain/(loss) on investments (0.30)
Net increase/(decrease) in net assets resulting from investment operations (0.32)
Distributions:
Dividends from net investment income N/A
Total Distributions N/A
Net asset value, end of period $ 9.68
Total return++ (3.20)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 46
Ratio of operating expenses to average net assets 2.70%+
Ratio of net investment income/(loss) to average net assets (0.85)%+
Portfolio turnover rate 3%
</TABLE>
* The Fund's Investor C Shares commenced operations on June 30, 1995.
** Amount represents less than $0.01 per share.
+ Annualized.
++ Total Return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period.
## For the Nations Emerging Markets Fund, the amount shown at this caption for
each share outstanding throughout the period may not accord with the change
in the aggregate gains and losses in the portfolio securities for the period
because of the timing of purchases and withdrawals of shares in relation to
the fluctuating market value of the portfolio.
9
<PAGE>
Objectives
GROWTH AND INCOME FUNDS:
NATIONS VALUE FUND: The Nations Value Fund's investment objective is to seek
long-term capital growth with income a secondary consideration. The Fund invests
under normal market conditions at least 65% of its total assets in common
stocks.
NATIONS EQUITY INCOME FUND: The Nations Equity Income Fund seeks to provide high
current income primarily through investments in equity securities (including
convertible securities) having a relatively high current yield. Secondarily,
equity securities will be selected which the Adviser believes have favorable
prospects for increasing dividend income and/or capital appreciation.
NATIONS BALANCED ASSETS FUND: The Nations Balanced Assets Fund's investment
objective is total investment return through a combination of growth of capital
and current income consistent with the preservation of capital. In seeking its
objective, the Fund will use a disciplined approach of allocating assets
primarily among three major asset groups: common stocks, fixed income securities
and cash equivalents.
GROWTH FUNDS:
NATIONS CAPITAL GROWTH FUND: The Nations Capital Growth Fund's investment
objective is to seek long-term capital appreciation by investing primarily in
common stocks issued by companies that, in the judgment of the Adviser, have
above-average potential for capital appreciation. Over time, total return is
likely to consist primarily of capital appreciation and secondarily of dividend
and interest income.
NATIONS EMERGING GROWTH FUND: The Nations Emerging Growth Fund's investment
objective is to seek capital appreciation by investing in equity securities of
high quality emerging growth companies that are expected to have earnings growth
rates superior to most publicly traded companies.
NATIONS DISCIPLINED EQUITY FUND: The Nations Disciplined Equity Fund's
investment objective is to seek long-term capital appreciation. The Fund seeks
to achieve its investment objective by investing primarily in the common stocks
of companies that are considered by the Adviser to have the potential for
significant increases in earnings per share.
INTERNATIONAL FUNDS:
NATIONS INTERNATIONAL EQUITY FUND: The Nations International Equity Fund's
investment objective is to seek long-term growth of capital primarily by
investing in marketable equity securities of established, non-United States
issuers.
NATIONS EMERGING MARKETS FUND: The Nations Emerging Markets Fund's investment
objective is to seek long-term capital growth. It seeks to achieve this
objective by investing primarily in securities of companies that conduct their
principal business activities in emerging markets. The Fund invests primarily in
companies located in countries considered to have potential for rapid economic
growth and that have a relatively low gross national product per capita compared
to the world's major economies.
NATIONS PACIFIC GROWTH FUND: The Nations Pacific Growth Fund's investment
objective is to seek long-term capital growth, with income a secondary
consideration. It seeks to achieve this objective by investing primarily in
securities of issuers that conduct their principal business activities in the
Pacific Basin and the Far East (excluding Japan).
How Objectives Are Pursued
GROWTH AND INCOME FUNDS:
NATIONS VALUE FUND: The Fund invests in stocks drawn from a universe of
approximately 800 stocks monitored by the Adviser. The Adviser closely monitors
these companies, rating them for quality and projecting their future earnings
and dividends as well as other factors. To qualify for purchase, an issuer would
normally have a market capitalization of $300 million or more and have average
monthly trading volume of at least $10 million. These requirements are generally
considered by the Adviser to be adequate to support normal purchase and sale
activity without materially affecting prevailing market prices of the issuer's
shares. The Adviser also analyzes key financial ratios that measure the growth,
profitability and leverage of such issuers that it believes will help maintain a
portfolio of above-average quality.
Stocks are selected from this universe based on the Adviser's judgment of their
total return potential. The Adviser buys stocks that it believes are undervalued
relative to the overall stock market. The principal factor considered by the
Adviser in making these determinations is the ratio of a stock's price to
earnings relative to corresponding ratios of other stocks in the same industry
or economic sector. The Adviser believes that companies
10
<PAGE>
with lower price/earnings ratios are more likely to provide better opportunities
for capital appreciation. This "value" approach generally produces a dividend
yield greater than the market average. The Adviser will attempt to temper risk
by broad diversification among economic sectors and industries. Through this
strategy, the Fund pursues above-average returns while seeking to avoid
above-average risks. No industry will represent 25% or more of the Fund's
portfolio at the time of purchase.
In addition to common stocks, the Fund also may invest in preferred stocks,
securities convertible into common stock, and other types of securities having
common stock characteristics (such as rights and warrants to purchase equity
securities). Although the Fund invests primarily in publicly-traded common
stocks of companies incorporated in the United States, the Fund may invest in
securities of foreign issuers. See "Appendix A -- Foreign Securities." The Fund
also may hold up to 20% of its total assets in obligations issued or guaranteed
as to payment of principal and interest by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Obligations"), and investment grade bonds
and other debt securities of domestic companies. Obligations with the lowest
investment grade rating (e.g. rated "BBB" by Standard & Poor's Corporation
("S&P") or "Baa" by Moody's Investors Service, Inc. ("Moody's")) have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations.
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. Unrated obligations may
be acquired by the Fund if they are determined by the Adviser to be of
comparable quality at the time of purchase to rated obligations that may be
acquired.
The Fund also may invest in various money market instruments. The Fund may
invest without limitation in such instruments pending investment, to meet
anticipated redemption requests, or as a temporary defensive measure if market
conditions warrant. For more information concerning these instruments and the
Fund's investment practices, see "Appendix A."
NATIONS EQUITY INCOME FUND: The investment program of the Fund is based on
several premises. First, the Adviser believes that, over time, dividend income
can account for a significant component of the total return from equity
investments. Over time, reinvested dividend income has accounted for
approximately one-half of the total return of the Standard & Poor's 500 Stock
Index ("S&P 500 Index"), a broad-based and widely used index of common stock
prices. Second, dividends are normally a more stable and predictable source of
return than capital appreciation. While the price of a company's stock generally
increases or decreases in response to short-term earnings and market
fluctuations, its dividends are generally less volatile. Finally, the Adviser
believes that stocks which distribute a high level of current income tend to
have less price volatility than those which pay below average dividends.
The Fund's equity investments will generally be made in companies which share
some of the following characteristics:
(Bullet) above-average current dividend yields relative to the S&P 500 Index;
(Bullet) five years of stable or increasing dividends;
(Bullet) established operating histories; and
(Bullet) strong balance sheets and other favorable financial characteristics.
To achieve its objectives, the Fund, under normal circumstances, will invest at
least 65% of its assets in income-producing common stocks, including securities
convertible into or ultimately exchangeable for common stock (i.e., convertible
bonds or convertible preferred stock), whose prospects for dividend growth and
capital appreciation are considered favorable by the Adviser. The securities
held by the Fund generally will be listed on a national exchange or, if not so
listed, will usually have an established over-the-counter market.
In order to further enhance its income, the Fund also may invest its assets in
fixed income securities (corporate, government, and municipal bonds of various
maturities), preferred stocks and warrants. The Fund may invest in debt
securities that are considered investment grade (e.g. securities rated in one of
the top four investment categories by S&P or Moody's, or if not rated, are of
equivalent investment quality as determined by the Adviser). Obligations rated
in the lowest of the top four investment grade rating categories (e.g., rated
"BBB" by S&P) have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade debt
obligations. The Fund also may invest up to 5% of its assets in debt securities
that are rated below investment grade (e.g. rated "BB" by S&P), or if not rated,
are of equivalent investment quality as determined by the Adviser.
Non-investment-grade debt securities are sometimes referred to as "high yield
bonds" or "junk bonds," tend to have speculative characteristics, generally
involve more risk of principal and income than higher rated securities, and have
yields and market values that tend to fluctuate more than higher quality
securities. The Fund will invest in such high-yield debt securities only when
the Adviser believes that the issue presents minimal credit risk. For a
description of corporate debt ratings, see "Appendix B." Although the Fund
invests primarily in securities of U.S. issuers, the Fund may
11
<PAGE>
invest 10% or more of its total assets in debt obligations of foreign issuers
and stocks of foreign corporations. The Fund will treat foreign securities as
illiquid unless there is an active and substantial secondary market for such
securities.
The Fund may invest in various money market instruments. The Fund may invest
without limitation in such instruments pending investment, to meet anticipated
redemption requests, or as a temporary defensive measure if market conditions
warrant. For additional information concerning these instruments and the Fund's
investment practices, see "Appendix A."
NATIONS BALANCED ASSETS FUND: In pursuing the Fund's objective, the Adviser will
allocate the Fund's assets based upon its judgment of the relative valuation and
the expected returns of the three major asset groups in which the Fund
principally invests: common stocks, fixed income securities and cash
equivalents. In assessing relative value and expected returns, the Adviser will
evaluate current economic and financial market conditions (both domestically and
internationally), current interest rate trends, earnings and dividend prospects
for common stocks, and overall financial market stability. In general, the
Adviser believes that common stocks typically offer the best opportunity for
long-term capital appreciation, and that high quality companies with
above-average earnings growth and return on equity offer the best growth
prospects among common stocks.
The Fund invests in common and preferred stocks of U.S. corporations and of
foreign issuers, as well as securities convertible into common stocks, and other
types of securities having common stock characteristics (such as rights and
warrants to purchase equity securities) that meet the Adviser's stringent
criteria. The stocks are primarily those of seasoned, financially strong U.S.
companies with records of above-average earnings growth and above-average
capital growth potential. No industry will represent 25% or more of the Fund's
portfolio at the time of purchase.
The Fund also will invest in government, corporate and mortgage-backed
securities (see "Appendix A -- Asset-Backed Securities"). Most obligations
acquired by the Fund will be issued by companies or governmental entities
located within the United States. Debt obligations acquired by the Fund will be
rated investment grade at the time of purchase by S&P, Moody's, Duff & Phelps
Credit Rating Co. ("D&P"), Fitch Investors Service, Inc. ("Fitch"), IBCA Limited
or its affiliate IBCA Inc. (collectively "IBCA"), or Thomson BankWatch, Inc.
("BankWatch") or, if unrated, determined by the Adviser to be comparable in
quality to instruments so rated. Obligations with the lowest investment grade
rating (e.g. rated "BBB" by S&P or "Baa" by Moody's) have speculative
characteristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt obligations. See
"Appendix B" for a description of these ratings designations. Subsequent
to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. Unrated obligations may
be acquired by the Fund if they are determined by the Adviser to be of
comparable quality at the time of purchase to rated obligations that may be
acquired. Under normal circumstances, at least 25% of the total value of the
Fund's assets will be invested in fixed income securities.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest 10% or more of its total assets in debt obligations of foreign issuers
and stocks of foreign corporations. See "Appendix A -- Foreign Securities."
The Fund also may invest in various money market instruments. The Fund may
invest without limitation in such instruments pending investment, to meet
anticipated redemption requests, or as a temporary defensive measure if market
conditions warrant. For more information concerning these instruments, see
"Appendix A."
GROWTH FUNDS:
NATIONS CAPITAL GROWTH FUND: The investment philosophy of the Fund is based on
the belief that companies with superior growth characteristics selling at
reasonable prices will, over time, outperform the market. Therefore, the Fund
will generally seek to invest in larger capitalization, high-quality companies
which possess above-average earnings growth potential.
The Fund's equity investments will generally be made in companies which share
some of the following characteristics:
(Bullet) above-average earnings growth relative to the S&P 500 Index;
(Bullet) established operating histories, strong balance sheets and favorable
financial characteristics; and
(Bullet) above-average return on equity relative to the S&P 500 Index.
In addition, the Fund's investment program enables it to invest in the following
companies that comprise the equity markets:
(Bullet) companies that generate or apply new technologies, new and improved
distribution techniques, or new services, such as those in the business
equipment, electronics, specialty merchandising and health service
industries;
(Bullet) companies that own or develop natural resources, such as energy
exploration companies;
12
<PAGE>
(Bullet) companies that may benefit from changing consumer demands and
lifestyles, such as financial service organizations and
telecommunication companies;
(Bullet) foreign companies, including those in countries with more rapid
economic growth than the U.S.;
(Bullet) companies whose earnings growth is projected at a pace in excess of the
average company (I.E., growth companies); and
(Bullet) companies whose earnings are temporarily depressed and are currently
out of favor with most investors.
In seeking capital growth, the Fund looks for companies whose securities appear
to present a favorable relationship between market price and opportunity. These
may include securities of companies whose fundamentals or products may be of
only average promise. Market misconceptions, temporary bad news and other
factors may cause a security to be out of favor in the stock market and to trade
at a price below its potential value. These undervalued securities can provide
the opportunity for above-average market performance. Through intensive
research, visits to many companies each year, and efficient response to changing
market conditions, the Adviser seeks to make the most of the Fund's flexible
charter.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks. In addition to common stocks, the Fund also may invest
in preferred stocks, securities convertible into common stocks and other types
of securities having common stock characteristics (such as rights and warrants
to purchase equity securities). Although the Fund invests primarily in publicly
traded common stocks of companies incorporated in the United States, the Fund
may invest 10% or more of its total assets in securities of foreign issuers. See
"Appendix A -- Foreign Securities."
The Fund also may invest in various money market instruments. The Fund may
invest without limitation in such instruments pending investment, to meet
anticipated redemption requests, or as a temporary defensive measure if market
conditions warrant. For additional information concerning these instruments and
the Fund's investment practices, see "Appendix A."
NATIONS EMERGING GROWTH FUND: The Fund will invest in common stocks and
securities convertible into common stocks selected from a universe of emerging
growth companies monitored by the Adviser. Most of the companies will have
revenues between $50 million and $1.5 billion and a debt ratio of less than 50%
of capitalization. The universe focuses on companies with above-average earnings
growth rates and profit margins, yet the portfolio may include positions of
special situation companies whose growth is expected to accelerate. These
companies are believed to offer significant opportunities for capital
appreciation and the Adviser will attempt to identify these opportunities before
their potential is recognized by investors in general.
In selecting industries and companies for investment, the Adviser will consider
overall growth prospects, financial condition, competitive position, technology,
research and development, innovative products, marketing expertise,
productivity, labor costs, raw material costs and sources, profit margins,
return on investment, structural changes in local economies, capital resources,
the degree of governmental regulation or deregulation, management and other
factors.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks. The Fund also may invest in various money market
instruments. The Fund may invest without limitation in such instruments pending
investment, to meet anticipated redemption requests, or as a temporary defensive
measure if market conditions warrant. For additional information concerning
these instruments and the Fund's investment practices, see "Appendix A."
The volatility of emerging growth stocks is higher than that of larger
companies. Many of these stocks trade over the counter and may not have
widespread interest among institutional investors. These securities may have
larger potential for gains but also carry more risk if unexpected company
developments adversely affect the stock prices. To help reduce risk, the Fund is
diversified and typically invests in 75 to 100 companies which represent a broad
range of industries and sectors, both in the United States and abroad.
NATIONS DISCIPLINED EQUITY FUND: The investment philosophy of the Fund is based
on the premise that companies with positive earnings trends also should
experience positive trends in their share price. Based on this philosophy, the
Fund invests primarily in the common stocks of companies that the Adviser
believes are likely to experience significant increases in earnings. By pursuing
this investment philosophy, the Fund seeks to provide investors with long-term
capital appreciation which exceeds that of the S&P 500 Index.
In selecting stocks for purchase by the Fund, the Adviser utilizes quantitative
analysis supported by fundamental research. This approach seeks to identify
companies that have experienced positive historical earnings trends, as
evidenced by earnings forecasts issued by investment banks, broker/dealers and
other investment professionals. The Adviser believes that companies experiencing
such earnings trends have the potential to generate significant increases in per
share earnings. The Adviser also believes that companies with increasing
earnings should experience positive trends in their stock price. Although the
Fund seeks to invest in companies with increasing earnings, the Fund's
investment objective focuses on long-term capital appreciation; income is not an
objective of the Fund.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks of
domes-
13
<PAGE>
tic issuers. With respect to the remainder of the Fund's assets, the Fund may
invest in a broad range of equity and debt instruments, including preferred
stocks, securities (debt and preferred stock) convertible into common stock,
warrants and rights to purchase common stocks, options, U.S. government and
corporate debt securities and various money market instruments. The Fund will
invest primarily in medium- and large-sized companies (I.E. companies with
market capitalizations of $500 million or greater) that are determined to have
favorable price/earnings ratios. The Fund also may invest in securities issued
by companies with market capitalizations of less than $500 million. The
volatility of small-capitalization stocks is typically greater than that of
larger companies. To help reduce risk, the Fund will invest in the securities of
companies representing a broad range of industries and economic sectors.
The Fund's investments in debt securities, including convertible securities,
will be limited to securities rated investment grade (E.G. securities rated in
one of the top four investment categories by a nationally recognized statistical
rating organization or, if not rated, are of equivalent quality as determined by
the Adviser). Obligations rated in the lowest of the top four investment grade
rating categories have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade debt
obligations.
The Fund may invest in foreign securities. Investments in foreign securities
involve risks that are different in some respects from investments in securities
of U.S. issuers, such as the risk of fluctuations in the value of the currencies
in which they are denominated. See "Appendix A -- Foreign Securities." For
temporary defensive purposes if market conditions warrant, the Fund may invest
without limitation in preferred stocks, investment grade debt instruments and
money market instruments.
INTERNATIONAL FUNDS:
NATIONS INTERNATIONAL EQUITY FUND: The Fund intends to diversify investments
broadly among countries and normally to invest in securities representing at
least three different countries. The Fund may invest in countries located in the
Far East and Western Europe as well as Australia, Canada, and other areas
(including developing countries). Under unusual circumstances, however, the Fund
may invest substantially all of its assets in one or two countries.
In seeking to achieve its objective, the Fund will invest at least 65% of its
assets in common stocks of established non-United States companies that the
Adviser believes have potential for growth of capital. The Fund also may invest
up to 35% of its assets in any other type of security including: convertible
securities; preferred stocks; bonds, notes and other debt securities (including
Eurodollar securities); and obligations of domestic or foreign governments and
their political subdivisions.
The Fund also may invest in American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs"), American Depository Shares ("ADSs"), bonds, notes,
other debt securities of foreign issuers, securities of foreign investment funds
or trusts and real estate investment trust securities. For additional
information concerning the Fund's investment practices, see "Appendix A."
NATIONS EMERGING MARKETS FUND: In seeking to achieve its objective, the Fund
will invest under normal market conditions at least 65% of its total assets in
securities of companies that conduct their principal business activities in
emerging markets. A company will be considered to conduct its principal business
activities in a country, market or region if it derives a significant portion
(at least 50%) of its revenues or profits from goods produced or sold,
investments made, or services performed in such country, market or region or has
at least 50% of its assets situated in such country, market or region.
Equity securities of emerging market issuers may include common stocks,
preferred stocks (including convertible preferred stocks) and warrants; bonds,
notes and debentures convertible into common or preferred stock; equity
interests in foreign investment funds or trusts and real estate investment trust
securities. The Fund may invest in ADRs, Global Depositary Receipts ("GDRs"),
EDRs, and ADSs of such issuers.
The Fund also may invest in other types of instruments, including debt
obligations. Debt obligations acquired by the Fund will be rated investment
grade at the time of purchase by Moody's, S&P or, if unrated, determined by the
Adviser to be comparable in quality to instruments so rated. Obligations with
the lowest investment grade rating (e.g., rated "Baa" by Moody's or "BBB" by
S&P) have speculative characteristics, and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade debt
obligations. See "Appendix B" for a description of those ratings designations.
The Fund is a diversified fund that intends, under normal market conditions, to
invest in at least three different countries, although it may, from time to
time, invest all of its assets in a single country. If the Fund invests all or a
significant portion of its assets at any time in a single country, events
occurring in such country are more likely to affect the Fund's instruments. For
additional information concerning risk, see "Special Risk Considerations
Relevant to an Investment in the Nations International Equity Fund, Nations
Emerging Markets Fund
14
<PAGE>
and Nations Pacific Growth Fund," below. When allocating investments among
individual countries, the Adviser will consider various criteria, such as the
relative economic growth potential of the various economies and securities
markets, expected levels of inflation, government policies influencing business
conditions and the outlook for currency relationships.
The Fund considers countries with emerging markets to include the following: (i)
countries with an emerging stock market as defined by the International Finance
Corporation; (ii) countries with low- to middle-income economies according to
the International Bank For Reconstruction and Development (more commonly
referred to as the World Bank); and (iii) countries listed in World Bank
publications as developing. The Adviser seeks to identify and invest in those
emerging markets that have a relatively low gross national product per capita,
compared to the world's major economies, and which exhibit potential for rapid
economic growth. The Adviser believes that investment in equity securities of
emerging market issuers offers significant potential for long-term capital
appreciation.
For defensive purposes, the Fund may temporarily invest substantially all of its
assets in U.S. financial markets or in U.S. dollar-denominated instruments. See
"Appendix A" below for additional information concerning the investment
practices of the Fund.
NATIONS PACIFIC GROWTH FUND: The Fund seeks to achieve its objective by
investing primarily in securities of issuers that conduct their principal
business activities in the regions known as the Pacific Basin and the Far East.
The Pacific Basin and the Far East include Australia, Hong Kong, Indonesia,
South Korea, Malaysia, New Zealand, Pakistan, the People's Republic of China,
the Philippines, Singapore, Sri Lanka, Taiwan and Thailand and may include other
markets that develop in the region. The Fund will not invest in securities of
issuers that conduct their principal business activities in Japan.
The Fund will focus on equity securities, but may also invest in debt
obligations. Such equity securities may include common stocks, preferred stocks
(including convertible preferred stocks) and warrants; bonds, notes and
debentures convertible into common or preferred stock; equity interests in
foreign investment funds or trusts and real estate investment trust securities.
Debt obligations acquired by the Fund will be rated investment grade at the time
of purchase by Moody's or S&P or, if unrated, determined by the Adviser to be
comparable in quality to instruments so rated. Obligations with the lowest
investment grade rating (e.g., rated "Baa" by Moody's or "BBB" by S&P) have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations. See
"Appendix B" for a description of these ratings designations.
In seeking to achieve its objective, the Fund will invest under normal market
conditions at least 65% of its total assets in securities of issuers that
conduct their principal business activities in countries of the Pacific Basin
and Far East, except for Japan. Although the Fund may not invest in securities
issued by companies that conduct their principal business activities in Japan,
the Fund may invest in securities that are listed on a Japanese exchange.
The Fund is a diversified fund that intends, under normal market conditions, to
invest in at least three different countries, although it may, from time to
time, invest all of its assets in a single country. If the Fund invests all or a
significant portion of its assets at any time in issuers that conduct their
principal business activities in a single country, events occurring in such
country are more likely to affect the Fund's investments. For additional
information concerning risk, see "Special Risk Considerations Relevant to an
Investment in the Nations International Equity Fund, Nations Emerging Markets
Fund and Nations Pacific Growth Fund," below. When allocating investments among
individual countries, the Adviser will consider various criteria, such as the
relative economic growth potential of the various economies and securities
markets, expected levels of inflation, government policies influencing business
conditions and the outlook for currency relationships. The Fund may invest in
ADRs, GDRs, EDRs and ADSs.
For defensive purposes, the Fund may temporarily invest substantially all of its
assets in U.S. financial markets or in U.S. dollar-denominated instruments. See
"Appendix A" below for additional information concerning the investment
practices of the Fund.
GENERAL: Each Fund may invest in certain specified derivative securities,
including: exchange-traded options; over-the-counter options executed with
primary dealers, including long calls and puts and covered calls to enhance
return; and U.S. and foreign exchange-traded financial futures approved by the
Commodity Futures Trading Commission ( the "CFTC") and options thereon for
market exposure risk management. The Nations Balanced Assets Fund also may
engage in dollar roll transactions. Each Fund may lend its portfolio securities
to qualified institutional investors. Each Fund also may invest in restricted,
private placement and other illiquid securities and securities issued by other
investment companies, consistent with the Fund's investment objective and
policies. Each Fund (except the Nations Balanced Assets Fund) may invest in real
estate investment trust securities.
SPECIAL RISK CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE NATIONS
INTERNATIONAL EQUITY FUND, NATIONS EMERGING MARKETS FUND AND NATIONS PACIFIC
GROWTH FUND: Investors should understand and consider carefully the special
risks
15
<PAGE>
involved in foreign investing. In addition, certain Funds present unique risks
that investors should be aware of.
Investors in the Nations International Equity Fund should be aware that the Fund
may, from time to time, invest up to 5% of its total assets in securities of
companies located in Eastern Europe. Economic and political reforms in this
region are still in their infancy. As a result, investment in such countries
would be highly speculative and could result in losses to the Fund and, thus, to
its shareholders.
Investors in the Nations Pacific Growth Fund should understand and consider
carefully the special risks involved in investing in the Pacific Basin and Far
East. Countries in the Pacific Basin and Far East are in various stages of
economic development, ranging from emerging markets to mature economies, but
each has unique risks. Most countries in this region are heavily dependent on
international trade, and some are especially vulnerable to recessions in other
countries. Many of these countries are also sensitive to world commodity prices.
Some countries that have experienced rapid growth may still have obsolete
financial systems, economic problems or archaic legal systems. In addition, many
of these nations are experiencing political and social uncertainties. For
example, the return of Hong Kong to Chinese dominion may have a profound effect
on both Hong Kong and China, and could affect the entire Pacific Basin and the
Far East.
The same is true, but even more so, for the emerging market countries in which
the Nations Emerging Markets Fund will invest. Although the Fund believes that
its investments present the possibility for significant growth over the
long-term, they also entail significant risks. Many investments in emerging
markets can be considered speculative, and their prices can be much more
volatile than in the more developed nations of the world. This difference
reflects the greater uncertainties of investing in less established markets and
economies.
The financial markets of emerging market countries are generally less well
capitalized and thus securities of issuers based in such countries may be less
liquid.
Moreover, for each of the Funds, investing in securities denominated in foreign
currencies and utilization of forward foreign currency exchange contracts and
other currency hedging techniques involve certain considerations comprising both
opportunities and risks not typically associated with investing in U.S.
dollar-denominated securities. Additionally, changes in the value of foreign
currencies can significantly affect a Fund's share price. General economic and
political factors in the various world markets also can impact a Fund's share
price.
The expenses to individual investors of investing directly in foreign securities
are very high relative to similar costs for investing in U.S. securities. While
the Funds offer a more efficient way for individual investors to participate in
foreign markets, their expenses, including custodial fees, are also higher than
the typical domestic equity mutual fund.
Risks unique to international investing include: (1) restrictions on foreign
investment and repatriation of capital; (2) fluctuations in currency exchange
rates; (3) costs of converting foreign currency into U.S. dollars and U.S.
dollars into foreign currencies; (4) greater price volatility and less
liquidity; (5) settlement practices, including delays, which may differ from
those customary in United States markets; (6) exposure to political and economic
risks, including the risk of nationalization, expropriation of assets and war;
(7) possible imposition of foreign taxes and exchange control and currency
restrictions; (8) lack of uniform accounting, auditing and financial reporting
standards; (9) less governmental supervision of securities markets, brokers and
issuers of securities; (10) less financial information available to investors;
and (11) difficulty in enforcing legal rights outside the United States. These
risks often are heightened for investments in emerging or developing countries.
See "Appendix A" for additional discussion of the risks associated with an
investment in the Nations International Equity Fund, Nations Emerging Markets
Fund and Nations Pacific Growth Fund.
PORTFOLIO TURNOVER: Generally, the Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. While it is not possible to predict exactly annual portfolio
turnover rates, it is expected that under normal market conditions, annual
portfolio turnover rates will not exceed 75% for Nations Emerging Markets Fund
and Nations Pacific Growth Fund. For other Funds' portfolio turnover rate, see
"Financial Highlights." If a Fund's annual portfolio turnover rate exceeds 100%,
it may result in higher costs to the Fund, including brokerage commissions or
dealer markups and other transaction costs on the sale of securities and the
reinvestment in other securities. Portfolio turnover also can generate
short-term capital gains tax consequences.
RISK CONSIDERATIONS: Although the Adviser will seek to achieve the investment
objective of each Fund, there is no assurance that it will be able to do so. No
single Fund should be considered, by itself, to provide a complete investment
program for any investor. The net asset value of the shares of the Funds will
fluctuate based on market conditions. Therefore, investors should not rely upon
the Funds for short-term financial needs, nor are the Funds meant to provide a
vehicle for participating in short-term swings in the stock market. Investments
in a Fund are not insured against loss of principal.
Investments by a Fund in common stocks and other equity securities are subject
to stock market risks. The
16
<PAGE>
value of the stocks that the Fund holds, like the broader stock market, may
decline over short or even extended periods. The value of a Fund's investments
in debt securities will tend to decrease when interest rates rise and increase
when interest rates fall. In general, longer-term debt instruments tend to
fluctuate in value more than shorter-term debt instruments in response to
interest rate movements. In addition, debt securities that are not backed by the
United States Government are subject to credit risk, which is the risk that the
issuer may not be able to pay principal and/or interest when due.
Certain of the Funds' investments constitute derivative securities, which are
securities whose value is derived, at least in part, from an underlying index or
reference rate. There are certain types of derivative securities that can, under
certain circumstances, significantly increase a purchaser's exposure to market
or other risks. The Funds' investment adviser, however, only purchases
derivative securities in circumstances where it believes such purchases are
consistent with the Fund's investment objective and do not unduly increase the
Fund's exposure to market or other risks. For additional risk information
regarding the Funds' investments in particular instruments, see "Appendix
A -- Portfolio Securities."
INVESTMENT LIMITATIONS: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAIs.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
tax-exempt securities issued by state or municipal governments and their
political subdivisions are not considered members of any industry.)
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
3. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, such Fund will not
hold more than 10% of the voting securities of any issuer.
The investment objective and policies of each Fund, unless otherwise specified,
may be changed without a vote of the Fund's shareholders. If the investment
objective or policies of a Fund change, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current position
and needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus and the SAIs. Should a Fund determine that any such
commitment is no longer in the best interests of the Fund, it may consider
terminating sales of its shares in the states involved.
How Performance Is Shown
From time to time the Funds may advertise the total return and yield on a class
of shares. BOTH TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a
class of shares of the Funds may be calculated on an average annual total return
basis or an aggregate total return basis. Average annual total return refers to
the average annual compounded rates of return on a class of shares over one-,
five-, and ten-year periods or the life of the Fund (as stated in the
advertisement) that would equate an initial amount invested at the beginning of
a stated period to the ending redeemable value of the investment (reflecting the
deduction of any applicable contingent deferred sales charge ("CDSC")), assuming
the reinvestment of all dividend and capital gains distributions. Aggregate
total return reflects the total percentage change in the value of the investment
over the measuring period, again assuming the reinvestment of all dividends and
capital gains distributions. Total return may also be presented for other
periods or may not reflect a deduction of any applicable CDSC.
Set forth below is certain performance data for the Pacific Ex-Japan Composite
and the Emerging Markets Composite, reflecting the performance of private
accounts, including U.K. authorized unit trusts, managed by the Gartmore Group,
as defined below. The performance data for these accounts is deemed relevant
because the Pacific Ex-Japan Composite and the Emerging Markets Composite have
investment objectives, policies and restrictions that are substantially similar
to
17
<PAGE>
those of the Nations Pacific Growth Fund and Nations Emerging Markets Fund,
respectively. There is substantial continuity between the portfolio managers of
the Gartmore Group who were responsible for managing those accounts and the
portfolio managers of Nations Gartmore who are responsible for managing the
Nations Pacific Growth Fund and Nations Emerging Markets Fund, respectively.
THIS PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NOT NECESSARILY
INDICATIVE OF THE FUTURE PERFORMANCE OF NBAI, NATIONS GARTMORE OR THE FUNDS.
<TABLE>
<CAPTION>
Average Annual Total
Return for the Periods
PACIFIC EX-JAPAN Indicated through
COMPOSITE March 31, 1995*
<S> <C>
One Year 4.90%
Three Year 24.50%
Five Year 15.70%
Since Inception on January 1, 1988 22.20%
</TABLE>
Annual Total Returns*
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
10.70% 56.10% (1.50)% 20.30% 21.10% 106.90% (15.10)%
</TABLE>
* The average annual total returns and annual total returns are net of fees. The
fees for these accounts were 1% per annum until September 30, 1988, and 1.5%
per annum thereafter.
<TABLE>
<CAPTION>
Average Annual Total
Return for the Periods
EMERGING MARKETS Indicated through
COMPOSITE March 31, 1995*
<S> <C>
One Year (24.40)%
Since Inception on January 1, 1993 9.60%
</TABLE>
Annual Total Returns*
<TABLE>
<CAPTION>
1993 1994
<S> <C>
73.90% (20.20)%
</TABLE>
* The average annual total returns and annual total returns are net of fees. The
fees for these accounts were 1.5% per annum.
Set forth below is the average annual total return and the annual total return
for the Nations International Equity Fund for the periods ending March 31, 1995:
<TABLE>
<CAPTION>
Average Annual Total
Return for the Periods
NATIONS INTERNATIONAL EQUITY Indicated through
FUND -- INVESTOR C SHARES March 31, 1995
<S> <C>
One Year (2.34%)
Since Inception on June 17, 1992 4.62%
</TABLE>
Annual Total Returns
<TABLE>
<CAPTION>
1993 1994
<S> <C>
25.78% 1.36%
</TABLE>
"Yield" is calculated by dividing the annualized net investment income per share
during a recent 30-day (or one month) period of a class of shares of a Fund by
the maximum public offering price per share on the last day of that period. The
yield on a class of shares does not reflect deduction of any applicable CDSC.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of the Funds' portfolio and the Funds'
operating expenses. Investment performance also often reflects the risks
associated with a Fund's investment objective and policies. These factors should
be considered when comparing the Funds' investment results to those of other
mutual funds and other investment vehicles. Since yields fluctuate, yield data
cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
In addition to Investor C Shares, the Funds offer Trust A, Trust B, Investor A
and Investor N Shares. Each class of shares may bear different sales charges,
shareholder servicing fees, loads and other expenses, which may cause the
performance of a class to differ from the performance of the other classes.
Total return and yield quotations will be computed separately for each class of
the Funds' shares. Any quotation of total return or yield not reflecting CDSCs
would be reduced if such sales charges were reflected. Any fees charged by a
selling agent and/or servicing agent directly to its customers' accounts in
connection with investments in the Funds will not be included in calculations of
total return or yield. Each Fund's annual report contains additional performance
information and is available upon request without charge from the Funds'
distributor or your selling agent.
18
<PAGE>
How The Funds Are Managed
The business and affairs of Nations Fund Trust, Nations Fund, Inc. and Nations
Portfolios are managed under the direction of their Board of Trustees and Boards
of Directors, respectively. Nations Fund Trust's SAI contains the names of and
general background information concerning each Trustee of Nations Fund Trust.
Nations Fund, Inc.'s and Nations Portfolios' SAIs contain the names of and
general background information concerning each Director of Nations Fund, Inc.
and Nations Portfolios.
Nations Fund and the Adviser have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially comply in all
material respects with the recommendations set forth in the May 9, 1994 Report
of the Advisory Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISER: NationsBanc Advisors, Inc., serves as investment adviser to
the Funds. NBAI is a wholly owned subsidiary of NationsBank, which in turn is a
wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation. NBAI has its principal
offices at One NationsBank Plaza, Charlotte, North Carolina 28255.
TradeStreet Investment Associates, Inc., with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as sub-investment
adviser to all of the Funds except for those Funds listed below, for which
Nations Gartmore serves as sub-investment adviser. TradeStreet is a wholly owned
subsidiary of NationsBank, which in turn is a wholly owned banking subsidiary of
NationsBank Corporation, a bank holding company organized as a North Carolina
corporation.
TradeStreet provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking.
Nations Gartmore Investment Management, with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as sub-investment
adviser to Nations International Equity Fund, Nations Emerging Markets Fund and
Nations Pacific Growth Fund pursuant to a sub-advisory agreement. Nations
Gartmore is a joint venture structured as a general partnership between NB
Partner Corp., a wholly owned subsidiary of NationsBank, and Gartmore U.S.
Limited, a wholly owned subsidiary of Gartmore plc, a UK company listed on the
London Stock Exchange which is the holding company for a leading UK-based
international fund management group of companies (the "Gartmore Group"). Banque
Indosuez S.A., a leading French bank, owns 75% of the equity of Gartmore plc.
The initial asset management company in the Gartmore Group was founded in 1969
and the Gartmore Group currently provides investment management and advisory
services to pension funds, unit trusts, offshore funds and investment funds. As
of December 31, 1994, the Gartmore Group had over $30 billion in assets under
management.
Subject to the general supervision of Nations Fund Trust's Board of Trustees and
Nations Fund, Inc.'s and Nations Portfolios' Boards of Directors, and in
accordance with each Fund's investment policies, the Adviser formulates
guidelines and lists of approved investments for each Fund, makes decisions with
respect to and places orders for each Fund's purchases and sales of portfolio
securities and maintains records relating to such purchases and sales. The
Adviser is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions which are affiliated with the Adviser or
which have sold shares in the Funds, if the Adviser believes that the quality of
the transaction and the commission are comparable to what they would be with
other qualified brokerage firms. From time to time, to the extent consistent
with its investment objective, policies and restrictions, each Fund may invest
in securities of companies with which NationsBank or Banque Indosuez S.A. has a
lending relationship. For the services provided and expenses assumed pursuant to
various Advisory Agreements, NBAI is entitled to receive advisory fees, computed
daily and paid monthly, at the annual rates of: 0.75% of the average daily net
assets of each of Nations Capital Growth Fund, Nations Emerging Growth Fund,
Nations Disciplined Equity Fund, Nations Value Fund and Nations Balanced Assets
Fund; and 0.75% of the first $100 million of the Nations Equity Income Fund's
average daily net assets, plus 0.70% of the Fund's average daily net assets in
excess of $100 million and up to $250 million, plus 0.60% of the Fund's average
daily net assets in excess of $250 million; and 0.90% of each of Nations
International Equity Fund's and Nations Pacific Growth Fund's average daily net
assets; and 1.10% of Nations Emerging Markets Fund's average daily net assets.
For the services provided and the expenses assumed pursuant to sub-advisory
agreements, NBAI will pay TradeStreet sub-advisory fees, computed daily and paid
monthly, at the annual rates of: 0.25% of Nations Value Fund's, Nations Balanced
Assets Fund's, Nations Capital Growth Fund's, Nations Emerging Growth Fund's and
Nations Disciplined Equity Fund's average daily net
19
<PAGE>
assets; and 0.20% of the Nations Equity Income Fund's average daily net assets.
For services provided and expenses assumed pursuant to a sub-advisory agreement,
Nations Gartmore is entitled to receive from NBAI sub-advisory fees, computed
daily and paid monthly, at the annual rate of 0.70% of Nations International
Equity Fund's average daily net assets; 0.85% of Nations Emerging Markets Fund's
average daily net assets and 0.70% of Pacific Growth Fund's average daily net
assets. Although the advisory fees for the Funds are higher than the advisory
fees paid by most other mutual funds, Nations Fund believes that the fees are
comparable to the advisory fees paid by many other funds with similar investment
objectives and policies.
From time to time, NBAI (and/or TradeStreet and/or Nations Gartmore) may waive
(either voluntarily or pursuant to applicable state limitations) advisory fees
payable by a Fund. For the fiscal year ended November 30, 1994, after waivers,
Nations Fund Trust paid NationsBank under a prior Advisory Agreement advisory
fees at the indicated rate of the following Funds' average daily net assets:
Nations Capital Growth Fund -- 0.75%; Nations Emerging Growth Fund -- 0.75%;
Nations Disciplined Equity Fund -- 0.05%; Nations Value Fund -- 0.74%; and
Nations Balanced Assets Fund -- 0.75%. For the fiscal year ended November 30,
1994, after waivers, Nations Disciplined Equity Fund paid its prior sub-adviser
fees at the rate of 0.21% of the Fund's average daily net assets. For the fiscal
year ended May 31, 1995, after waivers, Nations Fund, Inc. paid NationsBank
under a prior Advisory Agreement advisory fees at the rate of 0.40% the Nations
International Equity Fund's average daily net assets and 0.68% of the Nations
Equity Income Fund's average daily net assets. For the fiscal year ended May 31,
1995, after waivers, Nations International Equity Fund paid its prior
sub-adviser fees at the rate of 0.38% of the Fund's average daily net assets.
Philip Ehrmann is the principal portfolio manager of the Nations Emerging
Markets Fund and is the head of the Nations Gartmore Emerging Markets Team.
Prior to joining Nations Gartmore, Mr. Ehrmann was the Director of Emerging
Markets for Invesco in London. Mr. Ehrmann has over 15 years of investment
management experience.
Sharon M. Herrmann has been the principal portfolio manager for Nations Value
Fund since its inception in 1989. Ms. Herrmann is a Senior Vice President and
Director of the Value Equity Style Group and personally manages the core value
equity funds of NationsBank's trust investment division. Ms. Herrmann has over
20 years investment experience with NationsBank. Ms. Herrmann earned the
Chartered Financial Analyst designation in 1985 and is a member of the
Association for Investment Management and Research.
Philip J. Sanders, a member of the Value Equity Group, has been the principal
portfolio manager for the Nations Capital Growth Fund since May of 1995. Mr.
Sanders is also the Vice President and Fund Manager of the Nations Balanced
Target Maturity Fund. Mr. Sanders joined NationsBank in 1988 and prior to
joining NationsBank he was employed at Duke Power Company for six years where he
supervised and performed various types of detailed financial analysis. He holds
a B.A. in Economics from the University of Michigan and an M.B.A. from the
University of North Carolina in Charlotte. He is a Chartered Financial Analyst
and a member of the Association for Investment Management and Research.
Julie L. Hale is the Vice President and Manager of the Balanced Assets Group and
Co-Manager of the Equity Income Group and has been the principal portfolio
manager for the Nations Balanced Assets Fund since May of 1995. Ms. Hale joined
NationsBank in 1991 and was previously employed with National City Bank in Ohio
and the Mercantile Safe Deposit & Trust Company in Baltimore, Maryland. She
received a B.S. from Mount St. Mary's College and an M.B.A. from Kent State
University. She is a Chartered Financial Analyst and a member of the Association
for Investment Management and Research.
Edward E. Smiley is a Senior Vice President of NationsBank and has been the
principal portfolio manager for Nations Emerging Growth Fund since 1992. Mr.
Smiley received his B.B.A. in Management from Southern Methodist University in
1966 and is a Chartered Financial Analyst. After serving in investment positions
with Merrill Lynch and Dean Witter, Mr. Smiley joined Interfirst Investment
Management as a senior portfolio manager in 1980. Mr. Smiley manages
Emerging-Midcap Funds Style Group for NationsBank. Mr. Smiley also serves as one
of the officer members on the Growth Equity Style Group. Mr. Smiley is a member
of the Association for Investment Management and Research and the Dallas
Association of Investment Analysts. Mr. Smiley has over 25 years of investment
experience.
Jeff C. Moser, a Senior Vice President of NationsBank, has been the principal
portfolio manager for Nations Disciplined Equity Fund since 1995. He joined
NationsBank in 1983 and has been employed there as an equity analyst, account
portfolio manager and fund manager. Mr. Moser received a B.S. degree in
Mathematics from Wake Forest University where he graduated Phi Beta Kappa. He
also holds the Chartered Financial Analyst designation and is a member of the
Association for Investment Management and Research.
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Seok Teoh is the principal portfolio manager of the Nations Pacific Growth Fund.
She has been associated with the Gartmore Group since 1990 as the London based
manager on its Far East desk. Prior to that, Ms. Teoh worked for Overseas Union
Bank Securities in Singapore where she was responsible for Singaporean and
Malaysian equity sales and then subsequently for Rothschild as a Fund Manager in
Singapore and later in Tokyo. Ms. Teoh, who is a native of Singapore, is fluent
in Mandarin and Cantonese and received an Economics degree from the University
of Durham in 1985.
Stephen Watson has been the principal portfolio manager of the Nations
International Equity Fund since February, 1995. He joined the Gartmore Group as
a Global Fund Manager in August 1993 and was recently appointed Head of the
International and Global Team. Prior to that, Mr. Watson was employed by James
Capel Fund Managers where he acted as a Director, Global Fund Manager and Client
Services Manager for various international clients. From 1980 to 1987 he was
associated with Capel-Cure Myers in their Portfolio Management Division and
prior to that he was with the investment division at Samuel Montagu. Mr. Watson
is currently a member of the Securities Institute.
Eric S. Williams, a Senior Vice President of NationsBank, has been the principal
portfolio manager for Nations Equity Income Fund since 1991. Mr. Williams is
Senior Portfolio Manager for NationsBank's investment management division's
Equity Income Style Group. He has a B.S. in Business Administration, SUMMA CUM
LAUDE, from East Carolina University and has an M.B.A. in Finance from Indiana
University. Mr. Williams has been with NationsBank's investment management
division since 1986. He is a member of the Association for Investment Management
and Research and is on the Advisory Board of Indiana University's Reese
Investment Fund.
Morrison & Foerster LLP, counsel to Nations Fund and special counsel to
NationsBank, has advised Nations Fund and NationsBank that subsidiaries of
NationsBank may perform the services contemplated by the various Investment
Advisory Agreements, without violation of the Glass-Steagall Act or other
applicable banking laws or regulations. Such counsel has pointed out, however,
that there are no controlling judicial or administrative interpretations or
decisions and that future judicial or administrative interpretations of, or
decisions relating to, present federal or state statutes, including the
Glass-Steagall Act, and regulations relating to the permissible activities of
banks and their subsidiaries or affiliates, as well as future changes in federal
or state statutes, including the Glass-Steagall Act, and regulations and
judicial or administrative decisions or interpretations thereof, could prevent
such subsidiaries of NationsBank from continuing to perform, in whole or in
part, such services. If such subsidiaries of NationsBank were prohibited from
performing any of such services, it is expected that the Board of Trustees of
Nations Fund Trust and the Boards of Directors of Nations Fund, Inc. and Nations
Portfolios would recommend to each Fund's shareholders that they approve a new
advisory agreement with another entity or entities qualified to perform such
services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
Nations Fund pursuant to Administration Agreements. Pursuant to the terms of the
Administration Agreements, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of
First Data Corporation, with principal offices at One Exchange Place, Boston,
Massachusetts 02109, serves as the co-administrator of Nations Fund pursuant to
Co-Administration Agreements. Under the Co-Administration Agreements, TSSG
provides various administrative and accounting services to the Funds including
performing the calculations necessary to determine the net asset value per share
and dividends of each class of the Funds, preparing tax returns and financial
statements and maintaining the portfolio records and certain of the general
accounting records for the Funds.
For the services rendered pursuant to the Administration and Co-Administration
Agreements, Stephens and TSSG are entitled to receive a combined fee at the
annual rate of up to 0.10% of each Fund's average daily net assets. For the
fiscal year ended November 30, 1994, after waivers, Nations Fund Trust paid its
administrators fees at the rate of 0.09% of the average daily net assets of
Nations Capital Growth Fund, Nations Emerging Growth Fund, Nations Disciplined
Equity Fund, Nations Value Fund and Nations Balanced Assets Fund. For the fiscal
year ended May 31, 1995, after waivers, Nations Fund, Inc. paid its
administrators fees at the rate of 0.09% of the Nations International Equity
Fund and the Nations Equity Income Fund's average daily net assets.
NationsBank serves as sub-administrator for Nations Fund pursuant to a
Sub-Administration Agreement. Pursuant to the terms of the Sub-Administration
Agreement, NationsBank assists Stephens in supervising, coordinating and
monitoring various aspects of the Funds' administrative operations. For
providing such services, NationsBank shall be entitled to receive a monthly fee
from Stephens based on an annual rate of .01% of the Funds' average daily net
assets.
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Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker-dealer with principal
offices at 111 Center Street, Little Rock, Arkansas 72201. Nations Fund has
entered into distribution agreements with Stephens which provide that Stephens
has the exclusive right to distribute shares of the Funds. Stephens may pay
service fees or commissions to selling agents that assist customers in
purchasing Investor Shares of the Funds. See "Shareholder Servicing and
Distribution Plans."
Morgan Guaranty Trust Company ("Morgan Guaranty"), Avenue des Arts, 35 1040
Brussels, Belgium, serves as custodian for the assets of the Nations
International Equity Fund, Nations Emerging Markets Fund and Nations Pacific
Growth Fund.
NationsBank of Texas, N.A. ("NationsBank of Texas" and collectively with Morgan
Guaranty, the "Custodians") serves as custodian for the assets of each Fund
except Nations International Equity Fund, Nations Emerging Markets Fund and
Nations Pacific Growth Fund. NationsBank of Texas is located at 1401 Elm Street,
Dallas, Texas 75202, and is a wholly owned subsidiary of NationsBank
Corporation. In return for providing custodial services, NationsBank of Texas is
entitled to receive, in addition to out-of-pocket expenses, fees payable monthly
(i) at the rate of 1.25% of 1% of the average daily net assets of each Fund for
which it serves as custodian, (ii) $10.00 per repurchase collateral transaction
by such Funds, and (iii) $15.00 per purchase, sale and maturity transaction
involving such Funds.
TSSG serves as transfer agent (the "Transfer Agent") for the Funds' Investor C
Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
Price Waterhouse LLP serves as independent accountant to Nations Fund. Their
address is 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES: The accrued expenses of the Funds, as well as certain expenses
attributable to Investor C Shares, are deducted from accrued income before
dividends are declared. The Funds' expenses include, but are not limited to:
fees paid to the Adviser, NationsBank, Stephens and TSSG; interest; trustees'
and directors' fees; federal and state securities registration and qualification
fees; brokerage fees and commissions; cost of preparing and printing
prospectuses for regulatory purposes and for distribution to existing
shareholders; charges of the Custodians and Transfer Agent; certain insurance
premiums; outside auditing and legal expenses; costs of shareholder reports and
shareholder meetings, other expenses which are not expressly assumed by the
Adviser, NationsBank, Stephens or TSSG under their respective agreements with
Nations Fund; and any extraordinary expenses. Investor C Shares may bear certain
class specific retail transfer agency expenses and also bear certain additional
shareholder service and/or sales support costs. Any general expenses of Nations
Fund Trust, Nations Fund, Inc. and/or Nations Portfolios that are not readily
identifiable as belonging to a particular investment portfolio are allocated
among all portfolios in the proportion that the assets of a portfolio bears to
the assets of Nations Fund Trust, Nations Fund, Inc. and/or Nations Portfolios
or in such other manner as the relevant Board of Trustees or Board of Directors
deems appropriate.
Organization And History
The Funds are members of the Nations Fund Family, which consists of Nations Fund
Trust, Nations Fund, Inc., Nations Portfolios and Nations Institutional Reserves
(formerly known as The Capitol Mutual Funds). The Nations Fund Family currently
has 44 distinct investment portfolios and total assets in excess of $16 billion.
NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. The Funds currently offer five classes of shares -- Trust
A Shares, Trust B Shares, Investor A Shares, Investor C Shares and Investor N
Shares. This Prospectus relates only to the Investor C Shares of Nations Capital
Growth Fund, Nations Emerging Growth Fund, Nations Disciplined Equity Fund,
Nations Value Fund and Nations Balanced Assets Fund of Nations Fund Trust. To
obtain additional information regarding the Funds' other classes of shares which
may be available to you, contact your Selling Agent (as defined below) or
Nations Fund at 1-800-321-7854.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund, and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that
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the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See Nations Fund Trust's SAI for examples of when the
Investment Company Act of 1940 (the "1940 Act") requires voting by fund.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose or vote with respect to more than 25% of the outstanding shares of
Nations Fund Trust and therefore could be considered to be a controlling person
of Nations Fund Trust for purposes of the 1940 Act. In addition, as of August
31, 1995, Richard B. Boyle owned of record 25% or more of Investor C Shares of
the Nations Disciplined Equity Fund and therefore could be considered a
controlling person of such class for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series of shares over
which NationsBank and its affiliates possessed or shared power to dispose or
vote as of a certain date, see Nations Fund Trust's SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
NATIONS FUND, INC.: Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no operations prior to December 15, 1986. As of the date of
this Prospectus, the authorized capital stock of Nations Fund, Inc. consists of
270,000,000,000 shares of common stock, par value of $.001 per share, which are
divided into series or funds each of which consists of separate classes of
shares. This Prospectus relates only to the Investor C Shares of Nations
International Equity Fund and Nations Equity Income Fund of Nations Fund, Inc.
To obtain additional information regarding the Fund's other classes of shares
which may be available to you, contact your Selling Agent (as defined below) or
Nations Fund at 1-800-321-7854.
Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such fund
or class. In the event of dissolution or liquidation, holders of each class will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of that portion of the assets allocated to that class held in the
respective fund of Nations Fund, Inc., less (b) the liabilities of Nations Fund,
Inc. attributable to the respective fund or class or allocated among the funds
or classes based on the respective liquidation value of each fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Fund, Inc.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s shares.
Nations Fund, Inc.'s shares, when issued, will be fully paid and
non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Fund, Inc. and therefore could be considered to be a controlling person
of Nations Fund, Inc. for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see Nations Fund, Inc.'s SAI. It is anticipated that Nations
Fund, Inc. will not hold annual shareholder meetings on a regular basis unless
required by the 1940 Act or Maryland law.
NATIONS PORTFOLIOS: Nations Portfolios was incorporated in Maryland on January
23, 1995. As of the date of this Prospectus, the authorized capital stock of
Nations Portfolios consists of 150,000,000,000 shares of common stock, par value
of $.001 per share, which are divided into series or funds each of which
consists of separate classes of shares. This Prospectus relates only to the
Investor C Shares of Nations Emerging Markets Fund and Nations Pacific Growth
Fund of Nations Portfolios. To obtain additional information regarding the
Funds' other classes of shares which may be available to you, contact your
Selling Agent (as defined below) or Nations Fund at 1-800-321-7854.
Shares of a fund and class have equal rights with respect to voting, except that
the holders of shares of a fund or class will have the exclusive right to vote
on matters affecting only the rights of the holders of such fund or class. In
the event of dissolution or liquidation, holders of each class will receive pro
rata, subject to the rights of creditors, (a) the proceeds of the sale of that
portion of the assets allocated to that class held in the respective fund of
Nations Portfolios, less (b) the liabilities of Nations Portfolios attributable
to the respective fund or class allocated among the funds or classes based on
the respective liquidation value of each fund or class.
Shareholders of Nations Portfolios do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Portfolios. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations
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Portfolios. There are no preemptive rights applicable to any of Nations
Portfolios' shares. Nations Portfolios' shares, when issued, will be fully paid
and non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Portfolios and, therefore, could be considered to be a controlling
person of Nations Portfolios for purposes of the 1940 Act. In addition, as of
August 31, 1995, Carolyn Branan owned of record 25% or more of the Investor C
Shares of the Nations Pacific Growth Fund and therefore could be considered a
controlling person of such class for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see Nations Portfolios' SAI. It is anticipated that Nations
Portfolios will not hold annual shareholder meetings on a regular basis unless
required by the 1940 Act or Maryland law.
Because this Prospectus combines disclosure on three separate investment
companies, there is a possibility that one investment company could become
liable for a misstatement, inaccuracy or incomplete disclosure in this
Prospectus concerning the other investment company. Nations Fund Trust, Nations
Fund, Inc. and Nations Portfolios have entered into an indemnification agreement
that creates a right of indemnification from the investment company responsible
for any such misstatement, inaccuracy or incomplete disclosure that may appear
in this Prospectus.
About Your Investment
How To Buy Shares
Stephens has established various procedures for purchasing Investor C Shares in
order to accommodate different investors. Purchase orders for Investor C Shares
may be placed through banks, broker/dealers or other financial institutions
(including certain affiliates of NationsBank) that have entered into a Sales
Support Agreement with Stephens ("Selling Agents").
There is a minimum initial investment of $1,000, except that the minimum initial
investment is:
(Bullet) $500 for Individual Retirement Account ("IRA") investors;
(Bullet) $250 for non-working spousal IRAs; and
(Bullet) $100 for investors participating on a monthly basis in the Systematic
Investment Plan described below.
There is no minimum investment amount for investments by 401(k) plans,
simplified employee pension plans ("SEPs"), salary reduction-simplified employee
pension plans ("SAR-SEPs") or salary reduction-Individual Retirement Account
("SAR-IRAs"). However, the assets of such plans must reach an asset value of
$1,000 ($500 for SEPs, SAR-SEPs and SAR-IRAs) within one year of the account
open date. If the assets of such plans do not reach the minimum asset size
within one year, Nations Fund reserves the right to redeem the shares held by
such plans on 60 days' written notice. The minimum subsequent investment is
$100, except for investments pursuant to the Systematic Investment Plan
described below.
Investor C Shares are purchased at net asset value per share. Purchases may be
effected on days on which the New York Stock Exchange (the "Exchange") is open
for business (a "Business Day").
With respect to Investor C Shares, the Selling Agents have entered into Sales
Support Agreements with Stephens whereby they will provide various sales support
services to their customers ("Customers") who own Investor C Shares. In
addition, banks, broker/dealers or other financial institutions (including
certain affiliates of NationsBank) that have entered into Servicing Agreements
with Nations Fund ("Servicing Agents") will provide various shareholder services
for their Customers who own Investor C Shares. Servicing Agents and Selling
Agents are sometimes referred to hereafter as "Agents." From time to time the
Agents, Stephens and Nations Fund may agree to voluntarily reduce the maximum
fees payable for sales support or shareholder services.
Nations Fund reserves the right to reject any purchase order. The issuance of
Investor C Shares is recorded on the books of the Funds, and share certificates
are not issued unless expressly requested in writing. Certificates are not
issued for fractional shares.
EFFECTIVE TIME OF PURCHASES: Purchase orders for Investor C Shares of the Funds
which are received by Stephens or by the Transfer Agent before the close of
regular trading hours on the Exchange (currently 4:00 p.m., Eastern time) on any
Business Day are priced according to the net asset value determined on that day
but are not executed until 4:00 p.m., Eastern time, on
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the Business Day on which immediately available funds in payment of the purchase
price are received by the Funds' Custodian. Such payment must be received not
later than 4:00 p.m., Eastern time, by the third Business Day following receipt
of the order. If funds are not received by such date, the order will not be
accepted and notice thereof will be given to the Agent placing the order.
Payment for orders which are not received or accepted will be returned after
prompt inquiry to the sending Agent.
The Agents are responsible for transmitting orders for purchases of Investor C
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Fund.
SYSTEMATIC INVESTMENT PLAN: Under the Funds' Systematic Investment Plan ("SIP")
a shareholder may automatically purchase Investor C Shares. On a bi-monthly,
monthly or quarterly basis, a shareholder may direct cash to be transferred
automatically from his/her checking or savings account at any bank to his/her
Fund account. Transfers will occur on or about the 15th and/or 30th day of the
applicable month. The systematic investment amount may be in any amount from $25
to $100,000. For more information concerning the SIP, contact your Agent.
TELEPHONIC TRANSACTIONS: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How to Redeem Shares" and "How to
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. You should be aware that by electing the telephone transaction
feature, you may be giving up a measure of security that you may have if you
were to authorize written requests only. You may bear the risk of any resulting
losses from a telephone transaction. Nations Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
and if Nations Fund and its service providers fail to employ such measures, they
may be liable for any losses due to unauthorized or fraudulent instructions.
Nations Fund requires a form of personal identification prior to acting upon
instructions received by telephone and provides written confirmation to
shareholders of each telephone share transaction. In addition, Nations Fund
reserves the right to record all telephone conversations.
Shareholder Servicing And Distribution Plans
Pursuant to Rule 12b-1 under the 1940 Act, the Trustees and Directors have
approved a Distribution Plan with respect to Investor C Shares of the Funds.
Pursuant to the Distribution Plan, the Funds may compensate or reimburse
Stephens for any activities or expenses primarily intended to result in the sale
of the Funds' Investor C Shares. Payments under the Investor C Distribution Plan
will be calculated daily and paid monthly at a rate or rates set from time to
time by the Trustees and Directors provided that the annual rate may not exceed
0.75% of the average daily net asset value of the Funds' Investor C Shares.
The fees payable under the Distribution Plan are used (i) to compensate Selling
Agents for providing sales support assistance relating to Investor C Shares,
(ii) to pay for promotional activities intended to result in the sale of
Investor C Shares such as the preparation, printing and distribution of
prospectuses to other than current shareholders, and (iii) to compensate Selling
Agents for providing sales support services with respect to their Customers who
are, from time to time, beneficial and record holders of Investor C Shares.
Currently, substantially all fees paid pursuant to the Distribution Plan are
paid to compensate Selling Agents for providing the services described in (i)
and (iii) above, with any remaining amounts being used by Stephens to partially
defray other expenses incurred by Stephens in distributing Investor C Shares.
Fees received by Stephens pursuant to the Distribution Plan will not be used to
pay any interest expenses, carrying charges or other financing costs (except to
the extent permitted by the SEC) and will not be used to pay any general and
administrative expenses of Stephens.
Nations Fund and Stephens may suspend or reduce payments under the Distribution
Plan at any time, and payments are subject to the continuation of the
Distribution Plan described above and the terms of the Sales Support Agreement
between Selling Agents and Stephens. See the SAIs for more details on the
Distribution Plan.
The Trustees and Directors also have approved a shareholder servicing plan
("Servicing Plan") for the Funds which permits the Funds to compensate Servicing
Agents for services provided to their Customers that own Investor C Shares.
Payments under the Servicing Plan are calculated daily and paid monthly at a
rate or rates set from time to time by the Funds, provided that the annual rate
may not exceed 0.25% of the average daily net asset value of the Funds' Investor
C Shares.
The fees payable under the Servicing Plan are used primarily to compensate or
reimburse Servicing Agents for shareholder services provided, and related
expenses incurred, by such Servicing Agents. The shareholder services provided
by Servicing Agents may include: (i) aggregating and processing purchase and
redemption requests for Investor C Shares from Customers and
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transmitting net purchase and redemption orders to Stephens or the Transfer
Agent; (ii) providing Customers with a service that invests the assets of their
accounts in Investor C Shares pursuant to specific or preauthorized
instructions; (iii) processing dividend and distribution payments from the Funds
on behalf of Customers; (iv) providing information periodically to Customers
showing their positions in Investor C Shares; (v) arranging for bank wires; and
(vi) providing general shareholder liaison services.
Nations Fund may suspend or reduce payments under the Servicing Plan at any
time, and payments are subject to the continuation of the Servicing Plan
described above and the terms of the Servicing Agreements. See the SAIs for more
details on the Servicing Plan.
Nations Fund understands that Agents may charge fees to their Customers who are
the owners of Investor Shares for various services provided in connection with a
Customer's account. These fees would be in addition to any amounts received by a
Selling Agent under its Sales Support Agreement with Stephens or by a Servicing
Agent under its Servicing Agreement with Nations Fund. The Sales Support
Agreements and Servicing Agreements require Agents to disclose to their
Customers any compensation payable to the Agent by Stephens or Nations Fund and
any other compensation payable by the Customers for various services provided in
connection with their accounts. Customers should read this Prospectus in light
of the terms governing their accounts with their Agents.
Stephens may, from time to time, at its expense or as an expense for which it
may be reimbursed under the Distribution Plan, pay a bonus or other
consideration or incentive to Agents who sell a minimum dollar amount of shares
of the Funds during a specified period of time. Stephens also may, from time to
time, pay additional consideration to Agents not to exceed 0.75% of the offering
price per share on all sales of Investor C Shares as an expense of Stephens or
for which Stephens may be reimbursed under the Distribution Plan or upon receipt
of a CDSC. Any such additional consideration or incentive program may be
terminated at any time by Stephens.
In addition, Stephens has established a non-cash compensation program, pursuant
to which broker/dealers or financial institutions that sell shares of the Funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise. This non-cash compensation program may be
amended or terminated at any time by Stephens.
How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders are
effected at the net asset value per share next determined after receipt of the
order by Stephens or by the Transfer Agent, less any applicable CDSC. The Agents
are responsible for transmitting redemption orders to Stephens or to the
Transfer Agent and for crediting their Customer's account with the redemption
proceeds on a timely basis. No charge for wiring redemption payments is imposed
by Nations Fund. Except for any CDSC which may be applicable upon redemption of
Investor C Shares, as described below, there is no redemption charge.
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens or by the Transfer Agent.
However, redemption proceeds for shares purchased by check may not be remitted
until at least 15 days after the date of purchase to ensure that the check has
cleared; a certified check, however, is deemed to be cleared immediately.
Nations Fund may redeem a shareholder's Investor C Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of an Agent
pursuant to arrangements between the Agent and its Customers. Nations Fund also
may redeem shares of the Funds involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
Prior to effecting a redemption of Investor C Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to Nations Fund have previously been
made. Nations Fund may require any additional information reasonably necessary
to evidence that a redemption has been duly authorized.
CONTINGENT DEFERRED SALES CHARGE: Subject to certain waivers, Investor C Shares
of the Funds that are redeemed within one year of the date of purchase will be
subject to a CDSC equal to 0.50% of the lesser of the net asset value or the
purchase price of the shares being redeemed. Investor C Shares purchased prior
to January 1, 1996 remain subject to the 1.00% CDSC. No CDSC is imposed on
increases in net asset value above the ini-
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tial purchase price, including shares acquired by reinvestment of distributions.
Solely for purposes of determining the period of time that has elapsed from the
purchase of any Investor C Shares, all purchases are deemed to have been made on
the trade date of the transaction. In determining whether a CDSC is applicable
to a redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares held for the longest period of time or shares
acquired pursuant to reinvestment of dividends or distributions. The charge will
not be applied to dollar amounts representing an increase in the net asset value
since the time of purchase.
The CDSC will be waived on redemptions of Investor C Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as amended
(the "Code")) of a shareholder (including a registered joint owner), (ii) in
connection with the following retirement plan distributions: (a) by qualified
plans, (except in cases of plan level terminations); (b) distributions from an
IRA following attainment of age 59 1/2; (c) a tax-free return of an excess
contribution to an IRA, and (d) distributions from a qualified retirement plan
that are not subject to the 10% additional Federal withdrawal tax pursuant to
Section 72(t)(2) of the Code, (iii) effected pursuant to Nations Fund's right to
liquidate a shareholder's account if the aggregate net asset value of the
Investor Shares held in the account is less than the minimum account size, (iv)
in connection with the combination of Nations Fund with any other registered
investment company by merger, acquisition of assets or by any other transaction,
and (v) effected pursuant to the Automatic Withdrawal Plan discussed below,
provided that such redemptions do not exceed, on an annual basis, 12% of the net
asset value of the Investor C Shares in the account. Shareholders are
responsible for providing evidence sufficient to establish that they are
eligible for any waiver of the CDSC. Nations Fund may terminate any waiver of
the CDSC by providing notice in the Funds' Prospectus, but any such termination
would affect only shares purchased after such termination.
Within 120 after a redemption of Investor C Shares of a Fund, a shareholder may
reinvest any portion of the proceeds of such redemption in Investor C Shares of
the same Fund. The amount which may be so reinvested is limited to an amount up
to, but not exceeding, the redemption proceeds (or to the nearest full share if
fractional shares are not purchased). A shareholder exercising this privilege
would receive a pro rata credit for any CDSC paid in connection with the prior
redemption. A shareholder may not exercise this privilege with the proceeds of a
redemption of shares previously purchased through the reinstatement privilege.
In order to exercise this privilege, a written order for the purchase of
Investor C Shares must be received by the Transfer Agent or by Stephens within
120 days after the redemption.
AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of the Funds if the value of the
Investor C Shares in his/her accounts within the Nations Fund Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Investor C Shares redeemed under the AWP will not be subject to a CDSC,
provided that the shares so redeemed do not exceed, on an annual basis, 12% of
the net asset value of the Investor C Shares in the account. Otherwise, any
applicable CDSC will be imposed on shares redeemed under the AWP. Shareholders
who elect to establish an AWP may receive a monthly, quarterly or annual check
or automatic transfer to a checking or savings account in a stated amount of not
less than $25 on or about the 10th or 25th day of the applicable month of
withdrawal. Investor C Shares will be redeemed (net of any applicable CDSC) as
necessary to meet withdrawal payments. Withdrawals will reduce principal and may
eventually deplete the shareholder's account. If a shareholder desires to
establish an AWP after opening an account, a signature guarantee will be
required. An AWP may be terminated by a shareholder on 30 days' written notice
to his/her Agent or by Nations Fund at any time.
How To Exchange Shares
The exchange feature enables a shareholder of Investor C Shares of a Nations
Fund non-money market fund (including the Funds) to acquire shares of the same
class that are offered by another non-money market fund of Nations Fund or
Investor D Shares of any money market fund offered by Nations Fund when he or
she believes that a shift between funds is an appropriate investment decision. A
qualifying exchange is based on the next calculated net asset value per share of
each fund after the exchange order is received. No CDSC will be imposed in
connection with an exchange of Investor Shares that meets the requirements
discussed in this section.
If a shareholder acquires Investor C Shares of a non-money market fund through
an exchange, the CDSC applicable to the original shares purchased (except for
Nations Short-Term Income Fund and Nations Short-Term Municipal Income Fund
Shares purchased prior to January 1, 1996, which will be subject to the CDSC
schedule applicable to the acquired Fund) will be applied to any redemption of
the acquired shares. Additionally, if a shareholder acquires Investor D Shares
of a money market fund or Investor C Shares of Nations Short-Term Income Fund or
Nations Short-Term Municipal Income Fund with shares of another Fund purchased
prior to
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January 1, 1996, the CDSC schedule applicable to the exchanged Investor C Shares
will be applied on any redemption of the acquired shares. Notwithstanding the
foregoing, if a shareholder redeems shares acquired through an exchange, the
shareholder will be subject to the highest CDSC schedule applicable to any
shares that were exchanged within 30 days prior to the redemption. Additionally,
when an investor exchanges Investor C Shares of a Fund for shares of another
fund, the remaining period of time (if any) that the CDSC is in effect will be
computed from the time of the initial purchase of the previously held Investor C
Shares.
AUTOMATIC EXCHANGE FEATURE: Under the Funds' Automatic Exchange Feature ("AEF")
a shareholder may automatically exchange at least $25 on a monthly or quarterly
basis. Shareholder may direct proceeds to be exchanged from one Nations Fund to
another as allowed by the applicable exchange rules within the prospectus.
Exchanges will occur on or about the 15th and/or 30th day of the applicable
month. The shareholder must have an existing position in both Funds in order to
establish the AEF. This feature may be established by directing a request to the
Transfer Agent by telephone or in writing. For additional information, please
contact your selling agent.
GENERAL: The Funds and each of the other funds of Nations Fund may limit the
number of times this exchange feature may be exercised by a shareholder within a
specified period of time. Also, the exchange feature may be terminated or
revised at any time by Nations Fund upon such notice as may be required by
applicable regulatory agencies (presently 60 days for termination or material
revision), absent unusual circumstances.
The current prospectus for each fund of Nations Fund describes its investment
objective and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for Federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.
The Investor C Shares exchanged must have a current value of at least $1,000
(except for exchange through the AEF). Nations Fund reserves the right to reject
any exchange request. Only shares that may legally be sold in the state of the
investor's residence may be acquired in an exchange. Only shares of a class that
is accepting investments generally may be acquired in an exchange. An investor
may telephone an exchange request by calling his/her Agent which is responsible
for transmitting such request to Stephens or to the Transfer Agent.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. In such event, shares may be exchanged by mailing the
request directly to the Agent through which the original shares were purchased.
An investor should consult his/her Agent or Stephens for further information
regarding exchanges.
How The Funds Value Their Shares
The Funds calculate the net asset value of a share of each class by dividing the
total value of its assets, less liabilities, by the number of shares in the
class outstanding. Shares are valued as of the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on each Business Day. Currently,
the days on which the Exchange is closed (other than weekends) are: New Year's
Day, Presidents' Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Portfolio securities for which
market quotations are readily available are valued at market value. Short-term
investments that will mature in 60 days or less are valued at amortized cost,
which approximates market value. All other securities and assets are valued at
their fair value following procedures approved by the Trustees or Directors.
How Dividends And Distributions Are Made;
Tax Information
DIVIDENDS AND DISTRIBUTIONS: The Funds distribute any net investment income each
calendar quarter and any net realized capital gains (including net short-term
capital gains) at least annually. Distributions from capital gains are made
after applying any available capital loss carryovers. Investor C Shares of the
Funds are eligible to receive dividends when declared, provided, however, that
the purchase order for such shares is received at least one day prior to the
dividend declaration and such shares continue to be eligible for dividends
through
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and including the day before the redemption order is executed. Distributions
paid by the Funds with respect to one class of shares may be greater or less
than those paid with respect to another class of shares due to the different
expenses of the different classes.
The net asset value of Investor C Shares will be reduced by the amount of any
dividend or distribution. Certain Agents may provide for the reinvestment of
dividends in the form of additional Investor C Shares of the same class in the
same Fund. Dividends and distributions are paid in cash within five Business
Days of the end of the quarter to which the dividend relates. Dividends and
distributions payable to a shareholder are paid in cash within five Business
Days after a shareholder's complete redemption of his/her Investor C Shares.
TAX INFORMATION: Each Fund intends to qualify as a "regulated investment
company" under the Code. Such qualification relieves the Fund of liability for
Federal income taxes on amounts distributed in accordance with the Code.
Each Fund intends to distribute substantially all of its investment company
taxable income and net tax-exempt income each taxable year. Distributions by a
Fund of its net investment income (including net foreign currency gains) and the
excess, if any, of its net short-term capital gain over its net long-term
capital loss are taxable as ordinary income to shareholders who are not
currently exempt from Federal income taxes, whether such income is received in
cash or reinvested in additional shares. (Federal income taxes for distributions
to an IRA are generally deferred under the Code.)
Corporate investors in the Funds (except Nations International Equity Fund,
Nations Emerging Markets Fund and Nations Pacific Growth Fund) may be entitled
to the dividends-received deduction on all or a portion of such Funds'
dividends. Corporate shareholders of the Nations International Equity, Nations
Emerging Markets and Nations Pacific Growth Funds may be eligible for the
dividends-received deduction on the dividends (excluding the net capital gains
dividends) paid by these Funds to the extent that a Fund's income is derived
from dividends (which, if received directly, would qualify for such deduction)
received from domestic corporations. In order to qualify for the
dividends-received deduction, a corporate shareholder must hold the fund shares
paying the dividends upon which the deduction is based for at least 46 days.
Substantially all of the Funds' net realized long-term capital gains will be
distributed at least annually. The Funds will generally have no tax liability
with respect to such gains, and the distributions will be taxable to
shareholders who are not exempt from Federal income taxes as long-term capital
gains, regardless of how long the shareholders have held the Funds' shares and
whether such gains are received in cash or reinvested in additional shares.
Each year, shareholders will be notified as to the amount and Federal tax status
of all dividends and capital gains paid during the prior year. Such dividends
and capital gains may be subject to state and local taxes.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by the Funds on December 31 of such year
in the event such dividends are actually paid during January of the following
year.
Federal law requires Nations Fund to withhold 31% from any dividends (other than
exempt-interest dividends) paid by Nations Fund and/or redemptions (including
exchange redemptions) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply, or
if the Internal Revenue Service has notified Nations Fund that the Taxpayer
Identification Number listed on a shareholder account is incorrect according to
its records, or that the shareholder is subject to backup withholding. Amounts
withheld are applied to the shareholder's Federal tax liability, and a refund
may be obtained from the Internal Revenue Service if withholding results in
overpayment of taxes. Federal law also requires the Funds to withhold 30% or the
applicable tax treaty rate from dividends paid to certain nonresident alien,
non-U.S. partnership and non-U.S. corporation shareholder accounts.
Portions of each of Nations International Equity Fund, Nations Emerging Markets
Fund and Nations Pacific Growth Fund's investment income may be subject to
foreign income taxes withheld at their source. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Generally,
more than 50% of the value of the total assets of each of those Funds will
consist of securities of foreign issuers, and therefore each of those Funds may
elect to "pass through" to its shareholders these foreign taxes, if any. In such
event each shareholder will be required to include his or her pro rata portion
thereof in his or her gross income, but will be able to deduct or (subject to
various limitations) claim a foreign tax credit against U.S. income taxes for
such amount.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important Federal tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisers with respect to their specific tax
situations as well as with respect to state and local taxes. Further tax
information is contained in the SAIs.
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Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAIs contain more
information concerning such investments.
ASSET BACKED SECURITIES: Asset Backed Securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset Backed
Securities consist of both mortgage and non-mortgage backed securities.
Interests in pools of these assets differ from other forms of debt securities,
which normally provide for periodic payment of interest in fixed amounts with
principal paid at maturity or specified call dates. Instead, Asset Backed
Securities provide periodic payments which generally consist of both interest
and principal payments.
Mortgage backed securities represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself.
Mortgage backed securities include mortgage pass-through securities,
collateralized mortgage obligations ("CMOs"), parallel pay CMOs, planned
amortization class CMOs ("PAC Bonds") and stripped mortgage-backed securities
("SMBS"), including interest-only and principal-only SMBS. SMBS may be more
volatile than other debt securities. For additional information concerning
mortgage backed securities, see the related SAI.
Non-mortgage asset backed securities include interests in pools of receivables,
such as motor vehicle installment purchase obligations and credit card
receivables. Such securities are generally issued as pass-through certificates,
which represent undivided fractional ownership interests in the underlying pools
of assets. Such securities also may be debt instruments, which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. The Funds will limit their investments
in bank obligations so they do not exceed 25% of each Fund's total assets at the
time of purchase.
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Funds' total assets must be repaid prior to the purchase of
portfolio securities. The Funds are parties to a Line of Credit Agreement with
Mellon Bank, N.A. Advances under the agreement are taken primarily for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities.
Reverse repurchase agreements and dollar roll transactions may be considered to
be borrowings. When a Fund invests in a reverse repurchase agreement, it sells a
portfolio security to another party, such as a bank or broker-dealer, in return
for cash, and agrees to buy the security back at a future date and price.
Reverse repurchase agreements may be used to provide cash to satisfy unusually
heavy redemption requests without having to sell portfolio securities, or for
other temporary or emergency purposes. Generally, the effect of such a
transaction is that the Funds can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while they will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Funds of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Funds are obligated to repurchase under
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the agreement may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, the Funds' use of proceeds of the agreement may be restricted pending
a determination by the other party, or its trustee or receiver, whether to
enforce the Funds' obligation to repurchase the securities. In addition, there
is a risk of delay in receiving collateral or securities or in repurchasing the
securities covered by the reverse repurchase agreement or even of a loss of
rights in the collateral or securities in the event the buyer of the securities
under the reverse repurchase agreement files for bankruptcy or becomes
insolvent. The Fund only enters into reverse repurchase agreements (and
repurchase agreements) with counterparties that are deemed by the Adviser to be
credit worthy. Reverse repurchase agreements are speculative techniques
involving leverage, and are subject to asset coverage described above.
Dollar roll transactions consist of the sale by a Fund of mortgage-backed or
other asset-backed securities, together with a commitment to purchase similar,
but not identical, securities at a future date, at the same price. In addition,
a Fund is paid a fee as consideration for entering into the commitment to
purchase. If the broker/dealer to whom a Fund sells the security becomes
insolvent, the Fund's right to purchase or repurchase the security may be
restricted; the value of the security may change adversely over the term of the
dollar roll; the security that the Fund is required to repurchase may be worth
less than the security that the Fund originally held, and the return earned by
the Fund with the proceeds of a dollar roll may not exceed transaction costs.
COMMERCIAL INSTRUMENTS: Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or foreign
corporations and foreign commercial banks. Investments by a Fund in commercial
paper will consist of issues rated in a manner consistent with such Fund's
investment policies and objectives. In addition, a Fund may acquire unrated
commercial paper and corporate bonds that are determined by the Adviser at the
time of purchase to be of comparable quality to rated instruments that may be
acquired by a Fund. Commercial instruments include variable rate master demand
notes, which are unsecured instruments that permit the indebtedness thereunder
to vary and provide for periodic adjustments in the interest rate, and variable-
and floating-rate instruments.
CONVERTIBLE SECURITIES, PREFERRED STOCK, AND WARRANTS: Certain of the Funds may
invest in debt securities convertible into or exchangeable for equity
securities, preferred stocks or warrants. Preferred stocks are securities that
represent an ownership interest in a corporation providing the owner with claims
on a company's earnings and assets before common stock owners, but after bond or
other debt security owners. Warrants are options to buy a stated number of
shares of common stock at a specified price any time during the life of the
warrants.
FIXED INCOME INVESTING: The performance of the fixed-income debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. A Fund's share price
and yield depend, in part, on the maturity and quality of its debt instruments.
FOREIGN CURRENCY TRANSACTIONS: To the extent provided under "How Objections Are
Pursued," the Funds may enter into foreign currency exchange transactions to
convert foreign currencies to and from the United States Dollar. A Fund either
enters into these transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or uses forward contracts to
purchase or sell foreign currencies. A forward foreign currency exchange
contract is an obligation by a Fund to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the
contract.
Foreign currency hedging transactions are an attempt to protect a Fund against
changes in foreign currency exchange rates between the trade and settlement
dates of specific securities transactions or changes in foreign currency
exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. Neither spot transactions nor forward
foreign currency exchange contracts eliminate fluctuations in the prices of a
Fund's portfolio securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.
The Nations International Equity Fund, the Nations Emerging Markets Fund and/or
the Nations Pacific Growth Fund will generally enter into forward currency
exchange contracts only under two circumstances: (i) when the Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, to "lock" in the U.S. dollar price of the security; and (ii) when the
Adviser believes that the currency of a particular foreign country may
experience a substantial movement against another currency. Under certain
circumstances, the Fund may commit a substantial portion of its portfolio to the
execution of these contracts. The Adviser will consider the effects such a
commitment would have on the investment program of the Fund and the flexibility
of the Fund to purchase additional securities. Although forward contracts will
be used primarily to protect the Fund from adverse currency movements,
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they also involve the risk that anticipated currency movements will not be
accurately predicted. The Nations International Equity Fund will generally not
enter into a forward contract with a term of greater than one year.
FOREIGN SECURITIES: Foreign securities include obligations of foreign
corporations and banks as well as obligations of foreign governments and their
political subdivisions (which will be limited to direct government obligations
and government-guaranteed securities). Such investments may subject a Fund to
special investment risks, including future political and economic developments,
the possible imposition of withholding taxes on interest income, possible
seizure or nationalization of foreign deposits, the possible establishment of
exchange controls, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. In addition, foreign issuers in general may be subject to different
accounting, auditing, reporting, and record keeping standards than those
applicable to domestic companies, and securities of foreign issuers may be less
liquid and their prices more volatile than those of comparable domestic issuers.
Investments in foreign securities may present additional risks, whether made
directly or indirectly, including the political or economic instability of the
issuer or the country of issue and the difficulty of predicting international
trade patterns. In addition, there may be less publicly available information
about a foreign company than about a U.S. company. Further, foreign stock
markets are generally not as developed or efficient as those in the U.S., and in
most foreign markets volume and liquidity are less than in the U.S. Fixed
commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign stock exchanges, brokers, and companies
than in the U.S. With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS: To the extent provided under
"How Objectives Are Pursued" the Funds may attempt to reduce the overall level
of investment risk of particular securities and attempt to protect a Fund
against adverse market movements by investing in futures, options and other
derivative instruments. These include the purchase and writing of options on
securities (including index options) and options on foreign currencies, and
investing in futures contracts for the purchase or sale of instruments based on
financial indices, including interest rate indices or indices of U.S. or foreign
government, equity or fixed income securities ("futures contracts"), options on
futures contracts, forward contracts and swaps and swap-related products such as
interest rate swaps, currency swaps, caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable position.
Additional risks inherent in the use of futures, options, forward contracts and
swaps include: imperfect correlation between the price of futures, options and
forward contracts and movements in the prices of the securities or currencies
being hedged; the possible absence of a liquid secondary market for any
particular instrument at any time; and the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. A Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks, is
contained in the SAIs.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Funds will not knowingly
invest more than 15% of the value of their respective net assets in securities
that are illiquid or such lower percentage as may be required by the states in
which the appropriate Fund sells its shares. Repurchase agreements and time
deposits that do not provide for payment to a Fund within seven days after
notice, guaranteed investment contracts and some commercial paper issued in
reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act") (other than variable amount master demand notes with
maturities of nine months or less), are subject to the limitation on illiquid
securities.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by a Fund's Board of Trustees or Board of Directors or
the Adviser, acting under guidelines approved and monitored by the Fund's Board,
after considering trading activity, availability of reliable price information
and other relevant information, that an adequate trading market exists for that
security. To the extent that, for a period of time, qualified institutional
buyers cease purchasing such restricted securities pursuant to Rule 144A, the
level of illiquidity of a Fund holding such securities may increase during such
period.
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INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of its
portfolio from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, E.G., an exchange of floating rate payments for fixed rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. The Adviser expects to enter into these
transactions on behalf of a Fund primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipated purchasing at a later
date rather than for speculative purposes. A Fund will not sell interest rate
caps or floors that it does not own.
LOWER-RATED DEBT SECURITIES: Lower-rated, high-yielding securities are those
rated Ba or B by Moody's or BB or B by S&P which are commonly referred to as
"junk bonds." These bonds provide poor protection for payment of principal and
interest. Lower-quality bonds involve greater risk of default or price changes
due to changes in the issuer's creditworthiness than securities assigned a
higher quality rating. These securities are considered to have speculative
characteristics and indicate an aggressive approach to income investing. The
Funds intend to limit their investments in lower-quality debt securities to 35%
of assets.
The market for lower-rated securities may be thinner and less active than that
for higher quality securities, which can adversely affect the price at which
these securities can be sold. If market quotations are not available, these
lower-rated securities will be valued in accordance with procedures established
by the Funds' Board, including the use of outside pricing services. Adverse
publicity and changing investor perceptions may affect the ability of outside
pricing services used by a Fund to value its portfolio securities, and a Fund's
ability to dispose of these lower-rated bonds.
The market prices of lower-rated securities may fluctuate more than higher-rated
securities and may decline significantly in periods of general economic
difficulty which may follow periods of rising interest rates. During an economic
downturn or a prolonged period of rising interest rates, the ability of issuers
of lower quality debt to service their payment obligations, meet projected
goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower-rated securities, the Adviser will
try to minimize the risks inherent in investing in lower-rated debt securities
by engaging in credit analysis, diversification, and attention to current
developments and trends affecting interest rates and economic conditions. The
Adviser will attempt to identify those issuers of high-yielding securities whose
financial condition are adequate to meet future obligations, have improved, or
are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated securities,
but they may not be attractive to as many buyers. Each Fund's policies regarding
lower-rated debt securities is not fundamental and may be changed at any time
without shareholder approval.
MONEY MARKET INSTRUMENTS: The term "money market instruments" refers to
instruments with remaining maturities of one year or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable- or floating-rate instruments issued
by industrial development authorities and other governmental entities. While
there may not be an active secondary market with respect to a particular
instrument purchased by a Fund,
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a Fund may demand payment of the principal and accrued interest on the
instrument or may resell it to a third party as specified in the instruments.
The absence of an active secondary market, however, could make it difficult for
a Fund to dispose of the instrument if the issuer defaulted on its payment
obligation or during periods the Fund is not entitled to exercise its demand
rights, and the Fund could, for these or other reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by a
Fund will be determined by the Adviser to be of comparable quality at the time
of purchase to instruments rated "high quality" by any major rating service.
Where necessary to ensure that an instrument is of comparable "high quality," a
Fund will require that an issuer's obligation to pay the principal of the note
may be backed by an unconditional bank letter or line of credit, guarantee, or
commitment to lend.
Municipal securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases," and
units of participation in trusts holding pools of tax-exempt leases. Such loans
in most cases are not backed by the taxing authority of the issuers and may have
limited marketability or may be marketable only by virtue of a provision
requiring repayment following demand by the lender. Such loans made by a Fund
may have a demand provision permitting the Fund to require payment within seven
days. Participations in such loans, however, may not have such a demand
provision and may not be otherwise marketable. To the extent these securities
are illiquid, they will be subject to each Fund's limitation on investments in
illiquid securities. As it deems appropriate, the Adviser will establish
procedures to monitor the credit standing of each such municipal borrower,
including its ability to meet contractual payment obligations.
Municipal participation interests may be purchased from financial institutions,
and give the purchaser an undivided interest in one or more underlying municipal
security. To the extent that municipal participation interests are considered to
be "illiquid securities," such instruments are subject to each Fund's limitation
on the purchase of illiquid securities.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to Municipal Securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified Municipal Securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.
Although the Funds do not presently intend to do so on a regular basis, a Fund
may invest more than 25% of its total assets in Municipal Securities the
interest on which is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by the Adviser. To the extent that
more than 25% of a Fund's total assets are invested in Municipal Securities that
are payable from the revenues of similar projects, a Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if its assets were not so concentrated.
OTHER INVESTMENT COMPANIES: A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
REAL ESTATE INVESTMENT TRUSTS: A real estate investment trust ("REIT") is a
managed portfolio of real estate investments which may include office buildings,
apartment complexes, hotels and shopping malls. An Equity REIT holds equity
positions in real estate, and it seeks to provide its shareholders with income
from the leasing of its properties, and with capital gains from any sales of
properties. A Mortgage REIT specializes in lending money to developers of
properties, and passes any interest income it may earn to its shareholders.
REITs may be affected by changes in the value of the underlying property owned
or financed by the REIT, while Mortgage REITs also may be affected by the
quality of credit extended. Both Equity and Mortgage REITs are dependent upon
management skill and may not be diversified. REITs also may be subject to heavy
cash flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to qualify for tax-free pass-through of income under the
Code.
REPURCHASE AGREEMENTS: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker-dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
idle cash. A risk associated with repurchase agreements is the failure of the
seller to repurchase the securities as agreed, which may cause a Fund to suffer
a loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the limit
stated above. A Fund may enter into joint repurchase agreements jointly with
other investment portfolios of Nations Fund and Nations Institutional Reserves.
34
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SECURITIES LENDING: To increase return on portfolio securities, certain of the
Funds may lend their portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. There is a risk of delay in receiving
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Adviser to be credit worthy and
when, in their judgment, the income to be earned from the loan justifies the
attendant risks. The aggregate of all outstanding loans of a Fund may not exceed
30% of the value of its total assets.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indexes, non-U.S. interest rates and foreign currencies, that
have been approved by the CFTC for investment by U.S. investors, for the purpose
of hedging against changes in values of a Fund's securities or changes in the
prevailing levels of interest rates or currency exchange rates. The contracts
entail certain risks, including but not limited to the following: no assurance
that futures contracts transactions can be offset at favorable prices; possible
reduction of a Fund's total return due to the use of hedging; possible lack of
liquidity due to daily limits on price fluctuation; imperfect correlation
between the contracts and the securities or currencies being hedged; and
potential losses in excess of the amount invested in the futures contracts
themselves.
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
for which no common clearing facility exists and a trader may look only to the
broker for performance of the contract. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the
currencies in which trading is done on foreign exchanges, any profits that such
Fund might realize could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes.
U.S. GOVERNMENT OBLIGATIONS: U.S. Government obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. Obligations of U.S.
Government agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
E.G., Government National Mortgage Association certificates; in other cases
interest and principal are not guaranteed, E.G., obligations of the Federal Home
Loan Bank System and the Federal Farm Credit Bank. No assurance can be given
that the U.S. Government would provide financial support to government-sponsored
instrumentalities if it is not obligated to do so by law.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities takes
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
Appendix B -- Description of Ratings
The following summarizes the highest six ratings used by S&P for corporate and
municipal bonds. The first four ratings denote investment grade securities.
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher-rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher-rated categories.
BB, B -- Bonds rated BB and B are regarded, on balance, as predominantly
speculative with respect to
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capacity to pay interest and repay principal in accordance with the terms
of the obligation. BB represents the lowest degree of speculation and B a
higher degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the highest six ratings used by Moody's for corporate
and municipal bonds. The first four ratings denote investment grade securities.
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa through B. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category. With regard to municipal bonds, those bonds
in the Aa, A and Baa groups which Moody's believes possess the strongest
investment attributes are designated by the symbols Aa1, A1 or Baa1,
respectively.
The following summarizes the highest four ratings used by D&P for bonds, each of
which denotes that the securities are investment grade:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
A -- Bonds that are rated A have protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
BBB -- Bonds that are rated BBB have below average protection factors but
still are considered sufficient for prudent investment. Considerable
variability in risk exists during economic cycles.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major categories.
The following summarizes the highest four ratings used by Fitch for bonds, each
of which denotes that the securities are investment grade:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to
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<PAGE>
pay interest and repay principal is very strong, although not quite as
strong as bonds rated AAA. Because bonds rated in the AAA and AA categories
are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A -- Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are Duff 1, Duff 2 and Duff 3.
D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the highest
rating category. Duff 1+ indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be minor.
Duff 1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. Duff 2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. Duff 3 indicates satisfactory liquidity and other protection factors
which qualify the issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
The following summarizes the three highest rating categories used by Fitch for
short-term obligations, each of which denotes securities that are investment
grade:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
F-2 securities possess good credit quality. Issues carrying this rating
have a satisfactory degree of assurance for timely payment, but the margin
of safety is not as great as for issues assigned the F-1+ and F-1 ratings.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
37
<PAGE>
affected by external conditions. Ample alternate liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following is the four investment grade ratings used by BankWatch
for long-term debt:
AAA -- The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA -- The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
A -- The third highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with
higher ratings.
BBB -- The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however,
more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 -- The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
TBW-3 -- The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
The following summarizes the three highest long-term ratings used by IBCA:
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk albeit not very significantly.
A -- Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
The following summarizes the three highest short-term debt ratings used by IBCA:
A1+ -- Obligations supported by the highest capacity for timely repayment
and possessing a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
A2 -- Obligations supported by a good capacity for timely repayment.
38
<PAGE>
Prospectus
INVESTOR C SHARES
SEPTEMBER 30, 1995
AS SUPPLEMENTED ON
JANUARY 19, 1996
This Prospectus describes the NATIONS SHORT-TERM
INCOME FUND, NATIONS SHORT-INTERMEDIATE GOVERNMENT
FUND, NATIONS GOVERNMENT SECURITIES FUND, NATIONS
STRATEGIC FIXED INCOME FUND, NATIONS DIVERSIFIED
INCOME FUND AND NATIONS GLOBAL GOVERNMENT INCOME
FUND (the "Funds") of the Nations Fund Family
("Nations Fund" or "Nations Fund Family"). This
Prospectus describes one class of shares of the
Funds -- Investor C Shares.
This Prospectus sets forth concisely the information
about the Funds that prospective purchasers of
Investor C Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust, Nations Fund, Inc. and Nations
Fund Portfolios, Inc. ("Nations Portfolios") is
contained in separate Statements of Additional
Information (the "SAIs"), which have been filed with
the Securities and Exchange Commission (the "SEC")
and are available upon request without charge by
writing or calling Nations Fund at its address or
telephone number shown below. The SAIs for Nations
Fund Trust, Nations Fund, Inc. and Nations
Portfolios, dated September 30, 1995, September 30,
1995 and July 1, 1995, respectively, are
incorporated by reference in their entirety into
this Prospectus. NationsBanc Advisors, Inc. ("NBAI")
is the investment adviser to the Funds. TradeStreet
Investment Associates, Inc. ("TradeStreet") is
sub-investment adviser to certain of the Funds and
Nations Gartmore Investment Management ("Nations
Gartmore") is sub-investment adviser to the Nations
Global Government Income Fund. As used herein the
"Adviser" shall mean NBAI, TradeStreet and/or
Nations Gartmore as the context may require.
SHARES OF NATIONS FUND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. ("NATIONSBANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
NATIONSBANK AND CERTAIN OF ITS AFFILIATES PROVIDE
CERTAIN OTHER SERVICES TO NATIONS FUND, FOR WHICH
THEY ARE COMPENSATED. STEPHENS INC., WHICH IS NOT
AFFILIATED WITH NATIONSBANK, IS THE SPONSOR AND
ADMINISTRATOR AND SERVES AS THE DISTRIBUTOR FOR
NATIONS FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Nations Short-Term Income
Fund
Nations Short-Intermediate
Government Fund
Nations Government
Securities Fund
Nations Strategic Fixed
Income Fund
Nations Diversified Income
Fund
Nations Global Government
Income Fund
For purchase, redemption and
performance information
call:
1-800-321-7854
Nations Fund
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
(Nations Fund Logo)
<PAGE>
Table Of Contents
About The Funds
Expenses Summary 3
Financial Highlights 4
Objectives 8
How Objectives Are Pursued 8
How Performance is Shown 13
How the Funds are Managed 14
Organization and History 17
About Your Investment
How to Buy Shares 19
Shareholder Servicing and Distribution Plans 20
How to Redeem Shares 21
How to Exchange Shares 22
How the Funds Value Their Shares 23
How Dividends and Distributions are Made; Tax
Information 23
Appendix A -- Portfolio Securities 24
Appendix B -- Description of Ratings 32
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAIS
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
NATIONS FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY NATIONS FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds. The
following tables summarize shareholder transaction and operating expenses for
Investor C Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in Investor C Shares of the
indicated Fund over specified periods.
INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations Short-
Nations Short-Term Intermediate Nations Government Nations Strategic
Income Fund Government Fund Securities Fund Fixed Income Fund
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Deferred Sales Charge (as a percentage of
the lower of the original purchase price
or redemption proceeds)1 .50% .50% .50% .50%
</TABLE>
<TABLE>
<CAPTION>
Nations Global
Nations Diversified Government Income
SHAREHOLDER TRANSACTION EXPENSES Income Fund Fund
<S> <C> <C>
Sales Load Imposed on Purchases None None
Deferred Sales Charge (as a percentage of
the lower of the original purchase price
or redemption proceeds)1 .50% .50%
</TABLE>
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of average
net assets)
<TABLE>
<CAPTION> Nations Short-
Nations Short-Term Intermediate Nations Government Nations Strategic
Income Fund Government Fund Securities Fund Fixed Income Fund
<S> <C> <C> <C> <C>
Management Fees2 .30% .40% .50% .50%
Rule 12b-1 Fees2 .10% .25% .25% .25%
Shareholder Servicing Fees2 .25% .25% .25% .25%
Other Expenses .22% .18% .30% .16%
Total Operating Expenses2 .87% 1.08% 1.30% 1.16%
</TABLE>
<TABLE>
<CAPTION>
Nations Global
Nations Diversified Government Income
Income Fund Fund
<S> <C> <C>
Management Fees2 .50% .70%
Rule 12b-1 Fees2 .25% .25%
Shareholder Servicing Fees2 .25% .25%
Other Expenses .32% .60%
Total Operating Expenses2 1.32% 1.80%
</TABLE>
1 A Deferred Sales Charge is imposed only with respect to Investor C Shares
redeemed within one year of the date of purchase. Investor C Shares purchased
prior to January 1, 1996 will continue to be subject to the 1.00% Deferred
Sales Charge.
2 After any waivers and reimbursements.
EXAMPLES:
You would pay the following expenses on a $1,000 investment in Investor C Shares
of the indicated Fund, assuming (1) a 5% annual return and (2) redemption at the
end of each time period.
<TABLE>
<CAPTION>
Nations Short-
Nations Short-Term Intermediate Nations Government Nations Strategic
Income Fund Government Fund Securities Fund Fixed Income Fund
<S> <C> <C> <C> <C>
1 Year $ 14 $ 16 $ 18 $ 17
3 Years $ 28 $ 34 $ 41 $ 37
5 Years $ 48 $ 60 $ 71 $ 64
10 Years $ 107 $ 132 $ 157 $ 141
</TABLE>
<TABLE>
<CAPTION>
Nations Global
Nations Diversified Government Income
Income Fund Fund
<S> <C> <C>
1 Year $ 18 $ 23
3 Years $ 42 $ 57
5 Years $ 72 N/A
10 Years $ 159 N/A
</TABLE>
You would pay the following expenses on a $1,000 investment in Investor C Shares
of the indicated Fund, assuming a 5% annual return but no redemption.
<TABLE>
<CAPTION>
Nations Short-
Nations Short-Term Intermediate Nations Government Nations Strategic
Income Fund Government Fund Securities Fund Fixed Income Fund
<S> <C> <C> <C> <C>
1 Year $ 9 $ 11 $ 13 $ 12
3 Years $ 28 $ 34 $ 41 $ 37
5 Years $ 48 $ 60 $ 71 $ 64
10 Years $ 107 $ 132 $ 157 $ 141
</TABLE>
<TABLE>
<CAPTION>
Nations Global
Nations Diversified Government Income
Income Fund Fund
<S> <C> <C>
1 Year $ 13 $ 18
3 Years $ 42 $ 57
5 Years $ 72 N/A
10 Years $ 159 N/A
</TABLE>
3
<PAGE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor C Shares of the Funds will bear either directly or indirectly. Except
for the Nations Global Government Income Fund which fees and expenses are based
on estimates, certain figures contained in the above tables are based on amounts
incurred during each Fund's most recent fiscal year and have been adjusted as
necessary to reflect current service provider fees. There is no assurance that
any fee waivers and reimbursements will continue beyond the current fiscal year.
If fees waivers and/or reimbursements are discontinued, the amounts contained in
the "Examples" above may increase. Long-term shareholders in the Funds could pay
more in sales charges than the economic equivalent of the maximum front-end
sales charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. For more complete descriptions of the
Funds' operating expenses, see "How the Funds Are Managed." For a more complete
description of the Rule 12b-1 and shareholder servicing fees payable by the
Funds, see "Shareholder Servicing and Distribution Plans."
Absent fee waivers and reimbursements, "Management Fees," "Rule 12b-1 Fees,"
"Shareholder Servicing Fees" and "Total Operating Expenses" for Investor C
Shares of the indicated Fund would have been as follows: Nations Short-Term
Income Fund -- .60%, .75%, .25% and 1.82%, respectively; Nations
Short-Intermediate Government Fund -- .60%, .75%, .25% and 1.78%, respectively;
Nations Government Securities Fund -- .64%, .75%, .25% and 1.94%, respectively;
Nations Strategic Fixed Income Fund -- .60%, .75%, .25% and 1.76%, respectively;
Nations Diversified Income Fund -- .60%, .75%, .25% and 1.92%, respectively; and
Nations Global Government Income Fund -- .70%, .75%, .25% and 2.30%,
respectively.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Financial Highlights
The audited financial information on the following pages has been derived from
the financial statements of Nations Fund Trust and Nations Fund, Inc. Price
Waterhouse LLP is the independent accountant to Nations Fund Trust, Nations
Fund, Inc. and Nations Portfolios. The reports of Price Waterhouse LLP for the
most recent fiscal years of Nations Fund Trust and Nations Fund, Inc. accompany
the financial statements for such periods and are incorporated by reference in
the SAIs, which are available upon request. For more information see
"Organization and History." Shareholders of a Fund will receive unaudited
semi-annual reports describing the Fund's investment operations and financial
statements audited by the Funds' independent accountant.
4
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SHORT-TERM INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94# 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.48 $ 10.01 $ 9.75
Net investment income 0.28 0.46 0.48
Net realized and unrealized gain/(loss) on investments 0.28 (0.51) 0.26
Net increase/(decrease) in net assets resulting from investment
operations 0.56 (0.05) 0.74
Distributions:
Dividends from net investment income 0.28% (0.44) (0.48)
Distributions in excess of net investment income -- (0.02) --
Distributions from capital -- (0.02) --
Total distributions (0.28) (0.48) (0.48)
Net asset value, end of period $ 9.76 $ 9.48 $ 10.01
Total return++ 6.05% (0.51)% 7.73%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 6,964 $ 8,102 $ 19,851
Ratio of operating expenses to average net assets 0.86%+ 0.89% 0.87%
Ratio of net investment income to average net assets 6.00%+ 4.84% 4.77%
Portfolio turnover rate 145% 293% 121%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.21%+ 1.21% 1.29%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.26 $ 0.43 $ 0.45
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.08
Net realized and unrealized gain/(loss) on investments (0.26)
Net increase/(decrease) in net assets resulting from investment
operations (0.18)
Distributions:
Dividends from net investment income (0.07)
Distributions in excess of net investment income --
Distributions from capital --
Total distributions (0.07)
Net asset value, end of period $ 9.75
Total return++ (1.82)%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 6,747
Ratio of operating expenses to average net assets 0.80%+
Ratio of net investment income to average net assets 5.04%+
Portfolio turnover rate 45%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.40%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.07
</TABLE>
* The Nations Short-Term Income Fund Investor C Shares commenced operations on
October 2, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed method did not accord with the results of operations.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94 11/30/93
<CAPTION>
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 3.93 $ 4.28 $ 4.16
Net investment income 0.11 0.20 0.20
Net realized and unrealized gain/(loss) on investments 0.16 (0.33) 0.14
Net increase/(decrease) in net assets resulting from investment
operations 0.27 (0.13) 0.34
Distributions:
Dividends from net investment income (0.11) (0.20) (0.20)
Distributions in excess of net investment income -- (0.00)# --
Distributions from net realized capital gains -- (0.02) (0.02)
Total distributions (0.11) (0.22) (0.22)
Net asset value, end of period $ 4.09 $ 3.93 $ 4.28
Total return++ 6.98% (2.80)% 8.20%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 13,742 $ 16,725 $ 31,440
Ratio of operating expenses to average net assets 1.08%+ 1.17% 1.30%
Ratio of net investment income to average net assets 5.57%+ 5.18% 4.65%
Portfolio turnover rate 130% 133% 92%
Ratio of operating expenses to average net assets before fee
waivers and/or expense reimbursements 1.29%+ 1.38% 1.54%
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.10 $ 0.19 $ 0.19
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 4.19
Net investment income 0.10
Net realized and unrealized gain/(loss) on investments (0.03)
Net increase/(decrease) in net assets resulting from investment
operations 0.07
Distributions:
Dividends from net investment income (0.10)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.10)
Net asset value, end of period $ 4.16
Total return++ 1.64%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 24,352
Ratio of operating expenses to average net assets 1.18%+
Ratio of net investment income to average net assets 4.80%+
Portfolio turnover rate 25%
Ratio of operating expenses to average net assets before fee
waivers and/or expense reimbursements 1.44%+
Net investment income per share before fee waivers and/or
expense reimbursements $ 0.09
</TABLE>
* The Nations Short-Intermediate Government Fund Investor C Shares commenced
operations on June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
# Value represents less than $0.01 per share.
5
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
INVESTOR C SHARES 05/31/95# 05/31/94
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.80 $ 10.46
Net investment income 0.57 0.55
Net realized and unrealized gain/(loss) on investments 0.06 (0.61)
Net increase/(decrease) in net assets resulting from investment operations 0.63 (0.06)
Distributions:
Dividends from net investment income (0.53) (0.50)
Dividends in excess of net investment income -- (0.01)
Distributions in excess of net realized capital gains -- (0.05)
Distributions from capital (0.04) (0.04)
Total distributions (0.57) (0.60)
Net asset value, end of period $ 9.86 $ 9.80
Total return++ 6.76% (0.69)%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 2,945 $ 5,265
Ratio of operating expenses to average net assets 1.51% 1.48%
Ratio of net investment income to average net assets 5.94% 5.33%
Portfolio turnover rate 413% 56%
Ratio of operating expenses to average net assets without waivers and
reimbursements 1.69% 1.69%
Net investment income per share without waivers and reimbursements $ 0.55 $ 0.53
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 05/31/93*#
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.52
Net investment income 0.59
Net realized and unrealized gain/(loss) on investments 0.02
Net increase/(decrease) in net assets resulting from investment operations 0.61
Distributions:
Dividends from net investment income (0.63)
Dividends in excess of net investment income --
Distributions in excess of net realized capital gains (0.04)
Distributions from capital --
Total distributions (0.67)
Net asset value, end of period $ 10.46
Total return++ 5.37%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 5,998
Ratio of operating expenses to average net assets 1.60%+
Ratio of net investment income to average net assets 5.92%+
Portfolio turnover rate 103%
Ratio of operating expenses to average net assets without waivers and
reimbursements 1.75%+
Net investment income per share without waivers and reimbursements $ 0.42
</TABLE>
* The Nations Government Securities Fund Investor C Shares commenced
operations on July 6, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charge.
# Per share amounts have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed income method did not accord with the results of
operations.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS STRATEGIC FIXED INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94 11/30/93
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.32 $ 10.55 $ 9.94
Net investment income 0.27 0.47 0.48
Net realized and unrealized gain/(loss) on investments 0.70 (0.89) 0.62
Net increase/(decrease) in net assets resulting from investment
operations 0.97 (0.42) 1.10
Distributions:
Dividends from net investment income (0.27) (0.45) (0.48)
Distributions in excess of net investment income -- (0.02) --
Distributions from net realized capital gains -- (0.34) (0.01)
Total distributions (0.27) (0.81) (0.49)
Net asset value, end of period $ 10.02 $ 9.32 $ 10.55
Total return++ 10.57% (4.14)% 11.20%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 39 $ 41 $ 65
Ratio of operating expenses to average net assets 1.18%+ 1.43% 1.36%
Ratio of net investment income to average net assets 5.68%+ 4.68% 4.65%
Portfolio turnover rate 155% 307% 161%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.29%+ 1.51% 1.52%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.26 $ 0.46 $ 0.47
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.97
Net investment income 0.02
Net realized and unrealized gain/(loss) on investments (0.04)
Net increase/(decrease) in net assets resulting from investment
operations (0.02)
Distributions:
Dividends from net investment income (0.01)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.01)
Net asset value, end of period $ 9.94
Total return++ (0.22)%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 84
Ratio of operating expenses to average net assets 1.03%+
Ratio of net investment income to average net assets 5.40%+
Portfolio turnover rate 12%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.63%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.02
</TABLE>
* The Nations Strategic Fixed Income Fund Investor C Shares commenced
operations on November 16, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
6
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR
05/31/95 ENDED ENDED
INVESTOR C SHARES (UNAUDITED) 11/30/94# 11/30/93#
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.67 $ 10.88 $ 9.96
Net investment income 0.34 0.67 0.70
Net realized and unrealized gain/(loss) on investments 0.86 (1.06) 0.92
Net increase/(decrease) in net assets resulting from investment
operations 1.20 (0.39) 1.62
Distributions:
Dividends from net investment income (0.34) (0.67) (0.70)
Distributions in excess of net investment income -- (0.00)## --
Distributions from net realized capital gains -- (0.15) --
Total distributions (0.34) (0.82) (0.70)
Net asset value, end of period $ 10.53 $ 9.67 $ 10.88
Total return++ 12.64% (3.77)% 16.65%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3,153 $ 2,636 $ 3,633
Ratio of operating expenses to average net assets 1.52%+ 1.49% 1.30%
Ratio of net investment income to average net assets 6.78%+ 6.56% 6.27%
Portfolio turnover rate 67% 144% 86%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.68%+ 1.70% 1.70%
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.33 $ 0.65 $ 0.64
</TABLE>
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 11/30/92*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 9.93
Net investment income 0.03
Net realized and unrealized gain/(loss) on investments 0.02
Net increase/(decrease) in net assets resulting from investment
operations 0.05
Distributions:
Dividends from net investment income (0.02)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total distributions (0.02)
Net asset value, end of period $ 9.96
Total return++ (0.54)%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 149
Ratio of operating expenses to average net assets 1.00%+
Ratio of net investment income to average net assets 7.01%+
Portfolio turnover rate 46%
Ratio of operating expenses to average net assets before fee waivers
and/or expense reimbursements 1.60%+
Net investment income per share before fee waivers and/or expense
reimbursements $ 0.03
</TABLE>
* The Nations Diversified Income Fund Investor C Shares commenced operations
on November 9, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed method did not accord with the results of operations.
## Value represents less than $0.01 per share.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT THE PERIOD
NATIONS GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
INVESTOR C SHARES 9/30/95*
<S> <C>
Operating Performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss)## 0.10
Net realized and unrealized gain/(loss) on investments 0.04
Net increase/(decrease) in net assets resulting from investment operations 0.14
Distributions:
Dividends from net investment income (0.10)
Total Distributions (0.10)
Net asset value, end of period $ 10.04
Total return++ 1.46%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 9
Ratio of operating expenses to average net assets 2.30%+
Ratio of net investment income/(loss) to average net assets 4.61%+
Portfolio turnover rate 104%
</TABLE>
* The Fund's Investor C Shares operations on June 30, 1995.
** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
## For the Nations Emerging Markets Fund, the amount shown at this caption for
each share outstanding throughout the period may not accord with the change
in the aggregate gains and losses in the portfolio securities for the period
because of the timing of purchases and withdrawals of shares in relation to
the fluctuating market value of the portfolio.
7
<PAGE>
Objectives
NATIONS SHORT-TERM INCOME FUND: The Nations Short-Term Income Fund's investment
objective is to seek as high a level of current income as is consistent with
prudent investment risk. The Fund invests primarily in investment grade
corporate bonds and mortgage-backed bonds. Under normal market conditions, it is
expected that the Fund will have an average dollar-weighted maturity of three
years or less. The Fund's investment program attempts to maintain a higher level
of income than normally provided by money market instruments, and more price
stability than investments in intermediate- and long-term bonds. However, the
value of the Fund's portfolio generally will vary inversely with changes in
prevailing interest rates.
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND: The Nations Short-Intermediate
Government Fund's investment objective is to seek as high a level of current
income as is consistent with prudent investment risk. The Fund invests
essentially all of its assets in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and in repurchase agreements
relating to such obligations. Under normal market conditions, the Fund is
expected to have an average dollar-weighted maturity between two and seven
years.
NATIONS GOVERNMENT SECURITIES FUND: The Nations Government Securities Fund's
investment objective is to provide current income and preservation of capital.
The Fund seeks to achieve its objective by investing primarily in obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
NATIONS STRATEGIC FIXED INCOME FUND: The Nations Strategic Fixed Income Fund's
investment objective is to maximize total investment return through the active
management of fixed income securities. The Fund invests primarily in investment
grade fixed income securities. The Fund may under normal market conditions
invest in long-term, intermediate-term and short-term securities and has not
placed any limitations on the duration of the portfolio.
NATIONS DIVERSIFIED INCOME FUND: The Nations Diversified Income Fund's
investment objective is to seek as high a level of current income as is
consistent with prudent investment risk. The Fund invests primarily in a
diversified portfolio of government and corporate fixed income securities.
NATIONS GLOBAL GOVERNMENT INCOME FUND: The Nations Global Government Income
Fund's investment objective is to seek current income. Although the Fund
emphasizes income when selecting investments, the potential for growth of
capital also is considered. It seeks to achieve this objective by investing
primarily in debt securities issued by governments, banks and supranational
entities located throughout the world.
How Objectives Are Pursued
NATIONS SHORT-TERM INCOME FUND: In pursuing its investment objective, the
Nations Short-Term Income Fund may invest in a broad range of debt obligations
such as U.S. Government obligations; corporate debt obligations, including
bonds, notes and debentures rated investment grade by one of the following six
nationally recognized statistical rating organizations, Duff & Phelps Credit
Rating Co. ("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard & Poor's
Corporation ("S&P"), Moody's Investors Service, Inc. ("Moody's"), IBCA Limited
or its affiliate, IBCA Inc. (collectively, "IBCA") or Thomson BankWatch, Inc.
("BankWatch") (collectively, "NRSROs"), or, if not so rated, determined by the
Adviser to be of comparable quality to instruments so rated; dollar-denominated
debt obligations of foreign issuers, including foreign corporations and foreign
governments (see "Appendix A -- Foreign Securities"); and mortgage-related
securities of governmental issuers, including the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"), or of private issuers,
including mortgage pass-through certificates, collateralized mortgage
obligations or "CMOs", real estate investment trust securities or
mortgage-backed bonds; other asset-backed securities rated by one of the six
NRSROs, or, if not so rated, determined by the Adviser to be of comparable
quality to instruments so rated. (For more information concerning Asset Backed
Securities, including Mortgage-Backed Securities, see "Appendix A -- Asset
Backed Securities.")
The Fund will invest, under normal market conditions, at least 65% of the total
value of its assets in investment grade corporate bonds and mortgage-backed
bonds. Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. Debt obligations
acquired by the Fund generally will be rated investment grade at the time of
purchase by D&P, Fitch, S&P, Moody's, IBCA or BankWatch, or, if unrated,
determined by the Adviser to be comparable in quality to instruments so rated.
Obligations rated in the lowest of the top four investment grade rating
categories (e.g. rated "BBB" by S&P or "Baa" by Moody's) have speculative
characteristics, and changes in economic conditions or other circumstances
8
<PAGE>
are more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt obligations. Subsequent to its
purchase by the Fund, an issue of securities may cease to be rated or its rating
may be reduced below the minimum rating required for purchase by the Fund. The
Adviser will consider such an event in determining whether the Fund should
continue to hold the obligation. See "Appendix B" below for a description of
these rating designations.
The Fund also may hold or invest in short-term U.S. Government obligations,
"high quality" money market instruments (I.E., those within the two highest
rating categories or unrated instruments determined by the Adviser to be of
comparable quality), repurchase agreements and cash. Such obligations may
include those issued by foreign banks and foreign branches of U.S. banks. These
investments may be in such proportions as, in the Adviser's opinion, prevailing
market or economic conditions warrant.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest 10% or more of its assets in securities of foreign issuers. See "Appendix
A" below for additional information concerning the investment practices of this
Fund.
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND: The Nations Short-Intermediate
Government Fund invests substantially all of its assets in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities ("U.S.
Government Obligations") and repurchase agreements relating to such obligations.
U.S. Government Obligations have historically involved little risk of loss of
principal if held to maturity. However, due to fluctuations in interest rates,
the market value of such securities may vary during the period a shareholder
owns shares of the Fund. The value of the Fund's portfolio generally will vary
inversely with changes in prevailing interest rates.
Certain government securities that have variable or floating interest rates or
demand or put features may be deemed to have remaining maturities shorter than
their nominal maturities for purposes of determining the average weighted
maturity of the Fund. See "Investment Objectives and Policies" in the Fund's
SAI. See "Appendix A" below for additional information concerning the investment
practices of this Fund.
NATIONS GOVERNMENT SECURITIES FUND: Under normal circumstances, substantially
all, and in any event, at least 65% of the Fund's assets, will be invested in
U.S. Government Obligations. U.S. Government Obligations include Treasury
obligations, which differ only in their interest rates, maturities and times of
issuance. U.S. Government Obligations also include obligations issued or
guaranteed by U.S. Government agencies, authorities or instrumentalities, some
of which are backed by the full faith and credit of the U.S. Treasury, such as
direct pass-through certificates of the Government National Mortgage Association
("GNMA"); some of which are supported by the right of the issuer to borrow from
the U.S. Government, such as obligations of Federal Home Loan Banks; and some of
which are backed only by the credit of the issuer itself, such as obligations of
the Federal National Mortgage Association ("FNMA"). For a more detailed
description of the investment practices of this Fund, see "Appendix A -- U.S.
Government Obligations" and "Asset Backed Securities."
Although changes in the value of securities subsequent to their acquisition are
reflected in the net asset value of the Fund's shares, such changes will not
affect the income received by the Fund from such securities. However, since
available yields vary over time, no specific level of income can ever be
assured. The dividends paid by the Fund will increase or decrease in relation to
the income received by the Fund from its investments, which will in any case be
reduced by the Fund's expenses before being distributed to the Fund's
shareholders. The value of the Fund's portfolio generally will vary inversely
with changes in prevailing interest rates.
The Fund also may hold or invest in short-term U.S. Government obligations,
"high quality" money market instruments (I.E., those within the two highest
rating categories or unrated instruments deemed by the Adviser to be of
comparable quality), repurchase agreements and cash. Such obligations may
include those issued by foreign banks and foreign branches of U.S. banks. These
investments may be in such proportion as, in the Adviser's opinion, existing
circumstances warrant.
NATIONS STRATEGIC FIXED INCOME FUND: In pursuing its investment objective, the
Nations Strategic Fixed Income Fund may invest in corporate convertible and
non-convertible debt obligations, including bonds, notes and debentures rated
investment grade at the time of purchase by one of the six NRSROs, or if not so
rated, determined by the Adviser to be of comparable quality to instruments so
rated; U.S. Government obligations; dollar-denominated debt obligations of
foreign issuers, including foreign corporations and foreign governments (see
"Appendix A -- Foreign Securities"); mortgage-backed securities of governmental
issuers, including GNMA, FNMA and FHLMC, or of private issuers, including
mortgage pass-through certificates, CMOs, real estate investment trust
securities or mortgage-backed bonds; other asset-backed securities rated by one
of the six NRSROs, or if not so rated, determined by the Adviser to be of
comparable quality. (For more information concerning Asset Backed Securities,
including Mortgage-Backed Securities, see "Appendix A -- Asset Backed
Securities.") Pursuant to its investment objective, the Fund also may invest in
dividend-paying preferred and common stock.
9
<PAGE>
Under normal market conditions, the Fund will invest at least 65% of the total
value of its assets in government, corporate and mortgage-backed securities.
Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. Debt obligations
acquired by the Fund will be rated investment grade at the time of purchase by
D&P, Fitch, S&P, Moody's, IBCA or BankWatch, or, if unrated, determined by the
Adviser to be comparable in quality. Obligations rated in the lowest of the top
four investment grade rating categories (e.g. rated "BBB" by S&P or "Baa" by
Moody's) have speculative characteristics, and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade debt
obligations. Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum rating required
for purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. See "Appendix B" below
for a description of these rating designations.
The Fund also may hold or invest in short-term U.S. Government obligations,
"high quality" money market instruments (i.e., those within the two highest
rating categories or unrated instruments determined by the Adviser to be of
comparable quality), repurchase agreements and cash. Such obligations may
include those issued by foreign banks and foreign branches of U.S. banks. These
investments may be in such proportions as, in the Adviser's opinion, existing
circumstances warrant.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest 10% or more of its total assets in securities of foreign issuers. See
"Appendix A -- Foreign Securities." See "Appendix A" below for additional
information concerning the investment practices of this Fund.
NATIONS DIVERSIFIED INCOME FUND: In pursuing its investment objective, the
Nations Diversified Income Fund may invest in a broad range of corporate
convertible and non-convertible debt obligations such as fixed and variable rate
bonds; obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; dollar-denominated and non-dollar-denominated debt
obligations of foreign issuers, including foreign corporations and foreign
governments (see "Appendix A -- Foreign Securities"); mortgage-backed securities
of governmental issuers, including GNMA, FNMA and FHLMC, or of private issuers,
including mortgage pass-through certificates, CMOs, real estate investment trust
securities or mortgage-backed bonds; other asset-backed securities rated by one
of the six NRSROs, or if not so rated, determined by the Adviser to be of
comparable quality. (For more information concerning Asset Backed Securities,
including Mortgage-Backed Securities, see "Appendix A -- Asset Backed
Securities.") In pursuing its investment objective, the Fund also may invest in
dividend-paying convertible and non-convertible preferred and common stocks.
Under normal market conditions, the Fund will invest at least 65% of the total
value of its assets in fixed income securities, such as government, government
agency and corporate bonds. Most obligations acquired by the Fund will be issued
by companies or governmental entities located within the United States. Not less
than 65% of the debt obligations acquired by the Fund will be rated investment
grade at the time of purchase by D&P, Fitch, S&P, Moody's, IBCA or BankWatch,
or, if unrated, determined by the Adviser to be comparable in quality to
instruments so rated. Obligations rated in the lowest of the top four investment
grade rating categories (e.g. rated "BBB" by S&P or "Baa" by Moody's) have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations.
Up to 35% of the total value of the Fund's assets may be invested in
lower-quality fixed income securities rated "B" or better by Moody's or S&P, or
if not so rated, determined by the Adviser to be of comparable quality.
Securities which are rated "B" generally lack characteristics of the desirable
investment, and assurance of interest and principal payment over any long period
of time may be limited. Non-investment-grade debt securities are sometimes
referred to as "high yield bonds" or "junk bonds," tend to have speculative
characteristics, generally involve more risk of principal and income than higher
rated securities, and have yields and market values that tend to fluctuate more
than higher quality securities. See "Appendix A -- Lower-Rated Debt Securities."
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. See "Appendix B" below
for a description of these rating designations.
The Fund may hold or invest in short-term U.S. Government obligations, "high
quality" money market instruments (i.e., those within the two highest rating
categories or unrated instruments deemed by the Adviser to be of comparable
quality), repurchase agreements and cash. Such obligations may include those
issued by foreign banks and foreign branches of U.S. banks. These investments
may be in such proportions as, in the Adviser's opinion, existing circumstances
warrant.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest 10% or more of its total assets in securities of foreign issuers. The
value of the
10
<PAGE>
Fund's portfolio generally will vary inversely with changes in prevailing
interest rates. See "Appendix A" below for additional information concerning the
investment practices of this Fund.
NATIONS GLOBAL GOVERNMENT INCOME FUND: In seeking to achieve its investment
objective, the Fund will invest under normal market conditions at least 65% of
its total assets in debt securities issued or guaranteed by U.S. or foreign
governments (including states, provinces and municipalities) or their agencies,
instrumentalities or subdivisions ("Government Securities"). Except for
temporary defensive purposes, the Fund will concentrate its investments in
foreign Government Securities. Concentration in this context means the
investment of more than 25% of the Fund's total assets in such securities. The
Fund may invest in the debt securities of any type of issuer, including
corporations, banks and supranational entities.
The Fund, under normal market conditions, will invest in at least three
different countries. These countries may include the U.S., the countries of
Western Europe, Japan, Australia, New Zealand and Canada. If the Fund invests a
significant portion of its assets at any time in a single country, events
occurring in such country are more likely to affect the Fund's investments. For
additional information concerning risk, see "Special Risk Considerations
Relevant to an Investment in the Nations Global Government Income Fund" below.
Because the Fund intends to invest a large portion of its assets in foreign
Government Securities, the Fund is a "non-diversified" investment company for
purposes of the Investment Company Act of 1940 (the "1940 Act"). The Fund may
invest in securities of issuers located in any region or country and that are
denominated in any currency.
The Fund is managed in accordance with an overall global investment strategy
which means that Fund investments are allocated among securities denominated in
U.S. dollars and the currencies of a number of foreign countries. The Fund's
exposure to various countries and currencies will vary in accordance with the
Adviser's assessment of the relative yield and appreciation of such
securities. Fundamental economic strength, credit quality and interest rate
trends are the principal factors considered by the Adviser in determining
whether to increase or decrease the emphasis placed upon a particular country
or particular type of security within the Fund's investment portfolio.
Under normal market conditions, the Fund intends to invest primarily in
securities rated "A" or better at the time of purchase by Moody's or S&P and
unrated securities that, at the time of purchase will be determined to be of
comparable quality by the Adviser. The Fund also may invest in securities rated
"Baa" by Moody's or "BBB" by S&P, but does not as a general matter, intend to
invest more than 10% of its total assets in such securities. Subsequent to its
purchase by the Fund, an issue of securities may cease to be rated or its rating
may be reduced below the minimum rating required for purchase by the Fund. The
Adviser will consider such event in determining whether the Fund should continue
to hold the obligation. In no event will the Fund hold more than 5% of its total
net assets in securities rated below investment grade. See "Appendix B" below
for a description of these rating designations. The Adviser expects that the
Fund's average dollar-weighted maturity will not be greater than fifteen years
under normal market conditions.
Supranational entities are international organizations jointly operated by
multiple sovereign governments including, for example, the World Bank, the
European Coal and Steel Community, the Asian Development Bank, the European
Investment Bank and the Inter-American Development Bank. Supranational entities
generally have no taxing authority and are dependent upon their members for the
funds necessary to pay principal and interest on their debt obligations.
For defensive purposes, the Fund may temporarily invest substantially all of its
assets in U.S. financial markets or in U.S. dollar-denominated instruments. See
"Appendix A" below for additional information concerning the investment
practices of the Fund.
SPECIAL RISK CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE NATIONS GLOBAL
GOVERNMENT INCOME FUND: Investors should understand and consider carefully the
special risks involved in foreign investing. In addition, the Nations Global
Government Income Fund presents unique risks that investors should be aware of.
The Nations Global Government Income Fund's yield and share price will change
based on changes in domestic or foreign interest rates and in an issuer's
creditworthiness. In general, bond prices rise when interest rates fall, and
vice versa.
Moreover, investing in securities denominated in foreign currencies and
utilization of forward foreign currency exchange contracts and other currency
hedging techniques involve certain considerations comprising both opportunities
and risks not typically associated with investing in U.S. dollar-denominated
securities. Additionally, changes in the value of foreign currencies can
significantly affect a Fund's share price. General economic and political
factors in the various world markets also can impact a Fund's share price.
The expenses to individual investors of investing directly in foreign securities
are very high relative to similar costs for investing in U.S. securities. While
the Fund offers a more efficient way for individual investors to participate in
foreign markets, its expenses, including
11
<PAGE>
custodial fees, are also higher than the typical domestic equity mutual fund.
Risks unique to international investing include: (1) restrictions on foreign
investment and repatriation of capital; (2) fluctuations in currency exchange
rates; (3) costs of converting foreign currency into U.S. dollars and U.S.
dollars into foreign currencies; (4) greater price volatility and less
liquidity; (5) settlement practices, including delays, which may differ from
those customary in United States markets; (6) exposure to political and economic
risks, including the risk of nationalization, expropriation of assets and war;
(7) possible imposition of foreign taxes and exchange control and currency
restrictions; (8) lack of uniform accounting, auditing and financial reporting
standards; (9) less governmental supervision of securities markets, brokers and
issuers of securities; (10) less financial information available to investors;
and (11) difficulty in enforcing legal rights outside the United States. These
risks often are heightened for investments in emerging or developing countries.
See "Appendix A" for additional discussion of the risks associated with an
investment in the Nations Global Government Income Fund.
GENERAL: The Nations Short-Intermediate Government Fund, Nations Government
Securities Fund, Nations Short-Term Income Fund, Nations Diversified Income Fund
and Nations Strategic Fixed Income Fund may invest in certain specified
derivative securities, including: interest rate swaps, caps and floors for
hedging purposes; exchange-traded options; over-the-counter options executed
with primary dealers, including long calls and puts and covered calls to enhance
return; and U.S. and foreign exchange-traded financial futures and options
thereon approved by the Commodity Futures Trading Commission ("CFTC") for market
exposure risk-management. Each of those Funds may lend its portfolio securities
to qualified institutional investors and may invest in restricted, private
placement and other illiquid securities. Each of those Funds may engage in
reverse repurchase agreements and dollar roll transactions. The National Global
Government Income Fund may invest in money market instruments, forward foreign
currency exchange contracts, futures and options and other instruments.
Additionally, each Fund may purchase securities issued by other investment
companies, consistent with the Fund's investment objective and policies.
PORTFOLIO TURNOVER: Generally, the Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. While it is not possible to predict exactly annual portfolio
turnover rates, it is expected that under normal market conditions, annual
portfolio turnover rates will not exceed 175% for Nations Global Government
Income Fund. If a Fund's annual portfolio turnover rate exceeds 100%, it may
result in higher brokerage costs and possible tax consequences for the Fund and
its shareholders. For the other Funds' portfolio turnover rates, see "Financial
Highlights."
RISK CONSIDERATIONS: Although the Adviser will seek to achieve the investment
objective of each Fund, there is no assurance that it will be able to do so. No
single Fund should be considered, by itself, to provide a complete investment
program for any investor. Investments in a Fund are not insured against loss of
principal.
Investments by a Fund in common stocks and other equity securities are subject
to stock market risks. The value of the stocks that the Fund holds, like the
broader stock market, may decline over short or even extended periods.
The value of a Fund's investments in debt securities will tend to decrease when
interest rates rise and increase when interest rates fall. In general,
longer-term debt instruments tend to fluctuate in value more than shorter-term
debt instruments in response to interest rate movements. In addition, debt
securities that are not backed by the United States Government are subject to
credit risk, which is the risk that the issuer may not be able to pay principal
and/or interest when due.
Certain of the Funds' investments constitute derivative securities, which are
securities whose value is derived, at least in part, from an underlying index or
reference rate. There are certain types of derivative securities that can, under
certain circumstances, significantly increase a purchaser's exposure to market
or other risks. The Funds' investment adviser, however, only purchases
derivative securities in circumstances where it believes such purchases are
consistent with the Fund's investment objective and do not unduly increase the
Fund's exposure to market or other risks. For additional risk information
regarding the Funds' investments in particular instruments, see "Appendix
A -- Portfolio Securities."
INVESTMENT LIMITATIONS: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAIs.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry, provided that this limitation does not apply (a) with respect to
the Nations Global Government Income Fund, to investments in foreign Government
12
<PAGE>
Securities; and (b) to investments in obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities.
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
3. Each Fund (other than Nations Global Government Income Fund) may not:
Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, such Fund will not
hold more than 10% of the voting securities of any issuer.
The Nations Global Government Income Fund may not:
Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 25% of the value of such Fund's total
assets would be invested in the securities of one issuer, and with respect to
50% of such Fund's total assets, more than 5% of its assets would be invested in
the securities of one issuer.
The investment objective and policies of each Fund, unless otherwise specified,
may be changed without a vote of the Fund's shareholders. If the investment
objective or policies of a Fund change, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current position
and needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus and the SAIs. Should a Fund determine that any such
commitment is no longer in the best interests of the Fund, it may consider
terminating sales of its shares in the states involved.
How Performance Is Shown
From time to time a Fund may advertise the total return and yield on a class of
shares. BOTH TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND
ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a class
of shares may be calculated on an average annual total return basis or an
aggregate total return basis. The "total return" of a class of shares refers to
the average annual compounded rates of return over one-, five-, and ten-year
periods or the life of the Fund (as stated in the advertisement) that would
equate an initial amount invested at the beginning of a stated period to the
ending redeemable value of the investment (reflecting the deduction of any
applicable contingent deferred sales charge ("CDSC")), assuming the reinvestment
of all dividend and capital gains distributions. Aggregate total return reflects
the total percentage change in the value of the investment over the measuring
period, again assuming the reinvestment of all dividends and capital gains
distributions. Total return may also be presented for other periods or may not
reflect a deduction of the CDSC.
Set forth below is certain performance data for the Global Government Bond
Ex-U.K. Composite, reflecting the performance of private accounts, including
U.K. authorized unit trusts, managed by the Gartmore Group, as defined below.
The performance data for these accounts is deemed relevant because the Global
Government Bond Ex-U.K. Composite has investment objectives, policies and
restrictions that are substantially similar to those of the Nations Global
Government Income Fund. There is substantial continuity between the portfolio
managers of the Gartmore Group who were responsible for managing those accounts
and the portfolio managers of Nations Gartmore who are responsible for managing
the Nations Global Government Income Fund. THIS PERFORMANCE DATA REPRESENTS PAST
PERFORMANCE AND IS NOT NECESSARILY INDICATIVE OF THE FUTURE PERFORMANCE OF NBAI,
NATIONS GARTMORE OR THE FUNDS.
<TABLE>
<CAPTION>
<S> <C>
Average Annual Total
Return for the Periods
GLOBAL GOVERNMENT BOND Indicated through
EX-U.K. COMPOSITE* March 31, 1995
One Year 7.90%
Three Year 9.40%
Since Inception on September 1, 1990 11.40%
</TABLE>
Annual Total Returns**
<TABLE>
<CAPTION>
1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
19.30% 3.30% 13.50% (2.40%)
</TABLE>
* The accounts of the Global Government Bond Ex-U.K. Composite do not invest in
securities of U.K. issuers, which are permissible investments for the Nations
Global Government Income Fund. However, inclusion of such securities, to the
extent of their representation in the J.P. Morgan Global Government
13
<PAGE>
Bond Index, would not have materially affected their total returns.
** The average annual total returns and annual total returns are net of fees.
The fees on these accounts varied by contractual agreement and have been
assumed to be 1.5% per annum.
"Yield" is calculated by dividing the annualized net investment income per share
during a recent 30-day (or one month) period of a class of shares of a Fund by
the maximum public offering price per share on the last day of that period. The
yield on a class of shares does not reflect deduction of any applicable CDSC.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a Fund's portfolio and a Fund's operating
expenses. Investment performance also often reflects the risks associated with
such Fund's investment objective and policies. These factors should be
considered when comparing a Fund's investment results to those of other mutual
funds and other investment vehicles. Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in a Fund with bank deposits,
savings accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time.
In addition to Investor C Shares, the Funds offer Trust A, Trust B, Investor A
and Investor N Shares. Each class of shares may bear different sales charges,
shareholder servicing fees, loads and other expenses, which may cause the
performance of a class to differ from the performance of the other classes.
Total return and yield quotations will be computed separately for each class of
the Funds' shares. Any quotation of total return or yield not reflecting CDSCs
would be reduced if such sales charges were reflected. Any fees charged by a
selling agent and/or servicing agent directly to its customers' accounts in
connection with investments in a Fund will not be included in calculations of
yield and total return or yield. Each Fund's annual report contains additional
performance information and is available upon request without charge from the
Funds' distributor or your selling agent.
How The Funds Are Managed
The business and affairs of Nations Fund Trust, Nations Fund, Inc., and Nations
Portfolios are managed under the direction of its Board of Trustees and Boards
of Directors, respectively. The SAI for Nations Fund Trust contains the names of
and general background information concerning the Trustees of Nations Fund
Trust. The SAIs for Nations Fund, Inc. and Nations Portfolios contain the names
of and general background information concerning the respective Directors of
Nations Fund, Inc. and Nations Portfolios.
Nations Fund and the Adviser have adopted codes of ethics which contain policies
on personal securities transactions by "access persons," including portfolio
managers and investment analysts. These policies substantially comply in all
material respects with the recommendations set forth in the May 9, 1994 Report
of the Advisory Group on Personal Investing of the Investment Company Institute.
INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds. NBAI is a wholly owned subsidiary of NationsBank, which in turn is a
wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation. NBAI has its principal
offices at One NationsBank Plaza, Charlotte, North Carolina 28255.
TradeStreet Investment Associates, Inc., with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as sub-investment
adviser to all of the Funds except for the Nations Global Government Income
Fund, for which Nations Gartmore serves as sub-investment adviser. TradeStreet
is a wholly owned subsidiary of NationsBank, which in turn is a wholly owned
banking subsidiary of NationsBank Corporation, a bank holding company organized
as a North Carolina corporation.
TradeStreet provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking.
Nations Gartmore Investment Management, with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as sub-investment
adviser to the Nations Global Government Income Fund pursuant to a sub-advisory
agreement. Nations Gartmore is a joint venture structured as a general
partnership between NB Partner Corp., a wholly owned subsidiary of NationsBank,
and Gartmore U.S. Limited, a wholly owned subsidiary of Gartmore plc, a UK
company listed on the London Stock Exchange which is the holding company for a
leading UK based international fund management group of companies (the "Gartmore
Group"). Banque Indosuez S.A., a leading French bank owns 75% of the equity of
Gartmore plc. The initial asset management company in the Gartmore Group was
founded in 1969 and the Gartmore Group currently provides investment management
and advisory services to pension funds, unit trusts, offshore funds and invest-
14
<PAGE>
ment funds. As of December 31, 1994 the Gartmore Group had over $30 billion in
assets under management.
Subject to the general supervision of Nations Fund Trust's Board of Trustees and
Nations Fund, Inc. and Nations Portfolios' Boards of Directors, and in
accordance with the Funds' investment policies, the Adviser formulates
guidelines and lists of approved investments for each Fund, makes decisions with
respect to and places orders for each Fund's purchases and sales of portfolio
securities and maintains records relating to such purchases and sales. The
Adviser is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions which are affiliated with the Adviser or
which have sold shares of a Fund, if the Adviser believes that the quality of
the transaction and the commission are comparable to what they would be with
other qualified brokerage firms. From time to time, to the extent consistent
with its investment objective, policies and restrictions, each Fund may invest
in securities of companies with which NationsBank or Banque Indosuez S.A. has a
lending relationship. For the services provided and expenses assumed pursuant to
an Investment Advisory Agreement, NBAI is entitled to receive advisory fees,
computed daily and paid monthly, at the annual rate of 0.60% of the average
daily net assets of each of Nations Short-Term Income Fund, Nations Diversified
Income Fund, Nations Strategic Fixed Income Fund, and Nations Short-Intermediate
Government Fund; and 0.65% of the first $100 million of the Nations Government
Securities Fund's average daily net assets, plus 0.55% of the Fund's average
daily net assets in excess of $100 million and up to $250 million, plus 0.50% of
the Fund's average daily net assets in excess of $250 million; and 0.70% of the
average daily net assets of Nations Global Government Income Fund.
For the services provided and the expenses assumed pursuant to a sub-advisory
agreement, NBAI will pay TradeStreet sub-advisory fees, computed daily and paid
monthly, at the annual rate of 0.15% of Nations Short-Term Income Fund's,
Nations Short-Intermediate Fund's, Nations Governmental Securities Fund's,
Nations Strategic Fixed Income Fund's and Nations Diversified Income Fund's
average daily net assets.
For services provided and expenses assumed pursuant to a sub-advisory agreement,
NBAI will pay Nations Gartmore sub-advisory fees, computed daily and paid
monthly, at the annual rate of 0.54% of Nations Global Government Income Fund's
average daily net assets.
Although the advisory fees for the Nations Global Government Income Fund are
higher than the advisory fees
paid by most other mutual funds, Nations Portfolios believes that the fees are
comparable to the advisory fees paid by many other funds with similar investment
objectives and policies. From time to time, NBAI and/or TradeStreet and/or
Nations Gartmore may waive (either voluntarily or pursuant to applicable state
limitations) advisory fees payable by a Fund. For the fiscal year ended November
30, 1994, after waivers, Nations Fund Trust paid NationsBank under a prior
Advisory Agreement advisory fees at the indicated rate of the Funds' average
daily net assets: Nations Short-Term Income Fund -- 0.29%; Nations Diversified
Income Fund -- 0.40%; Nations Strategic Fixed Income Fund -- 0.52%; Nations
Short-Intermediate Government Fund -- 0.40%. For the fiscal year ended May 31,
1995, after waivers, Nations Fund, Inc. paid NationsBank fees at the rate of
0.46% of Nations Government Securities Fund's average daily net assets.
David M. Hetherington is Senior Vice President, Director of Fixed Income
Management and a member of the Investment Policy Committee. Mr. Hetherington has
been the principal portfolio manager of the Nations Short-Term Income Fund since
1995. Mr. Hetherington has over 16 years of investment experience including
security analysis and portfolio management. Mr. Hetherington received a B.A.
from Duke University and holds the Chartered Financial Analyst designation.
Mark S. Ahnrud is a Vice President and Fixed Income Portfolio Manager at
NationsBank. He has been the principal portfolio manager for Nations Diversified
Income Fund since 1992. Mr. Ahnrud is a member of the Fixed Income Team and has
eight years of investment experience. Mr. Ahnrud received a B.S. from Babson
College and an M.B.A. from Duke University. Mr. Ahnrud holds the Chartered
Financial Analyst designation.
Gregory H. Cobb is a Vice President and Fixed Income Portfolio Manager at
NationsBank and has been principal portfolio manager for Nations Strategic Fixed
Income Fund since 1995. Mr. Cobb, who joined NationsBank in 1993, is a member of
the Fixed Income Group and has over 7 years of portfolio management experience.
Mr. Cobb received a B.A. from the University of North Carolina-Chapel Hill.
John Swaim joined NationsBank in 1986 and has been the principal portfolio
manager for Nations Short-Intermediate Government Fund and Nations Government
Securities Fund since 1995. Mr. Swaim is a member of the Fixed Income Team and
has over eight years of investment experience. Mr. Swaim previously served as
derivative products manager for the NationsBank Texas Corporate Investment
Division portfolio. Mr. Swaim received his B.S. from the University of North
Texas and holds an M.B.A. from the University of Texas, Arlington.
Mark Rimmer is the principal portfolio manager of the Nations Global Government
Income Fund and has been
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an International Fixed Income Manager with the Gartmore Group since 1990. He
joined Gulf International Bank in 1986 on the trading desk, and subsequently
joined their Investment Management Group in 1988, managing multi-currency funds
for institutional clients in the Gulf region. Prior to that he was associated
with Sumitomo Finance International as a senior trader. Mr. Rimmer graduated
from Cambridge University in 1984 with an honors degree in Economics. Mr. Rimmer
also is a member of the Institute of Investment Management and Research.
Morrison & Foerster LLP, counsel to Nations Fund and special counsel to
NationsBank, has advised Nations Fund and NationsBank that subsidiaries of
NationsBank may perform the services contemplated by the Investment Advisory
Agreement without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. Such counsel has pointed out, however, that there
are no controlling judicial or administrative interpretations or decisions and
that future judicial or administrative interpretations of, or decisions relating
to, present federal or state statutes, including the Glass-Steagall Act, and
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as future changes in such statutes,
regulations and judicial or administrative decisions or interpretations, could
prevent such subsidiaries of NationsBank from continuing to perform, in whole or
in part, such services. If such subsidiaries of NationsBank were prohibited from
performing any such services, it is expected that the Trustees of Nations Fund
Trust and the Boards of Directors of Nations Fund, Inc. and Nations Portfolios
would recommend to the Funds' shareholders that they approve a new advisory
agreement with another entity or entities qualified to perform such services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
Nations Fund pursuant to an Administration Agreement. Pursuant to the terms of
the Administration Agreement, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary of
First Data Corporation, with principal offices at One Exchange Place, Boston,
Massachusetts 02109, serves as the co-administrator of the Funds pursuant to a
Co-Administration Agreement. Under the terms of the Co-Administration Agreement,
TSSG provides various administrative and accounting services to the Funds,
including performing the calculations necessary to determine net asset values
and dividends, preparing tax returns and financial statements, maintaining the
portfolio records and certain general accounting records for the Funds.
For the services rendered pursuant to the Administration and Co-Administration
Agreements, Stephens and TSSG are entitled to receive a combined fee at the
annual rate of up to 0.10% of each Fund's average daily net assets. For the
fiscal year ended November 30, 1994, after waivers, Nations Fund Trust paid its
administrators fees at the rate of 0.09% of the average daily net assets of
Nations Short-Term Income Fund, Nations Diversified Income Fund, Nations
Strategic Fixed Income Fund and Nations Short-Intermediate Government Fund. For
the fiscal year ended May 31, 1995, after waivers, Nations Fund, Inc. paid its
administrators fees at the rate of 0.09% of the Nations Government Securities
Fund's average daily net assets.
NationsBank serves as sub-administrator for Nations Fund pursuant to a
Sub-Administration Agreement. Pursuant to the terms of the Sub-Administration
Agreement, NationsBank assists Stephens in supervising, coordinating and
monitoring various aspects of the Funds' administrative operations. For
providing such services, NationsBank shall be entitled to receive a monthly fee
from Stephens based on an annual rate of .01% of the Funds' average daily net
assets.
Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker-dealer with principal
offices at 111 Center Street, Little Rock, Arkansas 72201. Nations Fund Trust
has entered into a distribution agreement with Stephens which provides that
Stephens has the exclusive right to distribute shares of the Funds. Stephens may
pay service fees or commissions to selling agents that assist customers in
purchasing Investor Shares. See "Shareholder Servicing and Distribution Plans."
Morgan Guaranty Trust Company ("Morgan Guaranty"), Avenue des Arts, 35 1040
Brussels, Belgium, serves as custodian for the assets of the Nations Global
Government Income Fund.
NationsBank of Texas, N.A., ("NationsBank of Texas", and, collectively with
Morgan Guaranty, the "Custodians"), serves as the Funds' (other than Nations
Global Government Income Fund's) custodian. NationsBank of Texas is located at
1401 Elm Street, Dallas, Texas 75202 and is a wholly owned subsidiary of
NationsBank Corporation. In return for providing custodial services, NationsBank
of Texas is entitled to receive, in addition to out-of-pocket expenses, fees
payable monthly (i) at the rate of 1.25% of 1% of the average daily net assets
of each Fund, (ii) $10.00 per repurchase collateral transaction by the Funds,
and (iii) $15.00 per purchase, sale and maturity transaction involving the
Funds.
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TSSG serves as transfer agent (the "Transfer Agent") for the Funds' Investor C
Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
Price Waterhouse LLP serves as independent accountant to Nations Fund. Their
address is 160 Federal Street, Boston, Massachuetts 02110.
EXPENSES: The accrued expenses of each Fund, as well as certain expenses
attributable to Investor C Shares, are deducted from accrued income before
dividends are declared. Each fund's expenses include, but are not limited to:
fees paid to the Adviser, NationsBank, Stephens and TSSG; interest; trustees'
and directors' fees; federal and state securities registration and qualification
fees; brokerage fees and commissions; costs of preparing and printing
prospectuses for regulatory purposes and for distribution to existing
shareholders; charges of the Custodian and Transfer Agent; certain insurance
premiums; outside auditing and legal expenses; costs of shareholder reports and
shareholder meetings; other expenses which are not expressly assumed by the
Adviser, NationsBank, Stephens or TSSG under their respective agreements with
Nations Fund; and any extraordinary expenses. Investor C Shares may bear certain
class specific retail transfer agency expenses and also bear certain additional
shareholder service and sales support costs. Any general expenses of Nations
Fund Trust, Nations Fund, Inc., and/or Nations Portfolios that are not readily
identifiable as belonging to a particular investment portfolio are allocated
among all portfolios in the proportion that the assets of a portfolio bear to
the assets of Nations Fund Trust, Nations Fund, Inc., and/or Nations Portfolios
or in such other manner as the Board of Trustees or Boards of Directors deems
appropriate.
Organization And History
The Funds are members of the Nations Fund Family, which consists of Nations Fund
Trust, Nations Fund, Inc., Nations Portfolios and Nations Institutional Reserves
(formerly known as The Capitol Mutual Funds). The Nations Fund Family currently
has 44 distinct investment portfolios and total assets in excess of $16 billion.
NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. The Funds currently offer five classes of
shares -- Investor A, Investor B, Investor C, Trust A and Trust B Shares. This
Prospectus relates only to the Investor C Shares of Nations Short-Term Income
Fund, Nations Diversified Income Fund, Nations Strategic Fixed Income Fund and
Nations Short-Intermediate Government Fund of Nations Fund Trust. To obtain
additional information regarding the Funds' other classes of shares which may be
available to you, contact your Selling Agent (as defined below) or Nations Fund
at 1-800-321-7854.
Each share is without par value, represents an equal proportionate interest in
the related fund with other shares of the same class, and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
such fund as are declared in the discretion of Nations Fund Trust's Board of
Trustees. Nations Fund Trust's Declaration of Trust authorizes the Board of
Trustees to classify or reclassify any class of shares into one or more series
of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund, and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See the related SAI for examples of when the 1940 Act
requires voting by fund.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose or vote with respect to more than 25% of the outstanding shares of
Nations Fund Trust and therefore could be considered to be a controlling person
of Nations Fund Trust for purposes of the 1940 Act. In addition, as of August
31, 1995, the Mary Jane Bakery Salesman Association and Walter St. George
Gladding owned of record 25% or more of Investor C shares of the Nations
Strategic Fixed Income Fund and therefore could be considered a controlling
person of such class for purposes of the 1940 Act. For more detailed information
concerning the percentage of each class or series of shares over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see Nations Fund Trust's related SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
NATIONS FUND, INC.: Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no operations prior to December 15, 1986. As of the date of
this Prospectus, the authorized capital stock of Nations
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Fund, Inc. consists of 270,000,000,000 shares of common stock, par value of
$.001 per share, which are divided into series or funds each of which consists
of separate classes of shares. This Prospectus relates only to the Investor C
Shares of Nations Government Securities Fund of Nations Fund, Inc. To obtain
additional information regarding the Fund's other classes of shares which may be
available to you, contact your Selling Agent (as defined below) or Nations Fund
at 1-800-321-7854.
Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such fund
or class. In the event of dissolution or liquidation, holders of each class will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of that portion of the assets allocated to that class held in the
respective fund of Nations Fund, Inc., less (b) the liabilities of Nations Fund,
Inc. attributable to the respective fund or class or allocated among the funds
or classes based on the respective liquidation value of each fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Fund, Inc.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s shares.
Nations Fund, Inc.'s shares, when issued, will be fully paid and
non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Fund, Inc. and therefore could be considered to be a controlling person
of Nations Fund, Inc. for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see Nations Fund, Inc.'s SAI. It is anticipated that Nations
Fund, Inc. will not hold annual shareholder meetings on a regular basis unless
required by the 1940 Act or Maryland law.
NATIONS PORTFOLIOS: Nations Portfolios was incorporated in Maryland on January
23, 1995. As of the date of this Prospectus, the authorized capital stock of
Nations Portfolios consists of 150,000,000,000 shares of common stock, par value
of $.001 per share, which are divided into series or funds each of which
consists of separate classes of shares. This Prospectus relates only to the
Investor C Shares of Nations Global Government Income Fund of Nations
Portfolios. To obtain additional information regarding the Fund's other classes
of shares which may be available to you, contact your Selling Agent (as defined
below) or Nations Fund at 1-800-321-7854.
Shares of a fund and class have equal rights with respect to voting, except that
the holders of shares of a fund or class will have the exclusive right to vote
on matters affecting only the rights of the holders of such fund or class. In
the event of dissolution or liquidation, holders of each class will receive pro
rata, subject to the rights of creditors, (a) the proceeds of the sale of that
portion of the assets allocated to that class held in the respective fund of
Nations Portfolios, less (b) the liabilities of Nations Portfolios attributable
to the respective fund or class or allocated among the funds or classes based on
the respective liquidation value of each fund or class.
Shareholders of Nations Portfolios do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Portfolios. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Portfolios.
There are no preemptive rights applicable to any of Nations Portfolios' shares.
Nations Portfolios' shares, when issued, will be fully paid and non-assessable.
As of August 31, 1995, NationsBank and its affiliates possessed or shared power
to dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Portfolios and, therefore, would be considered to be a controlling
person of Nations Portfolios for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see Nations Portfolios' SAI. It is anticipated that Nations
Portfolios will not hold annual shareholder meetings on a regular basis unless
required by the 1940 Act or Maryland law.
Because this Prospectus combines disclosure on three separate investment
companies, there is a possibility that one investment company could become
liable for a misstatement, inaccuracy or incomplete disclosure in this
Prospectus concerning the other investment company. Nations Fund Trust, Nations
Fund, Inc. and Nations Portfolios have entered into an indemnification agreement
that creates a right of indemnification from the investment company responsible
for any such misstatement, inaccuracy or incomplete disclosure that may appear
in this Prospectus.
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About Your Investment
How To Buy Shares
Stephens has established various procedures for purchasing Investor C Shares in
order to accommodate different investors. Purchase orders for Investor C Shares
may be placed through banks, broker/dealers or other financial institutions
(including certain affiliates of NationsBank) that have entered into a Sales
Support Agreement with Stephens ("Selling Agents").
There is a minimum initial investment of $1,000, except that the minimum initial
investment is:
(Bullet) $500 for Individual Retirement Account ("IRA") investors;
(Bullet) $250 for non-working spousal IRAs; and
(Bullet) $100 for investors participating on a monthly basis in the Systematic
Investment Plan described below.
There is no minimum investment amount for investments by 401(k) plans,
simplified employee pension plans ("SEPs"), salary reduction-simplified employee
pension plans ("SAR-SEPs") or salary reduction-Individual Retirement Accounts
("SAR-IRAs"). However, the assets of such plans must reach an asset value of
$1,000 ($500 for SEPs, SAR-SEPs and SAR-IRAs) within one year of the account
open date. If the assets of such plans do not reach the minimum asset size
within one year, Nations Fund reserves the right to redeem the shares held by
such plans on 60 days' written notice. The minimum subsequent investment is
$100, except for investments pursuant to the Systematic Investment Plan
described below.
Investor C Shares are purchased at net asset value per share. Purchases may be
effected on days on which the New York Stock Exchange (the "Exchange") is open
for business (a "Business Day").
With respect to Investor C Shares, the Selling Agents have entered into Sales
Support Agreements with Stephens whereby they will provide various sales support
services to their customers ("Customers") who own Investor C Shares. In
addition, banks, broker/dealers or other financial institutions (including
certain affiliates of NationsBank) that have entered into Servicing Agreements
with Nations Fund ("Servicing Agents") will provide various shareholder services
for their Customers who own Investor C Shares. Servicing Agents and Selling
Agents are sometimes referred to hereafter as "Agents." From time to time the
Agents, Stephens and Nations Fund may agree to voluntarily reduce the maximum
fees payable for sales support or shareholder services.
Nations Fund reserves the right to reject any purchase order. The issuance of
Investor C Shares is recorded on the books of the Funds, and share certificates
are not issued unless expressly requested in writing. Certificates are not
issued for fractional shares.
EFFECTIVE TIME OF PURCHASES: Purchase orders for Investor C Shares of the Funds
which are received by Stephens or by the Transfer Agent before the close of
regular trading hours on the Exchange (currently 4:00 p.m., Eastern time) on any
Business Day are priced according to the net asset value determined on that day
but are not executed until 4:00 p.m., Eastern time, on the Business Day on which
immediately available funds in payment of the purchase price are received by the
Funds' Custodian. Such payment must be received not later than 4:00 p.m.,
Eastern time, by the third Business Day following receipt of the order. If funds
are not received by such date, the order will not be accepted and notice thereof
will be given to the Agent placing the order. Payment for orders which are not
received or accepted will be returned after prompt inquiry to the sending Agent.
The Agents are responsible for transmitting orders for purchases of Investor C
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Fund.
SYSTEMATIC INVESTMENT PLAN: Under the Funds' Systematic Investment Plan ("SIP")
a shareholder may automatically purchase Investor C Shares. On a bi-monthly,
monthly or quarterly basis, a shareholder may direct cash to be transferred
automatically from his/her checking or savings account at any bank to his/her
Fund account. Transfers will occur on or about the 15th and/or 30th day of the
applicable month. The systematic investment amount may be in any amount from $25
to $100,000. For more information concerning the SIP, contact your Agent.
TELEPHONIC TRANSACTIONS: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How to Redeem Shares" and "How to
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. You should be aware that by electing the telephone transaction
feature, you may be giving up a measure of security
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that you may have if you were to authorize written requests only. You may bear
the risk of any resulting losses from a telephone transaction. Nations Fund will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if Nations Fund and its service providers fail to
employ such measures, they may be liable for any losses due to unauthorized or
fraudulent instructions. Nations Fund requires a form of personal identification
prior to acting upon instructions received by telephone and provides written
confirmation to shareholders of each telephone share transaction. In addition,
Nations Fund reserves the right to record all telephone conversations.
Shareholder Servicing And Distribution Plans
Pursuant to Rule 12b-1 under the 1940 Act, the Trustees have approved a
Distribution Plan with respect to the Investor C Shares of each Fund. Pursuant
to the Distribution Plan, each Fund may compensate or reimburse Stephens for any
activities or expenses primarily intended to result in the sale of the Fund's
Investor C Shares. Payments under the Distribution Plan will be calculated daily
and paid monthly at a rate or rates set from time to time by the Trustees
provided that the annual rate may not exceed 0.75% of the average daily net
asset value of each Fund's Investor C Shares.
The fees payable under the Distribution Plan are used (i) to compensate Selling
Agents for providing sales support assistance relating to Investor C Shares,
(ii) to pay for promotional activities intended to result in the sale of
Investor C Shares such as the preparation, printing and distribution of
prospectuses to other than current shareholders, and (iii) to compensate Selling
Agents for providing sales support services with respect to their Customers who
are, from time to time, beneficial and record holders of Investor C Shares.
Currently, substantially all fees paid pursuant to the Distribution Plan are
paid to compensate Selling Agents for providing the services described in (i)
and (iii) above, with any remaining amounts being used by Stephens to partially
defray other expenses incurred by Stephens in distributing Investor C Shares.
Fees received by Stephens pursuant to the Distribution Plan will not be used to
pay any interest expenses, carrying charges or other financing costs (except to
the extent permitted by the SEC) and will not be used to pay any general and
administrative expenses of Stephens.
Nations Fund and Stephens may suspend or reduce payments under the Distribution
Plan at any time, and payments are subject to the continuation of the
Distribution Plan described above and the terms of the Sales Support Agreement
between Selling Agents and Stephens. See the SAI for more details on the
Distribution Plan.
The Trustees and Directors also have approved a shareholder servicing plan
("Investor C Servicing Plan") for each Fund which permits the Funds to
compensate Servicing Agents for services provided to their Customers that own
Investor C Shares. Payments under the Investor C Servicing Plan are calculated
daily and paid monthly at a rate or rates set from time to time by the Funds,
provided that the annual rate may not exceed 0.25% of the average daily net
asset value of the Investor C Shares.
The fees payable under the Investor C Servicing Plan are used primarily to
compensate or reimburse Servicing Agents for shareholder services provided, and
related expenses incurred, by such Servicing Agents. The shareholder services
provided by Servicing Agents may include: (i) aggregating and processing
purchase and redemption requests for Investor C Shares from Customers and
transmitting net purchase and redemption orders to Stephens or the Transfer
Agent; (ii) providing Customers with a service that invests the assets of their
accounts in Investor C Shares pursuant to specific or preauthorized
instructions; (iii) processing dividend and distribution payments from a Fund on
behalf of Customers; (iv) providing information periodically to Customers
showing their positions in Investor C Shares; (v) arranging for bank wires; and
(vi) providing general shareholder liaison services.
Nations Fund may suspend or reduce payments under the Investor C Servicing Plan
at any time, and payments are subject to the continuation of the Investor C
Servicing Plan described above and the terms of the Servicing Agreements. See
the SAI for more details on the Investor C Servicing Plan.
Nations Fund understands that Agents may charge fees to their Customers who are
the owners of Investor Shares for various services provided in connection with a
Customer's account. These fees would be in addition to any amounts received by a
Selling Agent under its Sales Support Agreement with Stephens or by a Servicing
Agent under its Servicing Agreement with Nations Fund. The Sales Support
Agreements and Servicing Agreements require Agents to disclose to their
Customers any compensation payable to the Agent by Stephens or Nations Fund and
any other compensation payable by the Customers for various services provided in
connection with their accounts. Customers should read this Prospectus in light
of the terms governing their accounts with their Agents.
Stephens may, from time to time, at its expense or as an expense for which it
may be reimbursed under the Distribution Plan, pay a bonus or other
consideration or
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incentive to Agents who sell a minimum dollar amount of shares of a Fund during
a specified period of time. Stephens also may, from time to time, pay additional
consideration to Agents not to exceed 0.75% of the offering price per share on
all sales of Investor C Shares as an expense of Stephens or for which Stephens
may be reimbursed under the Distribution Plan or upon receipt of a CDSC. Any
such additional consideration or incentive program may be terminated at any time
by Stephens.
In addition, Stephens has established a non-cash compensation program pursuant
to which broker/dealers or financial institutions that sell shares of the Funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise. This non-cash compensation program may be
amended or terminated at any time by Stephens.
How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders are
effected at the net asset value per share next determined after receipt of the
order by Stephens or by the Transfer Agent, less any applicable CDSC. The Agents
are responsible for transmitting redemption orders to Stephens or to the
Transfer Agent and for crediting their Customer's account with the redemption
proceeds on a timely basis. No charge for wiring redemption payments is imposed
by Nations Fund. Except for any CDSC which may be applicable upon redemption of
Investor C Shares, as described below, there is no redemption charge.
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens or by the Transfer Agent.
However, redemption proceeds for shares purchased by check may not be remitted
until at least 15 days after the date of purchase to ensure that the check has
cleared; a certified check, however, is deemed to be cleared immediately.
Nations Fund may redeem a shareholder's Investor Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of an Agent
pursuant to arrangements between the Agent and its Customers. Nations Fund also
may redeem shares of a Fund involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
Prior to effecting a redemption of Investor C Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to Nations Fund have previously been
made. Nations Fund may require any additional information reasonably necessary
to evidence that a redemption has been duly authorized.
CONTINGENT DEFERRED SALES CHARGE: Subject to certain waivers, Investor C Shares
of the Funds that are redeemed within one year of the date of purchase will be
subject to a CDSC equal to 0.50% of the lesser of the net asset value or the
purchase price of the shares being redeemed. Investor C Shares purchased prior
to January 1, 1996 remain subject to the 1.00% CDSC (except for Nations
Short-Term Income Fund). No CDSC is imposed on increases in net asset value
above the initial purchase price, including shares acquired by reinvestment of
distributions.
Solely for purposes of determining the period of time that has elapsed from the
purchase of any Investor Shares, all purchases are deemed to have been made on
the trade date of the transaction. In determining whether a CDSC is applicable
to a redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares held for the longest period of time or shares
acquired pursuant to reinvestment of dividends or distributions. The charge will
not be applied to dollar amounts representing an increase in the net asset value
since the time of purchase.
The CDSC will be waived on redemptions of Investor C Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as amended
(the "Code")) of a shareholder (including a registered joint owner), (ii) in
connection with the following retirement plan distributions: (a) by qualified
retirement plans, (except in cases of plan level terminations); (b)
distributions from an IRA following attainment of age 59 1/2; (c) a tax-free
return of an excess contribution to an IRA, and (d) distributions from a
qualified retirement plan that are not subject to the 10% additional Federal
withdrawal tax pursuant to Section 72(t)(2) of the Code, (iii) effected pursuant
to Nations Fund's right to liquidate a shareholder's account if the aggregate
net asset value of the Investor Shares held in the account is less than the
minimum account size, (iv) in connection with the combination of Nations Fund
with any other registered investment company by merger, acquisition of assets or
by any other transaction, and (v) effected pur-
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suant to the Automatic Withdrawal Plan discussed below, provided that such
redemptions do not exceed, on an annual basis, 12% of the net asset value of the
Investor C Shares in the account. Shareholders are responsible for providing
evidence sufficient to establish that they are eligible for any waiver of the
CDSC. Nations Fund may terminate any waiver of the CDSC by providing notice in
the Prospectus, but any such termination would affect only shares purchased
after such termination.
Within 120 days after a redemption of Investor C Shares of a Fund, a shareholder
may reinvest any portion of the proceeds of such redemption in Investor C Shares
of the same Fund. The amount which may be so reinvested is limited to an amount
up to, but not exceeding, the redemption proceeds (or to the nearest full share
if fractional shares are not purchased). A shareholder exercising this privilege
would receive a pro rata credit for any CDSC paid in connection with the prior
redemption. A shareholder may not exercise this privilege with the proceeds of a
redemption of shares previously purchased through the reinstatement privilege.
In order to exercise this privilege, a written order for the purchase of
Investor C Shares must be received by the Transfer Agent or by Stephens within
120 days after the redemption.
AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of a Fund if the value of the
Investor C Shares in his/her accounts within the Nations Fund Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Investor C Shares redeemed under the AWP will not be subject to a CDSC,
provided that the shares so redeemed do not exceed, on an annual basis, 12% of
the net asset value of the and Investor C Shares in the account. Otherwise, any
applicable CDSC will be imposed on shares redeemed under the AWP. Shareholders
who elect to establish an AWP may receive a monthly, quarterly or annual check
or automatic transfer or to a checking or savings account in a stated amount of
not less than $25 on or about the 10th or 25th day of the applicable month of
withdrawal. Investor C Shares will be redeemed (net of any applicable CDSC) as
necessary to meet withdrawal payments. Withdrawals will reduce principal and may
eventually deplete the shareholder's account. If a shareholder desires to
establish an AWP after opening an account, a signature guarantee will be
required. An AWP may be terminated by a shareholder on 30 days' written notice
to his/her Selling or Servicing Agent or by Nations Fund at any time.
How To Exchange Shares
SHARES ACQUIRED DIRECTLY: The exchange feature enables a shareholder of Investor
C Shares of a Nations Fund non-money market fund (including the Funds) to
acquire shares of the same class that are offered by another non-money market
fund of Nations Fund or Investor D Shares of any money market fund of Nations
Fund when he or she believes that a shift between funds is an appropriate
investment decision. A qualifying exchange is based on the next calculated net
asset value per share of each fund after the exchange order is received.
No CDSC will be imposed in connection with an exchange of Investor C Shares that
meets the requirements discussed in this section.
If a shareholder acquires Investor C Shares of a non-money market fund through
an exchange, the CDSC applicable to the original shares purchased (except for
Nations Short-Term Income Fund and Nations Short-Term Municipal Income Fund
Shares purchased prior to January 1, 1996, which will be subject to the CDSC
schedule applicable to the acquired Fund) will be applied to any redemption of
the acquired shares. Additionally, if a shareholder acquires Investor D Shares
of a money market fund or Investor C Shares of Nations Short-Term Income Fund or
Nations Short-Term Municipal Income Fund with shares of another Fund purchased
prior to January 1, 1996, the CDSC schedule applicable to the exchanged Investor
C Shares will be applied on any redemption of the acquired shares.
Notwithstanding the foregoing, if a shareholder redeems shares acquired through
an exchange, the shareholder will be subject to the highest CDSC schedule
applicable to any shares that were exchanged within the 30 days prior to the
redemption. Additionally, when an investor exchanges Investor C Shares of
Nations Diversified Income Fund, Nations Strategic Fixed Income Fund, Nations
Short-Intermediate Government Fund, Nations Government Securities Fund, Nations
Global Government Income Fund or Investor C Shares of Nations Short-Term Income
Fund purchased after January 1, 1996, for shares of the same class of another
non-money market fund or Investor D Shares of any money market fund of Nations
Fund, the remaining period of time (if any) that the CDSC is in effect will be
computed from the time of the initial purchase of the previously held Investor C
Shares. If an investor exchanges Investor C Shares of Nations Short-Term Income
Fund purchased prior to January 1, 1996 for shares of the same class of another
non-money market fund, the remaining period of time that the CDSC applicable to
the acquired shares is in effect will be computed from the time of the exchange.
AUTOMATIC EXCHANGE FEATURE: Under the Funds' Automatic Exchange Feature ("AEF")
a shareholder may automatically exchange at least $25 on a monthly or quarterly
basis. Shareholder may direct proceeds to be
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exchanged from one Nations Fund to another as allowed by the applicable exchange
rules within the prospectus. Exchanges will occur on or about the 15th and/or
30th day of the applicable month. The shareholder must have an existing position
in both Funds in order to establish the AEF. This feature may be established by
directing a request to the Transfer Agent by telephone or in writing. For
additional information, please contact your selling agent.
GENERAL: The Funds and each of the other funds of Nations Fund may limit the
number of times this exchange feature may be exercised by a shareholder within a
specified period of time. Also, the exchange feature may be terminated or
revised at any time by Nations Fund upon such notice as may be required by
applicable regulatory agencies (presently 60 days for termination or material
revision), absent unusual circumstances.
The current prospectus for each fund of Nations Fund describes its investment
objective and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for Federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.
The Investor A Shares exchanged must have a current value of at least $1,000
(except for exchanges through the AEF). Nations Fund reserves the right to
reject any exchange request. Only shares that may legally be sold in the state
of the investor's residence may be acquired in an exchange. Only shares of a
class that is accepting investments generally may be acquired in an exchange. An
investor may telephone an exchange request by calling his/her Selling or
Servicing Agent which is responsible for transmitting such request to Stephens
or to the Transfer Agent.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. In such event, shares may be exchanged by mailing the
request directly to the Selling or Servicing Agent through which the original
shares were purchased. An investor should consult his/her Selling or Servicing
Agent or Stephens for further information regarding exchanges.
How The Funds Value Their Shares
The Funds calculate the net asset value of a share of each class by dividing the
total value of its assets, less liabilities, by the number of shares in the
class outstanding. Shares are valued as of the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on each Business Day. Currently,
the days on which the Exchange is closed (other than weekends) are: New Year's
Day, Presidents' Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Portfolio securities for which
market quotations are readily available are valued at market value. Short-term
investments that will mature in 60 days or less are valued at amortized cost,
which approximates market value. All other securities and assets are valued at
their fair value following procedures approved by the Trustees or Directors.
How Dividends And Distributions Are Made;
Tax Information
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income are declared
daily and paid monthly by the Funds. The Funds' net realized capital gains
(including net short-term capital gains) are distributed at least annually.
Distributions from capital gains are made after applying any available capital
loss carryovers. Distributions paid by the Funds with respect to one class of
shares may be greater or less than those paid with respect to another class of
shares due to the different expenses of the different classes.
The net asset value of Investor C Shares will be reduced by the amount of any
dividend or distribution. Certain Selling and Servicing Agents may provide for
the reinvestment of dividends in the form of additional Investor Shares of the
same class in the same Fund. Dividends and distributions are paid in cash within
five Business Days of the end of the month or quarter to which the dividend
relates. Dividends and distributions payable to a shareholder are paid in cash
within five Business Days after a shareholder's complete redemption of his/her
Investor C Shares.
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TAX INFORMATION: Each Fund intends to qualify as a "regulated investment
company" under the Code. Such qualification relieves a Fund of liability for
Federal income taxes on amounts distributed in accordance with the Code.
The Funds intend to distribute substantially all of their investment company
taxable income and net tax-exempt income each taxable year. Distributions by a
Fund of its net investment income (including net foreign currency gains) and the
excess, if any, of its net short-term capital gain over its net long-term
capital loss are taxable as ordinary income to shareholders who are not
currently exempt from Federal income taxes, whether such income is received in
cash or reinvested in additional shares. (Federal income taxes for distributions
to an IRA are generally deferred under the Code.) Corporate investors may be
entitled to the dividends-received deduction on a portion of the dividends from
those Funds investing in the stock of domestic corporations.
Substantially all of the Funds' net realized long-term capital gains will be
distributed at least annually. The Funds will generally have no tax liability
with respect to such gains, and the distributions will be taxable to
shareholders who are not exempt from Federal income taxes as long-term capital
gains, regardless of how long the shareholders have held the Funds' shares and
whether such gains are received in cash or reinvested in additional shares.
Each year, shareholders will be notified as to the amount and Federal tax status
of all dividends and capital gains paid during the prior year. Such dividends
and capital gains may be subject to state and local taxes.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by the Funds on December 31 of such year
in the event such dividends are actually paid during January of the following
year.
Federal law requires Nations Fund to withhold 31% from any dividends (other than
exempt-interest dividends) paid by Nations Fund and/or redemptions (including
exchange redemptions) that occur in certain shareholder accounts if the
shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply, or
if the Internal Revenue Service has notified Nations Fund that the Taxpayer
Identification Number listed on a shareholder account is incorrect according to
its records, or that the shareholder is subject to backup withholding. Amounts
withheld are applied to the shareholder's Federal tax liability, and a refund
may be obtained from the Internal Revenue Service if withholding results in
overpayment of taxes. Federal law also requires the Funds to withhold 30% or the
applicable tax treaty rate from dividends paid to certain nonresident alien,
non-U.S. partnership and non-U.S. corporation shareholder accounts.
Portions of the Nations Global Government Income Fund's investment income may be
subject to foreign income taxes withheld at their source. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. Generally, more than 50% of the value of the total assets of the Nations
Global Government Income Fund will consist of securities of foreign issuers, and
therefore the Fund may elect to "pass through" to its shareholders these foreign
taxes, if any. In such event each shareholder will be required to include his or
her pro rata portion thereof in his or her gross income, but will be able to
deduct or (subject to various limitations) claim a foreign tax credit against
U.S. income taxes for such amount.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important Federal tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisers with respect to their specific tax
situations as well as with respect to state and local taxes. Further tax
information is contained in the SAI.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAI contains more
information concerning such investments.
ASSET BACKED SECURITIES: Asset Backed Securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset Backed
Securities consist of both mortgage and non-mortgage backed securities.
Interests in pools of these assets differ from other forms of debt securities,
which normally provide for periodic payment of interest in fixed amounts with
principal paid at maturity or specified call dates. Instead, Asset Backed
Securities provide periodic payments which generally consist of both interest
and principal payments.
The life of an Asset Backed Security varies depending upon rate of the
prepayment of the underlying debt instruments. The rate of such prepayments will
be pri-
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marily a function of current market interest rates, although other economic and
demographic factors may be involved. For example, falling interest rates
generally result in an increase in the rate of prepayments of mortgage loans
while rising interest rates generally decrease the rate of prepayments. An
acceleration in prepayments in response to sharply falling interest rates will
shorten the security's average maturity and limit the potential appreciation in
the security's value relative to a conventional debt security. Consequently,
Asset Backed Securities are not as effective in locking in high, long-term
yields. Conversely, in periods of sharply rising rates, prepayments are
generally slow, increasing the security's average life and its potential for
price depreciation.
MORTGAGE BACKED SECURITIES represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself.
Mortgage pass-through securities may represent participation interests in pools
of residential mortgage loans originated by U.S. governmental or private lenders
and guaranteed, to the extent provided in such securities, by the U.S.
Government or one of its agencies, authorities or instrumentalities. Such
securities, which are ownership interests in the underlying mortgage loans,
differ from conventional debt securities, which provide for periodic payment of
interest in fixed amounts (usually semi-annually) and principal payments at
maturity or on specified call dates. Mortgage pass-through securities provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans.
The guaranteed mortgage pass-through securities in which a Fund may invest may
include those issued or guaranteed by GNMA, by FNMA and FHLMC. Such Certificates
are mortgage-backed securities which represent a partial ownership interest in a
pool of mortgage loans issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations. Such mortgage loans may have fixed or
adjustable rates of interest. Each mortgage loan included in the pool is either
insured by the Federal Housing Administration ("FHA") or guaranteed by the
Veterans Administration ("VA").
The average life of a GNMA Certificate is likely to be substantially less than
the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return on the greater part of principal invested far in advance of
the maturity of the mortgages in the pool. Foreclosures impose no risk to
principal investment because of the GNMA guarantee.
As the prepayment rates of individual mortgage pools will vary widely, it is not
possible to accurately predict the average life of a particular issue of GNMA
Certificates. However, statistics published by the FHA indicate that the average
life of a single-family dwelling mortgage with a 25- to 30-year maturity, the
type of mortgage which backs most GNMA Certificates, is approximately 12 years.
It is therefore customary practice to treat GNMA Certificates as 30-year
mortgage-backed securities which prepay fully in the twelfth year.
As a consequence of the fees paid to GNMA and the issuer of GNMA Certificates,
the coupon rate of interest of GNMA Certificates is lower than the interest paid
on the VA-guaranteed or FHA-insured mortgages underlying the Certificates.
The yield which will be earned on GNMA Certificates may vary from their coupon
rates for the following reasons: (i) Certificates may be issued at a premium or
discount, rather than at par; (ii) Certificates may trade in the secondary
market at a premium or discount after issuance; (iii) interest is earned and
compounded monthly which has the effect of raising the effective yield earned on
the Certificates; and (iv) the actual yield of each Certificate is affected by
the prepayment of mortgages included in the mortgage pool underlying the
Certificates and the rate at which principal so prepaid is reinvested. In
addition, prepayment of mortgages included in the mortgage pool underlying a
GNMA Certificate purchased at a premium may result in a loss to the Fund.
Due to the large numbers of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors, GNMA
Certificates are highly liquid instruments.
Mortgage backed securities issued by private issuers, whether or not such
obligations are subject to guarantees by the private issuer, may entail greater
risk than obligations directly or indirectly guaranteed by the U.S. Government.
Collateralized mortgage obligations or "CMOs," are debt obligations
collateralized by mortgage loans or mortgage pass-through securities (collateral
collectively hereinafter referred to as "Mortgage Assets"). Multi-class pass-
through securities are interests in a trust composed of Mortgage Assets and all
references herein to CMOs will include multi-class pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the funds to pay debt service on the CMOs
or make scheduled distribution on the multi-class pass-through securities.
Moreover, principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of the premium if
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any has been paid. Interest is paid or accrues on all classes of the CMOs on a
monthly, quarterly or semiannual basis.
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. Planned Amortization Class CMOs ("PAC
Bonds") generally require payments of a specified amount of principal on each
payment date. PAC Bonds are always parallel pay CMOs with the required principal
payment on such securities having the highest priority after interest has been
paid to all classes.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage
securities. A Fund will only invest in SMBS that are obligations backed by the
full faith and credit of the U.S. Government. SMBS are usually structured with
two classes that receive different proportions of the interest and principal
distributions from a pool of mortgage assets. A Fund will only invest in SMBS
whose mortgage assets are U.S. Government obligations.
A common type of SMBS will be structured so that one class receives some of the
interest and most of the principal from the mortgage assets, while the other
class receives most of the interest and the remainder of the principal. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, a Fund may fail to fully recoup its initial investment in these
securities. The market value of any class which consists primarily or entirely
of principal payments generally is unusually volatile in response to changes in
interest rates. Because SMBS were only recently introduced, established trading
markets for these securities have not yet been developed.
The average life of mortgage backed securities varies with the maturities of the
underlying mortgage instruments, which have maximum maturities of 40 years. The
average life is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities as the result of mortgage
prepayments, mortgage refinancings, or foreclosures. The rate of mortgage
prepayments, and hence the average life of the certificates, will be a function
of the level of interest rates, general economic conditions, the location and
age of the mortgage and other social and demographic conditions. Such
prepayments are passed through to the registered holder with the regular monthly
payments of principal and interest and have the effect of reducing future
payments. Estimated average life will be determined by the Adviser and used for
the purpose of determining the average weighted maturity of the Funds. For
additional information concerning mortgage backed securities, see the related
SAI.
NON-MORTGAGE ASSET BACKED SECURITIES include interests in pools of receivables,
such as motor vehicle installment purchase obligations and credit card
receivables. Such securities are generally issued as pass-through certificates,
which represent undivided fractional ownership interests in the underlying pools
of assets. Such securities also may be debt instruments, which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt.
Non-mortgage backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities. In addition, such securities generally will have
remaining estimated lives at the time of purchase of five years or less.
The purchase of non-mortgage backed securities raises considerations peculiar to
the financing of the instruments underlying such securities. For example, most
organizations that issue Asset Backed Securities relating to motor vehicle
installment purchase obligations perfect their interests in their respective
obligations only by filing a financing statement and by having the servicer of
the obligations, which is usually the originator, take custody thereof. In such
circumstances, if the servicer were to sell the same obligations to another
party, in violation of its duty not to do so, there is a risk that such party
could acquire an interest in the obligations superior to that of the holders of
the Asset Backed Securities. Also, although most such obligations grant a
security interest in the motor vehicle being financed, in most states the
security interest in a motor vehicle must be noted on the certificate of title
to perfect such security interest against competing claims of other parties. Due
to the larger number of vehicles involved, however, the certificate of title to
each vehicle financed, pursuant to the obligations underlying the Asset Backed
Securities, usually is not amended to reflect the assignment of the seller's
security interest for the benefit of the holders of the Asset Backed Securities.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on those securities. In
addition, various state and Federal laws give the motor vehicle owner the right
to assert against the holder of the owner's obligation certain defenses such
owner would have against the seller of the motor vehicle. The assertion of such
defenses could reduce payments on the related Asset Backed Securities. Insofar
as credit card receivables are concerned, credit card holders are entitled to
the protection of a number of state and Federal consumer credit laws, many of
which give such holders the right to set off certain amounts against balances
owed on the credit card, thereby reducing the amounts paid on such receivables.
In addition, unlike
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most other Asset Backed Securities, credit card receivables are unsecured
obligations of the card holder.
The development of non-mortgage backed securities is at an early stage compared
to mortgage backed securities. While the market for Asset Backed Securities is
becoming increasingly liquid, the market for mortgage backed securities issued
by certain private organizations and non-mortgage backed securities is not as
well developed. As stated above, each Fund intends to limit its purchases of
mortgage backed securities issued by certain private organizations and
non-mortgage backed securities to securities that are readily marketable at the
time of purchase.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. Each Fund will limit its investments in
bank obligations so they do not exceed 25% of its total assets at the time of
purchase.
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risk, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Fund's total assets must be repaid prior to the purchase of
portfolio securities. The Funds are parties to a Line of Credit Agreement with
Mellon Bank, N.A. Advances under the agreement are taken primarily for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities.
Reverse repurchase agreements and dollar roll transactions may be considered to
be borrowings. When a Fund invests in a reverse repurchase agreement, it sells a
portfolio security to another party, such as a bank or broker-dealer, in return
for cash, and agrees to buy the security back at a future date and price.
Reverse repurchase agreements may be used to provide cash to satisfy unusually
heavy redemption requests without having to sell portfolio securities, or for
other temporary or emergency purposes. Generally, the effect of such a
transaction is that the Funds can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while they will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Funds of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Funds are obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Funds' use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Funds'
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The Fund
only enters into reverse repurchase agreements (and repurchase agreements) with
counterparties that are deemed by the Adviser to be credit worthy. Reverse
repurchase agreements are speculative techniques involving leverage, and are
subject to asset coverage requirements if the Funds do not establish and
maintain a segregated account (as described above). Under the requirements of
the 1940 Act, the Funds are required to maintain an asset coverage (including
the proceeds of the borrowings) of at least 300% of all borrowings. Depending on
market conditions, the Fund's asset coverage and other factors at the time of a
reverse repurchase, the Funds may not establish a segregated account when the
Adviser believes it is not in the best interests of the Funds to do so. In this
case, such reverse repurchase agreements will be considered borrowings subject
to the asset coverage described above.
Dollar roll transactions consist of the sale by a Fund of mortgage-backed or
other asset-backed securities, together with a commitment to purchase similar,
but not identical, securities at a future date, at the same price. In addition,
a Fund is paid a fee as consideration for
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entering into the commitment to purchase. If the broker/dealer to whom a Fund
sells the security becomes insolvent, the Fund's right to purchase or repurchase
the security may be restricted; the value of the security may change adversely
over the term of the dollar roll; the security that the Fund is required to
repurchase may be worth less than the security that the Fund originally held,
and the return earned by the Fund with the proceeds of a dollar roll may not
exceed transaction costs.
COMMERCIAL INSTRUMENTS: Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or foreign
corporations and foreign commercial banks.
Investments by a Fund in commercial paper will consist of issues rated in a
manner consistent with such Fund's investment policies and objectives. In
addition, a Fund may acquire unrated commercial paper and corporate bonds that
are determined by the Adviser at the time of purchase to be of comparable
quality to rated instruments that may be acquired by a Fund. Commercial
instruments include variable-rate master demand notes, which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate, and variable- and floating-rate
instruments.
CONVERTIBLE SECURITIES, PREFERRED STOCK, AND WARRANTS: Certain of the Funds may
invest in debt securities convertible into or exchangeable for equity
securities, preferred stocks or warrants. Preferred stocks are securities that
represent an ownership interest in a corporation providing the owner with claims
on a company's earnings and assets before common stock owners, but after bond or
other debt security owners. Warrants are options to buy a stated number of
shares of common stock at a specified price any time during the life of the
warrants.
FIXED INCOME INVESTING: The performance of the fixed-income debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. A Fund's share price
and yield depend, in part, on the maturity and quality of its debt instruments.
FOREIGN CURRENCY TRANSACTIONS: Certain of the Funds may enter into foreign
currency exchange transactions to convert foreign currencies to and from the
United States Dollar. A Fund either enters into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or uses forward contracts to purchase or sell foreign currencies. A
forward foreign currency exchange contract is an obligation by a Fund to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract.
Foreign currency hedging transactions are an attempt to protect a Fund against
changes in foreign currency exchange rates between the trade and settlement
dates of specific securities transactions or changes in foreign currency
exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. Neither spot transactions nor forward
foreign currency exchange contracts eliminate fluctuations in the prices of a
Fund's portfolio securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.
A Fund will generally enter into forward currency exchange contracts only under
two circumstances: (i) when such Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, to "lock" in the U.S.
dollar price of the security; and (ii) when the Adviser believes that the
currency of a particular foreign country may experience a substantial movement
against another currency. Under certain circumstances, a Fund may commit a
substantial portion of its portfolio to the execution of these contracts. The
Adviser will consider the effects such a commitment would have on the investment
program of such Fund and the flexibility of such Fund to purchase additional
securities. Although forward contracts will be used primarily to protect a Fund
from adverse currency movements, they also involve the risk that anticipated
currency movements will not be accurately predicted. The Funds will generally
not enter into a forward contract with a term of greater than one year.
FOREIGN SECURITIES: Foreign securities include obligations of foreign
corporations and banks as well as obligations of foreign governments and their
political subdivisions (which will be limited to direct government obligations
and government-guaranteed securities). Such investments may subject a Fund to
special investment risks, including future political and economic developments,
the possible imposition of withholding taxes on interest income, possible
seizure or nationalization of foreign deposits, the possible establishment of
exchange controls, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. In addition, foreign issuers in general may be subject to different
accounting, auditing, reporting, and record keeping standards than those
applicable to domestic companies, and securities of foreign issuers may be less
liquid and their prices more volatile than those of comparable domestic issuers.
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Investments in foreign securities may present additional risks, whether made
directly or indirectly, including the political or economic instability of the
issuer or the country of issue and the difficulty of predicting international
trade patterns. In addition, there may be less publicly available information
about a foreign company than about a U.S. company. Further, foreign stock
markets are generally not as developed or efficient as those in the U.S., and in
most foreign markets volume and liquidity are less than in the U.S. Fixed
commissions on foreign stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign stock exchanges, brokers, and companies
than in the U.S. With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS: Certain of the Funds may
attempt to reduce the overall level of investment risk of particular securities
and attempt to protect a Fund against adverse market movements by investing in
futures, options and other derivative instruments. These include the purchase
and writing of options on securities (including index options) and options on
foreign currencies, and investing in futures contracts for the purchase or sale
of instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign government, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and swaps
and swap-related products such as interest rate swaps, currency swaps, caps,
collars and floors.
The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable position.
Additional risks inherent in the use of futures, options, forward contracts and
swaps include: imperfect correlation between the price of futures, options and
forward contracts and movements in the prices of the securities or currencies
being hedged; the possible absence of a liquid secondary market for any
particular instrument at any time; and the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. A Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks, is
contained in the SAI.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Funds will not knowingly
invest more than 15% of the value of their respective net assets in securities
that are illiquid or such lower percentage as may be required by the states in
which the appropriate Fund sells its shares. Repurchase agreements and time
deposits that do not provide for payment to a Fund within seven days after
notice, guaranteed investment contracts and some commercial paper issued in
reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act") (other than variable amount master demand notes with
maturities of nine months or less), are subject to the limitation on illiquid
securities.
If otherwise consistent with its investment objective and policies, certain
Funds may purchase securities which are not registered under the 1933 Act but
which can be sold to "qualified institutional buyers" in accordance with Rule
144A under the 1933 Act. Any such security will not be considered illiquid so
long as it is determined by a Fund's Board of Trustees or Board of Directors or
the Adviser, acting under guidelines approved and monitored by such Fund's
Board, after considering trading activity, availability of reliable price
information and other relevant information, that an adequate trading market
exists for that security. To the extent that, for a period of time, qualified
institutional buyers cease purchasing such restricted securities pursuant to
Rule 144A, the level of illiquidity of a Fund holding such securities may
increase during such period.
INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of its
portfolio from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, E.G., an exchange of floating rate payments for fixed rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. The Adviser expects to enter into these
transactions on behalf of a Fund primarily to
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preserve a return or spread on a particular investment or portion of its
portfolio or to protect against any increase in the price of securities the Fund
anticipated purchasing at a later date rather than for speculative purposes. A
Fund will not sell interest rate caps or floors that it does not own.
LOWER-RATED DEBT SECURITIES: Lower-rated, high-yielding securities are those
rated "Ba" or "B" by Moody's or "BB" or "B" by S&P which are commonly referred
to as "junk bonds." These bonds provide poor protection for payment of principal
and interest. Lower-quality bonds involve greater risk of default or price
changes due to changes in the issuer's creditworthiness than securities assigned
a higher quality rating. These securities are considered to have speculative
characteristics and indicate an aggressive approach to income investing. The
Funds intend to limit their investments in lower-quality debt securities to 35%
of assets.
The market for lower-rated securities may be thinner and less active than that
for higher quality securities, which can adversely affect the price at which
these securities can be sold. If market quotations are not available, these
lower-rated securities will be valued in accordance with procedures established
by the Funds' Board, including the use of outside pricing services. Adverse
publicity and changing investor perceptions may affect the ability of outside
pricing services used by a Fund to value its portfolio securities, and a Fund's
ability to dispose of these lower-rated bonds.
The market prices of lower-rated securities may fluctuate more than higher-rated
securities and may decline significantly in periods of general economic
difficulty which may follow periods of rising interest rates. During an economic
downturn or a prolonged period of rising interest rates, the ability of issuers
of lower quality debt to service their payment obligations, meet projected
goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower-rated securities, the Adviser will
try to minimize the risks inherent in investing in lower-rated debt securities
by engaging in credit analysis, diversification, and attention to current
developments and trends affecting interest rates and economic conditions. The
Adviser will attempt to identify those issuers of high-yielding securities whose
financial condition are adequate to meet future obligations, have improved, or
are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated securities,
but they may not be attractive to as many buyers. Each Fund's policies regarding
lower-rated debt securities is not fundamental and may be changed at any time
without shareholder approval.
MONEY MARKET INSTRUMENTS: The term "money market instruments" refers to
instruments with remaining maturities of one year or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable- or floating-rate instruments issued
by industrial development authorities and other governmental entities. While
there may not be an active secondary market with respect to a particular
instrument purchased by a Fund, a Fund may demand payment of the principal and
accrued interest on the instrument or may resell it to a third party as
specified in the instruments. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if the
issuer defaulted on its payment obligation or during periods the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss. Some of these instruments may be unrated, but unrated
instruments purchased by a Fund will be determined by the Adviser to be of
comparable quality at the time of purchase to instruments rated "high quality"
by any major rating service. Where necessary to ensure that an instrument is of
comparable "high quality," a Fund will require that an issuer's obligation to
pay the principal of the note may be backed by an unconditional bank letter or
line of credit, guarantee, or commitment to lend.
Municipal securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases," and
units of participation in trusts holding pools of tax exempt leases. Such loans
in most cases are not backed by the taxing authority of the issuers and may have
limited marketability or may be marketable only by virtue
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of a provision requiring repayment following demand by the lender. Such loans
made by a Fund may have a demand provision permitting the Fund to require
payment within seven days. Participations in such loans, however, may not have
such a demand provision and may not be otherwise marketable. To the extent these
securities are illiquid, they will be subject to each Fund's limitation on
investments in illiquid securities. As it deems appropriate, the Adviser will
establish procedures to monitor the credit standing of each such municipal
borrower, including its ability to meet contractual payment obligations.
Municipal participation interests may be purchased from financial institutions,
and give the purchaser an undivided interest in one or more underlying municipal
security. To the extent that municipal participation interests are considered to
be "illiquid securities," such instruments are subject to each Fund's limitation
on the purchase of illiquid securities.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to Municipal Securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified Municipal Securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.
Although the Funds do not presently intend to do so on a regular basis, each may
invest more than 25% of its total assets in Municipal Securities the interest on
which is paid solely from revenues of similar projects if such investment is
deemed necessary or appropriate by the Adviser. To the extent that more than 25%
of a Fund's total assets are invested in Municipal Securities that are payable
from the revenues of similar projects, a Fund will be subject to the peculiar
risks presented by such projects to a greater extent than it would be if its
assets were not so concentrated.
OTHER INVESTMENT COMPANIES: A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
REPURCHASE AGREEMENTS: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker-dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
idle cash. A risk associated with repurchase agreements is the failure of the
seller to repurchase the securities as agreed, which may cause a Fund to suffer
a loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the limit
stated above. A Fund may enter into joint repurchase agreements jointly with
other investment portfolios of Nations Fund and Nations Institutional Reserves.
SECURITIES LENDING: To increase return on portfolio securities, certain of the
Funds may lend their portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring that the loans be
continuously secured by collateral equal at all times in value to at least the
market value of the securities loaned. There is a risk of delay in receiving
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Adviser to be credit worthy and
when, in their judgment, the income to be earned from the loan justifies the
attendant risks. The aggregate of all outstanding loans of a Fund may not exceed
30% of the value of its total assets.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indexes, non-U.S. interest rates and foreign currencies, that
have been approved by the CFTC for investment by U.S. investors, for the purpose
of hedging against changes in values of a Fund's securities or changes in the
prevailing levels of interest rates or currency exchange rates. The contracts
entail certain risks, including but not limited to the following: no assurance
that futures contracts transactions can be offset at favorable prices; possible
reduction of a Fund's total return due to the use of hedging; possible lack of
liquidity due to daily limits on price fluctuation; imperfect correlation
between the contracts and the securities or currencies being hedged; and
potential losses in excess of the amount invested in the futures contracts
themselves.
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
for which no common clearing facility exists and a trader may look only to the
broker for performance of the contract. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the
currencies in which trading is done on foreign exchanges, any profits that such
Fund might realize could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes.
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U.S. GOVERNMENT OBLIGATIONS: U.S. Government obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. Obligations of U.S.
Government agencies, authorities and instrumentalities are issued by
government-sponsored agencies and enterprises acting under authority of
Congress. Although obligations of federal agencies, authorities and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. Government,
E.G., GNMA certificates; in other cases interest and principal are not
guaranteed, E.G., obligations of the Federal Home Loan Bank System and the
Federal Farm Credit Bank. No assurance can be given that the U.S. Government
would provide financial support to government-sponsored instrumentalities if it
is not obligated to do so by law.
VARIABLE- AND FLOATING-RATE INSTRUMENTS: Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks and corporations
may carry variable or floating rates of interest. Such instruments bear interest
rates which are not fixed, but which vary with changes in specified market rates
or indices, such as a Federal Reserve composite index. A variable-rate demand
instrument is an obligation with a variable or floating interest rate and an
unconditional right of demand on the part of the holder to receive payment of
unpaid principal and accrued interest. An instrument with a demand period
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities takes
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
Appendix B -- Description Of Ratings
The following summarizes the highest six ratings used by S&P for corporate and
municipal bonds. The first four ratings denote investment grade securities.
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher-rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher-rated categories.
BB, B -- Bonds rated BB and B are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB represents the lowest
degree of speculation and B a higher degree of speculation. While such
bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the highest six ratings used by Moody's for corporate
and municipal bonds. The first four ratings denote investment grade securities.
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
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A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa through B. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category. With regard to municipal bonds, those bonds
in the Aa, A and Baa groups which Moody's believes possess the strongest
investment attributes are designated by the symbols Aa1, A1 or Baa1,
respectively.
The following summarizes the highest four ratings used by D&P for bonds, each of
which denotes that the securities are investment grade:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
A -- Bonds that are rated A have protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
BBB -- Bonds that are rated BBB have below average protection factors but
still are considered sufficient for prudent investment. Considerable
variability in risk exists during economic cycles.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major categories.
The following summarizes the highest four ratings used by Fitch for bonds, each
of which denotes that the securities are investment grade:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A -- Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
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The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are Duff 1, Duff 2 and Duff 3.
D&P employs three designations, Duff 1+, Duff 1 and Duff 1-, within the highest
rating category. Duff 1+ indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is judged to be "outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations." Duff 1 indicates very
high certainty of timely payment. Liquidity factors are excellent and supported
by good fundamental protection factors. Risk factors are considered to be minor.
Duff 1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. Duff 2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. Duff 3 indicates satisfactory liquidity and other protection factors
which qualify the issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
The following summarizes the three highest rating categories used by Fitch for
short-term obligations, each of which denotes securities that are investment
grade:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
F-2 securities possess good credit quality. Issues carrying this rating
have a satisfactory degree of assurance for timely payment, but the margin
of safety is not as great as for issues assigned the F-1+ and F-1 ratings.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following is the four investment grade ratings used by BankWatch
for long-term debt:
AAA -- The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA -- The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
A -- The third highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with
higher ratings.
BBB -- The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however,
more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
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TBW-1 -- The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
TBW-3 -- The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
The following summarizes the three highest long-term ratings used by IBCA:
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk albeit not very significantly.
A -- Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
The following summarizes the three highest short-term debt ratings used by IBCA:
A1+ -- Obligations supported by the highest capacity for timely repayment
and possessing a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
A2 -- Obligations supported by a good capacity for timely repayment.
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